Photo: Flickr Chris Griffith
This year’s pension reform bill is out, and I will try to explain the proposals. Rather than quoting text, I will insert the page numbers (which are on the top of the page, not the bottom) from the bill followed by a brief description of the change, my thoughts, and a letter grade in regards to how effective each proposal is likely to be for staving off plan bankruptcy.
- (2) In addition to the trustees there will be a committee overseeing the pension system. Useless. If you can’t trust the trustees, what’s another committee going to get you? In the next reforms are we going to get more commissions, committees, and boards until there are more people overseeing the plan than actually benefiting from it (assuming the overseers don’t benefit in some way already)? F-
- (21) Employee contribution rate for those now putting in 5.5 per cent of pay goes to 6.5 per cent immediately and then another 1 per cent is phased in over 7 years. Expect the unions to call this an 18 per cent increase but, as I said before, the total dollar impact of all the proposed contribution hikes will come to about $250 million annually into a fund that’s paying out about $8 billion a year for now. D-
- (22) Judges will have their contribution rate raised from 3 per cent to 12 per cent (because they have the most generous plan), but that’s phased in over 7 years. Acknowledgement of the generosity of the Judicial plan, but with a long enough phase-in for current judges to skate a little longer. D
- (26) Prosecutors contribution rate goes from 7.5 per cent to 10 per cent. ibid above but without the phase-in. D
- (26) Police and Fire contribution rate goes from 8.5 per cent to 10 per cent. D
- (33) State Police contribution rate goes from 7.5 per cent to 9 per cent. D
- (33) Open 30-year amortization will change to “closed” with the 2018/19 valuation, stay closed for 10 years, then return to “open” at a set 20 years. Too technical for details, but this is a gimmick to keep the contribution down that is being phased-out at about the time all the money will be gone anyway. F+
- (34-35) Change in Early Retirement Age requiring 30 years of service and a reduction of 1/4 per cent per month prior to age 65. Theoretically would decrease benefits around 2036 when it’s academic but, for now, will slightly reduce the calculated required contribution so as to speed the date of bankruptcy. F
- (39) It’s not underlined but it does say (new section), and here is where the co-payments for health insurance are delineated–ranging from 3 per cent to 35 per cent of the cost of coverage depending on your salary, with a four-year phase in of the full cost for current employees. It will likely be scaled back further, and will wind up as more of a transfer from property-tax payers (after higher salaries are negotiated to offset this sacrifice) to the insurance industry. C-
- (52-53) No more Cost-Of-Living-Adjustments for anybody. B, if it stands up in court.
- (54) If the government does not make their contributions, anybody and everybody can sue. If you read any part of this bill, it has to be this section on page 54. It might as well have said: “We know…you know….believe us, we know you know…we politicians are scumbags who can’t be trusted, but if we stiff you again then you can sue us and trust your future to the New Jersey judicial system. F-
- (81) A State Health Benefits Plan Design Committee is set up. See first bullet. F-
Overall grade: D (and if it weren’t for the COLA elimination – F).
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