NJ.com - I would like to bring some clarity to the extremely confusing make-up of the New Jersey pension system.
|Surrounded by New Jersey mayors, Gov. Chris Christie signs into law landmark pension and health benefit reform at the War Memorial in Trenton, June 28, 2011. (Governor's Office/Tim Larsen, file photo)
The system consists of five separate and distinct parts. In addition to the Police and Fireman’s Retirement System (PFRS), school employees are members of the Teachers Pension and Annuity Fund (TPAF), Troopers are members of the State Police Retirement System (SPRS), judges are members of the Judicial Retirement System (JRS) and all other public employees are members of the Public Employees Retirement System (PERS). Each system has specific funding formulas and retirement benefits.
In 2011, the Legislature enacted Chapter 78, which consisted of reforms to all five parts of the pension system. Among those reforms included higher contributions from employees, reductions to benefits for active and future employees and the elimination of cost-of-living adjustments (COLA).
Another important piece of the legislation was the creation of local and state distinctions between the systems. What that means is firefighters, police, EMTs, dispatchers and other local government employees do not receive funding from the state for their pensions; they rely solely on payments from the employees and their municipalities. Local government budgets fund the employer portion of the system.
Currently, the police and fire (PFRS) system is funded to 77 percent. Actuaries consider 80 percent to be healthy. Since 2010, PFRS members contribute 10 percent of their salary toward their pension, which is an increase from 8.5 percent. No other workers covered by the New Jersey public employee pension system contributes to that level.
Unfortunately, the state has continued its actuarial practice of using the increased contributions of career firefighters and police officers to offset other items in the state budget outside of the pension fund. Last year, more than $54 million of increased employee contributions were pilfered from the PFRS system.
The police and fire pension system’s unique characteristics must be considered. PFRS is funded at a higher level, because municipalities and police and firefighters have been contributing their share. The other four parts of the pension system, however, require the state to contribute to them, but it has continuously shortchanged them.
Local governments are making their payments. If the monies from the system stay in the system and strict funding practices are followed, our system will grow even stronger and healthier without further amendments or restructuring. Why would we restructure part of a system that is working?
It is expected that the Pension and Benefit Study Commission formed by Gov. Christie will recommend further reform. There have been back-room conversations in regard to implementing a 401(K) for current and future members along with other reforms. The PFRS needs to be analyzed separately. The healthiest plan in the system should be carved out, preserved and used as a model for what works. With the distinct differences in the systems, it would be unjust to use a "broad stroke" approach for all funds. Such an approach should not be considered, let alone implemented.
The governor and Legislature should be diligent and demand that before any further changes to public employee pensions are proposed, objective information should be gathered and dialogue with the leaders of the unions representing the pensioners should be conducted.
Eddie Donnelly is president of the New Jersey State Firefighters Mutual Benevolent Association, which represents more than 5,000 active and retired career firefighters, EMTs and dispatchers.
This article appeared on NJ.com authored by Eddie Donnelly.