PENSION REFORM

New Jersey's pension plans are in bad shape. Really bad shape. According to the latest accounting, the funds are underfunded by at least $54 billion. Certainly, part of this problem rests with the fact that the state has skipped more annual payments than it has made, even while rank-and-file workers were contributing. However, even if the state had put in every penny it owed, the system would still be underfunded by billions of dollars. Benefit enhancements were put in without requiring anyone to pay any more for them, even while employee contributions were cut. Also, there are not only more retirees leaving active service, but they are living longer, and the smaller number of active employees will never be able to put enough into the system on their own to keep it balanced, given the investment losses faced by the pension fund.

Something has to be done, and fast. Unless we act now, the system will eventually run out of money. If that happens, employees who have literally banked their futures on a secure pension will be left with nothing.

The Sweeney Plan is a responsible way to move forward, by taking politics out of the system once-and-for-all, and letting real numbers direct changes in our pension system. The Sweeney plan will provide over $120 billion in savings to New Jersey taxpayers over the next 30 years and protect workers’ pensions in a fair manner.

Compromise Legislation
Christie Proposal
Original Sweeney Proprosal

Includes contractual guarantee that State make required pension payments, enforceable by courts.

No payment guarantee.

Includes contractual guarantee that State make required pension payments, enforceable by courts.

Establishes new employee/employer governance boards for any pension system that reaches 80 percent funding. Board can modify contribution rates, re-establish COLA, modify retirement age, N/X formula, and other pension factors.

Current governance structure maintained. No opportunity to restore COLAs or other pension reductions when pension reaches 80 percent funding.

Establishes new employee/employer governance boards for all pension systems. Board can modify contribution rates, re-establish COLA, modify retirement age, N/X formula, and other pension factors.

Eliminates statutory COLA but allows new pension boards to restore COLA when fund is healthy.

Completely eliminates the COLA for all current and future retirees.

Eliminates statutory COLA but allows new pension boards to restore COLA or employee to pay an additional amount to buy COLA.

Raises the retirement age to 65 for all future employees.

Raises the retirement age for all current employees to age 65.

No change to retirement age.

No decrease in N/X formula for any employees.

Decreases formula from N/55 to N/65 for current and future employees.

Decreases formula from N/55 to N/60 for current employees but allows employee to buy back N/55.

For PERS and TPAF systems, employee contribution increases by 1 percent immediately, and an additional 1 percent over 7 years.

For PERS and TPAF systems, employee contribution increases by 3 percent immediately.

New employer/employee boards can raise or lower employee contribution rates.

State police and police and fire retirement systems contribution rates increased 1.5 percent.

State police retirement system contribution increased by 1 percent.

New employer/employee boards can raise or lower employee contribution rates.

New employer/employee boards can lower contribution rates when fund reaches healthy level.

Higher employee contribution rates are permanent.

New employer/employee boards can lower contribution rates when fund reaches healthy level.

No change to final average salary calculation.

Increases number of years used to calculate “final average salary” for current employees.

No change to final average salary calculation.

Changes early retirement from 25 to 30 years for future employees.

Changes early retirement from 25 to 30 years for current employees.

No change to early retirement.

All information Copyright 2011 Senate President Steve Sweeney. Web site produced in-house by the Senate Majority Office.