New Jersey Pension Commission Release Report; Proposal Would Bring Savings to State, Cuts to Workers

New Jersey Gov. Chris Christie unveiled a series of pension reform proposals at his budget address yesterday.

But he’s taking his cues from a just-released report from his pension commission, which he set up in the summer of 2014.

Christie acknowledged in mid-2014 that future pension changes would likely mean benefit cuts for workers. Now, we are getting more details about the specifics of the reforms Christie and his panel have in mind.

The five key pillars of the pension reform proposal, summarized by

1. Frozen Plan

The current pension plan would be frozen. Retirees would continue to receive their benefits, though without cost of living adjustments. Active employees would no longer accrue benefits under that plan.

2. “Cash balance” plan

The state would create a new “cash balance” plan, which is considered a hybrid between defined-contribution and defined-pension plans. Workers’ benefits are shown as a cash balance, funded by employee and employer contributions and investment returns, but they can take their payout as a lifetime annuity.

3. Health care premium change

Employees would pick up a larger share of their health care premiums, and health care coverage would be less generous overall. On average, employees pay 18 percent of their health care premiums. Under the proposal, that would increase to 25 percent, though higher-paid employees pay more. State and local governments pay, on average, 95 percent of the total cost of health care coverage, but the proposal calls for new health care plans that reduce the employer cost to 80 percent.

4. School plans

Local school districts would take on local education employee retirement benefits, which are currently paid for by the state, and the cost of the new cash balance plan. The commission estimates the savings from the health care cuts would more than cover those new responsibilities.

5. Constitutional amendment

Lawmakers would be asked to pass a proposed constitutional amendment that would appear on the November ballot and guarantee public employees adequate pension contributions from the state.

The commission’s report can be read here.


Cover photo credit: Walter Burns [CC BY 2.0 (], via Wikimedia Commons

Philadelphia Mayor Comes Out Against Pension Bonus Payments


Philadelphia’s pension system is only 47 percent funded – but due to a unique policy, it will be handing out bonus checks to many retirees in 2015 to the tune of $62.4 million.

That’s because the system pays out a bonus when it exceeds a set investment return target.

The target in 2014 was 8.85 percent. The fund returned over 11 percent.

So, retirees will receive a bonus for the first time since 2008.

But city Mayor Michael Nutter is now criticizing the bonus payments, saying they “jeopardize…the future health of the pension fund in a significant way.”

More on Nutter’s comments, from

Current Mayor Nutter said Tuesday that the law is financially irresponsible and raises questions about Kenney’s judgment as a mayoral candidate.

“We cannot always do everything we want, even if those things are to make people feel better,” Nutter said. “To run a big city, you have to not only deal with the issues of the present, but you need to be able to see the long-term impact of your actions.”


“Purely for political reasons, from my perspective, in an election year, City Council removed the minimum threshold,” said Nutter, who was not in office at that time. “In doing so, from my perspective, they jeopardized the future health of the pension fund in a significant way.”

Finance Director Rob Dubow said the pension fund crisis has taken an increasingly larger bite of the city’s revenue over time. About 7 percent of the budget went to the pension fund a decade ago, he said, a figure that is now up to 15 percent.

“Those are dollars we would otherwise spend on city services for everybody, retirees and the rest of our citizens,” Nutter said.

Before 2007, the bonuses could only be paid out if the pension fund was 76 percent funded or more.

But then-Councilman James F. Kenney lifted the funding limit on the bonus payments.


Photo credit: “GardenStreetBridgeSchuylkillRiverSkylinePhiladelphiaPennsylvania” by Massimo Catarinella – Own work. Licensed under CC BY 3.0 via Wikimedia Commons –