Fitch: Pension Fund “Depletion Dates” Raise Red Flags

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Under new GASB accounting standards, public pension funds are required to calculate their “depletion date” – or, the date where benefit payouts become larger than assets.

The dates help give context to the funding situations at the pension funds, says Fitch Ratings. For some of the country’s most underfunded plans, the depletion dates are startlingly close.

From Reuters:

New accounting rules for public pensions are exposing the damage done by U.S. states, including New Jersey, that have failed to adequately fund their retirement systems, according to a report to be released by Fitch Ratings on Friday.

With the first wave of pensions beginning to issue financial statements under the new rules, the impact of underfunding becomes clearer, the Fitch report shows.

[…]

Some retirement systems already known for their fiscal struggles reported depletion dates.

Six of New Jersey’s seven funds, for example, disclosed depletion dates as of their June 30, 2014 valuations. The two largest – covering retired state employees and teachers – said their tipping points would come in 2024 and 2027, respectively.

Under the previous actuarial methods, those plans were funded at 49.1 percent and 51.5 percent, a distressed level far off the minimum 80 percent generally considered healthy. Under the new calculations, which included a lower blended rate of return, those levels look even worse, at 27.9 percent and 28.5 percent.

Even Illinois, with among the worst-funded state retirement systems in the U.S., doesn’t have depletion dates until 2065 for two of its three biggest funds and is able to use higher blended rates. It has no depletion date for the third fund, Fitch Senior Director Douglas Offerman told Reuters in an email.

The nation’s most underfunded plan –the Kentucky Employee Retirement System – did not report a depletion date because recent reforms complicated the calculation.

 

Photo by  Paul Becker via Flickr CC License

Pension Funds Sue Chris Christie Over State Contribution Cut

Chris Christie

New Jersey’s three largest pension funds filed a lawsuit against New Jersey Gov. Chris Christie on Wednesday for slicing the state’s required pension contribution by $900 million in 2014.

The complaint can be read here.

More from New Jersey Watchdog:

Filed Wednesday in Mercer County Superior Court, the lawsuit is the latest conflict in the wake of Christie’s decision last June to balance the state budget by chopping nearly $900 million from a scheduled public-pension contribution of $1.6 billion. The governor also announced plans to cut $1.6 billion from the state’s obligation of $2.25 billion for the current fiscal year.

“The governor is not living up to his own pension reform,” said Wayne Hall, chairman of the Police and Firemen’s Retirement System, told New Jersey Watchdog. “We had to step up and do this; we had to protect our members.”

The other plaintiffs are the Public Employees’ Retirement System and the Teachers’ Pension and Annuity Fund. Combined, the three pension plans represent roughly 290,000 retired public-sector workers and 475,000 active members.

Overall, the state’s retirement systems face a $170-billion shortfall, according to the state’s official numbers. That includes:

– $82.7 billion in unfunded liability for the pension plans of state workers.

– A $20.7 billion shortfall for the pensions of local government employees.

– $53 billion in unfunded health benefits for state retirees.

– $13.8 billion to cover the post-employment benefits local government workers.

The lawsuit asks the court to force the state to make its full payment.

“Everybody’s Not Going To Retire At The Same Time”: Actuary Evaluates Former Illinois Governor Edgar’s Pension Comments

 

Illinois map and flag

Last month, former Illinois governor Jim Edgar gave his thoughts on the state’s pension situation. He notably said he didn’t support the state’s pension reform law, and said the following:

“I don’t think also you have to have 100 percent funding in the pension plan. Everybody’s not going to retire at the same time. I think you can keep probably 75, 80 percent is sufficient, but I think what you’ve got to demonstrate to a lot of folks out there who rate the state’s credit and a lot of those things is that the plan will work over a period of time and that they are committed and are going to stick with it.”

Actuary Mary Pat Campbell, who runs the STUMP blog, weighed in on Edgar’s comments. As you’ll see, she is not a fan of Edgar’s pension knowledge. The full post is below.

_________________________________

By Mary Pat Campbell, originally published on STUMP

Seems that not all recent Illinois governors end up in prison, (Quinn isn’t out of the woods yet!) but perhaps they should be jailed for this crap:

“I don’t think also you have to have 100 percent funding in the pension plan. Everybody’s not going to retire at the same time. I think you can keep probably 75, 80 percent is sufficient, but I think what you’ve got to demonstrate to a lot of folks out there who rate the state’s credit and a lot of those things is that the plan will work over a period of time and that they are committed and are going to stick with it. We thought when we put in the provision you had to pay into the pension plan first thing before you did anything else that they would keep paying in. I never thought they would have the nerve to change that, but under (former Gov. Rod) Blagojevich they did and so you’re going to have to find some safeguards to put into the plan, but I think it’s going to take 20, 30 years to get to the level we want to get to, but if we start working toward it and don’t go on any spending spree with the pension plan, I think we can do that.”

First off, we do have an appearance of the 80% canard, but there’s a new lie that’s been creeping in that is pissing me off: “Oh, it’s not a problem right now… it would only be a problem if everybody retired at the same time.”

Let me explain, conceptually, what the pension liability is supposed to represent, and what the unfunded portion represents: it is what people have earned for their PAST service, and is using all sorts of assumptions, such as THE AGE THEY WILL PROBABLY RETIRE.

The actuarial value of the pension, under even the craziest approaches, does not assume everybody retires right now.

Let’s consider your pension value for a person still working: each extra year of service, they’ve earned some more. They are also a year closer to retirement. As long as they keep working and are still alive, the value of their pension increases, under most pension benefit design. Sometimes you’ll see a pension value drop at later ages, but that’s getting persnickety (though it has had some repercussions elsewhere).

The pension valuation is supposed to be a snapshot, indicating what has ALREADY BEEN EARNED. There are approaches that try to capture future salary increases, and tries to make accrual less drastic (as one usually does see huge increases in pension value right before retirement under some approaches).

The main time the pension value would be decreasing for a person is when they’re in retirement, as they’re not accruing more benefits, and each year they’re one year closer to death. The time the pension gets paid out is generally getting shorter. If the pension fund cannot cover retiree benefits, it’s in a really bad condition.

And here’s the deal: some pensions are not able to cover just the current retiree portion of the benefits:

Nobody is any more worried now than they were before the New Jersey Pension Study Commission report came out. Yes, “[t]his problem is dire and will only become much worse if meaningful steps are not taken quickly” but what does that really mean to anyone?

…. Scary Conclusions

1. For retirees there may be about $15 billion to cover $40 billion in liabilities and that’s ONLY for retirees leaving absolutely NOTHING for the 151,669 participants who have not yet started receiving monthly benefits except, for now, the refund of their contributions.

2. There is an equally good chance that Conclusion #1 is overly optimistic

I doubt New Jersey is the only state in that situation. As noted earlier, Kentucky is looking really bad.

And in my recent teaser, I showed a set of graphs I am developing for various pension plans. The ones being shown were for Texas Teachers Retirement System. I will explain them in a later post, and start showing you some truly scary information — using the official numbers from the plans themselves.

But shame on Gov. Edgar for mouthing the same bullshit everybody else does in favor of underfunding the pensions. I have looked at over a decades’ worth of Illinois pension valuations, and for all major funds (except one), they deliberately underfunded by substantial amounts, even in “good” years.

If you’re not going to make contributions when times are good, guess what will happen to the pensions when times are bad?

I guess ex-Gov. Edgar wants to cover his own ass for the pensions being underfunded in the go-go 90s, when he was governor (1991 – 1999). Hey! Everybody was doing it! 80% is good enough!

NO, IT’S NOT.

SHAME.

 

Proposed New Jersey Bill Would Halt State Aid to Municipalities Not Complying With 2011 Pension Reforms

New Jersey State House

A New Jersey assemblyman proposed on Thursday a piece of legislation that would block state money to cities that aren’t complying with the state’s 2011 pension reform law.

From NJ.com:

[Assemblyman Declan] O’Scalon said he is proposing the legislation after reports surfaced that Newark had not been collecting payments that employees are legally required to pay toward their health care premiums.

Under the revised pension reforms Gov. Chris Christie signed in 2011, all public workers were required to contribute more toward its healthcare premiums, but state officials said earlier this year that Newark has not been compliant.

The city said in October that it took several months to update its payroll system in the wake of the law and that they did not know why the payments weren’t collected last year.

“It was long overdue, but it has come to light that the City of Newark has been ignoring the law since it was put into place,” O’Scalon said in a statement.

“The result is that the Mayor, Council members, and all employees in Newark pay less than the law requires – and worse, what common sense and fairness demand.”

The legislation would also dock the pay of elected officials and top finance department heads in municipalities that are not compliant, according to O’Scalon.

The proposed legislation would also establish noncompliance as grounds for impeachment or removal of the mayor of city officials, O’Scalon said.

O’scalon’s remarks arrive months after the state agreed to give Newark $10 million in transitional aid to address its budget crisis.

“Newark is a city that is facing tough issues and is legitimately going to need continued help from the state, but the local elected officials must lead by example,” O’scalon said.

The legislation will be officially introduced by the end of the year.

 

Photo credit: “New Jersey State House” by Marion Touvel. Licensed under Public domain via Wikimedia Commons

Kolivakis on Post-GASB New Jersey and Pension Fund Compensation

numbers and graphs

Last week, the funding ratio of New Jersey’s pension system dropped 20 points. That’s because the state began measuring funding under new GASB accounting rules, which requires using market asset values instead of actuarial ones.

This new way of measuring liabilities puts New Jersey in an even deeper hole. But as Leo Kolivakis of Pension Pulse points out, this is a hole that New Jersey dug for itself – with poor pension governance, below-median investment performance and by diverting state pension payments to other parts of the budget.

Here’s Kolivakis’ take on New Jersey’s situation, the new GASB rules and compensating pension fund staff.

__________________________

Originally published at Pension Pulse:

You can read more on GASB’s new rules for pensions here. I note the background for these changes:

On August 2, 2012, the GASB published accounting and financial reporting standards that improve the way state and local governments report their pension liabilities and expenses, resulting in a more faithful representation of the full impact of these obligations.

The guidance contained in these Statements will change how governments calculate and report the costs and obligations associated with pensions in important ways. It is designed to improve the decision-usefulness of reported pension information and to increase the transparency, consistency, and comparability of pension information across state and local governments.

For example, net pension liabilities will be reported on governments’ balance sheet, providing citizens and other users of these financial reports with a clearer picture of the size and nature of the financial obligations to current and former employees for past services rendered.

In particular, Statement 68 requires governments providing defined benefit pensions to recognize their long-term obligation for pension benefits as a liability for the first time, and to more comprehensively and comparably measure the annual costs of pension benefits.

The new GASB rules will impact all state and local pensions, not just New Jersey. This will be another important measure to determine whether U.S. public pensions are indeed on solid footing.

As for New Jersey, back in March, I commented on its pensiongate scandal and didn’t mince my words:

The article doesn’t capture the real problem at U.S. public pension plans, namely, lack of proper governance. You basically have politicians appointing political bureaucrats in charge of public pensions, paying them peanut salaries and getting monkey results. There are exceptions but this is typically how U.S. public pension funds are mismanaged.

And who benefits most from this? Of course, the Paul Singers, Dan Loebs, Steve Schwarzmans, and all the rest of the who’s who managing hedge funds and private equity funds. It’s one big alternatives party — for the big boys. Everyone is making a killing except for these public pension funds, praying for an alternatives miracle that will never happen. These alternatives managers and their sophisticated marketing are milking the public pension cow dry. They basically have a license to steal.

And why not? There are plenty of dumb institutions listening to their useless investment consultants who are more than happy to recommend the latest hot hedge fund or private equity fund to their ignorant clients. It’s a frigging joke which is why the Oracle of Omaha is 100% right when he warns us that the worst is yet to come for U.S. public pensions.

As far as New Jersey, Gov. Christie has done some good things on pension reform but a lot more needs to be done. Double-dipping pensioners are bleeding New Jersey dry.  Unions can bitch all they want about rich alternatives managers meddling in their state’s politics but they must accept shared risk of their plan, which includes raising the retirement age and cuts in benefits as long as the plan is chronically underfunded. The state of New Jersey, however, should make sure it tops up its public pension plan which it neglected to do for years (the major cause of the pension deficit).

The biggest factor explaining the pension deficit in New Jersey and other states is how successive state governments failed to make their pension contributions, using the money to fund other things (no doubt in an effort to buy votes).

But there are plenty of other factors that didn’t help, like lack of sensible pension reforms, lousy investment performance and poor governance.

On this last point, Michael B. Marois of Bloomberg reports, California Pension Fund Bonus Payouts Climb 14% From Prior Year:

The $300 billion California Public Employees’ Retirement System, the largest U.S. public pension, paid $9 million in bonuses last fiscal year, up 14 percent from a year earlier as earnings exceeded benchmarks.

The fund, known as Calpers, paid $8.7 million in bonuses to investment staff in the year ended June 30, and almost $300,000 to four non-investment executives, according to data provided by the system. The rewards are based on three-year performance verses a benchmark, as well as the earnings of each asset class and individual portfolios, said spokesman Brad Pacheco.

“These awards are part of the overall compensation we provide to recruit and retain skilled investment professionals needed to ensure success of the fund,” Pacheco said.

Public-pension funds are recouping investment losses suffered during the 18-month recession that ended in June 2009, which wiped out a third of Calpers’ value. Still, the crisis left U.S. pensions short more than an estimated $915 billion needed to cover benefits promised to government workers. Taxpayers have been asked to make up the shortfall.

The biggest bonus earner was Ted Eliopoulos, the chief investment officer who recorded a $305,810 bonus last year in addition to his $412,039 base pay.

Top Job

That bonus was paid when Eliopoulos was acting chief investment officer after his predecessor Joe Dear died in February from cancer. Prior to that, Eliopoulos headed the fund’s real estate portfolio. He now earns $475,000 in base pay after he was tapped for the top investment job in September.

Eliopoulos announced in September that the fund was divesting all $4 billion it had in hedge funds, saying they were too expensive and too complicated and not worth the returns.

The pension fund earned 18.4 percent last fiscal year, 12.5 percent a year earlier and 1 percent in 2012. It estimates it need 7.5 percent annually to meet its long-term obligation to pay benefits promised to state and local government workers.

Calpers is still short $103.6 billion needed to cover those promises based on market value as of June 30, 2012, the latest figure that was available. That shortfall is up 19 percent from a year earlier.

The California fund says it must grant bonuses to help compete with the pay that employees could make if they went to work on Wall Street. Pacheco said spending money on in-house investment management saves about $100 million a year that otherwise would be paid to Wall Street in fees.

Wall Street bonuses, which rose 15 percent on average last year to $164,530 — the highest since 2007 — may climb again as a result of payments deferred from previous years, New York Comptroller Thomas DiNapoli said last month.

Four executives outside the Calpers investment office were paid a total of $295,930 in bonuses last year, the fund said. Anne Stausboll, chief executive officer, got $113,679; Chief Actuary Alan Milligan earned $75,748 and Chief Financial Officer Cheryl Eason was paid $89,703, almost double a year earlier.

Calpers paid a total of $7.9 million in bonuses in the prior fiscal year.

Compensation is part of pension governance and if you ask my expert opinion, CalPERS’ compensation is fair and accurately reflects the market, their performance and their ability to attract and retain professionals to manage billions. The only thing I would change is base it on four-year rolling returns, like they do at Canadian public pension funds.

All this hoopla on compensation at U.S. public pension funds is totally misdirected. I happen to think most U.S. public pension fund managers are grossly underpaid, just like I think some Canadian public pension fund managers are grossly overpaid (read my comment on PSP’s hefty payouts and the subsequent ones on its tricky balancing act and its FY 2014 results which were likely padded by skirting foreign taxes).

Getting compensation right is critical to the long-term health of any public pension fund but supervisors of these funds should make sure they’re paying their senior investment staff properly based on benchmarks that truly reflect the risks they’re taking. I believe in paying people for performance, not for taking dumb risks to trounce their silly benchmark (that contributed to Caisse’s ABCP disaster which the media is still covering up).

New Jersey Pension Funding Drops 20 Points As New Accounting Rules Kick In

New Jersey seal

The funding status of New Jersey’s pension system dropped 20 points this week as the state’s Treasury Department began measuring funding using new accounting rules.

From Reuters:

In a document released on Tuesday after a bond sale, the state revealed that one of its five main pension funds will have insufficient assets to cover projected benefit payments within 10 years.

Under new pension accounting standards, issued by the Government Accounting Standards Board (GASB), the New Jersey system’s overall funded level stands at 44 percent for fiscal 2014, compared to the 63 percent previously determined by standard actuarial methods. Eighty percent or more is generally considered healthy.

[…]

New Jersey Treasury Department spokesman Christopher Santarelli said in a statement that the retirement system had current assets of about $40 billion.

But he added that the new pension reporting system, based on actual contributions, “underscores the urgent need for additional, aggressive reform of a pension and health benefits system that if fully funded would eat up 20 percent of New Jersey’s budget.”

[…]

The GASB rules measure a retirement system’s net position as a percentage of total pension liability.

The net position uses market asset values instead of actuarial ones. In the case of more poorly funded systems such as New Jersey’s, it also uses lower discount rates that make the liabilities appear much higher.

Fitch said the funding drop “wasn’t a surprise”, but that pensions remain a serious problem. From Fitch:

The significantly weaker pension figures released by the state of New Jersey today in a supplemental bond sale disclosure are not a surprise, in Fitch’s view. The state is the first to disclose materially weaker pension metrics following its conversion to new accounting requirements under GASB statement 67.

[…]

For more than a decade, the state has severely underfunded the actuarially calculated contributions needed to progress toward full actuarial funding, even following extensive plan reforms, and the state cut its already insufficient contributions for fiscal years 2014 and 2015 to address unexpected structural budget weakness. The governor has convened a special pension taskforce to propose options for additional pension reform and is expected to make a proposal to the legislature in early 2015. Fitch’s Negative Outlook at the current rating level reflects the concern that state corrective action to address its budgetary and pension challenges will be difficult to achieve and sustain over time, particularly given its narrow liquidity, limited fiscal flexibility, and the risk that litigation may defer or dilute pension reforms.

Fitch continues to believe that the new GASB pension standards represent a step forward in improving pension transparency. For example, the requirement to calculate total pension liabilities under the more conservative entry age normal cost method, rather than the multiple options allowable under the old standards, will increase the comparability of governments’ pension liabilities. Although most large public plans already used entry age normal, New Jersey did not, and the materially higher total pension liabilities that it disclosed under the GASB 67 standard reflect in part this switch.

Read Fitch’s full statement here.

New Jersey Pension Shifts $100 Million From U.S. to Asian Real Estate

businessman holding small model house in his hands

The New Jersey Division of Investment, the arm of the state government that manages and invests pension assets, is pulling $100 million out of U.S. real estate and shifting the money to a fund that invests in Asian real estate.

The fund will invest in real estate in China, Japan, Singapore and Australia. More details from IPE Real Estate:

The New Jersey Division of Investment is pulling capital out of two core US real estate funds and redeploying it into an Asia-Pacific property fund.

New Jersey is redeeming all of its $91m (€73.2m) interest in the AEW Core Property Trust as well as a partial redemption from its $400m interest in the CT High Grade Partners II fund.

The pension fund has approved a $100m commitment to SC Investment Management’s Real Estate Capital Asia Partners I, which will be funded by the two redemptions.

Following a recent recovery in US real estate prices, New Jersey decided to rotate capital from existing managers to new opportunities. Over the past several months, the pension fund has been evaluating core investments it made between 2006 to 2008.

New Jersey is seeking to capitalise on sustained occupier and investor demand in Asia Pacific, driven by long-term demographic and urbanisation trends in the region.

[…]

SC Invesmtent is targeting a 9% return by investing in undervalued, under-managed and distressed properties where value creation opportunities exist.

According to New Jersey, SC Investment has been a consistent top-quartile performer. In the manager’s previous investment funds, deals generated a 35% gross IRR and 2.1x return, with proceeds of $600m.

The Division of Investment manages $81.22 billion in pension assets.

Moody’s: Public Pension Liabilities Declined in Majority of States in 2013

United States map

States paid more of their actuarially required contributions to their pension systems in 2013; coupled with “strong” investment performance, 27 states saw their pension liabilities decline in fiscal year 2013, according to a new Moody’s report.

From Pensions & Investments:

In a report released Thursday, “U.S. State Pension Medians for FY 2013,” Moody’s found that pension liabilities declined in 27 states, while 21 states with lagging valuations had an average increase of 38.9%. “We believe that states should continue to show improvement in their liabilities in fiscal 2014 due to continued strong investment performance,” Moody’s said in a statement.

The median annualized returns for the period ended June 30, 2014, was 16.1%.

In measuring actuarially determined contribution levels, Moody’s found that 34 states contributed 90% or higher in fiscal 2013 and 12 contributed between 60% and 90%, while only four states contributed less. New Jersey was the lowest at only 29% of actuarial determined contributions.

In terms of pension liability as a proportion of government revenue, the median ratio dropped to 60.3% from 63.9% in fiscal 2013, but 14 states were more than 100%. The highest ratios of pension liability to revenue were in Illinois (268.3%), Connecticut (236%), Kentucky (193.2%) and New Jersey (179.7%).

States with the lowest liabilities-to-revenue ratio included Nebraska (12.6%), Wisconsin (13.8%), Tennessee (20.9%) and New York (24.2%).

The report can be read here [subscription required].

Robert Grady Steps Down From New Jersey Pension Investment Board

Robert Grady

Robert Grady has resigned from his position as chairman of the New Jersey State Investment Council. He announced his decision during the council’s meeting on Wednesday.

The Council formulates investment polices that govern New Jersey’s Division of Investment, which manages the state’s pension assets.

The rest of the board members collectively commented on Grady’s tenure with the Council, according to ai-cio.com:

“The members of the council acknowledge and appreciate Chairman Grady’s unique blend of outstanding investment and communication skills, which will be deeply missed,” the resolution stated. “We are grateful for his leadership, will miss his warmth and wisdom and good humor, and thank him for his selfless and exemplary service.”

Grady’s tenure was marked by the outperformance of benchmarks – but also controversy. From Chief Investment Officer:

For the four years ending May 30, 2014, the fund has outperformed its policy benchmark by an annualized rate of 1%, generating an additional $3 billion in alpha. New Jersey’s pension returned 17% in the 2014 fiscal year—in line with the median large public plan, according to Wilshire Associates—while taking less risk than 85% of its peers.

[…]

Earlier this year, Grady was the target of criticism from a major New Jersey union, which accused the fund of pay-to-play violations during his and prior chairman’s tenures. The state ethics commission has taken no action on the union’s allegations, which it addressed to the department.

More on the controversy surrounding Grady, from the International Business Times:

In recent months, campaign finance documents revealed that under Grady’s leadership, the state has awarded lucrative pension management contracts to hedge fund, private equity, venture capital and other so-called “alternative investment” firms whose executives made campaign contributions to Christie’s campaign, his state party, the Christie-led Republican Governors Association and the Republican National Committee. The donations included a $10,000 contribution from Massachusetts Republican Gov.-elect Charlie Baker to the New Jersey Republican State Committee just months before Baker’s firm was given a New Jersey pension investment.

The donations were made despite New Jersey and federal rules aiming to restrict contributions to state officials like Christie who oversee pension investment decisions. Documents uncovered by International Business Times showed that Grady, a former Carlyle Group executive, was in regular communication with Christie’s campaign officials at the time the campaign was raising money and he was overseeing the state’s pension investments. Grady pushed New Jersey to move pension money into an investment in which his private financial firm was also investing, documents revealed. New Jersey also invested in Carlyle Group funds during Grady’s tenure, though he recused himself from final votes on those investments.

Grady has categorically denied the pay-to-play allegations, saying that his position doesn’t give him the power to give pension money to investment firms.

It’s likely that Grady will become a bigger part of Chris Christie’s potential campaign for the presidency.

 

Photo by Opine Needles Blog via Wikimedia Commons

New Jersey Lawmaker Wants to Reduce Pension Tax to Keep Retirees From Leaving State

New Jersey State House

In light of a recent poll that found 25 percent of New Jersey residents are “very likely” to leave the state when they retire, one lawmaker wants to reform the way the state taxes pension benefits.

The goal is to keep middle-class retirees in New Jersey.

More details from the Burlington County Times:

New Jersey Senate President Stephen Sweeney says he’s interested in changing the way the state taxes pension income to help keep retirees from leaving New Jersey for less expensive states.

New Jersey does not tax Social Security or military pensions, but requires residents to include pension income when they file their income tax returns.

Residents age 62 or older can qualify for a pension tax exclusion of up to $20,000 of their income for couples or $15,000 for individual filers, provided their gross income doesn’t exceed $100,000.

Speaking to seniors during a telephone town hall meeting hosted by AARP-NJ, Sweeney said he was interested in reforming the pension tax to help entice residents to remain in New Jersey during their retirements.

“We’re looking at raising the threshold to keep people in New Jersey,” Sweeney, D-3rd of West Deptford, said Tuesday.

[…]

The issue of seniors fleeing New Jersey has prompted several lawmakers to propose repealing the state’s inheritance tax or raising the state’s threshold for paying an estate tax from $675,000 to the federal level of $5.34 million.

Sweeney didn’t dismiss those proposals during the town hall, but said he also wanted to pursue changing the pension tax because it would assist more middle-class retirees.

“It really hits the middle class hard,” he said.

New Jersey taxes pension benefits at a rate of 3.6 percent; that number has grown from 3.1 percent since 2000.

But it’s not the only reason retirees are thinking about leaving. The state’s housing costs for seniors are the highest in the country, and healthcare costs are the third-highest.