According to the Pew Charitable Trusts, the condition of New Jersey’s pension system ranks among the most underfunded in the country. The State’s combined pension and retiree health benefit liabilities of $151.5 billion are four times the size of the State’s annual budget; and more than three times the size of the State’s bonded debt. That public employee debt represents $16,772 for every one of New Jersey’s nine million residents, it will continue to grow every year. Without changes to the pension and benefit structure, the cost of pensions and benefits will rise by $4.1 billion over the next four years and eat up 26 percent of the state budget.
Recommendations – Pension System:
- Shift new state and local government employees and those with less than five years of service in the Public Employees’ Retirement System and the Teachers’ Pension and Annuity Fund from the current defined benefit pension system to a sustainable hybrid system and preserve the current system for employees with over five years of service who have vested contractual pension rights.
Recommendations – Health Benefits and Other Benefits:
- Shift all state and local government employees and retiree’s health care coverage from Platinum to Gold.
- Require all new state and local government retirees to pay the same percent of premium costs they paid when working.
- Merge the School Employees Health Benefits Program into the larger State Health Benefits Plan and make the plans identical in coverage.
- Cap accrued terminal leave payouts for state and local retirees at $7,500 or the amount currently earned, and makes those payments based on average career salary.
- Require state and local governments to pay the first $15,000 of remaining earned sick leave immediately or allocate it on a pre-tax basis to retiree healthcare premiums for qualifying employees and pay the remaining amount over five years.
- Require an ongoing third-party audit of health care claims
- Require families with multiple State or local government employers to select only one health care plan from one employer.