On Monday, March 13th, the Senate amended S-3040 on the floor, by an emergency, and then passed the amended bill unanimously.
One of the amendments will require the Board, at the end of 6 years, to conduct a review of the performance and funding levels of the retirement system, as compared to available market data, including, but not limited to, the performance of the State Investment Council and Division of Investment and the Bloomberg Barclay Indices. Based on the review, by a majority vote, the Board may petition the Legislature to consider legislation that revert control of the pension system back to the Department of Treasury.
The other amendments, which address some issues raised by the League, include:
- Reduces the number of meetings a Board member can miss from 1/2 of the scheduled meetings to 3 meetings.
- Requires the Board to establish standards to define “unexcused absences”.
- Permits Board members to participate in meetings by teleconference.
- Establish minimum standards for Executive Director and Chief Investment Officer:
- Bachelor’s degree from an accredited college.
- 5 years of management experience in accounting, finance, public administration, government pension and retirement planning, investment banking, financial consulting, money management, or similar field.
- Permits the Board to establish additional qualifications for Executive Director and Chief Investment Officers.
- Prohibits any member, retiree, or other beneficiary of the system from holding the position of the Executive Director or Chief Investment Officer.
- Requires a minimum 8 votes of the board for:
- any enhancement or reduction of member benefits.
- approve any increase or decrease in employer contribution that is more than what is recommended by actuary for the system for the purpose of the annual funding requirement for the system.
This provision does not apply to activation of application for retirees pursuant to N.J.S.A. 43:3B-1 et seq.
Changes the quarterly payment dates to March 1, June 1, September 1, and December 1.
While the amendments address many of the concerns we had with S-3040, the amendments did not address our main concern with the Board of Trustees composition of 7 labor representatives and 5 management representatives.
The PFRS is a defined benefit system, where the amount of the retirement pay is calculated on a formula considering factors including length of employment and salary history; not on the return of the funds’ investments. As a result if there is a shortfall in a return from investments the employers (in this case municipalities and counties) must make up the difference from their general funds. At present time, local government employers are contributing 25.51% while the employee is contributing 10% to the PFRS. Therefore, the board should be comprised of an equal number of labor and management representatives with one independent member for an uneven number of members. Otherwise, S-3040 creates a system where the employees retain all the control while the employers, which ultimately are our property taxpayers, assume the greater contribution risk.
In addition, S-3040 still continues to include a provision of withholding State Aid for non-payment of the employer contributions. Local government employers have consistently made their pension payments and other safeguards exist that would prevent a local government employer from skipping a payment, such as Division of Local Government Services approval of local government budgets. This provision is simply unnecessary and should be removed.
It is anticipated that an Assembly companion will be introduced as soon as Thursday (March 16) but it is not known when the Assembly will act.
Ultimately, the League, as well as our partners with the New Jersey Association of Counties, share the same objective as the public safety unions, that is to secure the local PFRS system. Thus, we look forward to continuing our dialogue with the public safety unions and we believe that we are close to developing a consensus on some specific aspects of the proposal we believe could be improved.
Lori Buckelew, Sr. Legislative Analyst, 609-695-3481 x112, email@example.com.
Michael Cerra, Asst. Executive Director, 609-695-3481 x120, firstname.lastname@example.org.