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correct size blogOn February 16, Assemblyman Thomson, who is a pension actuary by trade, introduced legislation proposing alternatives to the legislation (S-5) that transfers management of Police and Fire Retirement System (PFRS) to labor dominated Board of Trustees.    Likewise, Senator Declan O’Scanlon has introduced an identical Senate companion.   A-3414 and S-1964 would transfer the management of the PFRS to a 15 member Board of Trustees.

While A-3414/S-1964 include many of the same elements of S-5 (see blog post) there are the following differences, which the League believes improves elements of S-5.

  • A-3414 creates balanced representation on the Board of Trustees. It increases PFRS Board of Trustees representation to 15 members as follows:
    • 7 Labor representatives
      • 2 police officers
        • 1 appointed by PBA President
        • 1 appointed by FOP President
      • 2 firefighters
        • 1 appointed by FMBA President
        • 1 appointed by PPFA President
      • 1 active police officer elected from active members of the system
      • 1 active firefighter elected from the active members of the system
      • 1 retiree elected from the retiree members of the system
    • 7 Management representatives
      • 4 appointed by the Governor from recommendations of the League and the Association of Counties who are either elected or employed as administrator or chief financial officer in municipal or county government
      • 1 appointed by the Governor who holds a management or supervisory position of the Executive Branch
      • 1 direct appointment from the League
      • 1 direct appointment from the Association of Counties
    • 1 Taxpayer
      • Appointed by Governor
      • Cannot be a
        • member retiree,
        • beneficiary,
        • state or local elected official,
        • officer of a county,
        • state labor organization, union or affiliate that represents public employees
  • Increases the required number of Trustees that must be present for the Board to take action. Requires 8 trustees to be present for a quorum.
  • Requires a supermajority to assure accountability for benefit enhancements before reaching secure financial footing. Until the fund has reached the target fund ratio of 80%,  9 affirmative votes will be required to:
    • Enhance or reduce member benefits, including COLA
    • Approve any increase or decrease in employer or employee contribution rates, other than those recommended by the actuary.
  • Increases assurances of financial stability. Prohibits the implementation of a Board decision if, according to a written actuary report, the direct or indirect result of the decision will be that the fund ratio of that part falls below the target fund ratio (80%) in any valuation period during the 5 years following the implementation.
  • Assures property taxpayers will not be left making up for decisions on contribution rates. Changes to members’ contribution rate cannot be implemented if the direct or indirect result of the adjustment will be that the fund ratio of the part falls below 80% during the 5 years following implementation.
  • Assures reasonable benchmarks are used to evaluate the fund. Every 3 years, the Director of the Division of Investments shall compare the investment rate of return of PFRS with the investment rate of return attained by the Division on behalf of the other pensions.
  • If the Director determines that PFRS has yielded a lower rate of return than the State during the preceding 3 years, then the Board must increase the employer and employee contribution rates.
  • The increase is by an amount necessary to contribute to the retirement fund, within 2 years, the difference between the 2 rates of returns.
  • The increase shall be by the amount necessary for each to generate 50% of the amount required.
  • Requires the PFRS Board of Trustees to set the same regular interest rates as the State Treasurer for PERS, TPAF, JRS, & SPRS.

A-3414 and S-1964 include many of the safeguards that the League has advocated for S-5.    Both bills await committee hearings.