NJPSA Pension WebinarNJPSA Pension Webinar

NJPSA Participants Debra Bradley GR Director Robert Murphy Director of Retirement Services Robert Schwartz Chief Counsel Moderator: Jennifer Keyes-Maloney

Rules for the Webinar ▪This is an interactive experience ▪Feel free to pose questions via the text box at the bottom of the page and as we move along we’ll answer your questions as they come in or at the end of the presentation.

Agenda ▪Failure to Make This & Next Year’s Payment –Governmental Action –Response ▪Legal ▪Legislative ▪Keeping Tabs on the Future: Proposals ▪Action!

Governmental Action ▪P.L.2011, c.78 statutorily required annual phase up payments over a 7 year period into the pension fund –Under Chapter 78, all 500,000 active public employees in the pension systems are paying more for reduced benefits, and nearly 300,000 retirees have seen their COLA’s frozen. –Chapter 78 requires the STATE to make a payment, graduating from 3/7 th this year to 4/7 next year. This payment isn’t optional because c.78 created a contract right!

Governmental Action ▪Decreasing revenues from budget projections in the FY2014 budget led to Gubernatorial action ▪Action –March 25 recalculation of pension liability (via change in funding formula for the state’s pension contribution) ▪Cancelled $93.7 million in previously budgeted pension payments due June 30 (current budget year) ▪Cut FY2015 pension bill by $150 million, putting $900 million LESS into pension system –May 21 cut payment by 2.4 billion in FY2014 & FY2015 ▪FY $1.558 billion down to $696 million ▪FY $2.24 billion down to $681 million

Governmental Action ▪Skipping the 3/7 th (FY 2014) and the 4/7 th (FY2015) kicks the can down the road. ▪The unfunded accrued liability does not go away if the State freezes the defined contribution retirement systems (TPAF or PERS) because this is a past service cost.

Governmental Action ▪The system can be saved if the State sticks to the schedule! –C.78 required a ramp-up by 1/7 th each year until full contributions 7/7 th are made in If the State sticks with the plan, State contributions will level off. –Eventually the cost will decline to about 3.0% of compensation – cheaper than most defined contribution (DC) plans.

NJPSA Legal Action in Response ▪Litigation in response to enactment of P.L.2011, c.78 ongoing –COLA –Elimination of free health benefits for future retirees with less than 20 years in the system as of June 28, 2011 –NJPSA is a named plaintiff ▪Litigation in response to failure to make the required 3/7 & 4/7 payments –NJPSA joined suit with CWA & NJEA amongst other union groups –Motion on matter to be heard on June 25 in Mercer before Assignment Judge Jacobsen

NJPSA Legislative Action in Response ▪Joined Coalition of Labor Organizations to protect pension rights of prospective members ▪Public Statement in Opposition to CutPublic Statement in Opposition to Cut ▪Participated in Joint Labor Organization Lobby Day on June 23 ▪Organized letter writing campaign –TPAF (urging them to join the litigation) –Legislators (urging them to develop solutions )

NJPSA Legislative ‘Asks’ ▪Require pension payments to be made quarterly. ▪Fight for the payment that was included in this year’s budget. ▪Explore additional revenue options so that the State can live up to its legal obligations without impacting other important parts of the budget. Consider: –Reinstatement of the 2009 millionaire’s tax –Alternative revenue sources ▪Only VOTE for a budget that includes the full required payment next year

Legislative Action: Driving Change ▪NJPSA & her sister labor groups pushed the Legislature to drive change ▪By including specific language in the budget & passing supplemental legislation associated with the ‘asks’ the issue is highlighted & change is possible Governor Senate Assembly

Legislative Action: Status ▪IN the BUDGET –Millionaire’s tax –Increase CBT & end BEIP –Quarterly payment ▪Stand alone legislation Governor Senate Assembly

Keeping Tabs on the Future ▪While there has been ongoing discussion around what the Administration may propose with regard to future changes… the Governor has NOT released any specifics NOR provided a date for specifics. X

Keeping Tabs on the Future ▪Regardless of what the GOVERNOR proposes, however, the LEGISLATURE must AGREE –NO proposal right now –NJPSA will keep you posted

ACTION: Advocacy by Pen TPAF Board ▪Under Chapter 78, the pension plans have the right to sue if the state fails to make its full, required contribution. ▪PFRS & PERS have made this decision but TPAF (your pension fund) has NOT ▪We are urging pension plan members to demand that the board of their fund sue on their behalf as well. ▪Take a few minutes to send a letter to your pension board via our Advocacy Center. Advocacy Center

ACTION: Advocacy by Pen NJ Legislature ▪Consider contacting your Legislator to let them know how you feel about being shorting the pension bill. ▪Ask them to honor the commitment they made to public employees and the taxpayers of New Jersey to meet their funding obligations to these systems over a seven- year payment cycle. ▪Contact your Legislator via our Advocacy Center

ACTION: Advocacy by Pen Advocacy Center

Resources For more information, NJSpotlight’s Mark Magyar did a great job laying out the benefits and detriments of the rumors that have been out there on potential future changes o Explainer: The Debate Over Defined-Benefit vs. Defined Contribution Pensions Explainer: The Debate Over Defined-Benefit vs. Defined Contribution Pensions o Analysis: Christie Administration Eyes Shift to ‘Hybrid’ Pension System Analysis: Christie Administration Eyes Shift to ‘Hybrid’ Pension System o Analysis: Retiree Health Benefits Easier to Cut than Pensions Analysis: Retiree Health Benefits Easier to Cut than Pensions

Questions?