Senator Declan O’Scanlon and Assemblyman Ned Thomson have launched a joint effort to safeguard the pensions of police officers and firefighters, and to increase protections for property taxpayers.
Legislation sponsored by Sen. Declan O’Scanlon and Asm. Ned Thomson would safeguard the pensions of police officers and firefighters and increase protections for property taxpayers. (SenateNJ.com)
Their new legislative effort, S-1964/A-3414, would improve upon a plan to transfer management of the Police and Firemen’s Retirement System (PFRS) to a newly empowered PFRS Board of Trustees.
O’Scanlon and Thomson expressed concern that a different version of the PFRS transfer plan, S-5, could result in increased costs to property taxpayers and a reduction of pension payouts to retirees.
“I have absolutely no problem with police and fire unions taking more control of their pension system investments. But if you let pension fund members set their own benefits or contribution rates without strict safeguards, you invite the very missteps that led to the underfunding of these systems in the first place,” said O’Scanlon (R-Monmouth). “The potential consequences would be dire both for police and fire retirees who depend on their pension checks, and for property taxpayers who fund over 70% of the system. Assemblyman Thomson and I have proposed reasonable protections that can help the PFRS transfer to succeed financially over the long term.”
The new legislation stemmed from proposed amendments to S-5 that Democrats refused to consider.
Their legislation differs from S-5 by:
- Balancing the PFRS board between labor and management by increasing the PFRS board from 12 to 15 members. This new board will be 7 -7 with the tiebreaker. The 3 new members will be:
- One direct appointment by NJAC.
- One direct appointment by NJLOM.
- One appointment to be tiebreaker focused on taxpayers without police/fire experience or local government management experience.
- Requiring a super-majority of the board (9 of 15) for any benefit enhancement including COLA restoration or any contribution change until the fund reaches the sustained target funded ratio of 80%. After it hits 80%, a simple-majority of the board (8 of 15) will be enough for any benefit enhancement or contribution change.
- Ensuring that any pension changes will allow the fund to sustain 80% funding – not just hit that level and immediately decline once a benefit enhancement begins.
- Ensuring that the cost of any underperforming investment returns be shared by the labor unions. A rolling 3-year analysis comparing the PFRS return rate to the return rate of the other state managed systems will be done, and if PFRS underperforms against the other pension funds, the PFRS member and employer contribution rates shall equally increase from the current statutory contribution rates to make up the difference over a 2-year period.
Thomson, one of just 9,000 federally approved pension actuaries in the nation, has more than 35 years of experience analyzing pension funds.
He administers more than 500 pension plans, working with employers to improve the retirement outcome for workers. Additionally, he has spent more than two decades as a trustee of the state Public Employees Retirement System.
“My number one priority is to ensure that PFRS is managed well to the benefit of both police and fire retirees and property taxpayers,” said Thomson (R-Monmouth and Ocean). “I’m gravely concerned, however, that S-5 lacks the significant safeguards and controls that Senator O’Scanlon and I have proposed. Unfortunately, as public retirees in Rhode Island recently learned, public pension benefits can be reduced, even retroactively, if the courts believe doing so is necessary to maintain the solvency of the fund. We don’t want PFRS retirees to risk having their benefits cut. We urge our colleagues to consider the sensible protections that would be afforded through our new legislation.”
Click here to view video of Thomson discussing the need to improve upon the protections offered in S-5.