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February 9, 2010

Re:      Proposed Pension Reform Bills S-2, S-3, S-4 and SCR-1

Dear Mayor:

Yesterday Senate President Sweeney and Senate Republican Leader Kean announced bipartisan legislation to complete the 2006 Joint Legislative Committee’s reforms to the state’s public employee pension and benefits system.  The four bills S-2, S-3, S-4 and SCR-1, detailed below, according to the Senators would “return the pension and benefits system to its original goal of ensuring the retirements of rank-and-file public employees and constitutionally require government to meet its annual pension obligations.”  Senate President Sweeny stated his goal is to have the reforms pass the full Senate before the end of the month.

S-2:

  • Limits enrollment to defined benefits plans to full-time employees rather than compensation for PERS.  For local government, full-time employees must work 32 hours per week.  Employees working less than 32 hours prior to the law going into effect would continue in the pension system as long as they remain continuously employed.
  • All new Part-time employees, those working less than 32 hours per week, will no longer qualify for PERS but will go into the Defined Contribution Retirement Plan. 
  • Increases the compensation requirement to join the Defined Contribution Retirement Plan from $1,500 to $5,000.
  • The calculation for pension benefits returns to N/60 for all new employees in the PERS.  The Veterans status remains unchanged.
  • Changes pension calculations from the highest 3 years to highest 5 years for all new employees in PERS and from the highest 1 year to highest 3 years for all new employees in PFRS.  The Veterans status remains unchanged.
  • Allows currents employees or employees with less than 10 years in PERS to opt into the Defined Contribution Retirement Plan or opt-out from the retirement system all together.
  • For PFRS only, imposes the salary cap linked to Social Security maximum contribution limit on future employees and repeals the benefit enhancement.  The enhancement allows PFRS members to retire with 75% maximum compensation if the retirement fund reaches 104% funding level.
  • Requires PERS employees to designate one job for one pension.  The position with the highest compensation would be used.  This provision does not effect current PERS employees with several jobs as long as they remain continually employed by the same multiple municipalities. 
  • For new hires, repeals the statutory non-forfeitable rights provision for all employees in State-administered retirement systems. 
  • Eliminates Prosecutors Part of PERS.

S-3:

  • Requires all current local employees to pay at least 1.5% of their base salary towards health benefits after expiration of current contract.
  • Requires all newly hired local employees, when they retire, to pay at least 1.5% of their base pension toward health benefits. 
  • For future retirees, eliminates the waiver of the 1.5% for participating in the Wellness Program.
  • Allows local governments the ability to negotiate a coverage plan offered by the Health Benefits Commission through collective bargaining agreements. 
  • Requires all changes made with the State employees’ health benefit coverage through negotiation be applied to local government employees covered by the State Health Benefits Plan. 
  • Requires new local employees to work at least 25 hours per week to qualify for health benefits.  A local employer could decide to impose a higher threshold of hours per week, but the minimum is 25 hours. 
  • Limits the current financial incentive to waive State Health Benefits Plan to 25% of the cost or $5,000, whichever is less. 
  • Prohibits duplicate coverage under the State Health Benefit Program.

S-4:

  • For new local government employees, limits sick leave payout to $15,000.
  • Permits only one year’s worth of vacation time carried over year to year for new local government employees. 
  • For PERS, replaces ordinary disability and accidental disability pension benefits with private disability insurance coverage.

SCR-1:

  • A constitutional amendment to require the State to pay each year the full amount of their contribution obligation for each pension plan operated by the State.  Starting in FY 2012, the State would be required to pay 1/7th of the required amount. Every year, this would increase by 1/7th of the required amount until reaching the full required amount.  

 

Questions on these bills can be directed to Lori Buckelew at lbuckelew@njslom.com or 609-695-3481 x112.
Very truly yours,

William G. Dressel, Jr.

Executive Director

 

 

 

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