Corzine Signs Garden State Pension Reform Bill

September 30, 2008 (PLANSPONSOR.com) - Pension reform legislation signed into law by New Jersey Governor Jon S. Corzine that calls for a higher retirement age and new income eligibility requirements for enrollment should save the Garden State $150 million through 2022.

That was a key message Corzine delivered when he signed the Public Employee Pension and Benefits Reform Act of 2008 (S-1962/A-2818), according to a Corzine news announcement.

“The signing of this legislation is another step in the realignment of the compensation of our public employees,” Corzine said in the announcement. “The reforms we’ve made over the last two years strike the right balance of being fair to hard-working public employees and at the same time lightening the burden on our taxpayers.”

The significant changes include increasing to $7,500 the annual salary required for new workers to qualify for the state pension system. Previously, workers were required to have an annual compensation of only $500 to qualify for the Teachers Pension and Annuity Fund, and a minimum salary of $1,500 a year for the Public Employees Retirement System.

The legislation also raises the retirement age to 62 for new employees to qualify for a pension without a reduction. The current retirement age is 60.

The Corzine announcement said the number of paid holidays for state employees is reduced to 12 - eliminating the Lincoln's Birthday holiday and combining it with Washington's Birthday, to be observed as President's Day.

The new law makes further reforms to the State Health Benefits Program (SHBP), allowing the state to offer an incentive to employees to opt out of the program and accept health coverage from other sources, such as a spouse's plan. The state would determine whether to offer the incentive and the amount of the incentive, which cannot exceed half of the amount saved because of the employee's waiver of coverage.

"These changes reflect the state's fiscal realities and come in the same year when we had the largest year-on-year reduction in the budget in New Jersey history, set aside $650 million for debt repayment, and reduced the actual size of government itself," Corzine said, in the statement.

Pension and Benefits Reform, State and Local Savings Summary

  • 2007 Contract Negotiations
    Average Annual Savings: $572.6 million
    Total Savings Through 2022: $6.4 billion
  • 2008 Legislation (S1962/A2818)
    Average Annual Savings: $12.77 million
    Total Savings Through 2022: $150 million
  • Health, Pension, and Other Benefit Reforms, State and Local Savings Mandatory Health Insurance Contribution for State Employees
    Average Annual Savings: $123.35 million
    Total Savings Through 2022: $1.85 billion
  • Increased Co-Pays
    Average Annual Savings: $38.26 million
    Total Savings: $191.32 million (through 2022)
  • Health Plan Design Changes
    Average Annual Savings: $155.38 million
    Total Savings Through 2022: $776.91 million
  • Retirement Age Increased from 55 to 60
    Average Annual Savings: $28.5 million
    Total Savings Through 2022: $370.55 million
  • Cap on Pensionable Income
    Average Annual Savings: $69.29 million
    Total Savings Through 2022: $900.78 million
  • Increased Employee Pension Contribution
    Average Annual Savings: $156.59
    Total Savings Through 2022: $2.29 billion
  • Mandated Defined Contribution Plan for Elected/Appointed Officials
    Average Annual Savings: $1.19 million
    Total Savings Through 2022: $16.69 million
  • Retirement Age Increased from 60-62
    Average Annual Savings: $8.92 million
    Total Savings Through 2022: $106.99 million
  • Limit Eligibility for Pension
    Average Annual Savings: $930,000
    Total Savings Through 2022: $13.06 million
  • Eliminate Lincoln's Birthday Holiday
    Average Annual Savings: $2.92 million
    Total Savings Through 2022: $32.15 million

Source: New Jersey Office of the Governor

More information about the bill is available here

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