Garden State Pension Reform Panel Recommends Retirement Age Increase

December 1, 2005 ( - A potentially controversial report by a blue-ribbon commission charged with recommending reforms to New Jersey's troubled pension and health benefit systems recommended raising the retirement age and cutting pension benefits.

The recommendations could potentially save theGarden State hundreds of millions of dollars, but are certain to push the hot buttons of both current government employees and those already retired, the New York Times reported. The report culminates the work of an eight-member task force appointed by Acting Governor Richard Codey, with a mandate to help fix a system burdened by escalating costs for its 526,479 state and local workers and 217,365 retirees.

This year, the state estimates the cost at $2.4 billion annually – with most of it going for health benefits – out of a $28 billion state budget. By 2010, according to the state, that figure will jump to $6.4 billion, or 20% of the budget.

The study group wrote: “public employee benefits are not simply a line item in the budget. They represent an important part of compensation. Benefits are an integral tool of State and Local governments to attract and retain a high quality workforce. We were also made cognizant of the increasing cost of providing these benefits; the annual challenge the State faces funding these benefits; and the need to protect the interests of all citizens.”

While deciding not to recommend converting the public retirement system from a defined benefit to a defined contribution program, the panel did recommend that:

  • the minimum retirement age should be bumped up to 60 from 55 for public employees other than police officers, firefighters or judges,
  • adjustments should be made to salary base by which pensions are calculated, potentially reducing each employee’s pension by 2% or 3%,
  • current workers and retirees should contribute something – perhaps 5% of the cost – toward their own health insurance,
  • the state should halt the practice of allowing employees to receive big salary increases just before retiring, to raise their pensions. It also recommends ending pensions for private contractors and lawyers who work part-time for municipal governments but are primarily in private practice.

TheGarden State panel also decided against going to a two-tier system that would offer different plans for different jobs for fear that such a move could hurt morale and discourage the state from recruiting younger workers.

Board members explained: “To arrive at these recommendations, our research and discussion was driven by a core set of values:

  • State and local governments have a moral obligation to their employees to make the payments they promised to make.
  • The pension system was meant for career employees. Abuses by the politically well-connected are more than simply inappropriate; they erode the integrity of the system.
  • The pension benefit structure must be able to attract and retain a high quality workforce. But that goal must be consistent with a benefit structure that is affordable.
  • The collective bargaining process must be respected and input from public employees is essential as future changes are considered.
  • Health care benefits are directly related to wages. Health care costs can, and must be, controlled through the collective bargaining process.”

The report is here .