NJ Legislature Passes Major Pension and Benefit Reform

On Thursday evening, the New Jersey assembly passed a landmark bi-partisan overhaul of the public employee benefit and pension system.  The bill passed the assembly by a 46-32 vote with 14 Democrats voted with Republicans for the bill. Now all that is needed is a signature from Governor Christie who has already touted the success of the bill’s passage. Over the next 30 years the passage of the public benefit reform bill will save taxpayers of New Jersey $120 billion at a minimum as well as adequately fund the health pension system to a greater degree than it is at today.  New Jersey Unions across the board have spent millions of dollars to fight this reform from Gov. Christie, arguing that they deserve to have taxpayers pick up the tab for their Cadillac health insurance and remarkable pension plans.  

The passage of S-2937 is not only a win for taxpayers but also for public employees who will now see mandated payments of their pension and more choices of health plans at various costs.

Some of the highlights of this bill as detailed by NJ.com are:


  • Police and firefighters would contribute an additional 1.5 percent of their salaries toward pensions, for a total of 10 percent. Non-uniformed public workers, including teachers, would eventually kick in an additional 2 percent of their salaries, for a total of 7.5 percent.
  • Cost of living adjustments would be eliminated for current and future retirees until the pension funds become stable, which is not expected until at least 2040.
  • The retirement age for new teachers and other non-uniformed employees would be 65, up from 60, and they would have to work 30 years, not 25, to be eligible for early retirement.
  • For new police and firefighters, pensions would be 65 percent of salary at 30 years, and 60 percent at 25 years. Current law is 65 percent of salary at 25 years.
  • The state would be contractually required to make its annual pension payment, and unions could sue to force payments.
  • An employee-manager board would be established to set contribution rates, retirement ages and other benefit levels, but only when the funds become stable and as long as the changes don’t have an adverse effect.

Health Benefits

  • All public employees would pay a percentage of their health care premiums in a tiered system based on salaries. 
  • Current retirees would not be affected. Current employees with 20 years of service on the effective date of the act would not be affected when they retire, but would pay the increased contributions while still working.
  • Unions would be able to renegotiate contributions levels, but not before paying the higher rates for at least four years.
  • A board would be established to create new health plans by Jan. 1 that would offer fewer benefits at lower prices, including at least one high-deductible plan. The board would also look at co-pays, prescriptions and other items.

Most importantly for state workers this law immediately improves the health of the pensions system, which at its current pace would be below 50 percent funding by 2040.  In contrast, the passage of this law will fund the pension system by 80 percent come 2040.  Obviously this law tremendously helps the taxpayer who currently pays both salary and benefit plans for nearly 500,000 public employees in New Jersey. More importantly, the mere idea of this legislation has had resounding effects at reducing the size of government in New Jersey.  Between January and July of this year alone, nearly 15,000 public workers are expected to retire.  In comparison, during the entire 2010, more than 20,000 workers retired.  Hopefully this trend will continue to rise and individuals looking for work will think twice before joining the public sector.

New Jersey has one of the largest debts as percentage of GDP in the country, and this bill will not solve that problem.  Further cuts are needed for government spending and unsustainable programs that have been implemented by a long list of big government spenders in the state.  However passage of S-2937 is a step in the right direction as New Jersey tries to shrink the size of government and rein in spending.