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Legislative Advocacy

Posted on: February 26, 2021

Your Action Needed: PFRS 20 & Out in Assembly on Monday

On Monday, the full Assembly will consider A-2562/S-1017, which permits a PFRS employee who is enrolled before or after the bill's effective date to retire, regardless of age, upon attaining 20 or more years of service credit and would allow that employee to receive a retirement allowance equal to 50% of the member's final compensation. This benefit will expire two years after enactment.

As we previously reported, public safety unions are pushing this legislation in response to what they believe is a misinterpretation of the 1999 law. The public safety unions have argued that the costs of this enhanced benefit will be offset by potential healthcare savings.

The League, along with the New Jersey Association of Counties (NJAC), view this legislation as an enhancement of benefits at a time when local governments can least afford it. The benefit provided in A-2562/S-1017 will impact the pension fund liability leading to increased cost for taxpayers. Before enhanced benefits are even considered, we all have the responsibility to ensure that the pension fund is stable. While a 71.7% funding ratio for the local Police and Fire System (PFRS) is on the right track, the fund is not yet stable enough to consider enhanced benefits. The legislation also does not account for the impact of the recent market downturn or the reduction of the assumed rate of return on the pension fund. In addition, we question how healthcare benefit savings will offset the increased pension liability cost, as not all municipalities and counties provide healthcare benefits in retirement.

The non-partisan Office of Legislative Services (OLS) fiscal impact analysis anticipates the bill will result in an increase in the annual contributions required to be paid by local governments to the PFRS. Furthermore, in their fiscal impact analysis, OLS notes that if "all currently eligible members with 20 to 24 years of service opt for the new benefit, this bill would reduce the current funded ratio of the PFRS-Local from 71.7% to 65.6% and of the PFRS-State from 38.9% to 35.7% in the first year."

Funded by property taxpayer dollars, county and municipal governments across the State will contribute $1,145 billion in 2021, for Police and Fire pension. An increase of $106.9 million from last year, while PFRS members' contribution remains flat at 10% of their salary. Since these additional costs will be borne by taxpayers, the League opposes this legislation.

Please contact your Assembly Representative and urge them to vote no on A-2562/S-1017.

Contact: Lori Buckelew, Assistant Executive Director, lbuckelew@njlm.org, 609-695-3481 x112.

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