The New Jersey General Assembly on Thursday voted overwhelmingly to allow the Police and Firemen's Retirement System to break away from the New Jersey Department of the Treasury administration and investment management.
By a 61-4 vote with 10 abstentions, the General Assembly joined the state Senate in calling for the pension fund to have a more powerful board of trustees and autonomy from the state's management of the New Jersey Pension Fund, Trenton. The Senate voted 37-0 for the same bill on March 13.
The legislation, which was approved by veto-proof majorities, now goes to Gov. Chris Christie, who has not commented on the bill. The Police and Firemen's Retirement System is the second largest of the seven pension systems within the $71.2 billion New Jersey Pension Fund. For the fiscal year ended June 30, PFRS had $22.8 billion in assets.
The bill increases the size of the police and fire fund's board to trustees to 12 from 11 and gives it more power to administer the fund and make investments. The bill removes the fund's administration from the Treasury Department's Division of Pensions and Benefits, and it severs its investment practices from the Treasury Department's division of investment.
Supporters of the legislation said PFRS can do a better job of administrating and investing as a separate fund rather than being lumped in with six other public pension funds under the umbrella of the New Jersey Pension Fund.
"If the unions want the ability to make investment decisions for their members when it comes to their retirement savings, then we should give them that opportunity — the same as private-sector unions do for their members," Vincent Prieto, the speaker of the General Assembly, said in a news release Thursday after the bill's passage.
A Thursday report by the Office of Legislative Services said the fiscal impact of the legislation could not be determined.
“Any increase in the administrative costs will depend on the board's decisions to establish its own staff and vendors instead of continuing to use the services of the Division of Pensions and Benefits and Division of Investment.” The trustees must hire an executive director, actuary, chief investment officer and ombudsman.
The bill permits trustees to change benefit payments, modify members' contributions, create compensation formulas and reinstate cost-of-living adjustments. COLA payments were suspended for New Jersey Pension Fund participants by a 2011 law, whose constitutionality was upheld by the State Supreme Court in 2016.
The legislation also installs an escape clause. It requires the board of trustees to review “the performance and funding levels” six years after the bill becomes law. The review will compare the pension fund to “available market data,” including performance of the division of investment's handling of other public pension funds.
After six years, a majority of fund participants can ask the trustees to petition the Legislature “to consider legislation that reverts control of the system to the Department of the Treasury or such other agency as the state deems appropriate,” the bill says.