The New Jersey Pension and Health Benefit Study Commission recommended freezing the $76.8 billion New Jersey Pension Fund, Trenton, and creating a new cash balance plan for current and future participants.
The commission was created Aug. 1 by an executive order from Gov. Chris Christie to analyze the state’s system for providing both pension and health benefits.
The report calls the state’s current pension funded status “dire,” noting the unfunded liability for the state’s pension funds has risen to $83 billion in 2014 from $37 billion in 2013, and that the Teachers’ Pension and Annuity Fund will be completely unable to make its projected payments beginning in 2027.
As a result, the commission recommended freezing the state’s pension funds, ending the accrual of new benefits and employee contributions, noting in the report that the state’s taxpayers “would be freed from having to fund accrual of benefits at levels that have proven to be unsustainable.”
Employees would then be moved to a newly created cash balance plan, which the commission cited as a better alternative than a pure defined contribution plan because lifetime annuities would still be provided, and that the State Investment Council and investment managers retain responsibility for investment decisions.
The commission also recommended a potential state constitutional amendment to circumvent challenges to the constitutionality of any changes in employee benefits.
The final report is available on the state Treasury Department’s website.