A bipartisan group of New Jersey legislators announced Thursday that they are introducing bills to restructure the state pension system, creating a hybrid system for some public employees covered by the $74.9 billion New Jersey Pension Fund, Trenton.
The hybrid system would protect current pension benefits for employees with more than five years of service, but it would create a different mechanism for new hires and those with fewer than five years of service, according to a news release Thursday.
These latter employees would participate in a defined benefit plan on the first $40,000 of income and a cash balance account on income above $40,000, the news release said. The cash balance account "pays a guaranteed 4% return or 75% of the amount the pension system earns on their account," the news release said.
The hybrid pension system covers teachers and non-uniformed state, county and municipal employees. "Any excess earnings would remain within the Teachers' Pension and Annuity Fund and the Public Employees Retirement System to reduce the unfunded liability," said the news release, referring to two large pension funds within the New Jersey Pension Fund.
"We need to have the courage to make the right decisions and take the actions that are best for New Jersey's future," said Stephen M. Sweeney, president of the New Jersey Senate, in the news release. "If we fail to act, property taxes will continue to go up, and pension, health benefits and debt service will continue to eat up every penny of state revenue growth over the next three years."
The pension system proposal is one of 27 bills being submitted to the Senate and General Assembly dealing with issues ranging from reducing health-care costs to consolidating certain school district and municipal government functions.
The proposals are based on recommendations issued in August by a commission composed of politicians, economists and financial professionals that was organized by Mr. Sweeney.
On Thursday, Mr. Sweeney was joined by fellow Democrats Sen. Paul A. Sarlo, chairman of the Senate Budget Committee; and Louis D. Greenwald, majority leader of the General Assembly, as well as by Republican Senate Budget Officer Paul Oroho in describing the proposals.
"Our first line of defense shouldn't be to raise taxes, especially when there are more fiscally responsible options on the table that can reasonably control government costs," Mr. Oroho said in the news release.