TRENTON, NJ — Assemblyman Edward Thomson (R-Monmouth/Ocean) is criticizing the Murphy administration’s decision to make an accounting change that he says will lower the state’s pension payments by more the $235 million for the upcoming fiscal year.
Thomson voiced his opposition to Acting-Treasurer Elizabeth Muoio’s decision on March 2 to use a 7.5 percent assumed rate for New Jersey’s pension systems, rather than 7 percent.
“It’s incredibly hypocritical for the Murphy administration to say it will fully fund the pension system and then lower the bar with rosy predictions on its health,” said Thomson, who represents the 30th Legislative District, which includes Belmar and Lake Como. “The Murphy administration is already breaking its promises to the state’s pension holders.”
In a statement, Muoio said the change was made to “lay out a responsible pathway to bring the rate in line with long-term expectations without immediately overburdening local governments.”
Her office claims that when the Christie administration lowered the rate of return from 7.65 percent to 7 percent, it would have increased local government employer pension contributions by more than $400 million in 2019 to meet their legally required obligations.
Thomson, who is among 9,000 federally approved pension actuaries in the nation and administers more than 500 pension plans, disagrees: “The new rate of return is higher than most other pension systems and is completely baseless. The goal is to fully fund the pension system as quickly as possible, not kick the can farther down the road.”
Assuming the investments will earn a high rate makes the pension fund look healthier than it really is and doesn't reflect the reality of the state's investment outcomes, he said.
“The higher the actual rate of return is over the assumed rate, the better funded the pension system will be,” said Thomson, who has spent more than two decades as a trustee of the state Public Employees Retirement System.
In related legislative news, Thomson in February is sponsoring a measure in the Assembly that he says would safeguard the pensions of police officers and firefighters, and increase protections for property taxpayers. A companion bill was introduced in the Senate by Declan O’Scanlon (R-Monmouth).
The legislators said their combined effort, S-1964/A-3414, would improve upon a plan to transfer management of the Police and Firemen’s Retirement System (PFRS) to a newly empowered PFRS Board of Trustees.
O’Scanlon and Thomson expressed concern that a different version of the PFRS transfer plan — S-5, which would give police and fire unions control of their pension fund — could result in increased costs to property taxpayers and a reduction of pension payouts to retirees.
“I have absolutely no problem with police and fire unions taking more control of their pension system investments. But if you let pension fund members set their own benefits or contribution rates without strict safeguards, you invite the very missteps that led to the underfunding of these systems in the first place,” O’Scanlon said.
“Unfortunately, as public retirees in Rhode Island recently learned, public pension benefits can be reduced, even retroactively, if the courts believe doing so is necessary to maintain the solvency of the fund,” Thomson said. “We don’t want PFRS retirees to risk having their benefits cut.”
To learn the highlights on how their legislation differs from S-5, click here.
Below is a video of Thomson explaining the legislation.
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