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Will Save Local Governments and Schools $314 Million Next Fiscal Year

(TRENTON) — The Assembly on Monday approved three bills reforming New Jersey’s pension and health benefits system, including one measure that would save local governments and schools $314 million in the fiscal year starting July 1.

After amending one bill to ensure the pension system remains stable for taxpayers and public workers, the Assembly approved legislation to:

  • Make numerous changes to public worker health benefits, mainly by requiring all public employees to pay at least 1.5 percent of their salary toward health benefits after the expiration of a current contract; (A-2460), sponsored by Assembly Speaker Sheila Y. Oliver (D-Essex/Passaic) and Assembly Republican Leader Alex DeCroce (R-Morris). It was approved 66-3-6;
  • Make numerous changes to other public employee benefits, mainly by limiting sick leave payouts for all new local and school employees (A-2459), sponsored by DeCroce and Oliver. It was approved 73-2-1; and
  • Make numerous changes to public worker pensions (A-2461), sponsored by Oliver and DeCroce. It was approved 62-5-9.

“With these bills we are bringing immediate and substantial savings to New Jersey’s beleaguered taxpayers and ensuring a strong pension system,” Oliver said. “This improved package takes a giant step toward fixing our broken pension and benefit system, bringing real reform and relief to taxpayers and creating a more reliable system for public workers.”

One bill (A-2461) was amended and approved on an emergency basis to remove a provision that would have allowed workers to opt-out of the pension system.

“This change was sound public policy that won’t cause more problems down the road,” Oliver said. “Allowing workers to opt-out of the pension system would have caused shortfalls that threatened the system’s sustainability. That would have cost taxpayers even more money, so we did the right thing in removing it.”

Oliver stressed the change did not alter cost-savings.

“These bills will save taxpayers $1 billion in three years, just as they always have,” Oliver said. “The legislative intent of these bills was not compromised. They were, in fact, be made better.”

A2460 would:

  • Require all public employees to pay at least 1.5 percent of their salary toward health benefits after the expiration of a current contract;
  • Require all newly-hired employees to pay at least 1.5 percent of their base pension toward health benefits upon retirement;
  • Require that any changes negotiated by the state — such as higher co-pays — with its employees be applied to every government entity participating in state health benefits programs;
  • Prohibit multiple coverage in state health benefits programs;
  • Require new state workers to work at least 35 hours per week to qualify for health benefits; and
  • Require new local and school employees to work at least 25 hours per week to quality for health benefits.

A2459 would:

  • Limit sick leave payouts for all new local and school employees to $15,000, just as it already is for state employees;
  • Prohibit local government and school employees to carry over only one year of vacation time year-to-year; and
  • Eliminate the ineffective sick leave injury program.

A2461 would:

  • Limit pension system enrollment to new full-time employees who work at least 35 hours per week for the state or 32 hours for local government and schools;
  • Require all workers with more than one public job to receive a pension for only one job, with only the highest-salaried position counting toward a pension;
  • Allow new employees earning at least $5,000 annually to enroll in a 401(k)-style plan;
  • Change the equation used to calculate pensions for new employees by dividing the number of years worked by 60, rather than 55, thus reversing for new workers the 9 percent benefit enhancement enacted in 2001;
  • Base pensions for new public workers and teachers on the five highest salary years, rather than the highest three;
  • Base pensions for new police and firefighters on the three highest salary years rather than the highest single year;
  • Impose a pensionable salary cap for new employees of the Police and Firemen’s Retirement System and the State Police Retirement System. Salary earned under the cap — the base salary equivalent to the maximum wage contribution base for Social Security, or for 2010, $106,800 — would be counted toward PFRS or SPRS membership. Salary over the cap could be included in a 401(k)-type program;
  • Repeal 2003 legislation that allowed a police or firefighter to retire at any age with 25 years of service credit on a special retirement allowance of 70 percent of final compensation, if the retirement system reached a funded level of 104 percent; and
  • Eliminate the non-forfeitable right to pension benefits after five years in the system for new employees.

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