(TRENTON) – Legislation Speaker Vincent Prieto, Majority Conference Leader Shavonda Sumter, Budget Chairman Gary Schaer and Majority Leader Lou Greenwald sponsored to transfer management of the Police and Firemen’s Retirement System from the state to the Board of Trustees of the Police and Firemen’s Retirement System was advanced Monday by an Assembly panel.
The bill (A-99) would grant more investment responsibility to employees and union members, with the board acting on behalf of contributing employers, active members of the retirement system and retired members.
“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,” said Prieto (D-Hudson/Bergen). “This is their money and they should be able to decide what’s best when it comes to investments. We know this works, and if the police and firefighters who put their lives at risk for us daily feel they can do better with smarter investments, we should not stand in their way.”
The sponsors noted that Colorado, Ohio and Washington police and fire pension funds give trustees investment and policy making powers.
“The unions know what’s best for their members,” said Sumter (D-Passaic/Bergen). “This bill does nothing to change the fundamentals of the retirement system, but allows police and firefighters to make smart decisions when it comes to investments and doing what they see as necessary to strengthen their system. Letting them determine the appropriate level of risk in the investment portfolio is a reasonable change.”
“The police and fire unions should decide on their own what’s best for their members’ retirements,” said Schaer (D-Passaic/Bergen). “Unfortunately, we’ve seen cases whether the pension board pays exorbitant fees to outside fund managers, while performance lags behind the broader market. If the police and fire feel they can make smarter and more efficient decisions for their members, we should give them that opportunity.”
“Letting the police and firefighter unions manage their own pension funds removes politics from the equation and puts responsibility where it should be – the people who directly represent the members,” said Greenwald (D-Camden/Burlington). “This is their money, and we know this works effectively in the private sector. Police and firefighter sacrifice each and every day for our safety, and if they feel this move can boost their system, we should give them the opportunity.”
As of July 1, 2016:
· The PFRS pension assets had a market value of $24.1 billion and an actuarial value of $26.3 billion;
· The unfunded liability was $11.2 billion;
· There were 40,789 active members;
· There were 45,625 pensioners and beneficiaries who received $2.3 billion in pension payments; and
This bill would transfer management of the Police and Firemen’s Retirement System (PFRS) from the Division of Pensions and Benefits in the Department of the Treasury to the Board of Trustees of the PFRS.
It would change the membership of the Board of Trustees of the PFRS from 11 to 12 members. Seven trustees must be present at any meeting of the board for the transaction of its business. The board will consist of:
· Three active policemen – one elected by the active members of the system and two appointed by the heads of unions representing policemen in the State;
· Three active firemen – one elected by the active members of the system and two appointed by the heads of unions representing firemen in the State;
· One retiree elected by retirees in the PFRS;
· Four trustees appointed by the Governor, who either hold or have held an elective local public office or are employed, or have been employed, by a local government as an administrator, manager, or chief financial officer.
· One trustee appointed by the Governor, who holds, or has held, a position in the Executive Branch of State government at the level of division director or above, to represent the interests of State government.
The bill would vest with the board of trustees all the functions, powers, and duties relating to the investment and reinvestment of money in any fund or account under the control of the board. The Division of Investment in the Department of the Treasury currently performs these functions. Under the bill, the board of trustees may make and execute agreements with public and private enterprises for the management of the investments of the retirement system. The bill requires the board to hire an executive director, actuary, chief investment officer, and ombudsman.
The bill would require local employers to pay their required contributions to the PFRS on a quarterly basis. If a local employer does not make a required contribution within 30 days of the due date, the Division of Local Government Services will withhold any State aid payment due to that employer in an amount equal to the amount of the delinquent contribution. The director will release the withheld State aid payment to the employer upon certification by the board of the receipt of the delinquent contribution. The bill would require the Division of Local Government Services in the Department of Community Affairs to consult with the board of trustees when a local employer that has not made the pension payment on time but is eligible for transitional aid, in order to develop a payment plan to ensure that the required payment and interest owed is paid in a timely manner
The bill does not diminish the non-forfeitable right PFRS members have to receive the benefits provided under State law or affirmed by the State’s courts. Nothing in the bill relieves the State or local government employers of any past, present, or future obligations to the PFRS or its members.
The bill would require the board of trustees, at the end of six years following the enactment date of this bill, to conduct a review of the performance and funding levels of the retirement system, as compared to available market data including but, not limited to, the performance of the State Investment Council and Division of Investment with regard to the investment of other State-administered retirement systems or funds and the Bloomberg Barclays Indices, and may, based on, and allow the board, based on a majority vote of the authorized membership, 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.
This would be effective on the 366th day following enactment, except the provisions concerning the election, appointment, and composition of the new Board of Trustees of the Police and Firemen’s Retirement System would take effect four months following enactment and the new Board of Trustees of the Police and Firemen’s Retirement System shall take office on the first business day of the seventh month next following the date of enactment of this act. The Board of Trustees of the Police and Firemen’s Retirement System, the Division of Pensions and Benefits, and the Division of Investment may take such anticipatory administrative action in advance as shall be necessary for the implementation of the act.
The bill was released by the Assembly Appropriations Committee.
