IAFF General President Harold Shaitberger Discusses Pension Issues During The Ed Show on MSNBC
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We have been advised that the Senate Democrat's will not adopt the changes called for in Governor Christie's CV of S-2220 that would limit payouts to local and school district employees for accrued sick and vacation days.
What this means, at this point in time, is that if the changes are not adopted, the current existing law regarding accrued sick leave and vacation days will remain unchanged. So however you are currently being compensated under your existing contract remains in effect.
If anything changes with the legislature, we will notify our members via email and our website.
As was reported at a recent PFANJ meeting, the hearing on our case took place on Tuesday, January 4th in Trenton. Our attorney, Mel was able to make the full presentation for which he had very thoroughly prepared, and that the judges were very attentive the whole time. They asked very few questions to either Mel or the State's and Legislature's attorneys, so it is hard to tell what they were thinking. Both the opposing attorneys presented very few arguments, relying principally on the Teachers decision, and it was obvious that they did not spend much preparation time. They each took about 10 minutes while Mel took the entire 30 minutes allotted to him. We believe our briefs and oral argument presented our case in the strongest possible light. Now we just have to wait for their decision which could be in two weeks or six months.
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The Division of Pensions and Benefits is implementing significant changes to retirement
application procedures for members of the Police and Firemen’s Retirement System
(PFRS). This memorandum consists of two sections: Section I addresses the new Terms and Conditions of Retirement members must read and agree to when applying for retirement; Section II explains their origins.
NEW YORK TIMES- August 19, 2010 - Federal regulators accused the State of New Jersey of securities fraud on Wednesday for claiming it had been properly funding public workers’ pensions when it was not.
The Securities and Exchange Commission said the action was its first ever against a state, and only its second against any government over the handling of a public pension fund. The first was the city of San Diego. More may be in store; the agency announced in January that it had a special unit looking into public pension disclosures. The S.E.C. has been trying to assume more authority over municipal securities.
The commission settled its suit with New Jersey by issuing a cease-and-desist order, which the state accepted without admitting or denying the findings. No penalties were imposed.
Nor did the S.E.C.’s order name any individual state officials, nor the bond underwriters and other professionals whose job it was to vouch for the state’s financial statements. New Jersey’s largest bond underwriters during the period in question include Citigroup, J. P. Morgan Securities, Morgan Stanley, Bank of America, Merrill Lynch, and Goldman Sachs.
The S.E.C. said its action was meant to dissuade other governments and their advisers from hiding bad fiscal news in a fog of pension numbers. Actuaries, for instance, have been raising questions about the framework Illinois has laid out for bolstering its pension funds. In New York, California and other places, financial advisers have told lawmakers that benefits could be sweetened at virtually no cost, only to be proved wrong once those benefits were adopted.
“Hopefully, it will send a message to other states or local governments,” Elaine C. Greenberg, chief of the S.E.C.’s municipal securities and public pensions unit, said in an interview.
The commission said that from 2001 to 2007, New Jersey claimed to have money set aside in a “benefit enhancement fund” as part of a “five-year plan” to pay for new benefits for teachers and general state employees. In fact, the fund was an accounting illusion and no such money was available.
The misstatements began during the Republican administration of Gov. Donald T. DiFrancesco and continued under Democratic administrations, including those of James McGreevey and Jon Corzine.
“The State of New Jersey didn’t give its municipal investors a fair shake, withholding and misrepresenting pertinent information about its financial situation,” Robert Khuzami, director of the S.E.C.’s division of enforcement, said in a statement.
Because of New Jersey’s misrepresentations, the commission said, investors bought more than $26 billion worth of the state’s bonds over six years without understanding the severity of its financial troubles. New Jersey’s pension fund — actually a family of funds for different groups of workers — is one of the biggest in the country, and when a pension plan of that size gets into trouble, its problems can dominate the finances of the whole state.
By the time Gov. Chris Christie took office this year, the pension funds had been deprived of contributions for so long that it had become near impossible to catch up. The state needs to come up with billions of dollars every year, something it cannot do without raising taxes, cutting public services or going even deeper into debt. Governor Christie has been forcing cuts in education spending and other areas in hopes of improving the state’s finances.
If things get worse, those who bought New Jersey’s bonds in years past could find themselves fighting with public retirees for the same limited pool of dollars.
A spokesman for the New Jersey treasury, Andrew Pratt, said the state had “never failed to pay a bondholder.”
The S.E.C. said the fraud began in 2001, when New Jersey increased retirement benefits for teachers and general state employees. New Jersey did not have the money to put behind the new benefits, but every year after that, the state treasurer certified that the pensions were being funded according to the plan.
These statements continued until an article in The New York Times, in April 2007, described the accounting gimmick. New Jersey then brought in legal advisers and began correcting the six years of false statements.
Some commentators expressed disappointment that the S.E.C. had not named any of the treasurers who certified the misstatements or other professionals who helped New Jersey’s bonds go to market during the fraud.
“Yes, they charged the State of New Jersey with fraud, but there’s no price paid here,” said Lynn E. Turner, a former chief accountant for the S.E.C. who helped with the pension investigation in San Diego. “There’s no fine, and no accountability on the part of any individuals.”
This article has been revised to reflect the following correction: Correction: August 20, 2010
An article on Thursday about a settlement between New Jersey and the Securities and Exchange Commission over accusations of securities fraud involving the state’s pension funds erroneously included one bond underwriter on a list of those that had underwritten New Jersey’s bonds during the period in question, from 2001 to 2007. Barclays Capital, which did not enter the municipal securities business until 2008, did not underwrite any New Jersey bonds during that time.
BEHIND FRAUD CHARGES, NEW JERSEY'S DEEP CRISIS
NEW YORK TIMES- August 18, 2010 - New Jersey got in trouble with federal regulators this week for misrepresenting the health of its pension funds. But the bigger problem may be what the state was trying to hide: a long-brewing crisis in its ability to pay retirees.
Experts say that governors and legislators, Republicans and Democrats, have all contributed to the problem by refusing to put state money into the funds as they should have. And even if benefits are cut and taxes raised, they said, there is no obvious fix in sight.
“The whole political culture evolved where the purpose in Trenton was to spend and defer the problems until later,” said James W. Hughes, dean of the Edward J. Bloustein School of Planning and Public Policy at Rutgers University.
The state’s most recent report said that as of June 2009, the pension funds should have had assets of $112 billion to meet their future obligations, but had only $66 billion — one of the largest shortfalls, known as unfunded liability, in the country.
The situation is probably worse today: The state is supposed to contribute about $3 billion a year to the funds, but amid huge budget deficits and spending cuts, it is in the second consecutive year of contributing nothing.
On Wednesday, New Jersey became the first state ever charged with fraud by the Securities and Exchange Commission, for illegally papering over the pension fund problems in pitches it made to bond investors. The case was simultaneously filed and settled with an order to the state to stop its deception.
The reaction from Trenton was muted. The office of Gov. Chris Christie, a Republican, declined to comment. The State Senate president, Stephen M. Sweeney, a Democrat, issued a statement that called for reform and a resumption of state contributions.
New Jersey has seven state-run funds that pay pensions to 244,000 former state and local government employees or their beneficiaries. Each year, the state uses a set of formulas to determine how much money it is required to contribute, based on factors like the funds’ balances and how well investments are expected to perform. And nearly every year, the state budget ignores those calculations.
The problem is that when the state puts in less than the required contribution, that increases the long-term deficit, which in turn raises the amount the formulas will tell the state to pay in future years. In 2002, the last year the funds had a small surplus, the state was supposed to pay $655 million into the system; in the fiscal year that started July 1, 2010, that figure is $3.06 billion. In other states, independently elected treasurers, comptrollers and attorneys general might serve as a check on such budgetary shenanigans, but in New Jersey those officials are appointees of the governor.
That the plans were headed for trouble is not new and not a secret; since the 1990s, financial analysts and a few legislators have been finding fault with the situation.
Deborah Howlett, a former journalist and aide to Gov. Jon S. Corzine who now leads a research group, New Jersey Policy Perspective, said the pension deficit became “like the closet that’s overstuffed, and everybody knows it but nobody wants to open it and get hit by what falls out.”
Christine Todd Whitman became governor in 1994, and to balance out her deep tax cuts, she reduced the payments to the state’s pension funds. That contributed to the growth of the unfunded liability.
In 1997, Ms. Whitman, a Republican, had the state borrow $2.75 billion to deposit in the pension funds, to address the liability and keep annual payments low. That infusion, plus the run-up in the stock market, gave the funds a surplus for a few years. But it also helped entrench the habit of paying little or nothing into the system from the state budget, and Ms. Whitman and her successors consistently paid a fraction of what was recommended.
From mid-1999 to mid-2006, the state contributed an average of about $23 million a year; keeping up with the formulas would have required more than $600 million a year.
In 2001, Gov. Donald DiFrancesco, a Republican, and the Republican-controlled Legislature raised pension benefits 9 percent and lowered the retirement age to 55, greatly increasing the future burden on the system. This came even as the stock market — and the value of the pension funds — was falling.
In 2002, James McGreevey, a Democrat, became governor and Democrats took control of the Legislature. As the pension surplus disappeared and state spending shot up, the imbalance between required and actual pension contributions continued.
Mr. Corzine, also a Democrat, presided over the first significant contributions to the system in a decade, almost $2.2 billion over two years, but even that fell far short of what the state was supposed to pay. He also increased the retirement age and curbed benefits, but the unfunded liability continued to grow. And in 2008, with the recession battering state finances, Mr. Corzine cut back on paying into the system.
This year, Mr. Christie signed legislation that will curb benefits for new employees, but the effects of that will not be seen for many years.
“There’s finally an admission in both parties that there’s a crisis,” Dr. Hughes, of Rutgers, said. “But we’ve dug ourselves such a deep hole over so many years that I don’t see a way out of it.”
Battle Begins Over New Pension Rules in New Jersey
Governor Christie is gearing up for a new fight. The state's largest police and firefighters unions are going to court over changes in the pension and health insurance rules, which the Governor says will save taxpayers billions of dollars long-term. Joann Pileggi has details.
The Pulse of Your Pension
PFANJ President Dominick Marino offers the FACTS about the New Jersey Pension controversy.
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How did our elected officials vote with regard to the following bills?
S4/A2459 - Makes various changes concerning payments to public employees for unused sick leave, sick leave injury in State service, and PERS and TPAF disability retirement. Click here.
S3/A2460 - Makes various changes to SHBP and SEHBP concerning eligibility, cost sharing, plan choice, benefit change application, coverage waiver, multiple coverage; requires contributions toward health care benefits by public employees and certain retirees. Click here.
S2/A2461 - Makes various pension system changes concerning eligibility, retirement allowance formula, compensation definition, position eligible for service credit, non-forfeitable rights, prosecutors part, PFRS special retirement, employer contributions. Click here.
Click here for the Senate explanation of the three bills signed into law.
See legislation notices below for a summary of the recently enacted laws:
Keep your PFRS beneficiary status up to date at all times Click
here for access to various PFRS forms and related information
Training Requirements for PFRS Eligibility and Enrollment Click here for details.
The Police and Fireman's Pension Handbook
Has Been Updated Click
Here for an Online Updated Copy
Background and Summary of Complaint
Pension Protection Action
Professional Firefighters Association of New Jersey,
New Jersey State Fraternal Order of Police
Past President Canzanella with
NJ Fraternal Order
of Police President Edward R. Brannigan announcing the
filing of legal action in State Superior Court seeking the full funding of employer
Police and Firemens Retirement System of New Jersey (PFRS) held a surplus
of approximately $938,000,000 in FY2000 drawing down to a deficit of approximately
$3,574,000,000 for FY2004. This $4.5 billion dollar deterioration is largely the
result of legislation (S-2586 of 2003) that permitted municipal employers of law
enforcement officers and firefighters to defer and discount employer required
contributions to the PFRS, in association with the State of New Jerseys
own failure to make required contributions. During this same time frame, police
officers and firefighters continued to make their own statutorily required contributions
totaling 8.5% of their base annual salaries, one, if not the highest public safety
employee pension contribution rate in the Nation.
State of New Jersey and its municipalities were first relieved of their obligations
make employer required contributions in 1997, when legislation was enacted that
revised the method of accounting and valuing plan assets. Under this new and more
creative method of accounting, the value of PFRS assets was purposely and substantially
increased, resulting in intended excess or more accurately, inflated assets. Accordingly,
the State and its municipalities used those enhanced assets as a manner in which
to relieve themselves of their obligation to match employee contributions for
the purpose of tax relief. Despite the free ride afforded to both
the State and municipalities, police officers and firefighters remained obligated,
and so did they continue, to contribute 8.5% of their base annual salaries for
which they have neither sought nor been granted any similar relief.
In 2003, with those self-created inflated assets
running dry, despite facing a growing PFRS deficit, and in order to provide continued
budgetary relief to municipalities who had by their own admission made no provisions
whatsoever to resume employer contributions, the State Treasurer proposed, and
the Legislature adopted, an initiative (S-2586) permitting municipalities to pay
only a discounted fraction of their required pension contributions. Adding insult
to injury, despite the fact that the foregoing legislation in no way extended
the State a like ability to skip or discount badly needed pension contributions,
they did so nonetheless, paying only a fraction of their required obligation.
Again, and to this day as we go forward, police officers and their firefighter
counterparts remain obligated to contribute 8.5% of their base annual salaries
serving as the sole and sustaining guaranteed plan income.
a result of the aforementioned legislation, and in association with the States
non-legislated failure to required contributions, the PFRS funding ratio, which
indicates the financial soundness of the plan, has fallen from 105.65 % for FY2000,
to 100.85% for FY2001, to 95.82% for FY2002, to 88.45% for FY2003 and to 83.95%
Enactment of the 2003 legislation,
in association with the States failure to make their own proper contributions
absent legal legislative authority, deprives the PFRS of the funds necessary to
maintain it on a sound actuarial reserve basis. An undeniable consequence of this
failed scheme is the alarmingly significant reduction in plan earnings from investments
and interest that would have been derived from skipped and substandard contributions.
The foregoing serving to jeopardize the financial soundness of the plan and its
ability to make good on earned benefits as they come due in the future. In that
regard, the complete and total lack of prudent fiscal judgment demonstrated by
the strategy articulated in S-2586, relying upon the exclusive use of employee
contributions to either sustain or accordingly grow the plan, that resulted in
the type of significant funding losses sustained over the last several years represents
an abdication of fiduciary responsibilities in its purest form.
complaint seeks to declare the 2003 legislation (S-2586) unconstitutional, to
end any conflict of interest that would allow the State Treasurer to determine
type and variety of contributions aside from statutory law, and to direct defendants
to make regular full payments to the PFRS for FY2004, FY2005, and beyond, in accordance
with fiscally responsible actuarial calculations.
plaintiffs, Professional Firefighters Association of New Jersey, I.A.F.F.-AFL-CIO,
and the New Jersey State Fraternal Order of Police, along with representative
active and retired members and widows of members of these two unions who have
been affected by this failure to adequately fund the plan, are represented by
the law firm of Greenberg, Dauber, Epstein & Tucker of Newark. The PFANJ/IAFF
and NJFOP represent the majority of career professional firefighters and law enforcement
officers throughout the State of New Jersey and this Nation.
as defendants in this action are the State of New Jersey,
John McCormac- Treasurer,
the New Jersey State Senate and General Assembly.
aforementioned action was filed this day in State Superior Court.
additional information and commentary please contact: Dominick Marino, President PFANJ
Edward R. Brannigan, President NJFOP 609/599-1222