Politics & Government

Gov. Christie Signs Pension Law

Public employees to pay more for pension and health benefits.

Gov. Chris Christie signed into law sweeping changes to the state's pensions and health benefits on Tuesday, marking Christie’s greatest legislative victory. About 500,000 active and retired public employees will pay more for their health and pension benefits, saving New Jersey taxpayers an estimated $120 billion over 30 years in pension costs. The health benefits changes are expected to save $3.1 billion over the next 10 years

“This is a defining moment in New Jersey’s history,” Christie said. “At a time when our state, along with dozens of others around the country are facing unprecedented fiscal challenges, a rarity happened. We stopped just talking about doing the big things and actually delivered.”

According to NJ Spotlight, the Senate and Assembly votes on the pension and healthcare bill last week split the Democratic Party, fractured its traditional alliance with organized labor, and marked the emergence of a new majority coalition on critical issues that renders the outcome of November’s legislative elections secondary in importance.

Find out what's happening in East Brunswickwith free, real-time updates from Patch.

In a press release sent to the news media and accompanying YouTube video, here is how the governor’s office described the new law:

The reforms will ensure long-term solvency, while slowing the rapid growth of government costs, spending and taxes that have overwhelmed taxpayers. 

Find out what's happening in East Brunswickwith free, real-time updates from Patch.

With reform, future retirees are protected and New Jerseyans provided with over $120 billion in taxpayer savings through 2041.

Increasing the Funding Ratio of the Pension System to 88%. These reforms protect the pension system for retirees, increasing the funded ratio of the combined state and local systems from the current 62% to more than 88% over the next thirty years. By 2041, this will reduce total pension underfunding to $37 billion. Without these critical reforms, the unfunded liability across the pension systems would have skyrocketed to $183 billion, resulting in a massive impact on state and local budgets.

Providing New Jerseyans Over $120 Billion in Taxpayer Savings by 2041.  This comprehensive set of reforms means critical savings for state and local governments and real property tax relief for New Jerseyans. 

  • $79 Billion in State Contribution Savings:  Over the next 30 years, the state pension contribution will be $148 billion, a projected savings of nearly $80 billion. Without reform, the state is projected to contribute $227 billion over the same period.
  • $43 Billion in Local Government Contribution Savings: Over the next 30 years, local government pension contributions will be $70 billion, a projected savings of nearly $43 billion. Without reform, local governments are projected to contribute $113 billion over the same period.

Changes for All New Public Employee Retirement System (PERS) and Teachers Pension and Annuity Fund (TPAF) Employees:

  • Updating the Formula for Retirement Eligibility:
    • Establishing the normal and early retirement age at 65 years.
    • Adjusting the early retirement penalty to 3 percent for each year.
    • Increasing eligibility for early retirement to 30 years of service. 

Changes for All New Police and Fire Retirement System (PFRS) Employees:

  • Updating the Formula for “Special Retirement” Eligibility:

o    Changes eligibility for special retirement from 65% with 25 years of service to 65% with 30 years and 60% with 25 years.

The Health Benefit Reform Plan: Transforming the System to Create Choice and Lower Costs for New Jersey Taxpayers

The reforms will modernize the State employee health benefits plans by bringing the system more in line with the private sector and federal government. Today, New Jersey’s unfunded other post-employment Benefits (OPEB) liability for providing health benefits is $71.4 billion. These reforms will substantially lower health benefits costs for local governments, including those at the county, school and municipal levels, representing another major step forward in providing real, long-term property tax relief. New Jersey spends $4.4 billion annually on public employees and retiree health care costs, with the cost of health benefits making up 9% of the State’s budget today. 

The reforms will result in $3.1 billion savings for taxpayers over the next 10 years alone, while increasing choice for employees and ensuring affordability.

Cost Sharing Reforms for Active Employees:

  • All public employees will pay a statutorily-established percent of premium (“premium share”), instead of a percentage of salary, for all State Health Benefits Plan (SHBP)/School Employee Health Benefits Plan (SEHBP) and non-SHBP/SEHBP participating plans. 
  • The employee’s share will phase in over four years. 
  • The premium share requirement will not affect employees until their current contract expires.
  • Premium shares will vary by salary level and coverage, but may not be less than 1.5% of salary (the current standard).
  • Current employees (excepting those with 20 or more years of service as of the effective date) will pay a premium share in retirement based on the date they reach 25 years of service. If they reach 25 years after the effective date, the employee will pay the premium share in effect based on the date s/he reaches 25 years (i.e., if the employee reaches 25 years in year two of the four year phase-in, then the employee, in retirement, will pay the premium share in effect in year two of the phase-in.)

Changes for Current Retirees:

  • There will be no change with respect to premium cost sharing for current retirees.


Get more local news delivered straight to your inbox. Sign up for free Patch newsletters and alerts.

We’ve removed the ability to reply as we work to make improvements. Learn more here