Pension and Benefits Reforms Signed into Law

Gov. Chris Christie this week signed into law a package of three pension and benefits reform bills.

The legislation (S-2, S-3 and S-4) requires current government workers and school employees to contribute 1.5 percent of their salaries toward the cost of their healthcare. The proposals will also change the method of calculating pension payments for future hires, which will be determined by averaging the highest five years of salary, rather than three years. The measures ban future part-time workers from participating in the pension system, and caps payments for unused sick leave at $15,000 for future employees.

The bills were passed by the Assembly on Monday, and signed into law that evening.

The Christie administration estimated the health-contribution measure will save local governments and school boards $315 million in the coming year, while the other two bills are projected to save approximately $8 billion over the next 15 years.

“It is clear that our state can no longer afford a system that is rife with abuse, that promises substantial payouts with little buy-in, and that provides benefits that are wildly out of proportion with the private sector,” Gov. Christie said at the bill signing. “The costs in the system remain dangerously out of balance and additional reforms are necessary to ensure the future solvency of the system.”

One of the bills, S-2, limits enrollment in the pension system to employees who work at least 35 hours per week at the state level, or 32 hours per week in local government and public schools. The bill also changes the equation used to calculate pension benefits for future employees by dividing the number of years worked by 60, instead of the current 55. The bill also changed the pension calculation from three to five years of salary.

S-2 passed after the Senate approved an amendment to remove a provision that would have permitted public employees with less than 10 years of service to waive enrollment in a defined benefit retirement system.

S-3 is the measure that will require all employees, including current school district employees, to pay at least 1.5 percent of their salary toward their health benefits after the expiration of their current contract. New employees will pay at least 1.5 percent of their base pension toward post-retirement health benefits.

The final bill, S-4, limits sick leave payouts for all new local and school employees to $15,000.

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