<p>OK here it goes- in terms of changing all government employees to a 401k type plan from defined benefit- last month Governing Magazine had an article about Rhode Islands Plan to do just that- the analysis it will take at least 10-12 years before any savings with the States cost higher for the first 10 years. </p>
<p>I will give more details later</p>
<p>OK- fundingfather -in terms of health care in retirement that is a negotiated benefit that gives health care to retirees with at least 25 yrs of pension service. Not all retirees get the same benefit it is governed by what health coverage was in place when you obtained 25 years. It can be changed for those with less years but will also offer no immediate savings as I do not believe ERISA is in play. It is a contractual agreement between the State and the employee- so I agree negotiate it away for those with less years but again no immediate savings to solve this budget mess. </p>
<p>If State employees go to a 401k type plan- what salary match should there be? If I put in 6% of my pay will the State match it dollar for dollar or 50 cents on the dollar or give me nothing?</p>
<p>I understand the idea that the benefits are “locked in” at 25 years of service. However, many corporations have changed the retiree benefits after retirements - so why can’t the NJ state gov’t ??</p>
<p>Furthermore, the state employees and NJEA members can insist on max benefits - but ultimately the well will run dry. NJ residents are voting with their feet - many are leaving the state. </p>
<p>Also, for the amount of taxes we all pay - then why do Rutgers, TCNJ, etc still cost so much ?</p>
<p>Tom,</p>
<p>I’m not saying that cutting of benefits is the complete and immediate solution, but unless I missed it, the 25 year plan (which is far from “immediate”) that Corsine is proposing keeps benefits constant throughout this period. If that is the case and if trends in the private sector continue, the only people left in the state with a lucrative defined benefit retirement plan with annual cost of living increases and retirement health care will be government workers. </p>
<p>Corzine’s proposal on the revenue side is absolutely ludicrous. Most people think “toll increase” how bad could that be? I live one exit on the Parkway (4 miles) from the mall. Currently a round trip costs 70 cents which is a pretty insignificant amount. However, under Corzines plan, in 20 years a round trip to the mall would cost approximately $5 in today’s dollars (and almost $7 four years later). How would he expect anyone to pay that amount of money to go one exit? They won’t - they will all go on the local roads and clog them up. But, then again, the roads may not be that clogged after-all since, like NorthEastMom2 says, many people will be so fed up with any part of NJ that requires toll road use by then that they will have moved out. Meanwhile people in other parts of the state will just say, “thank you very much, toll road users, for solving our budget problems.” Corzine must be delusional.</p>
<p>I do believe that benefits offered need to be addressed- but that does not solve the immediate problem. The solution needs to be a drastic cut in what the government does- what services go away, what aid programs etc, along with a change in the salary and benefit structure- I think the savings there are not a great as most think. I will post the salary of most jobs in State government when I get the chance.
NEmom2- the reason is that they were negotiated benefits and contracted- I believe that when private corps changed their benefit plans they were plans that the company offered but not negotiated plans.</p>
<p>In regard to the pension -years ago Republican Chuch Hi- tie-in(sp) looked into changing the pension. He was advised by a Republican labor and pension expert that since State employees pay via pension contributions that the State is contractual obligated to all employees from day one to honor the pension. It could only be changed for new hires. So the State could offer different tiers again it does not get them the savings they need.
Finally while NJ taxes are high you should know that as a % of the average income NJ taxes are on the low side. My sourse is an analysis of all 50 States by Governing Magazine- State taxes as a % of gross income.</p>
<p>Tom,</p>
<p>1) While pensions already vested can not be cut back for existing employees, ERISA allows for pension plans to be modified and or dropped on an on-going basis. Hence, someone who is 50 has a certain pension that he has earned and it is guaranteed. However, the employer has the right to say that effective immediately, the plan is terminated (or reduced) so that retirement benefits are frozen as of that time. You do not need to wait for new hires to work their way through the system before the savings are seen. This is what happened in my company, which is ironically 10 percent owned by the California employees pension plan. I don’t see anything in Corzine’s plan that calls for such a change to the pension plan. Even if there are some employees who have a collective bargaining agreement that includes such things, things can be negotiated out of these contracts. It is happening all around the country as unions realize that they have had a gravy train that ultimately caused the loss of their jobs and are now willing to take some of these perks out of the contract. State employees need to feel the same heat.</p>
<p>2) The biggest concern that I have with Corzine’s plan is the absolutely gross inequity of the system for increasing revenues. Rather than spread the pain around the entire state, Corzine has chosen to focus it on select areas and select people within those areas.</p>
<p>I came to NJ from Fairfax County, Virginia - Imagine my shock at the 700+ school districts and municipal gov’ts !! Obviously, Corzine has to cut back on gov’t services and spending. But the state cannot do it alone - cuts must also be made at the local/school level. Corzine’s plan seems to address increasing revenue - I see little attention to the spending side of the equation. I think we are all in agreement there !!</p>
<p>Tom1944 - I understand that addressing long term benefits does not result in immediate savings - but don’t let that be an excuse not to look at public sector benefits. Also, cutting services should result in cutting gov’t jobs - so the issue of public sector jobs & benefits cannot be downplayed. </p>
<p>Interesting, haven’t heard much from Katz on this new proposal !..</p>
<p>fundingfather my understanding is ERISA may not apply- changes to the pension can not be made unilaterally but changes can be made. For example when I was hired in 1980 I was to pay 3.2% of salary for a benefit of # of years worked over 60 of 3 highest years salary. After 25 years free Traditional Health care. Gov Whitman bought off a court challenge to her pension raid by lowering the 60 to 55. That is a 9% increase but this has resulted in my contribution being raised 72% to 5.5% of my pay. I also can no longer get free traditional health care only a PPO. I also pay for health care now and will make the same contribution in retirement.</p>
<p>As to all the Districts I agree it is stupid except no one will give up their district and merge. The tax solution is to end property tax for education and fund education on a per student basis via the income tax. The Abbot districts will have severe cuts but so will the elite towns- Princeton, MT Lakes etc. The middle class towns will be best served. Remember the Court has ruled that the Abbotts must be funded to the level of the best districts.</p>
<p>tom, I don’t think that it will happen. People are worried about their home values in the better school districts taking a nose dive. One of the big plugs for buying a 1950 split level that looks like it needs to be leveled (nothing pretty about it, and many need new everything) are the schools. The absolute tiniest fixer upper in my neighborhood is 450,000+ (rock bottom hard to find gem). If it is 3 bedrooms, 2 bathrooms with a couple of trees or flowers outside it quickly jumps to 550,000. Those that are redone, but still have much of the original plumbing and basement will cost over 800,000 for an equal sized home. Nobody wants their home value to go down from these numbers, and they will fight to keep it this way, IMO. The districts do share some services involving busing, and special education personnel.</p>
<p>tom,</p>
<p>My company used a similar formula (i.e. based on years of service and average wages over a short “window” of time.) For example, this meant that a 50 year-old worker with 25 years with the company, if he left his job would be eligible for a pension based on those 25 years used as the multiplier. However, if he chose to stay with the company to age 65, for example, he would benefit from an additional 15 years (40 total) to be used as the multiplier. What happened was (and it was perfectly legal), the company told the 50 year old employee that effective immediately, your pension is frozen using the current values of the parameters used in the pension equation (i.e., years of experience = 25 and salary = whatever his current salary component was.) Let’s say that that amounted to a payment of $2,000 per month from the day of retirement to death. Whether that worker stayed on to 55 or 65, his retirement benefits would still be $2,000 per month. (And, unlike the current State pension system, there is no cost of living adjustment added to this benefit; hence it actually amounts to a shrinking benefit each year.)</p>
<p>The net effect of this was that the pool of reserves that are required to fund the retirement plan based on actuarial tables was immediately capped and, actually, reduced because that pool was no longer required to grow to allow for growth in current employee retirement benefits nor was it required to have sufficient funds in it to account for future inflation. This is what is happening in the private sector - I haven’t seen any indication that any cost cutting measures to the State pension plans are part of Corzine’s proposal.</p>
<p>Plus, as I said before, the major complaint that I have about this plan is its inequities. If I were a state employee wishing to maintain as much of my retirement benefit as possible, I would be against this plan as well. If a plan were devised that was at least fair, it might be acceptable to the general public. This plan is so outrageously unfair that it is bound to stir up a hornet’s nest of complaints.</p>
<p>“However, if he chose to stay with the company to age 65, for example, he would benefit from an additional 15 years (40 total) to be used as the multiplier. What happened was (and it was perfectly legal), the company told the 50 year old employee that effective immediately, your pension is frozen using the current values of the parameters used in the pension equation (i.e., years of experience = 25 and salary = whatever his current salary component was.) Let’s say that that amounted to a payment of $2,000 per month from the day of retirement to death. Whether that worker stayed on to 55 or 65, his retirement benefits would still be $2,000 per month. (And, unlike the current State pension system, there is no cost of living adjustment added to this benefit; hence it actually amounts to a shrinking benefit each year.)”</p>
<p>Are more employees quitting with the changes?</p>
<p>“Are more employees quitting with the changes?”</p>
<p>Actually, no. But I think that is mostly due to the fact that this area is still feeling the effects of the collapse of the hi-tech boom years of the late 90’s. We have huge buildings in this county that used to employ 6,000 - 7,000 engineers sitting vacant and are destined for the wrecking ball. It’s pretty much an employer’s market with respect to jobs around here. Perhaps there has been more movement in parts of the country where we have a presence where the job market is more diverse.</p>
<p>IBM instituted a similar change- if the State made the changes IBM made I would sign up immediately. They now match dollar for dollar in a 401k plan for a significant %. My brother works for IBM and I would take his plan over mine everyday.</p>
<p>Everything is not as fair as you may believe- in my job you are required to use your own vehicle since the State does not have enough cars to get the work done- the reimbursement is 31cents per mile that is exactly 55% below the going rate for both the IRS and private businesses.</p>
<p>Unfortunately, there are also some companies in the private sector that have instituted that change without sweetening the 401k pot and quite a few that do not provide company cars yet reimburse no more than a couple of cents per mile better than the State rate that you cite for the use of private vehicles on company business. A lot of us would like to upgrade to the kind of benefits that IBM still provides, even though they are not anything like what they used to be.</p>