Evenhandedness in Pensions

Despite all of the criticism directed at public employees’ salary levels and at their generous benefits, there is at least one aspect of their compensation package where New Jersey government workers have a legitimate gripe – their pension plans. 

There is now a growing general consensus by lawmakers in Trenton that these pension plans are in serious need of reform – a view that this writer believes is long overdue and one that is supported by the public at large.

But that doesn’t leave Trenton legislators and prior governors off the hook for having knowingly ignored this problem for at least a decade, as they blithely observed the problem building up.

Elected officials, some of whom held the powerful legislative offices necessary to effect reform, chose to look the other way and, through default, helped to undermine a fragile pension system by not fully funding it on an annual basis to insure solvency.

Prior governors and legislators were able to get away with this sleight-of-hand by invoking the primacy of the state budget process which, under the New Jersey Constitution, allowed them to ignore or to marginalize annual contributions to pension plans.  They held a royal flush in their make-believe game of pension poker.

In private industry, under an employer’s defined pension plan, this would not be permitted, because the U.S. Employee Retirement Security Act (ERISA) requires that employers who choose to offer pension plans must keep them fully funded. 

Essentially, the Feds say to employers in private industry that, “If you are going to play in this game, you have to play it by a well-understood set of rules.”

For years, New Jersey legislators and governors knew very well what the rules were – at least the ethical ones – but chose to ignore them.  Why?  Because:  In many cases, lawmakers were in the pockets of public employee unions – a practice which has backfired on everybody.

Note:  By way of full disclosure, the author acknowledges, as he has before, that his spouse participates in a New Jersey pension plan.