Recently, Karen Pierog and Jim Christie published an article addressing state pension overhauls during these tough economic times. Specifically, the article examines how Illinois, California, and other states have instituted reforms to combat increasing and debilitating unfunded pension liabilities.
According to the article, the National Association of State Retirement Administrators found a nearly $443 billion collective unfunded liability for the 125 state, local government, and teacher pension funds in its most recent survey. The situation is likely to worsen as the recession punches holes in budgets nationwide and causes big investment losses for defined-benefit pension plans that pay out a fixed income. As a result, it is suggested that the economic downturn may also lead to more reforms as politicians and taxpayers realize they can no longer afford plush pensions compared to defined-contribution 401(k) plans in the private sector which pay income based on variable investment returns.
This year, laws were enacted in Georgia, Louisiana, Nevada, New Mexico, Rhode Island, and Texas that reduced benefits for new employees. On the local level, New York City has repeatedly trimmed pension benefits for new hires by creating pension tiers. Illinois and California are among the states evaluating various reform suggestions and/or establishing pension commissions in order to adequately address the problem. In all, it is clear state pension systems are facing a major overhaul in response to the poor economic climate.
This article is of particular importance because the status of the New Jersey public pension system is vital to every resident of this state and especially crucial to public safety employees. Consequently, all current or retired New Jersey public safety officers should read this article in order to fully understand the measures being taken across the country to rectify the problems that have become prevalent in defined-benefit pension plans. To read the full article, click on the following link.