By Brent Johnson
nj.com
TRENTON, N.J. — More police and firefighters enrolled in New Jersey’s pension system will get the chance to retire early with a reduced pension after 20 years of service under a law Gov. Phil Murphy signed Monday.
In 2019, Murphy signed a law permitting nearly 8,000 police and firefighters in the state set to reach the 20-year service mark within the following two years to retire early. With that law about to expire, lawmakers earlier this year passed a proposal — dubbed the “burnout bill” — to extend the option indefinitely.
But Murphy conditionally vetoed that broader bill in May and suggested lawmakers send him a new measure that would extend the 20-and-out benefit three more years instead. If it still makes financial sense after that, the governor said, the pension system’s board can make the benefit permanent.
The state Legislature concurred with those changes and overwhelmingly passed the altered measure (S3090) in recent weeks. The state Senate approved it 37-0 and the Assembly 77-0.
It’s unclear how many public safety workers this would affect. The measure does not include a fiscal analysis from the nonpartisan state Office of Legislative Services.
Supporters say extending the option will help a small number of police and firefighters who find it difficult to keep doing the job because of mental or physical exhaustion.
“It’s a very stressful job,” state Sen. Vin Gopal, D-Monmouth, a main sponsor, said in March. “If a police officer is at 20 years, why should we have them continue to work if they’re not able to? Very few officers take this.”
Opponents warned it would burden taxpayers by further straining New Jersey’s notoriously underfunded pension system and raising costs for local governments at a time of economic uncertainty.
Lori Buckelew, deputy executive director of the New Jersey League of Municipalities, said in March the pension system “needs to be shored up before we do any enhanced benefits.”
The Office of Legislative Services said in an analysis of the original bill it did not know how many employees would retire because of the legislation and did not attach a cost to it. But the office said the measure would “result in an indeterminate increase in the annual contributions” the state and local governments would be required to pay to the state’s Police and Firemen’s Retirement System.
Current state law requires members of the police and fire pension system to retire at 65 with their full pension. But a 1999 state law allowed people with 20 years of service to retire, albeit at half their final compensation. That was later changed during then-Gov. Chris Christie’s administration so anyone hired after January 2000 has to be at least 55 years old or have 25 years of service to retire early.
Murphy, however, signed the 2021 law that gave eligible workers a two-year window to retire at 20 years, regardless of their age or enrollment date, with half their final compensation. The unions who advocated for the change said the law was not creating a new benefit, but bringing workers in line with those hired before 2000 to correct what they argued was a misrepresentation of the 1999 law by Christie’s administration.
That temporary law Murphy signed expired in May.
One concern was that the law would inspire many of the 7,630 workers it covered to retire early. But police and fire union officials said only about 280 did in the last two years.
Murphy said the law did provide “some valuable insight into the impact” a 20-and-out benefit could have on the Police and Firemen’s Retirement System “in the short term.” But he said he’s “concerned that it is still too early to ascertain the long-term impacts.”
That, he said, is because New Jersey’s pension system in general is “still suffering from decades of underfunding that preceded my time in office.” That’s even though the new $54.3 billion state budget Murphy signed last week includes a full pension payment for a third consecutive year.
“Staying the course and continuing the positive trajectory of the state’s financial health is my administration’s highest priority, and there remains much work to be done to better protect the stability of the state’s pension funds, the expectations of its members, and the financial interests of the taxpayers of this state,” Murphy said.
Supporters also argue making the 20-and-out benefit permanent would reduce payrolls for local governments because higher-salaried employees would leave and there would be fewer overtime costs to cover those employees calling out sick.
But, Murphy said, the “bulk” of the savings “are expected to materialize following the first five years of a member’s retirement.”
“Simply put,” he wrote, “two years is not enough time to fully understand the impact.”
The governor said he was also worried the trial period aligned with the COVID-19 pandemic, which could have skewed retirement rates in the two-year window.
Murphy instead recommended lawmakers send him this new measure to extend the trial period another three years to “permit further evaluation of this benefit’s impact” on state finances, the Police and Firemen’s Retirement System, and its members over a five-year period.
After that, he said, if the system’s board of trustees finds the benefit “does not result in increased employer contributions or impact the long-term viability” of the system, the board “can then permanently institute” a 20-and-out benefit “without the need for additional legislation.”
NJ Advance Media staff writers Derek Hall and Susan K. Livio contributed to this report.
©2023 Advance Local Media LLC.
Visit nj.com.
Distributed by Tribune Content Agency, LLC.