New Jersey teachers’, public safety officers’, and public workers’ pension benefits are entitled to certain protections under state law and affirmed by court rulings. At the same time, the state does have some legal precedent that allows them to change particular aspects of retirement benefits.
In other words, there are parts of public pension benefits that can be changed by future state laws, but only certain parts of those benefits.
Equable Institute partnered with Columbia Law School’s Center for Public Research and Leadership to create infographics that map states’ pension governance. Understanding the legal environment for pension policies can be confusing for both lawmakers and public workers, but illuminating legally permissible policy pathways to improve funding sustainability and ensure adequate retirement income security for states’ workforces is essential.
In the case of New Jersey, state law allows the legislature to decrease cost-of-living adjustments for public workers. In 2011, they did just that, mandating that COLAs could not be handed out until the retirement systems reached a funded ratio of at least 75%, with the exception of COLA increases promised to retirees before the law went into effect.
Some public workers sued the state in an effort to have that part of the law overturned, but a judge ruled it was in the best public interest to keep it in place.
Changes have also been made to employee contribution rates — the Legislature in 2011 enacted phased contribution rate increases for members of the Public Employees’ Retirement System (PERS) and Teachers’ Pension & Annuity Fund (TPAF) that would lead to a 7.5% contribution rate, and raised the retirement age from 62 to 65.
The legal environment is favorable for these shifts – meaning that state law and legal precedent allows for changes to these aspects of pension policy.
What’s unclear is whether New Jersey can shift workers’ vesting periods or benefit calculations, because neither of those issues have been brought to court and there is no existing law explicitly prohibiting these changes.
It is important to note that current retirees’ benefits have greater legal protection than those of active employees. Apart from reduced or eliminated COLAs, current retirees’ benefits cannot be taken away or reduced.
Disclaimer: The information here doesn’t constitute legal advice or representation. Equable is not necessarily recommending any of the policies discussed in the infographic. Some may not work for certain states, others may not be desirable policy. Ultimately, any pension policy change should honor promises made to public workers and put them on a path to retirement security, while ensuring sustainable funding measures.