Later this year, New Jersey will begin a planned lowering of the public-employee pension system’s assumed rate of return for its long-term investments.

The move will bring New Jersey more in line with what other states have been doing in response to changing market conditions, as bond yields shrink and annual economic growth rates are more modest compared to those seen before the Great Recession.

A seemingly arcane aspect of fiscal planning, the change has important ramifications for the state’s budget, in addition to the pension system itself. […]

Just how much of an impact the assumption-rate change will have on New Jersey’s budget, as well as the budgets for local governments, remains to be seen. The first annual spending plan that will reflect the state’s move to a more realistic rate of return is fiscal year 2021, which begins later this year. Murphy is due to unveil his budget proposal for FY2021 to lawmakers next month.

For well over a decade, New Jersey’s $77.7 billion pension system operated under an assumed rate of return that equaled roughly 8%, which was considered an aggressive figure, especially for a retirement plan that is one the nation’s worst-funded.

Read the whole article about how New Jersey lowers assumed rate of return in NJ Spotlight.

This article quotes selections from “NJ Is Set to Change a Key Assumption About Public-Employee Pension Investments” by John Reitmeyer in NJ Spotlight.