I have given much thought to the modern day problem with pensions recently and it is certainly a perplexing issue. The Governor had only recently claimed it fixed only to declare the system bankrupt again a few years later. Pensions, originally created to draw people to otherwise low-paying jobs and provide security upon retirement to those who served the citizens of the state. Since then two things have happened; first, wages for many of these positions have increased dramatically, making public service a sought after and often lucrative job, and second, pensions have increased exponentially to the point many now retire with large six-figure pensions paid in perpetuity.
The inherent problem with the pension system in New Jersey is pensions while paid for by the state, are based on final compensation set by the local municipality. These towns have no incentive to control labor costs and are often even set by long time friends or even family members, creating a situation of inflated wages and leaving the state to pay an inflated pension total. Putting aside the overall high level of police pay in this state (and I will focus on police but this can be extrapolated to Fire, Educations, Municipal, and state employees alike) the system of pension based upon final compensation is the root of the pension system’s woes in NJ.
All too often state employees will work to get a promotion near the end of their career, work in that job for only a year or two to increase his/her pension payout before stepping aside to let the next man do the same thing. These chiefs are often not interested in public safety but rather in increasing their personal pensions at the end of a long career. Once this inflated figure is reached, public employees often retire to allow the next employee to achieve the same, elevated pension.
This practice must be curtailed through a system based upon uniform compensation tied to number of years served at each position and simultaneously eliminating the practice of collecting multiple pensions and collecting pensions while publically employed. If an officer only serves as chief for two years it should be only recognized for two years in the pension system’s calculation, not thirty as is the case today.
A very rough outline of how such a system might function follows:
| Position Served | $ Per Year Served at Position |
| Patrolman | 1,440 |
| Detective | 2,050 |
| Sergeant | 2,520 |
| Lieutenant | 3,420 |
| Captain | 3,840 |
| Chief | 4,560 |
Serve 0-10 years receive 9% of potential coupon payment
Serve 10-15 years receive 18% of potential coupon payment
Serve 15-20 years receive 34% of potential coupon payment
Serve 20-22 years receive 75% of potential coupon payment
Serve 22-25 years receive 78% of potential coupon payment
Serve 25-28 years receive 82% of potential yearly payout
Serve 28-31 years receive 90% of potential yearly payout
Serve 31-35 years receive 96% of potential yearly payout
Serve 35+ years receive 100% of potential yearly payout
*Totals do not include health benefits
Yearly pension COL adjustments will occur for both current workers and retirees
Only to be collected after age of 60
Pension guidelines would need to be created for all other positions
- If an employee retires to work another public service job, he shall not receive a full pension. Depending on salary level, pension payments will be made such that total compensation does not exceed 120% of the value of the yearly pension payment. If the salary of the position is greater than the value of 120% of the pension payment, no pension payments shall be made.
- That second public job will add to overall pension payout along fixed pension guidelines total upon final retirement
- If an employee retires and is collecting a pension but is still working (private sector), for every total dollar earned per year over 125% of pension payment or 95,000 whichever is higher (Current Salary+ Pension) $0.40 will be subtracted from yearly pension payments
- While working with full benefits, the state pension system will forgo the issuance of health care benefits. The benefits shall resume when the need further arises
To keep departments from promoting officers for pension considerations, the state must set rough guidelines in regard to total percentages of department staff that should occupy each position as well as an officer per capita guidelines. These are not stringent guidelines but should rather serve as a deterrent of over promotion of a department and only enforced in situations where there is clear misconduct.
An example of how this would work is an officer (Steve) is hired at age 23 and the following is a summary of his career:
Patrolmen–9 years ($1440 coupon per year)=$12,960
Detective–5 Years ($2050 coupon per year)=$10,250
Sergent–4 Years ($2520 coupon per year)=$10,080
Lieutenant–5 Years ($3420 coupon per year)=$17,100
Chief–6 years ($4560 coupon per year)=$27,360
–Retires–age 52–Serving 29 years, pension coupon equals $77,750–Will receive 90% of this total yearly in perpetuity for a yearly pension of $69,975
Accepts a job as a borough administrator and comes out of retirement at age 53–making $95,000 annually plus benefits. Pension system coupon payment in $3,500. Serves an additional 8 years
Serves an additional 8 years ($3,500 coupon per year)=$28,000
–Retires again–age 61–Serving 37 years, pension coupon equals $105,750–will receive 100% of this total in perpetuity for a yearly pension of $105,750.
At age 64–accepts a public job paying $65,000 that is pension eligible–Coupon payment of $1,800 is added yearly to the pension total–Steve would continue to receive his pension but his total compensation shall equal no more than 120% of his current pension (i.e. 120% of $105,750 in his first year of employment would equate to a total compensation of $126,900), all health benefits would cease coming through the state pension system but rather be provided by the current employer. This will be recalculated annually to reflect the new coupon payment (i.e. year two the addition of $1,800 to the total pension coupon would lead to a total compensation package of $129,060)
The new pension system will prevent this officer from collecting his pension upon retirement at the age of 52, which under the current system would be an estimated $100,000, pensions may only be collected after the age of 60. It also prevents him from collecting the $100,000 pension while returning to work for a total compensation value of greater than $200,000 while serving as borough administrator. When Steve returns to serve the public again at age 64, he will receive a salary for the position he fills, and to incentivize employee talent to continue to give back to the community, a portion of his pension. This would, however, be limited to a total compensation level of 120% of yearly pension payments. Without such a system limiting Steve’s income he would receive $180,750 in combined pension and salary payments plus benefits. This new system would protect the pension system, increase future pension payments for Steve to reflect his increased years of work, and saves the taxpayers money by preventing abuse of the system through the much berated practice of “double dipping” (or receiving full pension benefits while also receiving a full salary.
Creating A Better New Jersey 