Too Late For the Truth

Patrick Colligan, president of the New Jersey State Policemen’s Benevolent Association, argues in an opinion-piece today:

It was disappointing to see that the Governor’s Pension and Health Benefit Study Commission initial report doesn’t provide any true detail as to how well funded parts of the pension system are………The truth is the New Jersey pension system is not one monolithic fund that is hemorrhaging cash daily. In fact, the state manages five pension plans for State and local employees. Of those five, the Police and Firemen’s Retirement System (PFRS) is financed mainly by local governments who, unlike the state, have been making their required pension payments……….If this Commission is truly focused on the health of the pension system they would spell out the differences in the system and focus on the funding ratios, level of benefits and employee/employer contributions of each plan. If they were to offer the public those facts, it would undermine their proposal that benefits must again be rolled back or employees must face the elimination of their pension plans.

If you really want the truth…..

  1. There may be $30 billion in assets in the plans now after adjusting for fanciful values placed on alternative investments, taking into account those POBs due,  and assuming employee contributions would be returned to participants upon plan termination
  2. Benefit payouts are approaching $10 billion annually
  3. There is absolutely no possibility that the state of New Jersey will come up with any meaningful contributions ever again to even maintain the current level of benefits, much less to pay for the sins of the past.

If it is any consolation the retirees in the plans that the state is not responsible for funding might get 25 cents of what they were promised instead of 15 cents but the truth is you have been lied to since Florio said the plan could return 8.75% over the long-term with every governor thereafter either ignoring or exacerbating the situation that brings up to the point where….

64 responses to this post.

  1. Posted by hondo on October 18, 2014 at 6:29 pm

    They don’t want the truth, retirees believe that the (PFRS) is safe! They believe what all the union leaders tell them! BS


  2. Posted by Tough Love on October 18, 2014 at 6:29 pm

    Well maybe someone should ask Patrick Colligan, president of the New Jersey State Policemen’s Benevolent Association if, when the LOCAL Police Plan’s “official” funding ratio of just about 75% is properly calculated (NOT with the overly optimistic 7.9% assumption for BOTH the Investment return AND the for the discounting of Plan liabilities), using assumptions and procedures (a) that the US Gov’t REQUIRES of PRIVATE Sector pension Plans, and (b) which Moodys now uses in it’s creditworthiness analysis, that that “official” 75% funding ratio drops to just about 50%. Yes, a real lousy 50%.

    And, to understand just how VERY poor that is, the US Gov’t bars any Private Sector Plan with a funding ratio below 60% from crediting any future service accruals…. essentially a Plan suspension (until and if the funding ratio climbs above the 60% threshold).

    Bottom Line …. the LOCAL Plans, (although in slightly less TERRIBLE shape than the State Plans) are also at death’s doorstep, and all you hear from those with a vested interest in keeping these plans going (with the plan participants CONTINUING to accrue additional service credit every day they work, digging the financial hole we are in even deeper) and keeping the oppressed Taxpayers as the SUCKERS, backs-stopping the Plan failures sure to come.

    It’s WAY PAST time to hard-FREEZE ALL (State and Local) Plans now … with ZERO future growth for all CURRENT participants. These plans should be replaced with a retirement package (pensions & healthcare) EQUAL TO (but NOT better) than what comparable Private Sector Taxpayer typically get from their employers …. a 6.2% of pay employer Social Security contribution on their behalf, 3% into a 401K, and $300 annually into an HSA to help pay for retiree heathcare. Private Sector Retirees RARELY get more.

    Taxpayers should treat dedicated, hard-working Public Sector workers with RESPECT, but that does NOT mean that we should allow the Public Sector Unions and our elected officials to collude (via the trading of campaign contributions and election support for favorable votes on Public Sector pay, pensions, and benefits) in a way that has resulted in a decades-long financial “mugging” of the Taxpayers.


    • Posted by Anonymous on October 18, 2014 at 7:00 pm

      Merely more drivel as useless as teats on a bull.


      • Posted by Tough Love on October 18, 2014 at 7:07 pm

        As expected, you can always be counted upon to be the fool

        I suggest that you read my comment BELOW.


    • Posted by Anonymous on October 19, 2014 at 10:58 am

      TL if you spent a little time researching the issues with private sector 401k and IRA’s you would cease you droning on and on about these retirement plans as an alternative for public sector employees. The cashed strapped federal government is eyeing the $2 trillion untaxed dollars in 401k accounts. Finra, the SEC and the US Dept of Labor are looking at the$ 6.5 trillion stashed in IRAs. One proposal is a rollover to a Roth at retirement so the government can get it’s tax monies. There is also broker/dealer fiduciary rules to implement because of widespread abuse. Then there are fiduciary breach charges coming for plan sponsors who provide access to the wrong financial advisors, who victimize participants. 401k distributions and rollovers are getting a militancy look/see. You should check your own accounts, they might be lighter and very different in the near future.


      • Posted by Anonymous on October 19, 2014 at 11:19 am

        Multiagency looksee


      • Posted by Tough Love on October 19, 2014 at 12:24 pm

        A non-answer to the pension problem. It fails to address a solution to the grossly excessive, clearly unsustainable, and 1/3 to 1/2 “funded” under proper accounting. Why not suggest a solution rather than bringing up possible problems in other areas.?

        And FYI, a few of the European countries have done what you said (mostly Eastern European countries), because they literally had no money to function. The USA may get there if we don’t make a much greater effort to get our expenses in line with revenue, but that problem is still far off.

        In NJ, the pension crisis is here now, with 3 (maybe 5) years to go before the Plans hot “paygo”. If you think taxes will go instantly up by $5+ billion to continue paying retirees, I’ve got a bridge to sell you.


        • Posted by Anonymous on October 19, 2014 at 12:41 pm

          You recommend 401k solutions every comment, there are presently serious issues with this option. Whatever solutions the multiagencies devise will be reflected in IRS regulations that govern both private and public 401 retirement funds. The reviews are taking place now, the US will act long before the coffers go dry. The State treasuries will also benefit with taxing transfers. There are many layers and many solutions. The government need tax dollars and 401 participants need protection from unscrupulous financial services professionals. Your 401k monies will be taxed before the State pension funds collapse. The State coffers would benefit from an overhaul of distribution/transfer options under 401 whether private or public. The monies are pretax/tax deferred until distribution.


          • Posted by Tough Love on October 19, 2014 at 1:45 pm

            Yes, I recommend an end to the current DB Plans for the future service of all current workers. There are many reasons why that is both the necessary, preferred, and likely only option. A few follow…

            (1) Politicians cannot be trusted (and even if today’s can, tomorrow’s may be different and undermine or reverse prior administration reforms) and collude with the Public Sector Unions to provide pensions and benefits that are always MULTIPLES greater in value at retirement than those of comparable Private Sector workers, with there very rarely being a justifiable reason (such a cash pay differentials).

            (2) The REAL cost of a pension accruals in a single year is the Present Value of the ultimate payout. While that’s real easy to determine for 401K-style DC Plans (simply being the $$$ actually contributed in the year), for DB Plans, it is complicated and requires lots of guesses (via assumptions), and for those with an “agenda” it is easily manipulated. For example, by choosing assumptions and methodologies to make the annual “cost” appear much lower than what it will likely be. Of course THAT is exactly what has and continues to happen (in ALL Public Sector DB Plans), because all involved parties (except the uninformed, and mostly uninvolved Private Sector Taxpayers who foot almost the entire bill for Public Sector Plan promises) BENEFIT form such underestimate of TRUE Plans costs. The politicians benefit because by contributing LESS than the true annual cost, more of the budget is available for other expenditure which ingratiate the politicians with the voters. The Public Sector workers benefit because more money is available for annual raises and because their promised pensions (being underestimated) don’t look as out-of-line (i.e., MUCH greater) than what the Private Sector Taxpayers are getting from their employers.

            (3) Using best estimate assumptions and proper accounting/actuarial procedures, the EXPECTED total “normal cost” (which is ONLY for annual pension accruals, and does NOT address paying down existing unfunded liabilities) is, as a level % of pay, from 25%-40% for non-safety worker and from 40% to 60% for safety workers….. and it is not difficult for a properly trained person to verify the accuracy of these % cost ranges. Subtracting say 5% and 10% employEE contributions for the non-safety and safety workers groups respectively leaves a roughly (bytaking the range midpoints) 27.5% of pay annual TAXPAYER contribution for non-safety workers and a 40% annual of pay annual TAXPAYER contribution for Safety workers. These TAXPAYER contributions are ALWAYS MULTIPLES greater than what private Sector employers contribute to THEIR workers’ retirement Plans…. which is (today) rarely more than the 6.2% contribution to Social Security on the workers’ behalf plus a 3%-5% contribution into a 401K. And keep in mind in making the Private/ Public Sector comparison that (on average) 75% of Public Sector workers DO participate in Social Security. The upshot of all this is that the pension promises made to ALL Public Sector workers are … in the extreme …. grossly excessive, unnecessary to attract and retain a qualified workforce, and patently unfair to Private Sector taxpayers who (while THEY do NOT benefit from the largess) are supposedly responsible for paying 80-90% of total Plan cost.

            Sorry …got to go now. Maybe more later.

          • Posted by Anonymous on October 19, 2014 at 1:47 pm

            Great answer to the NJ budget revenue shortage, since retirement income is taxed. Tax 401k and IRA transfers at retirement to Roth accounts.

          • Posted by Tough Love on October 19, 2014 at 4:45 pm

            Anon, Not really a good or appropriate solution, because:

            (1) It only ADVANCES the tax revenue from the receipt in EACH year of distribution (from a regular IRA or 401K) to all in the year of transfer to a ROTH. There is no real NET tax benefit. It’s just a timing difference.

            (2) EVEN IF there was a material Tax benefit , just like would be a sale of the NJ Turnpike, these assets (and any revenue generated from a sale, or special deal) belong to ALL of NJ Taxpayers, NOT just the 15% of Taxpayers who are PUBLIC Sector workers. There is ZERO justification to use such additional revenue to fund what are VERY clearly unnecessary and grossly excessive… by ANY reasonable metric….. Public Sector pensions and benefits (negotiated in collusion with corrupt politicians).

          • Posted by Anonymous on October 19, 2014 at 7:05 pm

            TL millions of retirees are prepping to tap retirement funds, the federal taxes could amount to millions per month, billions per year. The states that tax retirement income would benefit from additional tax revenue. Tax revenue collected support state liabilities and surplus. The retirees would pay their taxes at retirement before Roth conversion. We are simply seeking solutions, 401k tax deferrals / IRA tax deferrals would end at retirement. We all pay taxes and this tax break is for public and private sector employees who are participants in 401 plans. There is a clear tax obligation, for 401 distributed/ transferred accumulations so there should be no problem with the government getting there tax dollars at retirement. You being a taxpayer cheerleader should agree. You are very aware that there are no laws under IRS codes that support wealth management. The State of NJ can put its 401tax bounty in the general fund and pay the bills which includes the pension obligations.

          • Posted by Tough Love on October 19, 2014 at 7:58 pm

            Quoting Anon … ” The states that tax retirement income would benefit from additional tax revenue. ”

            Either you do not understand or you don’t WANT TO understand (because “understanding” doesn’t support your position).

            Yes, a Qualified IRA or 401K transfer to a ROTH IRA brings in tax revenue up front (in the year of the transfer) but there is a (mostly*) opposite offset of equal Present Value in later years when the tax revenue that WOULD HAVE been collected is now not collected (because ROTH withdrawals are not taxable).

            But AGAIN because that revenue belongs to ALL NJ Taxpayers, NOT just the 15% of all workers that are PUBLIC Sector workers ………, there is ZERO justification for “earmarking” (more than a proportionate 15% of) such additional revenue to fund Public Sector pensions.

            * Mostly … because a tax-bracket shifts may make it not an exactly equal offset.

          • Posted by dunnigan on October 20, 2014 at 12:54 pm

            In the state of new Jersey Roth withdrawels are taxed as regular income .I believe we are one of two states to do this …another reason to leave the state

          • Posted by Tough Love on October 20, 2014 at 1:50 pm

            Responding to dunnigan, I believe that you are incorrect …

            From THIS web page:


            “The New Jersey gross income tax treatment of Roth IRAs conforms to the Federal treatment. Direct contributions to Roth IRAs are not deductible and qualified distributions from Roth IRAs are not includable in New Jersey gross income.”

            And, it goes on to define “qualified distributions from Roth IRAs” as follows:

            A qualified distribution from a Roth IRA is excludable from gross income and should not be reported anywhere on the New Jersey income tax return. A “Qualified Distribution” is one which is made after the five-taxable-year period beginning with the first taxable year for which a contribution was made to the Roth IRA, and which is made:

            * On or after the date on which the individual reaches age 59½; or
            * To a beneficiary (or the individual’s estate) after the individual’s death; or
            * Because the individual becomes disabled; or
            * As a qualified first-time homebuyer distribution as defined by the Internal Revenue Code.

        • Posted by Anonymous on October 20, 2014 at 11:48 am

          Maybe the private sector should start working holidays, weekends, and nights. Then they should not be allowed any pay increases or bonuses, maybe they should run into a fire instead of out of the building. Maybe they should run into the office shooting instead of away from it. Maybe they should go into work on their kids birthdays, miss their kids first day of school, i can go on and on and on.


          • Posted by Tough Love on October 20, 2014 at 12:36 pm

            Maybe $100+K Police should work 10-20 hours of overtime for free each week…. just like 90+% of $100K Private Sector workers that I know.

          • Posted by Metaphysical on October 20, 2014 at 5:42 pm

            Is this really the best you can come up with? Lots of people work on holidays. They’re often called “cashiers” and “store associates”. And, like pretty much the rest of the private sector, they don’t get to “retire” in their 40s/50s with 100K pension & lifetime medical. They also don’t get guaranteed raises and are subject to market forces which deter excessive greed.
            I’m also not persuaded by the emotional “look at me, I’m a hero” argument, either Funny video on this here:

  3. Posted by Tough Love on October 18, 2014 at 6:49 pm

    To all the “Anonymous” commentators …… read Mr. Bury’s #1, #2, and #3 above several times …… especially #3.

    It’s time you get off your high horse and give a great deal of thought to what’s fair to the Taxpayers as well as to current workers and retirees (meaning EQUAL, but not better “Total Compensation” in comparable Public/Private Sector jobs), and, for the “actives” to discuss amongst themselves (given the pension/benefit reductions sure to come) how much THEY want those already retired to share in the pain, because if those already retired get all that was “promised”, then the “actives” will likely get nothing (beyond a return of their $$$ contributions).

    It’s a pretty sad state of affairs, but NOT dealing with it is NOT a strategy.


  4. Posted by Anonymous on October 18, 2014 at 9:00 pm

    Dream on, things arent going your way, never will be, that is the bottom line really


    • Posted by Tough Love on October 18, 2014 at 11:04 pm

      Quoting #3 …

      “There is absolutely no possibility that the state of New Jersey will come up with any meaningful contributions ever again to even maintain the current level of benefits, much less to pay for the sins of the past.”


      • Posted by Anonymous on October 18, 2014 at 11:47 pm

        Add… Unless compelled by court order.


        • Posted by Tough Love on October 19, 2014 at 12:22 am

          Ah, more denial and arrogance …

          And you STILL feel that the 85% of the population (PRIVATE Sector taxpayers) NOT riding this PUBLIC Sector pension/benefit “pig-fest” should suffer with HUGE tax increases and/or devastating ADDITIONAL cuts to essential services just so your ilk (Public Sector workers/retirees) can continue to get all that was “promised” (always MULTIPLES greater pension & benefits than those of comparable Private Sector taxpayers) …….. no matter that those promises were made with NOBODY looking out for taxpayer interests, and which were unnecessary, unjust, and unsustainable from the get-go.

          If your Unions have any brains, they will realize that that kind of attitude isn’t go to go over well when (not if) the SH** hits the fan and you pensions have ZERO assets left.


  5. Posted by hondo on October 19, 2014 at 12:22 pm

    Well i hope John & TL are wrong with their predication but, as a wise investor you better plan for the worse!


  6. Posted by Anonymous on October 19, 2014 at 12:56 pm

    The millionaire that are about to be taxed are the 401k, 403b millionaires and trust the taxpayers who aren’t retirement millionaires will have absolutely no sympathy. The deal was you save money before tax in tax deferred retirement accounts upon distribution the money is to be taxed, to avoid taxes many rollover accumulation before retirement to IRA, from there they systematically rollover to Roth accounts paying the taxes, so distributions from the Roth are tax free. This is a wealth management scheme enjoyed by retirement millionaires. It appears the federal agencies are reviewing this scheme so that accumulations will go directly to Roth with taxes going to the Treasury but there is tax monies for state treasuries that tax retirement monies. There’s no off shore tax havens for the retirement millionaires. How’s that for a realistic solution?


    • Posted by Tough Love on October 19, 2014 at 5:16 pm

      The REAL retirement “millionaires” in NJ are the higher-pay Public Sector workers including ALL full-career Police and Firemen.

      Considering the very young full retirement ages, the VERY generous formulas, the very liberal definition of “pensionable compensation”, and (temporarily suspended) the annual COLA increases, most full-career safety pensions have a Lump Sum value at retirement of about $2 Million. For Private Sector workers (with TYPICAL Private Sector pensions) to get such a pension, they would need a final salary great than the $400K that the President now makes.

      It’s COMPLETELY absurd to grant safety workers such a pension …. and if you do the math properly, ALL of the safety worker’s own contributions (including investment income) accumulate to a sum at retirement sufficient to buy only about 10% of that EXTRAORDINARILY generous pension. The Taxpayers are the reluctant suckers in the equation, being “responsible” for the 90% balance….. although we (the Taxpayers) have ZERO intention of paying that 90% balance or anything even close …. and even the Elected Officials in your Union’s pocket have no intention of asking for such tax increases.

      Material reductions are INEVITABLE, as the MATH and REALITY will necessitate it.


      • Posted by Anonymous on October 19, 2014 at 7:43 pm

        TL its hard out there for police, firefighters and EMTs so I don’t begrudge them their earned benefits. Our roving Governor has done nothing to curb urban violence, suburban/urban heroin abuse and deaths, cutting aid to cities and towns fighting violence and drugs just increased the problem. You sound jealous. Collecting tax monies being wealth managed in 401 and IRA retirement accounts will help to relieve the revenue shortfall.


        • Posted by Tough Love on October 19, 2014 at 8:12 pm

          Quoting …” Collecting tax monies being wealth managed in 401 and IRA retirement accounts will help to relieve the revenue shortfall.”

          A more accurate statement would be …. “Using tax revenue generated by advancing tax collections to earlier years (thereby creating an equal tax shortfall in later years) so as to be able to CONTINUE to fund Public Sector pensions that are clearly grossly excessive by ANY reasonable measure, INSTEAD OF facing reality … and NOT kicking the can drown the road for MORE years … and MATERIALLY reducing (by AT LEAST 50%) the pension accrual rate for the FUTURE Service of all CURRENT workers … is just plain STUPID”


  7. Posted by hondo on October 19, 2014 at 6:52 pm

    TL take a deep breath don’t get a coronary!


    • Posted by Tough Love on October 19, 2014 at 8:18 pm

      I breath easy …. because I’m on the side of fairness, advocating for EQUAL PUBLIC/PRIVATE Sector “Total Compensation” (cash pay plus pensions plus benefits) in comparable jobs.

      It’s REAL hard to argue with EQUAL …. but the “Anonymous” commentators regularly do BECAUSE they know that they now get FAR FAR MORE than equal … and want to keep it that way….. understandable, but NOT acceptable.

      Sorry…. but I’m going to continue to advocate for EQUAL.


      • Posted by Anonymous on October 19, 2014 at 8:31 pm

        TL there are trillions of untaxed dollars in 401 and IRA accounts retirements happen daily, monthly or yearly, the money would flow to the federal and state coffers continuously. This is fair, wealth management is not legislated, there is relief on the horizon, it’s been there all the time. You should embrace this probable revenue source. It will just require a few weeks in existing legislation. I’m feeling a sense of relief, that there is a viable solution.


        • Posted by Tough Love on October 19, 2014 at 9:52 pm

          No, Stealing from the future (via simply ADVANCING tax revenue to earlier years) is bad policy REGARDLESS of the use. …. example: almost every State has blown DECADES of income they were supposed to receive from the Global Cigaret Industry settlement ($25 billion, if I recall correct) about 10 Years ago, by selling the income stream for payments up front. All the money is GONE.

          And using ANY such tax-advanced revenue to continue to fund the unnecessary, unjust, and grossly excessive Public Sector pension promises, is about as unworthy a cause as I can think of.


          • Posted by Anonymous on October 19, 2014 at 10:27 pm

            Seriously, this is just a reconsideration of previously legislated tax incentives. It is clear that the incentives were overly generous. US TREASURY in the red 6 trillion in tax deferred retirement accounts that could provide 60 billion in tax revenue. TL you advocate fairness, these tax billion is the unexpected consequence of not monitoring the impact of tax relief. So like the markets, a correction is the right thing. Stealing isn’t an appropriate description it’s really an oops we were to generous at the expense of the national coffers, we need money to fight ebola and domestic threats from internal ISIS threats. Training law enforcement, first responders and firefighters for a different level of threats. There are clear and present dangers that require money. This is a wonderful solution.

          • Posted by Tough Love on October 19, 2014 at 10:50 pm

            I’m stunned. With YOU, as a PUBLIC Sector worker …. ALL OF WHOM routinely get pensions MULTIPLES greater than your Private Sector counterparts …. have the audacity to propose that the lowly PRIVATE Sector worker, saving DESPERATELY for a retirement that will NEVER even remotely equal YOURS, should lost the tax advantages of their MUCH LOWER retirement Plans … just so that revenue can be found to make whole your grossly excessive pension promises.

            What reality do you live in ?

        • Posted by Anonymous on October 19, 2014 at 10:45 pm



          • Posted by Anonymous on October 20, 2014 at 11:22 am

            This reality “at times the government gives and under new circumstances the government takes back”, such is the cycle of tax incentives. Many 401k plans do not have a group annuity option, so the income options are systematic withdrawals and open annuity market as an individual. 401k and 403b retirement savings plans are pretax, it is understood that the taxes will be paid on distribution. So your outrage is misplaced. The reduction and reshaping of 401 tax incentives will impact both private and public sector employees.

          • Posted by Tough Love on October 20, 2014 at 12:32 pm

            Anonymous, Yes, but “taking back” the grossly excessive pensions and benefits promises granted to all PUBLIC Sector workers (as a result of the Public Sector Union/Politicians collusion) is a FAR FAR more justified take-away than the 401K/IRA tax deferrals that help PRIVATE Sector Taxpayers accumulate savings, (that if they’re VERY lucky) may provide HALF the level of pension grant Public Sector workers.

          • Posted by Anonymous on October 20, 2014 at 5:06 pm

            TL if you have evidence of state legislators and union officials engaged in collusion turn it in to the NJAG, otherwise cut the drama.

          • Posted by Tough Love on October 20, 2014 at 5:52 pm

            Anon, we both know it’s a clear Union/Politician” understanding” … so as to avoid bribery charges.

            But it goes something like THIS…


  8. Posted by TaxpayerSucker on October 20, 2014 at 9:50 pm

    TL – right on, right on, right on. I don’t believe these government workers are smart enough to calculate the windfall they have. Me – I’m voting with my feet and moving out of this public union swamp. Wanna see real estate values get strangled by property taxes? I’ll be on the sidelines watching the fight.


  9. Posted by MJ on October 21, 2014 at 6:10 pm

    I don’t understand why taxpayers are under any obligation to fund the publics retirement and health benefits. TL keeps saying equal but it will never be equal. Let the publics save for their own retirements and get the same type of health plan that is available to everyone else. I can’t help thinking that this is the ultimate purpose of Obamacare. Give publics a stipend and let them find their own insurance. Go to work, get a salary, pay your FAIR share of health benefits and pension costs and it you want your family on the plan then you pay for it and fund your own retirement through retirement vehicles that are already in place such as Roth IRAs, 401 Ks, etc. Retire at 65 like everybody else is you are lucky enough for that. Police and fire, retire to desk jobs if you are too old and worn out by 50 to be on the street. Better yet, use K-9s to run down the criminals if you are up in years. You were promised…haha ha…we were all promised.


    • Posted by Anonymous on October 21, 2014 at 9:32 pm

      There is a state, county and local government workforce, these employees handle public services. Under state and federal laws governing labor/employment workers must be paid, benefits such as pension and healthcare are apart of the compensation package. All citizens including members of the public workforce pay taxes, therefore we are all taxpayers. All public employees must pay a portion of their pension and healthcare each pay period. The 2010 reforms increased employee contributions to pension and healthcare for all public employees. The increases were staggered, it is clear that new measures are necessary to insure retirees continue to receive earned benefits and a hybrid system is required to strengthen/revise the present systems for retirees and future retirees. GM’ s rollover to a group annuity might provide some answers. The State has long-term defined contribution program providers there are valid solutions. TL is salivating at the prospect of several hundred thousand public workers without pensions, this is not going to happen. Public employees will pay more for their retirement and health. Public health benefits might just cover the employee, with spouses/children seeking coverage under the Affordable Healthcare. There are many different approaches. There will always be public and private employment sectors, it will always be evolving.


      • Posted by Tough Love on October 21, 2014 at 10:50 pm

        Anon, Isn’t “staggered” intentionally misleading. Let’s be honest. Almost NONE of the pension changes in NJ (except the COLA suspension which looks like it will be reversed by the Courts) impacted workers already employed or retired at the time the law was passed. It ONLY impacted NEW workers, and as such will save next to nothing for 20+ years until those NEW workers begin to retire.

        It was FINANCIALLY complete BS, because our elected official are BOUGHT-OFF by your Unions with campaign contributions and election support (and threats if they betray the Unions) and want to keep that money flowing.

        ALL of the changes should have applied to the FUTURE Service of all CURRENT workers … just as such changes ROUTINElY do in Private Sector Plans.


        And as to “solutions”, enough with the “generalities”. Make a VERY specific suggestion and I will HONESTLY critique it.

        You see, the problem is (considering the TRUE hole NJ is in … $200 Billion for Pensions and healthcare alone) has ZERO NON-PHONEY “solutions” that are not incredibly “financially” painful to “somebody”, and there are only 2 “somebodys, the Public Sector workers/retirees, and the Taxpayers ……… and neither is even willing to pick up even 5% of the incremental cost of that $200 Billion shortfall.


        • Posted by Anonymous on October 21, 2014 at 11:07 pm

          Not true the statute is available online every employee paid increased contributions per the law changes for pension and health benefits from the enactment date through to full implementation. Some retirees in expensive plans are required to pay. TL critique isn’t important, my comments relate to employment matters ie. pensions, benefits and solutions. You might not understand my solutions, but many others do, there are valid solutions.


          • Posted by Tough Love on October 22, 2014 at 12:45 am

            Ok, so let’s address that…….

            Right now if you were to mathematically accumulate all of the typical NJ Public Sector worker’s actual contributions to the date of retirement (INCLUDING all the investment income on those contributions), RARELY would the accumulated sum be sufficient to buy more than 10-20% of his/her promised pension (with the 80-90% remainder being the responsibility of the Taxpayers) BECAUSE your pensions are so VERY generous, and hence so VERY expensive.

            So do you really think the very few additional % of pay contribution accomplishes anything material ? No it doesn’t.

            We’re talking about a shortfall that would likely take an ADDITIONAL 20-30%% of pay annually forever to beat it down….. and NOBODY is willing to pay it.

            An from MY perspective (that of a Private Sector Taxpayer) and seeing pension promises made to PUBLIC Sector workers that are always MULTIPLES greater in value at retirement than those of your Private Sector counterparts, I see ZERO justification for Taxpayers to any any more. Your pension & benefit promises have always been too generous, and are too generous now. They need to be VERY materially reduced … and for the FUTURE Service of all CURRENT workers.

  10. Posted by Anonymous on October 22, 2014 at 10:12 am

    Public sector pension payouts are usually from group insurance policies, the accumulation in that case is a premium. The risk once lifetime income annuities are purchased through a group policy is bore by the insurer. Even the best individual deferred income annuity wouldn’t compare to long-term, pooled employer sponsored guaranteed annuities. You fully understand employer group annuities versus individual annuities. You also understand many private sector 401k participants want complete control over their retirement monies and embrace wealth management/legacy strategies, which is there right. You also know that employer-based insurance annuity premiums guarantee a specific amount of lifetime or period certain income based on the amount used to purchase the annuity. Public workers have received retirement payments from annuities in the US since the 1900’s.


  11. Posted by Tough Love on October 22, 2014 at 10:40 am

    Quoting …. “Public sector pension payouts are usually from group insurance policies, the accumulation in that case is a premium.The risk once lifetime income annuities are purchased through a group policy is bore by the insurer.”

    Wrong, in fact, Public Sector pension payouts almost NEVER come from purchased annuities of any type. They are paid DIRECTLY from Public Sector fund assets accumulated from employee and taxpayer contributions, and from investment earnings on those assets.

    The “cost” (i.e., “purchase price”) of buying annuities from insurance companies (who then take-on the investment and mortality risk) is simply too high for this to be (even remotely) a viable option.
    Is that you again Joel ?


  12. Posted by Anonymous on October 22, 2014 at 1:03 pm

    I get the feeling that state treasurers wrongly believed they could mimic insurance annuity payouts, the bottom line being asset retention. Insurers have larger participant pools, as salaries increased reality sunk in, there needs to be a consistent revenue pool both employer, participant and investments. Maybe the unknown is the public employer annuity pool through private insurers. Employers aren’t allowed to borrow, the monies are for the exclusive benefit of employees and their beneficiaries.


    • Posted by Tough Love on October 22, 2014 at 2:56 pm

      Quoting ….”Maybe the unknown is the public employer annuity pool through private insurers. ”

      Financially not viable … for the SAME reason I stated above. Insurance companies ALWAYS price the lump sum up-front cost to purchase annuities from THEM very conservatively because once sold, THEY assume all the investment and mortality risk or worse-than-expected experience …… unlike Public Sector Pension Plans who have a “sucker” in the equation … the oppressed TAXPAYER who supposedly* backstops all investment and mortality losses.

      * I said “supposedly” above, because the Taxpayers have wised up the this HUGE decades-long Public Sector Union/worker financial “mugging” perpetrated upon them, and have no intention of acting as that backstop any longer and funding the HUGE funding shortfalls that now exit.


      • Posted by Anonymous on October 22, 2014 at 9:27 pm

        Please visit the NJ Division of Pensions and Benefits website read NJABP,ACTS and DROP. The State has long-term connections with some of the oldest pension annuity providers.


        • Posted by Tough Love on October 22, 2014 at 9:48 pm

          These Annuities are purchased with the Lump Sum proceeds from DEFINED “CONTRIBUTION” pensions supplements, NOT from the primary retirement Plans in place for almost all of NJ Public Sector workers, which are Traditional DEFINED “BENEFIT” pension Plans.

          The latter simply CANNOT be cost-effectively moved to annuities purchased from Private Sector insurers because the promised “BENEFITS” (expressed as a monthly income) would cost FAR FAR more than the Pension Plan assets available for transfer to the insurer to buy it the annuity.

          It’s you again, isn’t it ……. Joel.


  13. Posted by Anonymous on October 23, 2014 at 10:39 am

    TL total collapse will not happen, I foresee a hybrid plan for current and future employees. I foresee the NJDPB, the division of Investments and the private insurers for NJABP developing a workable scheme to continue providing retirement income to retirees and their beneficiaries. The State can’t borrow money from dc plans,. The State really should turn the whole pension process over to providers, large pools of retirement accumulations are too tempting.


    • Posted by Tough Love on October 23, 2014 at 7:04 pm

      Anon, I believe you may be correct with the hybrid Plan … as a compromise, because our greedy Public Sector workers would “freak-out” if only given what typical Private Sector workers get … 3%-5% into a 401K Plan and SS.

      As long as the generosity is (worst case for Taxpayers) no greater than what Federal Employees now (a 1% of pay DB Plan + a very modest DC Plan) get (and justifiably quite a bit less). The key, is that it MUST MUST MUST apply to the FUTURE service of all CURRENT workers (BOTH State and Local) to have meaningful financial impact.

      Public Sector pensions now promised via Traditional DB Plans will NEVER be transferred to Private insurers via purchase of annuities from them …. too expensive by a factor of 2x.

      Quoting …… “The State really should turn the whole pension process over to providers, large pools of retirement accumulations are too tempting.”

      Great idea, as long as the cost to taxpayers is equal to (and legally CAPPED at as a % of pay) what THEY typically get from their employers towards their retirements.


  14. Posted by Anonymous on October 23, 2014 at 9:23 pm

    Presently there is information about switching from a db plan to a dc plan on the NJ DPB website. The statutes regarding pensions discusses the formula/impact of the switch on the employees accumulations. I believe there are valid solutions that will take into consideration all issues in the best interest of the stakeholders. I believe in the exclusive benefit clause and non reduction in promised benefits, I fully believe that the pension assets should not be accessible for borrowing.


    • Posted by Tough Love on October 23, 2014 at 10:02 pm

      Quoting …”Presently there is information about switching from a db plan to a dc plan on the NJ DPB website. ”

      Please provide a link directly to the webpage with this information.

      P.S. ………… A Public Sector DB Pension Plan switch to a DC Plan (whether run by either the Public or Private Sectors) is NOT the same as transferring Public Sector DB Pension Plan obligations to a Private Sector Insurance Company via the purchase of annuities. The latter simply will never happen due to the huge cost of buying (always CONSERVATIVELY priced) Private Sector annuities.

      Quoting … “I fully believe that the pension assets should not be accessible for borrowing.”

      I agree.

      Quoting …. ” I believe in the exclusive benefit clause and non reduction in promised benefits”

      I disagree. Current Public Sector pension AND benefit promises are GROSSLY EXCESSIVE (by any reasonable metric) and were granted ONLY because the Public Sector Unions BOUGHT-OFF our elected officials with campaign contributions and election support. As such, it is INDEED justifiable, necessary, and appropriate to MATERIALLY reduce these promises, and NOT just for new workers, but for all CURRENT workers and where financial circumstances so necessitate, for those already retired as well.


      • Posted by Anonymous on October 25, 2014 at 11:25 am

        TL “exclusive benefit” and “non reduction in benefit” plus no age requirement is the transported law in NJ. Public employees should read and understand the protections under the NJ Defined contribution laws.


    • Posted by Tough Love on October 23, 2014 at 11:36 pm

      Ooophs … I missed this big one …

      Quoting …”I believe there are valid solutions that will take into consideration all issues in the best interest of the stakeholders.”

      Considering that the interests of the 2 stakeholders (yes, there are ONLY 2 real stake-holders, the workers and the Taxpayers) are diametrically opposed both side will be VERY unhappy with ANY compromise that’s reachable because:

      (a) the Taxpayers are fed up with high taxes to pay for what are CLEARLY grossly excessive Public Sector pensions & benefit promises, ALWAYS multiples greater in value at retirement than what comparable Private Sector workers get from their employers, and

      (b) the workers won’t debate the very obvious (and extreme) generosity of their pension & benefits. They simply demand what they were “promised” (ignoring that those promises were made by politicians bought-off by their Unions) and want the TAXPAYERS (not THEM) to pay for it.

      And please ….. enough with generalities (as exemplified by your above quote).

      I challenge you. Clearly state these valid “solutions” with specifics and details.


  15. Posted by Anonymous on October 24, 2014 at 9:28 pm

    TL everyone seeking more information found it in the PERS member handbook, NJ DIVISION OF PENSION and Benefits website. NJ statutes are available on the NJ legislature website, under pensions and benefits. NJABP providers are private insurers with years/decades of experience providing public sector employees with guaranteed income annuities through group plans. NJ has long-term relationship with these six private insurers, NJABP, NJDOPB. Today the US Treasury and the IRS announced it will allow 401k participants to use a part of their savings to by deferred annuities at younger ages for guaranteed lifetime income. The annuities will be offered at prices that vary with a participant’s age. “Not reducing the promised benefit” is the statute language and intent. Read and weep/ or rejoice. Change is coming.


    • Posted by Tough Love on October 24, 2014 at 10:38 pm

      Ah, as I expected …….. When DEFINED CONTRIBUTION (DC) plan savings are “applied” to buy Private Sector annuities, there is no “cost”-issue to the State of NJ (because the full $$$ amount used to purchase the annuity ALREADY belongs to the 401K Plan participant and is transferred from THEIR 401K account) and those 401K participants who choose to buy such annuities, are buying very CONSERVATIVELY priced annuities (whether they know it or not) …. with lots of margins built into the pricing for the insurer’s expenses, profit, and risk of poorer than expected investment returns or long than expected life expectancies.

      As I have stated SEVERAL times in above comments, this is NOT the same as transferring Public Sector DEFINED BENEFIT Pension Plan obligations (i.e., the promised monthly payout) to a Private Sector Insurance Company via the purchase of annuities. The latter simply will never happen due to the huge cost (to the State) of buying (always CONSERVATIVELY priced) Private Sector annuities.

      If you don’t understand the difference, you have absolutely no business commenting on this issue, and anyone who takes advice from you on this subject is a fool.

      And ……by saying the following ….”“Not reducing the promised benefit” is the statute language and intent.” in a way that suggests it has ANY meaning whatsoever in the context of this discussion, suggests to me that you are either COMPLETELY incompetent on this subject, or a charlatan who is perhaps is looking for clients to advise with fees and/or commissions paid to you. That statement is MEANINGLESS because with DC (i.e., 401K-style) Plans, there IS NO “benefit” to be “diminished”.

      Additionally, there is almost nothing worse than using 401K accumulations (i.e., funds that are ALREADY tax-preferenced) to buy “DEFERRED” annuities (as you seem to be suggesting above), for which the buyer specifically pays VERY high fees specifically for the tax-preferences of Deferred annuities … that they don’t need because that ALREADY have those tax preferences via their 401K Plan.

      P.S. there is nothing inherently wrong with buying IMMEDIATE PAYOUT* annuities from an insurance company with 401K funds (assuming the IRS regs. will indeed allow such transfers w/o considering the transferred amount to be taxable income). . But just as with any other large purchase, you should research and understand what you are buying, that it meets your goals, is consistent with your risk-tolerance level, and that you are certain that you can trust the person advising you and that he/she is working in YOUR best interests, not theirs. A suggestion, INSIST that your adviser agrees to be advising you in a legal “fiduciary” capacity … and get that commitment IN WRITING., because if they act otherwise, they will indeed pay dearly for that betrayal.

      * IMMEDIATE annuities (under which the monthly payout starts right away) are typically low commission, low fee products, unlike DEFERRED annuities which are high fee, high commission products with significant penalties for early withdrawal of your investment.


  16. Posted by Anonymous on October 25, 2014 at 11:33 am

    NJ dc plan providers for decades has been some of the nation’s top insurers, the solution is already at the negotiation table. As of Friday 401k private sector employers can offer deferred annuities. Every 401k saver didn’t reach million/multimillionaire status, so deferred annuities could save them from Alpo and cardboard box housing. I get private sector 401k investors hate annuities but these would mirror the public sector annuities TO rants against.


    • Posted by Tough Love on October 25, 2014 at 1:06 pm

      A “solution to “which” problem? If you are suggesting a TRANSFER of the hugely underfunded Public Sector DB Plans to Private Sector DC Plan annuities, you are flat out wrong ….. will NEVER work or happen due to the huge INCREASE in cost TO THE STATE to buy those (highly priced PRIVATE Insurance Company) annuities.

      Of course, DC Plans CAB BE a a BIG solution to NJ’s pension crisis….. by hard freezing ALL of NJ’s DB Plans (now in place) for all CURRENT workers (ZERO future growth), and shifting those workers (for FUTURE Service) to a MODEST DC (401K-style) Plan with a a taxpayer %-of-pay match comparable to what Private Sector employers TYPICALLY grant THEIR workers …. 3%-5% of pay. THAT is without doubt the BEST and SMARTEST action NJ could take for it’s LONG-TERM financial well being.

      DEFERRED Annuities should NEVER (yes NEVER) be funded via ALREADY Tax-preferenced funds (such as those coming from 401K Plans) as the the VERY high fees (and commissions) associated with DEFERRED annuities are there BECAUSE of the tax preference features.

      VERY carefully researched and understood (and then ONLY when the potential buyer is being advised by someone with a legal “fiduciary” obligation to act in the buyer’s best interests) DEFERRED Annuities can be an effective and appropriate retirement vehicle, but ONLY AFTER they buyer has ALREADY maxed out all available tax-preferenced investment options for the year (such as 401K contributions) and the DEFERRED Annuity purchase is made with extra AFTER-TAX funds that the buyer has to invest.


  17. Posted by Anonymous on October 26, 2014 at 3:57 pm

    TL the NJDPB working with providers, DOL, IRS and unions can handle this my work is done.The laws are in place, participants need to read and assist their unions move the pension system to a more secure status.


    • Posted by Tough Love on October 26, 2014 at 4:25 pm

      Instead of more non-descriptive (meaningless BS) generalities, how about stating exactly HOW they will “handle this”?

      And exactly what the “this” you are referring to is.

      How’s it going Joel ?


  18. Posted by Bureau Of Prisons Registered Nurse on November 14, 2014 at 1:27 am

    Sure is fun to watch TL’s blood pressure go up! Been watching the posts for some years now, and they are getting more and more desperate as the predictions of pensions being zeroed out (or whatever) don’t materialize. Fun stuff! Keep it up TL, I enjoy the show.


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