NJ COLA Orals (2): The Argument Not Made

The next few blogs will take up aspects of the oral arguments made (or in this case not made) in Berg v. Christie, the cost-of-living-adjustment (COLA) lawsuit heard yesterday.

In the pension payment case the New Jersey Supreme Court came to a decision in favor of Governor Christie 34 days after oral arguments (5/6/15 – 6/9/15) and I expect something similar here (both as to timeline and outcome) so we have some time to get into details starting with an argument that would seem natural for the plaintiffs to have made but they didn’t – and for obvious reasons that have rarely been enunciated in public.

COLAs were costed for.  When actuaries did their reports they presumed that COLAs would be paid as part of a retiree’s benefit until 2011 when they presumed they wouldn’t be (thus resulting in lower liability and contribution amounts for 2011 and later years).  Therefore, in theory, through 2011 there was money contributed to pay for those COLAs.  What happens to that money? It would seem like a fair question but, for those of who haven’t yet caught on to this three-step tango:

  1. Public plan actuarial reports are a mechanism designed to generate the lowest contribution possible using any method generally accepted in the public-plan world (translation – any method) which leads to…
  2. Taxpayers through their politician representatives in cahoots with public employees through their union representatives abiding this farce and funding these lowball amounts (except when legislatures or governors further reduce them) which leads to…
  3. Arbitrary benefit cuts.

So you see what would seem like a logical argument to make is really an absurd conceit in the world of public-pension funding.



9 responses to this post.

  1. Posted by dentss dunnigan on March 15, 2016 at 12:43 pm

    One can’t expect our politicians to keep promises made in a different era under different circumstances to be kept .In the mid 80’s , 90’s and early 2000 interest rates were 10% or more ,now we had zero rates for over 10 years ,it’s impossible to predict the future and to try to lock taxpayers into an antiquated pension is to much of a burden on the back of taxpayers .Adjust and move on like every industry or become extinct .


    • Posted by Tough Love on March 15, 2016 at 5:47 pm

      It is exactly that possibility (that the future will be radically different than the past) that is why Private Sector Plans (per ERISA) have the legal ability to reduce the pension accrual rate for Future service of all CURRENT workers or to freeze the Plans altogether ….. and they do so quite frequently.

      You see, the Gov’t WANTED Private Sector employers to establish Pension Plans for their employees ….. but couldn’t FORCE them to do so. So to “encourage” them to do so WITHOUT tying their hand (with potentially devastating financial consequences) the legal structure ALLOWED them to change the accrual rates (for CURRENT workers) for FUTURE years no yet worked.

      Seems fair enough …doesn’t it ?

      Sure does, to anyone who is REASONABLE., but not to Public Sector workers who think that THEY are “special” and that the pension formula on day 1 of employment can NEVER be reduced (in terms of the pension accrual rate, the age at full retirement, and other beneficial provisions) no matter how future circumstances change and continued FUTURE Service accruals at the same rate (in a ZERO interest environment) become unaffordable..

      The insatiable greed and arrogance for Private Sector Taxpayers is palpable .


  2. Posted by Anonymous on March 15, 2016 at 10:37 pm

    TL a greedy thief trying shift the spotlight elsewhere.


    • Posted by Tough Love on March 15, 2016 at 11:59 pm

      Oh, so someone (me) who objects to a structure that VASTLY benefits one group (Public Sector workers) and the expense of another (the Taxpayers ….. 80 to 90% of whom are PRIVATE Sector taxpayers… who are responsible for paying for almost all of cost of promised Public Sector pensions & benefits) is now ………… “a greedy thief trying shift the spotlight elsewhere”.

      Really ?

      Really ?


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