NJ COLA Orals (7) What About Received COLAs?

A good sense of how the New Jersey Supreme Court is leaning on the cost-of-living-adjustment (COLA) case can be gleaned from the first question asked at oral arguments which was of the state and had nothing to do with what the state argued at the hearing (that silly unequivocal intent and sovereign power stuff) but rather how the state can define the term ‘benefits program’ to exclude COLAs when COLAs are part of benefits already being received:

  1. The state argues that COLAs are outside the definition of ‘benefits program’ in the law and thus not protected from forfeiture had they been under that definition.
  2. Most retirees are already receiving COLAs (as provided prior to 2011) as part of their benefits.
  3. What then are those COLAs if not part of the ‘benefits program’?

The question was posed pretty clearly (with an example even) and I don’t see the state’s response as providing much cover for anyone eager to be persuaded to their view:
.

 

21 responses to this post.

  1. A major drawback of a Defined Benefit fixed dollar pension is the fact that it does not adjust for inflation. This guarantees that its purchasing power will be diminished—-enter the annual cost of living adjustment which simply provides a partial (60 percent) increase to the original fixed dollar amount.

    With that said, the adjustment was originally 50 percent of the increase in the consumer price index and was increased to 60 percent many years ago. The fixed dollar pensioner is always 40 percent behind. This is why the annual adjustment is an integral part to the pension income benefit and cannot/should not be separated from the original fixed dollar pension.

    Reply

    • Posted by dentss dunnigan on March 18, 2016 at 12:36 pm

      I totally agree with your thoughts that’s exactly the way it would be in a perfect world ,but we know we are in that world .With middle class wages losing about 6% over the past 10 years it’s has gotten impossibly to pay for others that have a guaranteed income and now being asked to pay a COLA on top …. it just keep becoming more clear why people are fleeing this state

      Reply

    • Posted by Tough Love on March 18, 2016 at 2:15 pm

      Quoting joelfrank …..

      “A major drawback of a Defined Benefit fixed dollar pension is the fact that it does not adjust for inflation. ”

      Haven’t heard from you in a while, but as usual, your comments are full of self-interest and disdain for Private Sector taxpayers.

      For a given pension “COST” couldn’t the associated LEVEL stream of annuity payouts be replaced with an EQUIVALENT (based on life expectancy) increasing stream of annuity payments with say 2% or 3% annual increases? Of course it could, with the early year payments lower and the later year payments higher.

      But that’s not what you want is it. Even WITHOUT COLAs, Public Sector pensions are TYPICALLY multiples greater in value at retirement than those of their Private Sector counterparts who retire at the SAME age, with the SAME pay, and the SAME years of service. And adding a 2% annual COLA to an otherwise identical Plan w/o COLA increases the Plan’s value by roughly (depending on the age at retirement) ANOTHER 25%.

      So while your statement is correct, what’s behind it is that you don’t give a SH** about the cost to taxpayers ….. just give me more (MUCH more) on the day of retirement, and THEN make sure that MY PENSION never looses value via inflation, never mind that employer-sponsored Private Sector pensions almost NEVER include automatic annual COLAs , because they are TOO EXPENSIVE.

      Reply

      • Posted by Anonymous on March 18, 2016 at 2:43 pm

        Do you realize how damn boring you have become. It’s pathetic how you keep reiterating the same inaccuracies. It is all so incredible that in all this time you have not yet come up with one decent proposal just a bunch of unrealistic drivel

        Reply

        • Posted by Tough Love on March 18, 2016 at 3:07 pm

          Boring is an opinion ….do I value yours?

          Inaccurate….. no.

          You want a proposal ……….

          Taxpayer should contribute towards Public Sector workers pensions & benefits an amount (as a % of pay) EQUAL TO but no greater than what THEY typically get form their employers …… because that’s “FAIR” and Public Sector workers are NOT “special” and deserving of a better deal on the Taxpayers’ dime.

          Got a problem with EQUAL ?

          And to implement that ……. as long as the Taxpayer CONTRIBUTION is limited (as described above), the Public Sector workers can choose DB or DC Plans of their choice, but don’t expect rich pensions of Platinum+ benefits, because we (the Taxpayers) do NOT get such from our employers.

          EQUAL …. but NOT better.

          Reply

      • Posted by Anonymous on March 18, 2016 at 2:43 pm

        How about a compromise. How about for police and fire, you can retire early. But can’t collect on your pension until 57 yrs old. (Big improvement over now) and since no social security, cola will begin at age 67.
        I believe all other funds have 65 yrs already and get social security at 67. In pfrs anyway, that will prevent the 48 yr old sergeant retiring and collecting 80k+ a year and add millions to the fund. You want to retire? Fine, but you can’t collect until 57. Find somethjng else to do, (not that hard) in the meantime.

        Reply

        • Posted by Tough Love on March 18, 2016 at 3:16 pm

          Even 2%/yr (and capped at 60%), no COLAs, and with a full actuarial reduction of 5% PER YEAR if collecting before age 60 is too generous, being 2 to 3 times greater in value at retirement than what a Private Sector workers would get if retiring at the SAME age, with the SAME pay, and the SAME years of service.

          There is no justification for it. Police are EXTREMELY well pad in cash alone (OVERPAID in my opinion). They should get a MODEST taxpayer-funded pension and save on their own …. just as the Private Sector taxpayers are required to do.

          Reply

          • Posted by Anonymous on March 18, 2016 at 3:51 pm

            TL you are the ultimate oxymoron a gay Republican

          • Posted by Anonymous on March 18, 2016 at 4:16 pm

            That’s why it is called compromise. Each side is a little unhappy but satisfied. I thought my proposal was fair.

          • Posted by Tough Love on March 18, 2016 at 4:28 pm

            Only a greedy Public Sector worker would think a taxpayer-funded pension 2 to 3 times greater in value at retirement than that of a similarly situated Private Sector worker …… is “fair”.

            It’s NOT “fair”.

        • Posted by dentss dunnigan on March 18, 2016 at 5:51 pm

          Fair would be you’re allowed to withdraw 4 to 5% per year of what you’ve contributed to the pension fund …..it’s even less for SS

          Reply

          • Posted by Tough Love on March 18, 2016 at 6:46 pm

            In the days gone by when you could EXPECT to earn 7% to 8% annually in a balanced portfolio of fixed (bonds) and equity investments (e.g., stocks), a rough rule-of-thumb (the 4%-Rule) used by investment advisors was that you could upon retirement withdraw 4% of your total investment account and then increase that withdrawal by about 3% annually to account for inflation….. and have a reasonably high probability that the funds would last for 30 years in retirement.

            Think about that……. why is it 4% and not the 7% or 8% ? Because the difference is what enables the 3% annual increase to adjust for inflation and maintain purchasing power.

            The analogy for out VERY greedy Public Sector workers in NJ (where the underlying rate assumed by their pensions is 7.9%) is that they should get on the day one the FULL 7.9% and annually get inflation increases on top of that.

            It’s WAY past time to to put and end this this decades-long financial “mugging” of NJ’s Private Sector Taxpayers ….. called upon to pay for 80%-90% of the total cost of these GROSSLY EXCESSIVE Public Sector pension (AND benefit) promises.

  2. Posted by Eric on March 18, 2016 at 1:25 pm

    John:
    If cost of living adjustments, which of course are a benefit, are not part of the pension, perhaps the state will argue that it, meaning cost of living adjustments, belongs to the Department of Banking and Insurance. What about Health and Human Services?
    Eric

    Reply

  3. Posted by MJ on March 18, 2016 at 1:28 pm

    John, in regard to #2, I was not aware that those already retired still receive COLAs or do you mean have received COLAs in the past but no as of 2011?

    Reply

    • Anyone who had been retired for two years as of 2011 has a COLA as part of their monthly benefit. This makes the state’s case more confusing in that they are arguing that COLAs are not part of the “benefits package” yet they are being paid out as part of the benefit. You can see from the video that she Jean Reilly wanted nothing to do with this line of reasoning (or, for that matter, any line of reasoning).

      Reply

      • Posted by Anonymous on March 19, 2016 at 1:50 am

        Thank you! I too thought that Jean Reilly floundered over her answers (Essentially non-answers) to Justice Patterson’s line of questioning. She repeatedly dodged the question as it was stated , re-stated, and even simplified.

        Reply

  4. Posted by Anonymous on March 18, 2016 at 1:32 pm

    TL for president!!!

    Reply

  5. Posted by Lawrence McNasby on March 19, 2016 at 8:48 pm

    It’s a disgrace that public employees have to go to court to receive the benefits they were promised in the first place. How can the state change the rules after the game is over. I retired when I did because I was promised an index based pension, now I might not have enough to live a decent retirement. Inflation is low now, but who knows what inflation will be, our buying power will erode as time goes on.

    Reply

    • Posted by Tough Love on March 19, 2016 at 9:34 pm

      Yes, “promised”.

      Larry, who involved in the bargaining or negotiating for those VERY RICH pensions & benefits was truly looking out for the Taxpayers best interests ?

      Answer ….nobody.

      The grossly excessive Public Sector pension & benefit “promises” are VERY CLEARLY the result of the Public Sector Unions’ BUYING of the favorable votes of our elected officials with Union campaign contributions and election support.

      Such fraudulent “promises” should NOT be honored…… and advocating for such is not a “disgrace”, but a “badge of honor”.
      ———————————-

      Where in your thought process is fairness for Private Sector Taxpayers, whose employer-sponsored pensions (for the VERY FEW that still get them) very very very rarely include ANY COLA increases.

      You’re NOT “special” and deserving of a better deal …on the Taxpayers’ dime.

      Reply

      • Posted by Anonymous on March 22, 2016 at 12:16 pm

        who was looking out for the tax payers bets interest: The arbitrator, don’t be ignorant for one minute to think that anything the public servants were given were not negotiated over a extended period of time. If the state promised, then it needs to be held accountable. You can certainly change the rules but not with those that have already retired. Bitch if you want, but a deals a deal.

        Reply

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