Better Off Not Being Eligible for State Plan

2016-849: Authorizing the County Manager to award a contract to Mutual of America, Parsippany, New Jersey, in an amount not to exceed $111,903.97 for the period of July 1, 2016 through June 30, 2017 to implement an employee 401(a) benefits plan for county employees not covered under the Public Employee Retirement System (PERS).

As explained, this plan covers county employees who were at one time not eligible to enter the state plan:



But aren’t those employees much better off since the plan they were not allowed to enter is one that New Jersey is responsible for funding?

Those non-PERS employees get a Defined Contribution Plan that according to its Plan Document provides for discretionary contributions to be allocated among eligible participants based on a point-allocation system using Years of Service and Salaries (1 point for each Year of Service and 1 point for each $1,000 of Salary).

A spreadsheet lists 40 participants in the Plan (20 as active and almost all in Human Services) with total account balances of $3,287,204 as of 11/30/14.

The irony of all this is that the employees paid with grant money and not covered by PERS are put in a Defined Contribution Plan with individual accounts and have an excellent chance of getting all their money at retirement while the PERS people, subject to the funding whims of their employers, are in a severely underfunded Defined Benefit Plan that is going bankrupt leaving most of them with a slim chance of even recouping their own contributions.

19 responses to this post.

  1. To paraphrase Chairman Mao’s remark about the French Revolution: it’s really too soon to tell whether the PERS or DC Plan will turn out to be a better deal for the workers. While PERS is short of financial resources and it looks bad right now, the participants still have some cards to play when push really comes to shove (i.e. when checks start to bounce). For one thing, there’s still a lot of fighting to be done in court, and who knows who’ll ultimately prevail? Second, it sounds like the next NJ Gov (not Sweeney, pointedly) will probably be more sympathetic. Third, the Feds may respond to urgent cap-in-hand pleas by either a direct bailout or some sort of money-creating maneuver via the Federal Reserve. Anyone know Hillary’s or Yellen’s views on how/whether the Feds should act?


  2. Posted by Anonymous on October 24, 2016 at 6:46 am

    Correct me if I am wrong but wouldn’t these people if employed by the County be enrolled in the Local PERS plan which is funded by the County not the State of NJ as stated in the article.


    • All are employed by the county which pays for their pensions but the amount of those payments (even if there are to be payments) is determined by the state. Whitman to get the state out of payments allowed localities to skip payments from 1997 on for years and in 2009 local governments got to half-their contributions and pay later (something only Hudson, Passaic, and Union counties signed on for). And those lowball contribution amounts developed apply across the board.


      • Posted by Anonymous on October 24, 2016 at 10:32 am

        OK that is fine but if one would look at the PERS Local contribution bills those skipped payments are now being billed and paid with interest. Where the State government is still shorting the State portion of the pension. Also being the locals are paying more than the State everything I read points to the fact that Local pensions PERS and PFRS (while not ideally funded) are funded much better than the State portions.


        • In a world where a 30% funded plan is OK to use a 7.9% discount rate then local government plans (because they are getting a little more in contributions) will have a better looking funded ratio but those ratios are phony to start with and when it comes time to default PERS members working for local and state governments who get identical benefit promises will likely be treated alike. We will see soon enough with the JRS plan as to how NJ will handle it.


        • Posted by Anonymous on October 24, 2016 at 10:42 am

          Sounds like the employees in this plan are better funded than their counterparts but what of the latter’s alleged benefits?


          • If you mean the non-PERS plan with $3.3 million for 40 participants that would come to an average account balance of $82,500 with relative ages being the important factor as to which plan would be better though there are some good-sized accounts in the non-PERS plan:

            Jean M Koszulinski ACTIVE 10 09/07/2001 404,413.41


          • Posted by Anonymous on October 24, 2016 at 11:05 am

            Hmm very interesting, guess the only way to somewhat compare the two plans is; based on the individuals age, salary, and service calculate what the PERS benefit amount would be at eligibility versus annuitizing the account value (projected with minimal increases, say 1-2 ℅) at the same age?


          • Posted by Anonymous on October 24, 2016 at 12:20 pm

            John it’s labeled a 401 plan but with a DBP feature? Is the right to annuitize contractual between employer and employee OR is it dependent on the 3rd party contractor RFP available at time of each re-bid?


            • I assume most take their accounts but the document has monthly payout options so presumably this is where Mutual of America makes its money by talking participants into annuities.


  3. Posted by Anonymous on October 24, 2016 at 8:07 am

    Profit Making plans are reserved for profit-making companies. County governments are not profit making companies.


  4. More and more people are beginning to realize that Defined Benefit plans like public pensions are not sustainable, including the private sector which has more or less done away with them. Here is my solution to this looming crisis that is only going to get worse without any correction of course:

    Please help spread the word…


  5. Posted by Anonymous on October 24, 2016 at 12:35 pm

    John curious IF all levels of NJ governments stopped DBP and retiree health care what’s the approximate “net” savings (ie after a employer DCP ℅) and how does that compare to what would be required to fund earned benefits to date? Assuming only members with 10 years of service could be eligible for future DBP benefits upon age eligibility.


    • Will never happen, especially the health benefits part. Savings would be massive if health benefits were cut since taxpayers are paying the actual cost of premiums and all that is left is to negotiate with public employees as to copay and type of plan. DB pensions would be a much lesser savings since those payments are grossly understated. If these DB benefits were properly funded the real cost would be around $12 billion instead of the $4 billion now coming in.


      • Posted by Anonymous on October 24, 2016 at 12:48 pm

        Understand the unions and members would go crazy but how can it never happen if it’s heading towards bankruptcy?


  6. Posted by Anonymous on October 24, 2016 at 9:09 pm

    Why better off because the local government chooses to fund one and not the other?


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