Tier 5 was supposed to exclude part-time employees hired on or after June 28, 2011 from the pension system. But a review of active employees in the New Jersey retirement system as of September 30, 2016, as taken from the state’s YourMoney website, lists 391,283 people of whom 75,485 are Tier 5. Removing recently hired employees for whom a full year’s salary does not seem to be reported we get 62,770 Tier 5 employees hired by 9/1/15 of whom 203 made under $10,000 and 56 made under $5,000.
How did these people get 32 hours a week in a state with an $8.38 minimum hourly wage?
Pension Obligation Bonds (POB) are a stupid idea sold to desperate governments looking to camouflage debt for a few years rather than dealing with it. They are not solutions to but rather portents of either public pension defaults or government bankruptcies.
The ProPublica website has a handy chart on the 20 largest POB issues since 1996 with the warning:
Governments that borrow money to fund their pensions often pay less into their pension funds in future years than they’re supposed to. That can leave the funds in a worse shape than they were when the debt was sold, even if the pensions earn more on the borrowed money than taxpayers owe in interest.
It is no coincidence that the worst funded public pension systems (NJ, IL, CT, PR) all tried the POB gambit not because it made any fiscal sense but because they chose not to look at immediately unpleasant alternatives (i.e. cutting benefits or affording honest contribution amounts).
The POB money suddenly appeared in trust assets making the plans seem better funded which would theoretically reduce future contributions. In practice, in New Jersey at least, future contributions were reduced anyway as politicians simply chose to pick their contribution numbers with expediency as the primary determinate.
A look at the 1997 Official Statement for New Jersey’s POB sale lists the costs:
One of Governor Christie’s first initiatives was to call for transparency, especially in regard to pensions, which led to the creation of the YourMoney website.
Nothing much got done on the pension front but we do now have a listing of participants in the state pension, both retired and still working, updated through September, 2016 which yields this data:
All the actuarial organizations I know of are non-profits which means their 990 forms are on http://www.guidestar.org and their 5500 forms, if they have pensions, are on http://www.efast.dol.gov. Going over this data two things stand out.
1) These places pay pretty well judging by the salary of the highest paid official from each:
The Center for State & Local Government Excellence (CSLGE) came out with an issue brief today examining pension reforms in state and local government plans in the aftermath of the financial crisis so what better time to examine both their brief and the CSLGE itself.