LEGISLATIVE REPORT
The signing of SB 5:
How it happened and what it means for PBA members
Governor Murphy signed the State PBA’s
signature legislative priority into law on July
3, setting the PFRS on a path to its most fun-
damental changes in nearly 30 years. Senate
Bill 5 removes PFRS from control of the state
treasurer, Division of Pensions and the State
Investment Council and grants to the Board of
Trustees substantial, independent authority to
ROB NIXON put the pension system back on a path to full
funding. When the takeover of the system is
complete, professional pension management
will replace politics and funding gimmicks as the priority for
restoring and enhancing the health of PFRS into the future.
Many members have wondered why the State PBA would
take such a dramatic step to reorganize the management and
investment power of the pension system. Looking back at the
mistakes of the past and the success of other states’ pension
funds tells the whole story.
PFRS once was one of the healthiest pension systems in the
U.S. In the late 1990s, the PFRS pension was funded at well
over 100 percent. But through state intervention, public em-
ployers were directed to skip their pension payments. It was
thought that the fund could live off its investment success. But
9/11 happened, and then the stock market and housing mar-
ket collapsed, zapping those investment portfolios.
Rather than end the pension holidays and get the govern-
ment back on track to making its full payments, the state and
local governments continued to kick the can down the road.
By the time the full payments resumed, PFRS had been cheat-
ed out of more than $2 billion in contributions. The math that
shows how great a failure avoiding the pension payments was
doesn’t lie. Instead of being funded at the mid-90 percent level
today (where it would be if all the payments were made during
the financial crisis), PFRS is mired in the low 70-percent range,
with the state s howing zero clue how to move the needle high-
er.
When Governor Christie was elected, his solution to the
pension funding crisis was to blame employees and cut ben-
efits. Despite its health and simpler path to full funding, PFRS
saw member benefits reduced twice in two years. When we
learned that Governor Christie’s Pension and Benefit Review
Commission was planning to recommend blending all the
system finances and putting every employee in a 401K, our
mission was clear: protect PFRS before the state destroyed it
completely.
For several years, I had been attending pension conferences
around the nation, specifically those held by the National Con-
ference on Public Employee Retirement Systems (NCPERS)
focusing on police and fire pension systems. It was clear from
those meetings that not every state had a pension crisis and
The big moment: Governor Murphy holds up Senate Bill 5 after signing the
law to remove PFRS from state control.
that we could learn a lot from what was working elsewhere.
At the direction of State PBA President Pat Colligan, I be-
gan to research the best practices of healthy police and fire
pension systems nationwide. From those gatherings, we hired
an actuary, met with national and state pension experts, read
dozens of state laws and best practices and held countless
meetings with legislators and police and fire union leaders
that led to the law that Governor Murphy signed.
The law makes several major changes to the management
and powers of PFRS. First, a new Board of Trustees will be es-
tablished. The board members will serve as fiduciaries with a
legal obligation to focus on fully funding the pension system
and to protect its assets from abuse and mismanagement.
The new Board of Trustees will consist of 12 members –
seven employee and five employer representatives. The pres-
idents of the NJ State PBA, FOP, FMBA and PFANJ will each
appoint one trustee. Active members of the PFRS will elect
one law enforcement and one firefighter member, and retired
PFRS members will elect one member, similar to the way it
works now. The governor will appoint four local government
employer members (as recommended by the League of Mu-
nicipalities and the Association of Counties) and one state
government representative.
The Board of Trustees will have the power to hire profession-
als – an executive director, chief investment officer, actuaries,
lawyers, money managers and staff – to run PFRS day-to-day
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