Analysis: Christie Administration Eyes Shift to 'Hybrid' Pension System
While Gov. Chris Christie is still several weeks away from announcing his proposal to overhaul New Jersey's pension and retiree health benefits system, his plan seems most likely to center on a "hybrid" model that would give current employees a smaller defined-benefit payout supplemented by a 401K-style defined contribution plan.
Analysis: Christie Administration Eyes Shift to ‘Hybrid’ Pension System
While Gov. Chris Christie is still several weeks away from announcing his proposal to overhaul New Jersey’s pension and retiree health benefits system, his plan seems most likely to center on a “hybrid” model that would give current employees a smallersupplemented by a 401K-style defined contribution plan.
Christie, who was forced to make alast week to balance the budget, has repeatedly made it clear that he believes the only way out of the state’s deepening pension crisis “is to stop the insanity of a defined-benefit pension system that we cannot afford.”
The problem, Treasurer Andrew Sidamon-Eristoff told the Senate and Assembly budget committees last week, is that a “hard cutover” from the current defined benefit plan to a 401K-style defined contribution for current employees would actually increase the state’s annual pension bill because employee contributions are needed to help amortize the system’s $54 billion unfunded liability.
However, Sidamon-Eristoff said “there are ways to phase in” the transition from a defined-benefit system -- under which retirees are guaranteed a set monthly check based on their five years of highest pay and number of years worked -- to a 401K-style defined contribution system that could convert into an annuity based upon how much is in the account at retirement.
Sidamon-Eristoff said Christie administration officials have been analyzing pension reform plans in various states for “many months.” He emphasized that the final decision on pension reform would be made by Christie, but he specifically cited the hybrid pension system that Rhode Island’s independent governor and Democratic Legislature approved in 2011 as “an interesting model that bears analysis” in an Assembly Budget Committee hearing last Wednesday.