Christie’s pension reform plan panned by former NJ pension director
As part of an overall plan to reduce debt, New Jersey Gov. Chris Christie has proposed reforms to the state workers' pension system by giving employees and unions more control over the pension funds.
And while it's not an idea that is popular among the unions, Christie continues to support his plan at various town hall meetings throughout the state.
Fred Beaver, the former director of the New Jersey Division of Pensions and Benefits from 2002 to 2010, said it will be difficult for the state to hand over control of the different pension systems to the corresponding unions because there aren't sufficient funds to cover the money that's owed.
"There's always been this obligation and the biggest obligation has been on the part of the state, and they have not done it," Beaver said.
A study released on March 11 from the National Association of State Retirement Administrators, and sponsored by AARP, shows that from 2001 to 2013 New Jersey ranked last among states for making payments into its public pensions. It shows New Jersey made 38 percent of the annually required contribution during that time period, far below the median of 95 percent.
Beaver is also concerned that administrative costs could be huge under Christie's pension plan.
"The administrative expense that's going to be incurred by each of these individual organizations will be extensive. All these systems have to start from scratch - the investment management, who's going to do that? Who's going to keep the record keeping? The record keeping for these people is enormous, and then you've got to manage the payments,"Beaver said.
So could this ever become a reality?
"The unions, in the best case scenario, do have some real opportunities here," Beaver said. "I think if they do it right - if they manage their funds well, they've got the right people managing - they could make more money than perhaps the state did."
But there's another problem.
If the pension system were switched over to some kind of a 401(k) hybrid-type retirement system, Beaver said it could be a big disadvantage for rank and file members of the union.
"Left to their own devices, people go into those funds (and) they tend not to move the money around. The majority of people, once they make an election, do not wisely manage those funds. They don't pay attention and they just hope that the market is doing well. Those monies when you retire have to last you for life, and that's a huge responsibility on the average state worker," Beaver said.
The Associated Press contributed to this report.