By Christie Duffy
Correspondent
A report out today says the governor’s next move may put the retirement funds of teachers, firefighters and other public workers in an even deeper hole.
The idea of switching from the already in debt public pension system, known as a defined benefit plan, to a defined contribution plan or 401k is being tossed around.
But making the switch could cost you and me — the taxpayer — $42 billion, says the new report.
Gordon MacInnes heads up the organization that co-authored it. He says they wanted to take a look at how such a switch went over in other states.
“West Virginia did it for 15 years and after 15 years they decided it wasn’t working so they went back to the defined benefit approach,” said MacInnes, president of New Jersey Policy Perspective.
What wasn’t working?
“Well here is what they found. That people who had retired from public work in West Virginia had an average nest egg of $23,000 at retirement. If you take $23,000 and expect to live another 20 to 30 years, you don’t have a retirement plan,” MacInnes said.
MacInnes says that New Jersey’s pension system would yield much higher returns and that it’s a system that works when it’s funded.
“The problem is created by the fact that the employer, the state of New Jersey, has not made its payments,” said MacInnes.
“In my four years, I’ve paid more into the pension system than the last five governors combined,” Gov. Chris Christie said.
Christie speaking at a fiscal summit at Washington, DC earlier this year said strides have been made but more need to be done about New Jersey’s pension problem.
Last month a special public pension commission created by the governor put out a status report that offered little guidance on what recommendations they may make to the governor. But Christie has made it clear he wants to move away from the direct benefits system and possibly toward the 401k option MacInnes warns would be a downfall.
“The bigger issue is how do we avoid this in the future and the only way is to stop the insanity of a defined benefit pension system that we cannot afford,” Christie said.
There is also the option that New Jersey could move toward a hybrid of the two — part pension, part 401k system.
The governor is expected to rely heavily on the recommendations from his special pension commission. That guidance is due out “soon,” according to a spokesman with the treasury. In the meantime, New Jersey has been subjected to repeated credit downgrades by financial ratings firms. And the gap in the pension deficit continues to grow.