Implications Of The Health Care And Pension Reform Bill In New Jersey
A historic health care and pension reform bill passed by the New Jersey legislature in late June of this year and signed into law on June 28th is expected to have far-reaching implications at the state level as well as for municipal governments. Though the pension reforms will provide $120 billion in savings to New Jersey taxpayers over the next 30 years, while the health benefits reform will provide $3.1 billion over the next 10 years, there are myriad nuances and details that will have to be adjusted to, as new contracts will have to comply with the new laws.
What does this mean? It means, for example, that employees who are not currently in a collective bargaining unit or some type of union will begin paying new health care premiums immediately, as stipulated by the bill. Most other workers will be affected by 2012, which is when many state and municipal employees have contracts that are expiring. Those whose contracts expired previously, such as the police dispatchers’ contract and that of library employees, are therefore not under a contract and so will be impacted by the health care reforms in particular.
For some municipalities, the impact of the bill will be deeply felt. In Maplewood New Jersey, for example, the local fire chief views the bill as potentially having a devastating impact for police and firefighters, where the structure of the pension plan could be so altered as to adversely affect retirement for many who have been paying into the system. Maplewood’s mayor also sounded a discordant note about the new legislation, saying that it was wrong to destroy collective bargaining. Others, however, feel that changes needed to be made in order to bring budget problems under control, with the knowledge that the status quo is simply not sustainable.
To explain some of the changes at hand, the New Jersey League of Municipalities send out information detailing the impending new rates for health care premiums to be paid by public employees, noting that the new rates have a four-year phase-in period. The memo explained that all employees would be required to pay a portion of their health care premium, with the exact percentage based on the employee’s base salary. Of note is the fact that employees will be required to contribute to health benefits in retirement, unless they are current retirees or are current employees with at least 20 years of service.
The bill also has guidelines about the additional amounts of money state and local government and school workers will be required to pay towards their pensions. Furthermore, the bill moves the retirement age for new teachers from 60 to 55, and employees would now have to work 30 years instead of 25 to be eligible for early retirement.
While these are drastic changes, it is clear that the system needs serious reform in order to right itself, as the NJ pension fund is currently underfunded by about $54 billion. Are you looking for ways to lower health care premiums for employees? Take a look at how implementing a Section 125 POP Plan can help lower premiums and save on taxes.