New Jersey State Policemen s Benevolent Association. Senate Bill 3040 Securing the Future of PFRS

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1 New Jersey State Policemen s Benevolent Association Senate Bill 3040 Securing the Future of PFRS

2 The bill DOES NOT privatize PFRS Senate Bill 3040 The Myths The bill DOES NOT take PFRS out of State system The bill DOES NOT turn over PFRS assets to the unions The bill DOES NOT weaken your rights to a pension The bill DOES NOT let the government off the hook for what they owe The bill DOES NOT place our assets at risk Everything is working great so just leave things alone!

3 Senate Bill 3040 The Facts The bill preserves the status of PFRS as a governmental plan The bill transfers control of PFRS from the Governor/State Treasurer/Division of Pensions to a new PFRS Board of Trustees made up of employees and employers The bill places day to day management/investment policy in hands of professionals who will work exclusively for PFRS and its members The bill takes politics out of pension management The bill gives the PFRS board the right to enhance benefits and make critical policy changes to improve the value of the Fund The bill removes PFRS from the debate over the poor funding level and State management of the other pension funds

4 PFRS Management Comparison Current Law Senate Bill 3040 PFRS falls under Division of Pensions, Treasurer, Governor Investment policy part of State management plan (see above) PFRS professionals all work for State PFRS Board is administrative and not definitive policy makers State Treasurer/Division/AG can overrule or ignore actions of the Board All pension funds treated identically with assumptions, investments PFRS will be managed independently of Governor, staff and bureaucrats Investments will be managed by PFRS staff and professionals PFRS professionals will work for PFRS only PFRS Board will have exclusive powers over pension policy PFRS Board will have exclusive decision making powers independent of State control PFRS will be managed to focus on its health and investment needs

5 PFRS Board of Trustees as Fiduciaries: Primary Obligation The Primary Obligation of the board shall be to direct policies and investments to achieve and maintain the full funding and continuation of the retirement system for the exclusive benefit of its members Section a. (1)

6 PFRS Board of Trustees: Independence from State Mismanagement PFRS Management Team working only for PFRS members PFRS Executive Director: Set strategic direction for optimal investment results and operation of fund; implement board policy, manage PFRS staff Chief Investment Officer: Oversee management, strategy and effectiveness of investments Ombudsman: Provide consultation services to plan members and their families PFRS Board retains legal counsel, actuaries, auditors, accountants, money managers and investment professionals all professionals and staff responsible to board oversight and control

7 PFRS Board of Trustees: Exclusive Powers Establish process for review, approval and appeal for retirement applications Fund management and investment of assets Hire staff and professionals Establish actuarial funding policy Enhance any member benefit Reinstate or adjust COLA Revise employer and employee contributions rates Eliminate PFRS Tiers Modify caps on creditable salary established in 2010 Reform Accidental Disability requirements and medical review Retain Division of Pensions to manage administrative tasks Establish rules and regulations to manage PFRS fund and policy

8 PFRS Board of Trustees: Membership 7 Employee Trustees 1 State PBA appointee 1 State FOP appointee 1 State FMBA appointee 1 State IAFF appointee 1 Retired member Elected 1 Active law enforcement member Elected 1 Active firefighter member Elected 5 Employer Trustees 4 Members appointed by Governor as recommended by State League of Municipalities and NJ Association of Counties to represent local government 1 Member appointed by Governor to represent State Government

9 PFRS Board of Trustees: Oversight All staff reporting to and responsible to Board of Trustees Required Ethics, Trustee and Investment Training and Pay to Play restrictions for board members Audit Committee: Oversight of PFRS Financial Reporting, retain independent auditor, review fraud risks, protect integrity of PFRS finances Actuary Committee: Selection and Oversight of PFRS actuary Board retention of secondary actuary to cross check actuary analysis Investment Committee: Oversee investments of the Board Board power to remove Trustee for unexcused absences Mechanism to prevent vacancies

10 Senate Bill 3040 Enforcing Payments All employer unfunded liability and payment obligations remains in effect Quarterly payments required for local government PFRS contribution Board granted authority to enforce payments by local government and withhold State aid to any local government that refuses to pay required contribution

11 Senate Bill 3040 Transition and Implementation Trustee election/appointment takes place immediately upon signing New Board of Trustees takes office on 1 st day of seventh month after bill signed into law thereby eliminating current Board of Trustees 1 st day of seventh month the new board shall: Select Board Chairman, Vice Chairman and appoint Committee members Contract with Division of Pensions for administrative services at set price Executive Director, Chief Investment Officer and management team hiring process begins Take anticipatory administrative action necessary to implement transition Full powers of board take effect on 366 th day after enactment