A bill to allow police officers and firefighters with 20 years of service to retire early with a reduced pension, regardless of their age, was conditionally vetoed by Gov. Phil Murphy, who said he wants more clarity on how the legislation would impact the state pension system.
Murphy returned the proposal to the state Senate on Monday and recommended temporarily extending a bill he signed into law in 2021 for three more years, to better understand the financial effect of the law.
The 2021 law gave police officers and firefighters a two-year window to retire after 20 years and collect half their pension, no matter their age or enrollment date.
The law, which is set to expire at the end of this month, aimed to correct confusion from a 1999 law that allowed members enrolled in the pension system as of Jan. 18, 2000, an opportunity to retire after two decades with half their final compensation.
Workers hired after that date who wanted to retire before 65 — the age under state law they would be eligible for retirement with their full pension — had to be at least 55 years old.
Critics later argued the “20 and out” benefit should be available to all police officers and firefighters regardless of their enrollment date.
The temporary 2021 law signed by Murphy was designed to give lawmakers a glimpse at how the benefit might affect the state’s pension fund.
But while the two-year window gave “some valuable insight” into the benefit’s short-term effect, Murphy wrote in his conditional veto, he was “concerned that it is still too early to ascertain the long-term impacts that this benefit will have on the system.”
Proponents argue the benefit would save the state and local governments money because members who retire early do not receive retiree health benefits and forgo salary and pension enhancements available with more years of service.
But the bulk of the savings from the benefit is expected to come following the first five years of a member’s retirement, making it difficult to judge after two years, Murphy said. And those two years came during the pandemic, which may have distorted retirement numbers.
The state’s “overall pension system is still suffering from decades of underfunding that preceded my time in office,” Murphy said. “Staying the course and continuing the positive trajectory of the state’s financial health is my administration’s highest priority, and there remains much work to be done to better protect the stability of the state’s pension funds, the expectations of its members, and the financial interests of the taxpayers of this state.”
The nonpartisan Office of Legislative Services, which analyzes the financial impact of legislation, said an unknown number of workers might retire early to receive the benefit and made only vague predictions of its fiscal impact. The office anticipated the bill would result in an “indeterminant increase in the annual contributions” paid by state and local governments to the pension system.
“We really don’t know what those costs are going to be, or how to project them out, because you’re talking about individuals making life decisions. You really don’t know how many people will take advantage,” said Mark Pfeiffer, assistant director of the Bloustein Local Government Research Center at Rutgers University. “We only have two years’ experience, and that was piled on top of COVID. It could be a big number, or it could be a small number.”
Murphy suggested extending the trial period another three years. If the benefit does not result in increased employer contributions or impact the long-term viability of the pension system, then the Police and Firemen’s Retirement System’s board of trustees could choose to make it permanent, without the need for legislation, with powers the board was given to manage the system under a 2018 law.
The bill’s supporters, including public safety workers’ unions, had argued the so-called “burnout bill” would help people struggling with stress or the physical demands of the job.
“At a time when law enforcement has become more hazardous, more stressful and more unappreciated as ever before, this retirement option will give a level of peace of mind to our members who have been ‘burned out’ by the job,” the New Jersey State Policemen’s Benevolent Association said in a statement when the 2021 bill was signed.
But Pfeiffer said there are other ways to help workers dealing with stress or burnout.
“Officers are under a lot of stress. It’s a tougher job to do,” he said. “But if we’re concerned about stress, maybe we need to look at other solutions — counseling, the way shifts are assigned, management practices — to help officers who find themselves in stressful situations. Retirement doesn’t necessarily solve all the problems.