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N.J. public pension system still among worst-funded in U.S.

Friday, August 26, 2016   (0 Comments)
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NJ.com 08/25/16

New Jersey's public pension fund is shakier than all but two U.S. states also known for their notoriously underfunded retirement systems, according to a new comparison by the Pew Charitable Trusts. The pension fund was just 42 percent funded in 2014, based on the latest data available for 238 retirement plans in 50 states, Pew said. Illinois and Kentucky were each only 41 percent funded. Only three states — South Dakota, Oregon and Wisconsin — were more than 100 percent funded.

Researchers said New Jersey is among state with the most "distressed" pension systems. Those with the lowest funding ratios have a history or underfunding their systems, taking on too much risk or increasing benefits without paying for them, Pew senior researcher David Draine said. Pew found that state-run pension systems in the U.S. have a $934 billion gap in what it would cost to pay for future benefits. That figure is down $35 billion from 2013, thanks to strong investment returns.

But the combined unfunded liability is forecast to grow more than 20 percent once newer financial data becomes available following more recent investment struggles. Pension funds average 3 percent to 4 percent gains in 2015 and about 1 percent so far in 2016, Pew's researchers said.  The nationwide slowdown matches New Jersey's weakening investment returns, which saw a steep falloff after 2014. 

For the fiscal year that ended in June, investments returned 4.16 percent, less than the 7.9 percent needed to avoid adding to the system's liabilities and far below the 16.9 percent achieved the year before. As of July 1, 2015, the public pension fund was about 37.5 percent funded, when measured under a new accounting standard that requires the state to use an estimated rate of return lower than 7.9 percent. Some funds within the system that receive contributions from local governments, including the fund for police and firefighters, are better off than those that rely on state contributions.


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