N.J. Pension Formula Forgot
Retirees are Living Longer

By Dunstan McNichol, Star-Ledger 

October 19, 2006

As lawmakers grapple with ways to rein in the cost of public employee retirement benefits, a report released yesterday says New Jersey's price tag for pensions will balloon by nearly $100 million next year. 

And this soaring cost can't be blamed on the pension-system problems lawmakers are vowing to fix. 

A big reason instead: Retirees are living longer than the insurance gurus predicted they would. 

"It's good news and bad news," said Janet Cranna, an actuary with Buck Consultants who presented the new information to trustees of the Public Employees Retirement System yesterday. "People are living longer." 

Projections made by actuaries assumed nearly 14,000 retirees covered by PERS would die during the past three years. The actual figure proved to be 12,495. 

This year's review showed the projections also underestimated how many employees would quit their government jobs before they qualified for retirement benefits. The actuaries figured 42,600 government workers would quit, but fewer than 36,000 did. 

To bankroll the unanticipated costs, the retirement system for state and local government workers is going to need $849 million next year -- or $97 million more than actuaries had projected earlier this year. That extra cost will carry over each year after that. 

"We're hemorrhaging," said Sen. Bill Gormley (R-Atlantic), a member of the special legislative panel reviewing pension and benefit costs as part of an effort to trim property tax bills. "We're hemorrhaging and we have to do something." 

Members of the retirement system's board of trustees accepted the actuary's report with little comment. 

"It is what it is," said board member Ned Thomson. "There's not a lot of surprises." 
The Public Employees Retirement System covers about 311,000 working and retired employees of state and local governments throughout New Jersey. It is the second largest of New Jersey's seven state-funded retirement systems, behind the Teachers' Pension and Annuity Fund. 
Yesterday's report was an update required every three years, in which experts revisit the assumptions about pay, longevity, length of employment and other elements that go into the formula used to calculate the amount the pension funds needed each year for long-term benefit payments.