How do we bring back COLA?
Local 600 Report
This report specifically discusses COLA in light of finding out about S2582, a bill sponsored by Senator Joe Cryan to address COLA for those whose benefits are 150 percent of the poverty level or less. As the only member of the PFRS Board voted in exclusively by all retired members in the PFRS, I only recently became aware of this bill.
There are various bills out there. I previously mentioned various ways to look at COLA in a broad way to cover thousands of members in an equitable and fair manner, not just the few.
Part of this response includes items I discussed at April’s joint meeting for NJSPBA Retired Members Local 600 FMBA Local 500.
We talked about how this is, by far, the most important item on all retired members’ minds. The question is twofold: When will we get COLA, and how can we get COLA? My comments are my own, and I do not speak on behalf of the PFRS.
I have been asked in my position, who do I represent? As the trustee who represents all PFRS retired members, I do not represent any one group or affiliation more than the next in my official capacity. As a member of the PBA and the New Jersey Retired Police and Fire Association, I am one of 12 trustees.
That being said, I have never wavered in my support to bring back COLA. There are two ways to bring it back. The first way is legislatively. Currently, legislation exists that is commonly known as S260, or the most recently introduced S2582, and some others. Some include a one-time payment of $300 for the year. Another bill addresses putting a billion dollars back into the pension funds. S2582 is limited in scope in coverage and focuses on a few hundred folks at best. This legislation will encompass all retired public employees in NJ that are eligible to receive COLA as the bill is written.
A second option is through PFRS authority under Chapter 55. We would need eight members of the board to vote for this. This would cover the retired police and fire members only, and the board would need to determine how to structure the way COLA is given out.
I will proceed to state the obvious regarding this and other new legislation: it’s funded through COVID dollars and therefore does not charge the existing employers. It supposedly focuses on our most needy retired public employees. I will not minimize the obgliation to help our most needy, but I have proposed something that would help approximately 25,000 PFRS members.
The structure I discussed with many retired members is to implement COLA not in its past format, which would have started in the 25th month of one’s retirement, but to streamline the pool of eligible participants. Discussion has focused on the member being out for 10 years or 62 years old and not being out not less than five years.
This would cover every member prior to Chapter 78 and others who have been out 10 years or 62 years old. Let me reiterate that this is only an example discussed by many due to its perceived fairness, sustainability and significantly lower cost than in its past format. It can even be tiered in a manner that takes care of our most needy and still gives COLA to the thousands who would otherwise just be sitting on the sidelines for years to come.
Let me put into perspective how few dollars this plan would cost. The PFRS pays out approximately $3 billion in retirement each year. Here is a very simple one-year scenario:
If we gave every single retired person as of yesterday 1 percent COLA for one year, that’s approximately $30 million. I can only imagine what the cost is for one year as mentioned with the 10 years or 62 years old, but not less than five years. It’s approximately $15 million dollars. It’s certainly a fraction of the $30 million. I will explain how not one penny impacts the PFRS.
With the State flush with money and uncertain how to spend its billions of dollars in surplus, and inflation at an all-time high, the discussion of COLA should be front and center with a game plan in place to execute it responsibly at the first opportunity.
The PFRS still has not received its money from the Division of Investments, but does this mean we have to be scared to discuss COLA for fear that the state won’t give us our money. We are looking and planning ahead.
We’ve all heard that in order to receive COLA, it has to be funded in some manner. I agree with this. Prior to Chapter 78 in 2011, COLA has been funded under the Pension Adjustment Act by employers. This has been around since the late 1950s. The employer was given a bill that included in the pension obligation and COLA. Being separate, there was simply no impact to the fund.
The employer has had an 11-year holiday of not paying COLA, except for those who were receiving COLA prior to chapter 78. Due to our members dying off, this COLA bill to the employer has been getting smaller and smaller.
Under Chapter 55, the PFRS Trustee Board today has the full authority vote on this and to also bill the employer with zero impact to the fund, period. Ideally, I would like to see this board get the money from the Division of Investments prior to us voting on COLA, but candidly, regardless of our efforts, I do not know when that will be. The time is now for the board to see what this minimal cost is under the scenario listed above.