PFRS Trustee Board has built it…
…and now with infrastructure in place, members want to know if COLA will come
Before getting to the question so many NJSPBA members have for the independently run Police and Fire Retirement System (PFRS), it is important to understand how much work has gone in to just being able to entertain that inquiry. During the past two years the PFRS has been under the leadership of a trustee board that includes a majority of active and retired law enforcement officers and firefighters, the construction has been done to become one of the best public safety pension systems in the country.
The 12 members of the board have applied lessons learned and expertise gained from years of municipal, union and financial management to build the structure that can grow the system beyond its current 70 percent funding level. And of course achieve the No. 1 goal of securing a defined pension for every member, from those who are just coming on to those who might take advantage of the pending “20 and out” to those who are 20-plus years into retirement.
“We needed to put in the building blocks of PFRS just to get us where we are,” explains Bruce Polkowitz, a retired Edison Local 75 State Delegate who is the retired members elected trustee to the PFRS board. Polkowitz offers a view from his perch as chair of the PFRS personnel committee to let members know just how intricate the building process has been and what it has done.
“The remarkable work this board has done to put the building blocks in place of the PFRS – it’s a whole government entity from scratch,” Polkowitz continues. “I strongly believe that by having the leadership we have in place and the staff we have in place we are going to see far greater returns to make us more solvent and promise the members and their families that they will have a pension for the rest of their lives.”
Personnel has been priority one for building the PFRS. That began by stocking the various board committees such as investments, audit, actuarial and regulations, among others. The first hire of Board Secretary Lisa Pointer back in 2019 was also critical to running the $27 billion entity that is PFRS.
Subsequently, the system enacted its legal team led by general counsel Rob Garrison and has now grown to five attorneys. Not only does this give the PFRS freedom from having to go through the attorney general’s office, but it has the capacity to review pension requests, contracts, legislation and answer individual questions from members.
The administrative team and the entire staff have been running under the direction of Executive Director Gregory Petzold, who came on board after serving as Governor Murphy’s deputy chief of staff of intergovernmental affairs. The recent addition of Chief Investment Officer Russ Niemie, nationally renowned for his work with the Texas state pension and New York Nurses Association, sets up the PFRS to shift into high gear in 2021, which will include shifting its assets from control of the NJ Division of Pensions to independent managing and investing.
“We have achieved a very high level of accountability,” Polkowitz emphasizes. “We are able to know how the system is being run. Where’s the money? What is our return?”
So that brings us to the big question.
What about COLA?
Or, perhaps more appropriately as Polkowitz notes, how come it’s taken so long to even talk about COLA?
“And my answer is that it’s miraculous that we can even have a discussion about COLA at this point,” Polkowitz reports. “Had we still been part of the of Division of Pensions, this conversation may never have taken place in my lifetime. Or anybody’s lifetime.”
The fact of the COLA matter is that with putting personnel in place and building the system, the PFRS is now ready to have its actuarial resources conduct the research to see what COLA scenarios could work. One scenario is bringing back COLA the way it used to be when members would begin getting COLA at the start of their third year collecting their pensions. Another scenario could be something like every member who makes X amount of dollars and below gets COLA at 100 percent, and every member above that will get a lesser percentage.
The first step is getting information from the Division of Pensions – looking behind the curtain, as Polkowitz describes it. This is data such as how many retirees there are in the system, how long have they been retired, what are their pension levels, how much money goes out each month.
“Another component could be to tie COLA to our investment strategy,” Polkowitz adds. “We can better know about funding COLA if we are meeting our benchmarks. Let’s say if it costs X amount of dollars, what is going to be the impact on the fund? Can we look at those numbers and make sure it’s sustainable.”
Once the actuarial team provides the data, then the investment team can begin to plug in scenarios. The reality is the investment strategy under the Division of Pensions might be costing the system $100 million per year in lost opportunities. A new strategy might initially yield an annual 2 percent gain, which could be more than $500 million.
Could that be enough to fund COLA?
“I think for us to ever promise COLA we would really be violating our legal fiduciary responsibility,” Polkowitz states. “We know we want to make it equitable across the board and make sure that we never forget those who have been retired for years and years and are getting less money. So when they ask, ‘Bruce, what’s it going to look like,’ the best thing I can say is that we’re going to get there now that we have the pieces in place.”
The other promise Polkowitz wants to make is to keep PFRS members well-informed of the COLA endeavor, the asset growth through investment management and all the other benefits they anticipated when Chapter 55 was signed in 2018 to make PFRS independent.
“It’s going to take a 100 percent team effort between the staff, the committees, the members and all of us,” he declares. “We have no word for failure in this process. This will absolutely succeed. I say that not with hollow words. I say that with conviction.”