CWA: We Will Fight to Protect Retirement Security

Senate President Steve Sweeney (D-West Deptford) made headlines this week with news he is planning changes to New Jersey's public employee pension funding system. 

Not to be outdone, Governor Chris Christie jumped in, praising Sweeney for planning a "sweeping overhaul" as a way to "reforming a broken benefits and pension system."

The problem is, theonly  part that's "broken" about the pension system isn't so much the pension or the benefits.  It's that legislatures and governors haven't funded it for 15 years. 

Sweeney and the Senate Democrats also proposed other changes to sick leave and other benefits based on 41 recommendations made to the legislature in 2006.  But the truth is, pension benefits for public workers in New Jersey are very modest compared with those of public workers in other states or comparable private sector workers (stay tuned for an analysis of those benefits currently being compiled by CWA).  And while state workers have continued to make contributions of 5.5% each year, the State Legislature and Governors going back to Florio have raided the pension fund and not paid their fair share. 

"The problem has nothing to do with the level of benefits and has everything to do with the fact that Jon Corzine was the first Governor in 15 years to put any money into the pension fund" said Hetty Rosenstein, New Jersey Director of CWA. "Senator Sweeney says he is acting in order to protect the plan.  But there is only one way to protect the plan, and that is to work with CWA and all of the unions to work out a schedule where the state funds the plan.  Reducing the benefit doesn't matter if they don't put the money in."

Leaders Vow "All Out Fight"

At a meeting of 800 shop stewards on January 20, CWA leaders pledged to protect the defined benefit pension plan and retirement security.  A 401(k) plan does not provide that.

The members at my worksite are both frightened and angry about the attacks being made on state workers,"said Reggie Jones, a Shop Steward at the DYFS Newark District 3 Office and a member of Local 1037.  "We work hard.  It's incredibly difficult to go out into the field every day and try to protect abused and neglected kids.  We've paid our share always.   It’s hard to explain why new workers should get less in benefits or be forced into a 401k because the State hasn’t lived up to its end of the deal."

The Facts about Defined Contribution Plans, or 401(k)

The average 401(k) has a balance of less than $50,000.  Worse, 46% of all 401(k) accounts have less than $10,000.  Futhermore, a 2007 GAO report showed that the median combined balances in 401(k) plans for workers closest to retirement--those aged 55-64--was only $78,000.  For a worker who retires at age 65 and lives to be 85, that comes out to only $325 a month--hardly a comfortable retirement by any standards.  And that was before the Stock Market crashed.

Speaking of the market crashing, a 401(k) becomes more exposed to the market the longer it is held by a worker.  That means that if a market downturn occurs, the workers closest to retiremnet, those in need of security the most, are exposed to the greatest amount of risk.  As Time Magazine noted in October, "It's a twist that breaks the most basic rule of financial planning."

Who Benefits?

State Senator Shirley Turner (D-Lawrenceville) hit on something yesterday:

"I don't have any problem with providing people options. We have to secure our pension funds. But I'm looking to protect the pension fund for everybody, so that no one group will suffer more than another. Everybody realizes sacrifices need to be made. But they must be shared sacrifices not bourne primarily by the middle class and low income workers."

Troy Ellis, a state worker who teaches juvenile offenders and is a member of Local 1040, explained: "As a state worker dedicated to his job, I always believed that I would have a decent pension when I retired.  I'm proud to be paying into the pension of those state workers who have come before me, but how is a 401(k) going to pay for my retirement? A 401(k) is the beginning of the end for those of us who have worked so hard to provide an honorable service to the people of New Jersey."  For people like Ellis, who chose a career working with juvenile offenders to help those less fortunate than himself, this sends exactly the wrong message.

Everyone Steps Up to the Plate?

Indeed, there is a legitimate question to be asked: As New Jersey stares at a looming budget deficit, how do we ensure that the sacrifices needed are felt by all of the state's residents, and how to we make sure a few don't benefit at the expense of the weak?  After all, Chris Christie said we are all going to have to share the pain of balancing the budget: “Everyone is going to have to, myself included, step up to the plate on things we don’t like, but that’s the crisis we’re in,” Christie said last week. 

Wait a minute.  Why would a governor saying everyone needs to sacrifice cut taxes for people making more than $400,000 a year while applauding efforts to reduce retirement security for middle class public servants? 

Who are we to believe: The Chris Christie who wants shared sacrifices or the Chris Christie who needs to pay off his rich campaign donors at the expense of working New Jerseyans?  For the sake of the State, let's hope the answer is the former.

Educate Yourself.  Get Involved.

For more information on the defined benefit pension plan, click here.  To receive updates and stay informed about what CWA is doing to protect jobs and pensions, click here.