NJ Judges May Finally Get a Say in How Their Pension Investments Are Managed

John Reitmeyer | November 20, 2019 | Budget
Judges, who could soon be represented on State Investment Council, have worst-funded of all the public-worker retirement plans

State lawmakers want to give judges in New Jersey a greater say in their own pension investments. They’re planning to create a new seat on the State Investment Council to ensure the judges have more direct oversight of the handling of their public-worker pension assets.

Under a bipartisan bill that cleared its first committee hurdle earlier this week, the 15-member investment council would be expanded to include a new position that would represent the interests of members of the state’s Judicial Retirement System (JRS), the pension plan for judges of the Appellate, Superior, Supreme and Tax courts.

While other public employee groups and unions already have direct representation under the council’s current makeup, the judges do not. And their lack of a voice on the panel — which sets policy and plays an important oversight role for Treasury’s Division of Investment — has become an increasing concern for judges as their retirement system has become the worst-funded of all of the state’s individual retirement plans for government employees.

“The reason for this appointment is a simple matter of fairness and equity,” said retired Superior Court Judge Raymond A. Batten during a recent meeting of the Senate State Government, Wagering, Tourism and Historic Preservation Committee.

The State Investment Council doesn’t directly administer benefits or manage the various government pension systems’ investments on a day-to-day basis, but instead plays an administrative role, overseeing things like investment strategy and the distribution of pooled pension-fund stakes in stocks, bonds and other assets.

Judges have never had a seat on the council

Members serve on a voluntary basis, and seats are filled by gubernatorial appointees and representatives of employee groups. In all, the investment council’s policies have an impact on nearly 800,000 current and retired government employees in New Jersey. There are individual retirement funds for different groups of public workers, including for teachers (TPAF); judges (JRS); police officers and firefighters (PFRS); State Police (SPRS); and general government workers (PERS).

But judges have never had a seat on the council, apparently because the body’s establishment in 1950 predates the creation of the JRS two decades later.

During his testimony before the Senate committee earlier this week, Batten highlighted the concerns of many retired judges who have watched the condition of their retirement fund deteriorate along with the overall state pension system itself in recent decades as the state has skipped or made only partial employer pension contributions. Gov. Phil Murphy, a first-term Democrat, has continued that practice by sticking to a pension-funding ramp-up plan established by former Republican Gov. Chris Christie. (The state pension contribution funded in the current fiscal year budget totals $3.8 billion, which equals about 70% of the amount called for by actuaries to keep the pension funds in good health.)

New Jersey’s overall pension system was recently ranked as the worst-funded in the nation by S&P Global Ratings, a major Wall Street rating firm, and Batten referred during the hearing to other fiscal analyses that show the Judicial Retirement System is in the worst financial condition of any of the state’s individual retirement funds. (The latest state bond documents indicate a projected “depletion date” for JRS is 2026.)

Worried about ‘depletion date’

“(JRS) members are appropriately concerned about the depletion date,” Batten said. “Having that representative on the State Investment Council will give at least some measure of confidence to the JRS beneficiaries that their interests are being protected to the same extent of the other pension funds’ beneficiaries.”

The bill sponsored by Sens. Christopher “Kip” Bateman (R-Somerset) and Nicholas Scutari (D-Union) would officially add one more seat to the SIC’s roster as a matter of law. The measure passed the Senate committee on Monday in a 5-0 vote.

“It just makes sense for the judiciary to have a seat at the table,” Bateman said. “Transparency and accountability is essential, especially now with so much pressure on the investments to meet or exceed market performance.”

Under the current draft of the bill, the chief justice of the New Jersey Supreme Court would be granted the authority to select a member of the JRS board of trustees to serve on the investment council. But under a quirk of the law that set up the JRS in the 1970s, members of the State House Commission currently serve as JRS trustees even though that panel is comprised entirely of executive and legislative branch representatives.

A proposed amendment to Bateman and Scutari’s legislation would instead allow the governor to appoint a JRS representative from the Retired Judges Association of New Jersey to the council. Lawmakers said the amendment would likely be added to the legislation as it advances through additional committees on its way through the Legislature.