NJEA files suit to restore state pension funding

TRENTON ? The New Jersey Education Association today filed suit in State Superior Court against the State Treasurer and State Legislature, calling for the State to meet its obligation to cover an unfunded liability of more than $484 million in the Teachers Pension and Annuity Fund (TPAF).

Filed on behalf of several active and retired TPAF members, the suit charges the State violated the pension law enacted in 1997, which requires both the State and the employees to increase funding to the pension system when the State?s actuary determines there is an unfunded liability.

According to the lawsuit, the law (N.J.S. 18A:66-33) ?explicitly pronounces that the State of New Jersey has mandated ?obligations? to fully fund the TPAF in the amount as stated by the actuary. Under that law, the State is absolutely required to make a contribution, in the amount determined by the actuary, when the TPAF is underfunded (does not have a surplus or excess of assets over liabilities). The State is not required to make a contribution when the TPAF is overfunded (the assets exceed the liabilities). Similarly, if the TPAF is overfunded, the employee contribution rate is 3% of their salary, but the contribution rate increases to 5% if the TPAF is underfunded. That is, the contribution requirements of the State and the employees operate in tandem.?

Recently, the State Treasurer applied this provision of the law by requiring all school districts to raise the employee contribution rate from 3% to 5%, based on underfunding of the TPAF. However, the State failed to provide its share of the unfunded liability in the current State Budget, an obligation of more than $484 million.

?The State is requiring public school employees to meet our obligation under the law, while flouting its own legal obligation,? said NJEA President Edithe Fulton. ?That?s not only unfair ? it?s illegal.?

Under the higher employee contribution rate, public school employees will pay $350 million into the TPAF this year, an increase of $140 million.

?That?s an average increase of more than $1,000 out of the pocket of every public school teacher,? Fulton noted. ?We need to pay it to ensure a secure retirement. But the State must pay its fair share, too.

?The law permitted the State to forgo its payments into TPAF when times were good and the pension system was yielding investment income that exceeded its liabilities,? she added. ?As a result, the State had billions of dollars of additional resources. But the law now requires the State to meet its obligation to our retirees when the pension system is not flush with cash. The people who devote their lives to educating our children deserve a secure retirement.?