NCJ Number
57183
Date Published
1978
Length
78 pages
Annotation
ACTUARIAL ANALYSIS IS USED TO PROVIDE NEW JERSEY LEGISLATORS AND MANAGERS OF THE STATE'S PENSION SYSTEM FOR POLICE AND FIREFIGHTERS WITH INFORMATION ON FUTURE COSTS, FUNDING OBLIGATIONS, AND CASH FLOW OF THE SYSTEM.
Abstract
THE LONG-TERM FINANCIAL STATUS OF THE PENSION SYSTEM WAS ANALYZED BY MEANS OF 50-YEAR ACTUARIAL FORECASTS GENERATED FROM A COMPUTER MODEL OF THE SYSTEM. THE LONG-RANGE ANALYSIS IS INTENDED TO COMPLEMENT THE ANNUAL ACTUARIAL VALUATIONS THAT CERTIFY IN DETAIL THE RETIREMENT SYSTEM'S COSTS AND REQUIRED CONTRIBUTIONS FOR THE COMING YEAR. THE ANALYSIS OFFERS SEVERAL INSIGHTS THAT ARE NOT PROVIDED BY CONVENTIONAL ACTUARIAL VALUATION: (1) RECOGNITION OF THE FINANCIAL IMPLICATIONS OF OVERALL SYSTEM GROWTH AND OF FUTURE NEW ENTRANTS TO THE SYSTEM, (2) INFORMATION ON LONG-RANGE TRENDS IN PENSION COSTS AND FUNDING LEVELS, AND (3) CONSIDERATION OF ALL BENEFITS (INCLUDING POST-RETIREMENT COST-OF-LIVING ADJUSTMENTS) IN CALCULATIONS OF COSTS AND OF ASSETS-TO-LIABILITIES RATIOS. THE ANALYSIS SHOWS THAT THE NEW JERSEY RETIREMENT SYSTEM IS A WELL FUNDED ONE. ASSETS ON HAND EQUAL APPROXIMATELY 80 PERCENT OF ACCRUED LIABILITIES--A FUNDED LEVEL THAT COMPARES FAVORABLY TO OTHER PENSION PLANS, PARTICULARLY TO OTHER POLICE/FIRE PLANS. THE ANALYSIS ALSO PRODUCES DETAILED RECOMMENDATIONS FOR (1) IMPROVING THE ACTUARIAL ASSUMPTIONS USED TO ESTIMATE THE RETIREMENT SYSTEM'S ANNUAL COSTS; (2) ADOPTING AN ADVANCE FUNDING POLICY (AS OPPOSED TO A 'PAY-AS-YOU-GO' POLICY) FOR ALL PENSION BENEFITS, INCLUDING COST-OF-LIVING INCREASES; (3) CHANGING THE FORMAT OF THE ANNUAL VALUATION REPORT TO MAKE THE REPORT MORE USEFUL TO SYSTEM MEMBERS; AND (4) INCLUDING COST-OF-LIVING BENEFITS IN CALCULATIONS OF THE SYSTEM'S LIABILITIES (SHOULD THE LEGISLATURE DECIDE NOT TO ADVANCE-FUND THESE BENEFITS). A DESCRIPTION OF THE RETIREMENT SYSTEM, A SUMMARY OF THE METHODS AND FINDINGS OF THE ANALYSIS, AND SUPPORTING DATA AND DOCUMENTATION ARE PROVIDED. (LKM)