Changing N.J. pension system to 401k would cost $42 billion, liberal think tanks say

By Matt Friedman, NJ Advance Media for NJ.com

TRENTON — Shifting New Jersey’s public employee pension plan to a 401(k) system would cost $42 billion in the long run, two liberal think tanks claimed today.

In a joint report, New Jersey Policy Perspective and the Keystone Research Center — a Harrisburg, Pa.-based group — said New Jersey’s pension plan is similar in size and funding to Pennsylvania’s system.

In Pennsylvania, state actuaries, in response to a proposal by Gov. Tom Corbett, conducted an analysis of how much it would cost to shift to a 401(k).

“What did actuaries in Pennsylvania estimate would be the transition cost? Forty-two billion,” the report’s author, Keystone Research Center Executive Director Stephen Herzenberg, said in a call with reporters. “So it’s no surprise that when Pennsylvania’s legislature got that eye-popping estimate in May and June of last year, that led Pennsylvania to back away from a switch to a defined contribution account.”

Herzenberg said the $42 billion would be borne by workers, retirees and taxpayers over three decades.

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