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New Jersey Governor Proposes $4.6 Billion Pension Payment

The record contribution falls short of what’s needed for the nation’s worst-funded retirement system.
By Sarah Min


New Jersey Gov. Phil Murphy on Tuesday proposed making the state government’s full $4.6 billion pension payment in the next fiscal year. But the record contribution still falls short of what’s needed at the nation’s worst-funded state retirement system. 

If implemented for the 2021 fiscal year, the scheduled $4.6 billion state pension contribution for the nine months from October to June will represent a near 13% increase from the previous year, according to the state budget proposal. It’s also supplemented with an additional $279 million payment from the current 2020 fiscal year. 

“Making this pension payment is good news for everyone in our state because it moves us down the long road to fiscal responsibility,” Murphy said in a budget address, which was delivered at the Rutgers University SHI Stadium to adhere to social distancing protocols. 

Before the pandemic, New Jersey had been making great strides to improve its economic situation, worsened by its large debt load and pension liabilities. Over the past two years, the state contributed record payments into its retirement system, and it made its first rainy day fund deposit in over a decade. 

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With the third pension contribution during his tenure, Murphy’s cumulative payments to the pension systems would exceed total donations from any other governor in the state’s history.

But the coronavirus pummeled the state’s finances. Prior to the pandemic, the state budgeted just 70% of the annual actuarially determined contribution (ADC) for the state pension fund, which is roughly 40% funded.

In March, State Treasurer Elizabeth Maher Muoio said New Jersey will freeze nearly $1 billion in state spending to handle “precipitous declines” from the pandemic. In May, New Jersey decided to postpone pension contributions expected to be made in the current fiscal year to the next fiscal year, which had been moved to October when it was supposed to start in July.

The $32.5 billion budget spending plan the governor pitched Tuesday also outlines $4 billion in borrowing to fill gaps in the budget, as well as increased taxes on millionaires, firearms, and others. 

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Home > News > Pensions > Court Rules for Colgate Retirees in Benefit Calculation Lawsuit
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Court Rules for Colgate Retirees in Benefit Calculation Lawsuit

Colgate may have to pay a total of $300 million to 1,200 retirement plan participants.
By Michael Katz


A district court judge has ruled in favor of members of a Colgate-Palmolive retirement plan who sued the company for violating the Employee Retirement Income Security Act (ERISA) by miscalculating their benefit entitlement.

Judge Lorna Schofield of the US District Court for the Southern District of New York ordered the consumer goods giant to recalculate residual annuities for approximately 1,200 retirees who chose lump sum payments under their pension plan. The plaintiffs estimated the total claims to be approximately $300 million; however, Schofield ordered a stay for the relief to allow for an appeal.

The retirees had claimed that Colgate-Palmolive’s Employees’ Retirement Income Plan failed to comply with ERISA and accompanying regulations, and that they were wrongfully denied residual annuity benefits under an amendment to the plan.

The retirement plan originally operated as a traditional defined benefit (DB) plan, which guaranteed that each participant receive an accrued benefit in the form of an annuity on reaching the age of 65. Prior to July 1, 1989, the plan determined the level of benefits using a final average pay formula based on a participant’s final average earnings and years of credited service. Participants received their benefits only in the form of an annuity.

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In 1994, the plan was converted to a cash balance plan, effective as of July 1, 1989, in which each participant had a cash balance account called a personal retirement account balance, which reflected a set percentage of yearly pay plus interest. Unlike the previous version of the plan, the cash balance plan allowed participants the option to receive their benefits either as a lump sum or an annuity.

For participants like lead plaintiff Rebecca McCutcheon, who was separated from service between 1989 and 2002, the plan used a projection rate of the 20-year Treasury bill interest rate plus 1%. The 20+1% rate used by the company between 1989 and 2002 was consistently and substantially higher than the Pension Benefit Guaranty Corporation (PBGC) rate, according to the lawsuit.

In 2004, Colgate realized that the lump sum payments the plan had been paying to participants were less than the participants would have otherwise received if they elected to receive an annuity. And, in 2005, the company adopted a residual annuity amendment to address the potential illegal forfeiture of benefits. However, according to the lawsuit, the amendment was implemented only for participants who retired after March 2005, even though it was effective retroactively to July 1, 1989.

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