The Garden State Initiative (GSI), a center-right think tank in New Jersey, has released a report advocating for changes to the pension system for public school teachers. The report, titled "ABP: A Smarter Retirement Plan for New Jersey Teachers (and Taxpayers)," was authored by Danielle Zanzalari, Ph.D., an Assistant Professor of Economics at Seton Hall University, and E.J. McMahon, Adjunct Fellow at the Manhattan Institute for Policy Research.
The authors recommend adding a Defined Contribution Model alongside the existing Defined Benefit Model to provide more options within New Jersey's pension system. They warn that without new pension options, teacher shortages could worsen, and pension underfunding may continue.
"New Jersey’s pension system for public school teachers has become the most underfunded in the nation due to years of inadequate contributions and overly optimistic investment return estimates," said Dr. Zanzalari. She emphasized that this issue affects current teachers and discourages potential ones due to a lack of flexibility in retirement plans.
McMahon highlighted the benefits of moving towards a Defined Contribution plan like the Alternative Benefit Plan (ABP) offered at Rutgers University. He stated that such plans offer greater flexibility and portability along with immediate retirement security desired by young professionals.
Dr. Zanzalari noted that even Governor Murphy’s bipartisan task force on public school staff shortages recommended revisiting changes to pension plans in February 2023. Allowing access to ABP could help mitigate teacher shortages by providing more retirement savings than the current defined benefit system offers.
McMahon acknowledged that newly hired teachers opting into ABP would initially cost more due to higher employer contributions but would eventually lead to significant taxpayer savings as fewer new enrollees join TPAF.
Audrey Lane from GSI thanked both authors for their collaboration on the report and supported their views. "When you compare the potential retirement income between the Teachers’ Pension and Annuity Plan (TPAF) and an ABP, it’s no surprise young teachers would choose the ABP if given that option," she said.
Lane added that policy changes are needed because currently, non-vested TPAF members who leave teaching early face financial penalties. A fixed contribution system delivered on time would benefit both teachers and taxpayers now and in future generations.
