July 16 (Reuters) - Reforms of state public pension plans across the United States are likely to leave younger employees footing the bill for unfunded liabilities that accrued before they were even hired, according to a report released on Mon day.
“The new recruits could end up paying for their state’s unfunded pension liabilities without much to show for their efforts,” researchers at the Washington, D.C.-based Urban Institute said.
The institute looked in particular at New Jersey, which has trimmed pension benefits for new hires five times since 2007, according to the report.
While the changes will cut the state’s net pension costs overall, they “offer little or nothing to young, mobile employees until they have worked for the state for years” and could make recruiting more difficult, the report said.
In addition to pushing for reforms, New Jersey Governor Chris Christie included in the fiscal year 2013 budget a $1.1 billion contribution to the state’s pension plans.
Michael Drewniak, a spokesman for Christie, said that without the reforms, New Jersey’s public pension system would have become insolvent.
“If we allowed that to occur, the consequences would have been catastrophic for hundreds of thousands of past, current and future state employees,” he said.
Pension reform has become an increasingly urgent matter for states.
The recession hurt states’ revenues, and many have not been making full payments to their pension funds. The economic downturn also sliced into many pension funds’ assets.
That has left major shortfalls. The Pew Center on the States estimated the total pension gap for states at $757 billion in 2010, while the Urban Institute said it was $2.7 trillion.
“There is no perfect pension instrument,” the institute said, advising states to consider a combination of the best features of both traditional defined benefit plans and the 401(k) plans used more frequently in the private sector.