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The New Jersey Statehouse is shown int his file photo.

(Tony Kurdzuk/The Star-Ledger)

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.

New Jersey’s pension plan, which is in trouble because the state has underfunded it for more than a decade, faces a $37 billion unfunded liability.

Gov. Chris Christie and the Democrat-led Legislature in 2011 compromised on a plan that required workers to contribute more toward their pension and health benefits and also required the state to eventually return to making full pension payments. Christie, however, went back on the law this year by cutting $2.4 billion in pension payments to fill a budget hole.

Christie has since said his 2011 reforms weren’t enough and has created a commission to study the problem and recommended fixes. Most budget watchers expect them to recommend a 401k-style plan, or a hybrid between that and the defined-benefit plan the state currently uses.

Herzenberg said shifting to a 401(k) plan would mean once those paying into the system to support current and soon-to-be retirees were taken out, pension fund managers would have to shift from long-term to short-term investment strategies, which he said would likely yield lower returns.

“When investment returns pay for less of pension benefits, taxpayers have to pay more," Herzenberg said.

Herzenberg also said that 401(k) plans have higher administrative fees and produce smaller returns for workers.

The Christie administration, however, has not yet put forward a plan. At legislative hearings in the spring, state Treasurer Andrew Sidamon Eristoff recognized the challenges of shifting directly into a 401(k) system, but suggested that the state could adopt a hybrid system, according to NJSpotlight.com.

The report did not study the costs of transitioning to a hybrid system.

“You can’t reach a judgment about the good sense of a proposal without having the kind of detailed studies that these other states have gone through in considering a switch to a defined contribution,” said Gordon MacInnes, president of New Jersey Policy Perspective. “You’d have to do the same thing, frankly, if it’s going to be a hybrid plan.”

Christie spokesman Kevin Roberts said he had not read today’s report.

"It should be noted that whatever conjecture they’re offering about what the governor has and has not specifically advocated for is wrong — we are awaiting the final report of the Pension and Health Benefits Study Commission,” he said.

Matt Friedman may be reached at mfriedman@njadvancemedia.com. Follow him on Twitter @MattFriedmanSL. Find NJ.com on Facebook.

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