Mandatory Retirement Plans

1. Contribution Rates:

Contribution Rates for members of the Public Employees' Retirement System (PERS)

Under the provisions of Chapter 78, P.L. 2011, PERS employee pension contribution rates will increase from 5.5% to 6.5% of salary. An additional increase to be phased over the next 7 years will bring the total pension contribution rate to 7.5% of salary.

The second phase of the contribution rate increase from 6.5% to 7.5% is to be phased in equally over a 7-year period beginning July 2012. The contribution rate will increase by 0.14% each year* with the first payroll of July until the 7.5% contribution rate is reached in July 2018.

*For example, 6.64% in July 2012, 6.78% in July 2013, 6.92% in July 2014, etc. until it reaches 7.5% in 2018.

Contribution Rates for members of the Police and Firemen's Retirement System (PFRS)

The current contribution rate is 10.0%.

2. Life Insurance Coverage

Please refer to the Group Life Insurance Benefits Fact Sheet below for information regarding life insurance coverage during employment and after retirement for members of the Public Employees' Retirement System (PERS) and Police and Firemen's Retirement System (PFRS). Group Life Insurance Benefits - Division of Pensions and Benefits Fact Sheet #10

3. Pension Loans

To borrow from PERS or PFRS, an employee must:

a. Have at least three years of contributing membership credited to his/her account;
b. Repay such loans at 4% interest;
c. Make no more than two loans in any calendar year;
d. Be actively employed when the application for a loan is filed.

An employee may borrow amounts from $50 up to one-half of posted contributions. If an employee retires the monthly loan repayment schedule can continue into retirement. Please call the Division of Pensions and Benefits automated phone line at (609) 777-1777 to find out how much you are able to borrow from your pension account.

Effective November 1, 2008, an eligible member who wishes to borrow against their pension account, MUST submit the loan request through the Pension Loan Application in the Member Benefits Online System (MBOS).

4. Purchase of Service

Since your retirement allowance is based in part on the amount of service credit posted to your account at the time of retirement, it may be beneficial for you to purchase additional service credit if you are eligible to do so. The following types of service are eligible for purchase:

Temporary/Substitute Service
Leave of Absence
Former Membership
Layoff (PFRS only)
Local Retirement System Service
Out-of- State Service
US Government Service
Employment with Other Agencies (PFRS)
Optional Service
Uncredited Service
Military Service

Effective April 1, 2011, an eligible member who wishes to purchase service, MUST submit the purchase request through the Purchase of Service Application in the Member Benefits Online System (MBOS).

5. Withdrawing Contributions

If the employee ceases to be an active member for any cause other than death or retirement, he/she may withdraw all his/her contributions less any outstanding loan or other obligation that may have been charged to the account. Upon withdrawal, all rights and privileges of membership end. To withdraw, the employee must file a properly completed withdrawal application.

Pension Contribution Withdrawal Application through MBOS

6. Retirement Under Public Employees' Retirement System (PERS)

a. Service Retirement
Service Retirement is available to members age 60 or older with no minimum number of years of service credit required. The annual annuity for employees meeting this criteria is calculated based on the following formula:

Years of Service X Final Average Salary*

55

*Final Average Salary is the average of the salaries for the last three years before retirement or the three highest fiscal years, whichever yields the higher benefit. Salary is the member's base salary on which pension contributions are based.

b. Early Retirement
Available before age 60 to members having 25 or more years of service credit. A reduced allowance is payable if a member retires under Early Retirement before age 55. The benefit formula is the same as the one used for Service Retirement. However, there is a permanent reduction of the annuity payable, by one-quarter of 1 percent for each month under age 55.

c. Veteran Retirement
Members having veteran status with the retirement system may retire at age 60 with 20 years of service and at age 55 with 25 years of service, with an annual allowance equal to 54.5% of the salary received during the last year of credited service or highest 12 consecutive months of membership on which contributions were made. It is the member's responsibility to notify the Division of Pensions and Benefits of the higher 12 months of salary at the time of retirement. Otherwise, the last 12 months will be used. Qualified veterans age 55 or older with 35 or more years of service may retire with an annual allowance based on the following formula:

Years of Service X Last Year's Salary

55

The highest 12 consecutive months to be used in the benefit calculation does not apply to veteran members retiring with 35 or more years of service. Eligibility requirements must be met before leaving payroll. Veteran benefits cannot be deferred.

A veteran may elect these special benefits or retire on the same basis as nonveteran members. Please refer to the respective pension booklets for qualifications regarding veterans status and corresponding retirement benefits.

d. Disability Retirement

	*Ordinary Disability Retirement:* Member must be considered totally and permanently disabled from performing the duties of their position and have 10 years of New Jersey service credit.
	Accidental Disability Retirement: Member must be considered totally and permanently disabled as a result of a traumatic event that happened during and as a direct result of carrying out regular or assigned job duties.

e. Deferred Retirement
Available to members having terminated covered employment with 10 or more years of service credit. Benefits, calculated using the Service Retirement formula, are payable the first of the month following the member's 60th birthday. In most cases, there is no continuation of the group State Health Benefits Program (SHBP) coverage when a person defers retirement - leaves active employment without immediately receiving monthly retirement allowance checks. However, if the person continues the group SHBP coverage under the provisions of COBRA law up until the official retirement date, that person may continue coverage into retirement.

7. Retirement Under Police and Firemen's Retirement System (PFRS)

a. Service Retirement
Available to all members age 55 or older with no minimum number of years of service credit required. The annual allowance is equal to 2 percent of the member's final average compensation for each year of service up to 30 years plus 1 percent for each year of service over 30

b. Special Retirement
Available at any age to members having 25 or more years of service credit. The annual allowance is equal to 65 percent of final compensation plus 1 percent of final compensation for each year of creditable service over 25 years, but not more than 30 years. Therefore the maximum allowance is 70 percent of final compensation.

c. Deferred Retirement
Available to members having terminated covered employment with 10 or more years of service credit. Benefits, calculated using the Service Retirement formula, are payable the first of the month following the member's 55th birthday. In most cases, there is no continuation of the group State Health Benefits Program (SHBP) coverage when a person defers retirement - leaves active employment without immediately receiving monthly retirement allowance checks. However, if the person continues the group SHBP coverage under the provisions of COBRA law up until the official retirement date, that person may continue coverage into retirement.

d. Disability Retirement

	*Ordinary Disability Retirement:* Member must be totally and permanently disabled from performing job duties and have at least four years of pension service credit.
	*Accidental Disability Retirement:* Member must be totally and permanently disabled as a direct result of a traumatic event which occurred while performing normal job duties.

e. Mandatory Retirement
Effective July 1, 1997, retirement is mandatory on the first of the month following the member attaining age 65. If a retirement application is not filed prior to the mandatory retirement date, he/she is automatically retired on that date. However, benefits are not payable until the application is filed.

8. Retirement Procedures for Members of the PERS and PFRS Pension Systems

a. When an employee is contemplating retirement, he/she may request a pension estimate from the New Jersey Division of Pensions and Benefits.

Members within two years of retiring can hear a retirement estimate over the phone by calling the NJDPB's Automated Information System at (609) 292-7524. Or you can get a retirement estimate online using the Member Benefits Online System (MBOS). Both types of estimates use the service and salary information currently posted to your account.

Members who are more than two years from retiring can use the long-range retirement estimate calculators:

PERS/TPAF

Public Employees' Retirement System Calculator

Teachers' Pension and Annuity Fund Calculator

View How to Run a Retirement Estimate for PERS and TPAF Members

PFRS

Police and Firemen's Retirement System Calculator

b. Once a retirement date is determined, PERS,TPAF and PFRS members must submit their retirement application online using MBOS. View Reviewing a Retirement Application video in the Division of Pension and Benefits' video library.

c. Once a retirement date is chosen, the employee should provide written notification to his/her supervisor and send a copy of the notice to The Office of Human Resources.

9. Health Coverage at Retirement

Any employee retired from a State-administered pension fund will be eligible to continue participation in the State Health Benefits Program, provided they were eligible for coverage immediately preceding the effective date of retirement. A Retired Status Application furnished by the Division of Pensions and Benefits must be completed in its entirety by the employee for continuation of health coverage during retirement. This coverage includes medical and prescription drug plans. The dental, prescription, and vision care programs may be continued through COBRA.

a. State-Paid Health Benefits in Retirement

Previously, State law provided State-paid health benefits for state employees enrolled in the State Health Benefits Program (SHBP) who retired with 25 years of service in the retirement system. That law was changed by Chapter 8, P.L. 1996 to allow negotiation between the State and unions on payment of premiums for retirees. Those already retired are not affected by this change in law. The effect of Chapter 8 is outlined below.

For those with at least 25 years of service credit in the retirement system on June 30, 1997, the State will pay the cost of whatever State Health Benefit plan you select for you and your covered dependents, whenever you retire, up to the cost of the Traditional Plan. Those retiring on a deferred retirement are not normally eligible for SHBP coverage in retirement. These benefits represent no change from what was provided employees prior to the enactment of Chapter 8, PL 1996.

For those who attain 25 years of service credit in the retirement system on or after July 1, 1997, State payment of State Health Benefit Program costs in retirement will be in accordance with the union contract which applies to you at the time you reach 25 years of service credit in the retirement system, regardless of the date you retire. If you are not in a title eligible for union representation, the State Health Benefits Commission will determine the State's payment of State Health Benefits costs in retirement by applying the terms of one of the union contracts in effect at the time you reach 25 years of service credit in the retirement system.

Medicare Coverage at Age 65

Retired group members eligible for Medicare must enroll in Parts A and B of Medicare and attach a photocopy of their Medicare card to the application for SHBP coverage. Upon enrollment in Medicare, the SHBP becomes a secondary provider. If the retiree and their spouse are age 65 at retirement and have not enrolled in both parts of Medicare, they should contact Social Security to apply for full Medicare coverage at this time.

What happens to a spouse's health coverage if the retiree predeceases?

Upon the retiree's death the spouse will be sent a letter offering continuation of the SHBP coverage which was in effect at the time of the retiree's death. If premiums were being deducted through monthly annuity payments and if the spouse will be receiving a monthly check large enough to cover the cost, the cost will be deducted monthly. If the retiree was paying SHBP directly, or if the spouse will not receive a pension check, or if the pension check is not large enough to cover the cost, the spouse will be billed quarterly for the premiums. If the retiree and their spouse were receiving employer paid health coverage prior to the retiree's death, the spouse must now pay for the continued coverage.

10. Lump Sum Payment of Unused Sick Leave

Upon retirement from a State administered pension fund, The University will make a lump sum payment to retirees as supplemental compensation for earned and unused sick leave. The following employees will be eligible: all classified employees of the State and all unclassified administrators of the State. Faculty who have served in an administrative capacity are eligible for this payment for the time served in an administrative capacity only. Such employees, if eligible, shall be entitled to payment based on sick leave and salary earned while serving in the administrative title.

The amount to be paid to eligible employees for unused sick leave shall be computed at the rate of one-half the employee's daily rate of pay for each day of earned and unused accumulated sick leave up to a maximum of $15,000. The daily rate of pay is based on the employees annual base salary received during the last full year of active employment. Overtime pay or other supplemental pay and periods of leave of absence without pay shall not be included in the computation.

An individual eligible for lump sum unused sick leave payment may defer the payment for up to one year from the effective date of retirement.

Alternate Benefit Program (ABP)

The Alternate Benefit Program (ABP) is a defined contribution retirement program for eligible employees of the public institutions of higher education in New Jersey. In addition to retirement benefits, the ABP provides members with life insurance and disability coverage.

The program allows members to direct their own retirement accounts while offering portability of accumulated contribution balances. Vested members are permitted to allocate and transfer employer and employee contributions to any one or combination of authorized investment carriers. The variety of investment choices and distribution methods offered by the authorized carriers provide members flexibility in meeting their retirement goals.

Summary of Benefits

Member contributions on a tax-deferred basis
Tax-deferred employer contributions
Employer-provided group life insurance for eligible active and retired members
Disability benefits if permanently disabled
Loans through the member’s investment carrier(s)
A variety of retirement plan options, including lump sum distribution
State-paid health insurance coverage in the State Health Benefits Program if the member retires and has 25 years of ABP service.

Mandatory Contributions

The member and employer make regular tax-deferred contributions toward retirement savings. Members contribute 5% of base salary and employers contribute 8% of base salary.

Voluntary Additional Contributions

Under the voluntary 403(b) component of the program, members may make additional contributions on a tax-deferred basis. Members are required to complete a Salary Reduction Agreement to participate. Federal income tax will be deferred on the ABP contributions. However, the calculation of State income taxes, Social Security taxes and other benefits based upon compensation will not be affected.

Life Insurance (Active)

Employer-paid group life insurance is provided for all eligible members. No medical examination is required unless the member attained the age of 60 prior to enrollment. Coverage equals three and one half times base salary.

Life Insurance (Retired)

Retired members are eligible for paid group life insurance coverage of one-half of base salary if all of the following criteria are met:

10 years or more of pension service credit
At least age 60 at retirement
Take an annuity distribution within 12 months of the termination of employment, and
Covered by ABP group life insurance plan immediately prior to retirement

Life Insurance Conversion

When life insurance coverage reduces or ends (at retirement, termination of employment or approved leave of absence), members can convert all or a portion of group life insurance to an individual policy within 31 days by contacting Prudential at 1-800-262-1112 with the policy number G14800.

Long-term Disability

Members are eligible for employer-paid long-term disability after one year of participation in ABP. Benefits begin after six months of continuous disability. The plan pays 60% of monthly base salary (reduced by other periodic benefits such as short-term disability or Social Security), if totally and permanently disabled. The minimum benefit is $50 per month.

In addition, the basic 5% contribution that the member would have been required to make while actively working, is made by the carrier (Prudential Insurance Company). The employer continues to contribute 8% of base salary.

Loans

Vested members of the Alternate Benefit Program are eligible to receive loans based on their account balances. Members should contact their investment carrier(s) for applications and repayment procedures.

Retirement and Cash Distributions

A member of the ABP becomes eligible to commence distributions at any age upon termination of employment or retirement. Members may receive benefits in the form of an annuity or cash distribution. Annuity benefits will be calculated by the investment carrier(s) based upon the account accumulation, life expectancy and the distribution option selected. Cash distributions to members under the age of 55 are limited to their employee contributions and accumulations. The remaining employer contributions and earnings are available for distribution upon attaining age 55.

Once a member starts collecting benefits from their ABP account (annuity or cash) they are not eligible to enroll in any New Jersey state-administered retirement system nor are they eligible to re-enroll in the Alternate Benefit Program.

Employment After Retirement

Retired ABP members can return to public employment (including employment covered by ABP) and continue to receive benefits. However, retired members are not eligible for group life insurance or disability insurance. Additionally, retired members will not accrue service credit toward employer-paid health coverage.

Certain restrictions may apply to the benefits and features described. For more information, contact The Office of Human Resources or the Division of Pensions and Benefits.

Health Coverage at Retirement

Any employee retired from a State-administered pension fund will be eligible to continue participation in the State Health Benefits Program, provided they were eligible for coverage immediately preceding the effective date of retirement. A Retired Status Application furnished by the Division of Pensions and Benefits must be completed in its entirety by the employee for continuation of health coverage during retirement. This coverage includes medical and prescription drug plans only. The dental, prescription, and vision care programs may be continued through COBRA.

a. State-Paid Health Benefits in Retirement

Previously, State law provided State-paid health benefits for state employees enrolled in the State Health Benefits Program (SHBP) who retired with 25 years of service in the retirement system. That law was changed by Chapter 8, P.L. 1996 to allow negotiation between the State and unions on payment of premiums for retirees. Those already retired are not affected by this change in law. The effect of Chapter 8 is outlined below.

For those with at least 25 years of service credit in the retirement system on June 30, 1997, the State will pay the cost of whatever State Health Benefit plan you select for you and your covered dependents, whenever you retire, up to the cost of the Traditional Plan. Those retiring on a deferred retirement are not normally eligible for SHBP coverage in retirement. These benefits represent no change from what was provided employees prior to the enactment of Chapter 8, PL 1996.

For those who attain 25 years of service credit in the retirement system on or after July 1, 1997, State payment of State Health Benefit Program costs in retirement will be in accordance with the union contract which applies to you at the time you reach 25 years of service credit in the retirement system, regardless of the date you retire. If you are not in a title eligible for union representation, the State Health Benefits Commission will determine the State's payment of State Health Benefits costs in retirement by applying the terms of one of the union contracts in effect at the time you reach 25 years of service credit in the retirement system.

Medicare Coverage at Age 65

Retired group members eligible for Medicare must enroll in Parts A and B of Medicare and attach a photocopy of their Medicare card to the application for SHBP coverage. Upon enrollment in Medicare, the SHBP becomes a secondary provider. If the retiree and their spouse are age 65 at retirement and have not enrolled in both parts of Medicare, they should contact Social Security to apply for full Medicare coverage at this time.

What happens to a spouse's health coverage if the retiree predeceases?

Upon the retiree's death the spouse will be sent a letter offering continuation of the SHBP coverage which was in effect at the time of the retiree's death. If premiums were being deducted through monthly annuity payments and if the spouse will be receiving a monthly check large enough to cover the cost, the cost will be deducted monthly. If the retiree was paying SHBP directly, or if the spouse will not receive a pension check, or if the pension check is not large enough to cover the cost, the spouse will be billed quarterly for the premiums. If the retiree and their spouse were receiving employer paid health coverage prior to the retiree's death, the spouse must now pay for the continued coverage.

Lump Sum Payment of Unused Sick Leave

Upon retirement from a State administered pension fund, The University will make a lump sum payment to retirees as supplemental compensation for earned and unused sick leave. The following employees will be eligible: all classified employees of the State and all unclassified administrators of the State. Faculty who have served in an administrative capacity are eligible for this payment for the time served in an administrative capacity only. Such employees, if eligible, shall be entitled to payment based on sick leave and salary earned while serving in the administrative title.

The amount to be paid to eligible employees for unused sick leave shall be computed at the rate of one-half the employee's daily rate of pay for each day of earned and unused accumulated sick leave up to a maximum of $15,000. The daily rate of pay is based on the employees annual base salary received during the last full year of active employment. Overtime pay or other supplemental pay and periods of leave of absence without pay shall not be included in the computation.

An individual eligible for lump sum unused sick leave payment may defer the payment for up to one year from the effective date of retirement.

As a result of pension reform legislation, Chapter 89 P. L. 2008, all adjunct faculty members or part-time instructors are required to participate in the New Jersey State pension system - Alternate Benefit Program (ABP) immediately upon commencement of employment. Employees who have existing Public Employees Retirement System (PERS) or Teachers Pension Annuity Fund (TPAF) accounts may make a one time irrevocable election to remain/transfer to PERS.

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Mandatory Retirement Plans