Workers' Compensation is a rapidly
evolving and often confusing issue affecting pension administrators.
Fact Sheet 45 offers an excellent discussion to provide you
with a basic understanding Workers' Compensation issues.
New Jersey Administrative Code (NJAC
17:1-4.39) covers employer obligations under Workers' Compensation
vs. "Temporary" Workers' Compensation Awards
For pension purposes, there is no
distinction between temporary and permanent Workers' Compensation
Recent court rulings have held that
an employee who receives Workers' Compensation benefits must be
retained on payroll. The employer may be responsible for remitting
pension contributions on behalf of the employee.
When Employer Obligations
End under Workers' Compensation Awards
The following are circumstances under
which an employer's obligation to pay pension contributions will
- The employee voluntarily resigns
from employment for reasons other than the inability to perform
the functions of the former position; or
- The employee is terminated by
the employer for reasons unrelated to the Workers' Compensation
- The employee has sufficient service
credit to be eligible to receive a disability retirement allowance.
If the employer ceases remitting
contributions because the employee has voluntarily resigned from
employment or the employee was terminated for reasons unrelated
to the Workers' Compensation award, the employer must notify the
Division of Pensions and Benefits by correcting the Quarterly
Report of Contributions (ROC). In accordance with normal
policy, if the correction covers prior period adjustments, a detailed
letter should be sent to the Audit/Billing Section under separate
cover and you should attach appropriate supporting documentation,
such as the workers' compensation award, letter of resignation,
and/or termination agreement.
Specific issues that pertain to NJ
State-administered pension system reporting and contributions
are addressed below.
Pension Reporting and Contributions
Workers' Compensation awards may
result in awards of lump sum payments or in periodic payments:
- Lump sum payments for medical
expenses and/or "damages" are not considered pensionable,
therefore, are not reported to the Division of Pensions and
- Only "periodic"
payments intended to replace lost wages are pensionable.
Often, a portion of these awards are paid in a lump sum to cover
wages lost over a specified period of time in the past. In this
case the employer would report the pensionable portion of these
payments in the same manner as with a "retroactive
salary increase." Unless otherwise stated in the award,
the salary used for remitting and reporting to the Division
is the salary the member received immediately before the receipt
of Workers' Compensation benefits.
Compensation Awards "with Pay" versus "without
Awards "with Pay"
If an employer keeps an employee
on regular payroll and the insurance company pays the employing
location (not the member), then the employee is responsible for
all deductions, including the continuation of loans and arrears.
It is as though the member is still active in all respects for
Full contributions/repayments would
be remitted monthly, and full service credit, salary, contributions
and other deductions would be reported quarterly on the ROC.
If a periodic Workers' Compensation
award "with pay" is for only a percentage of the member's
regular salary, the member still contributes the normal amount
of pension deductions and is reported at full base salary on the
Augmented Workers' Compensation Awards
Some employers augment a Workers'
Compensation award that is for less than the full base salary.
When an employer augments or compensates for the remaining portion
of the member's full salary, then the member is treated as "with
pay": the member's full contributions and regular deductions
are withheld from the employer's salary payment and the member
is reported for full salary and deductions on the ROC.
For example, an insurance company
pays a Workers' Compensation award of 70% of base salary directly
to the member.The employer elects to augment the award amount
by the remaining 30% of base salary. The employer would deduct
pension contributions and repayments (loans, etc.) for 100% of
salary from the 30% check.
Compensation Awards "without Pay"
The employer is responsible for paying
the member's normal pension contributions and mandatory back deductions
if the only payment the employee is receiving is a check directly
from the insurance company. This is considered Workers' Compensation
Full contributions would be remitted
monthly, and full service credit, pensionable salary, and contributions
would be reported quarterly on the ROC.
The employer is not responsible for
voluntary payments such as loans, arrears, and SACT contributions.
If the periodic Workers' Compensation
award "without pay" is for a percentage of the member's
regular salary, the employer will still remit the full monthly
pension contributions on behalf of the member and report the full
base salary on the ROC.
Group Life Insurance Payments (PERS & TPAF Only)
If a Workers' Compensation award
is "with pay", the PERS or TPAF member is considered
to be active in all respects for pension purposes. Contributory
Group Life Insurance deductions from the member's salary will
continue as normal.
For the duration covered by the award
of Workers' Compensation "without pay", the PERS member
is considered "inactive" for purposes of group life
insurance coverage. The employer is obligated to inform the employee
of the requirement that group life insurance premiums must be
remitted to continue coverage.
The member must then make arrangements
to pre-pay the regular premium for contributory insurance. Payments
may be sent directly to the Division, or the employer may elect
to allow the member to pay the location, who would then forward
the premium to the Division through regular monthly TEPS transmittals
and report these premiums in the usual way on the ROC.
The key is that it is the PERS
member's responsibility to remit payments in advance (either
by direct payment or by payments made through the employer), or
face the termination of contributory insurance coverage. Premium
payments must to be remitted with a Personal
Life Insurance Remittance form.
TPAF members who are receiving Workers'
Compensation "without pay", or on approved leave of
absence for medical reasons, continue to be covered by contributory
life insurance. The TPAF contributory insurance premium is paid
for by the State and is not required of the member.
and Workers' Compensation
When an employee has a Workers' Compensation
award pending, or who is receiving an award of periodic benefits
under Workers' Compensation or the Second Injury Fund, the employee
is considered active in all respects for health benefits coverage.
Health benefits coverage will continue in force for the employee
and all eligible dependents covered under the employee's coverage
level selection. If the employee shares in the cost of health
benefit premiums, an employee receiving Workers' Compensation
"without pay" must pay the employer in advance for his
or her share of the premiums. If the Workers' Compensation award
is "with pay", the premium share may continue to be
deducted from the employee's paycheck.
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