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Group Life Insurance

Contents
	Employer Tasks with Group Life Insurance (GLI)
		What is Noncontributory Group Life Insurance (GLI)? What is Contributory Group Life Insurance (GLI)? When Enrolling New Members Collect, Remit, and Report Contributory GLI Premiums Delayed Enrollment and Back Contributory GLI Premiums Determine Imputed Income and Withhold Appropriate       Taxes for Insurance over $50,000 Reporting the Death of Active Members
	How Group Life Insurance (GLI) Works
		Noncontributory GLI Contributory GLI (PERS & TPAF) Optional JRS Contributory GLI Enrolling in GLI Naming a Beneficiary for GLI Confirmation of Enrollment in GLI
	When Changes in Group Life Insurance (GLI) Coverage Happen
		Withdrawal from Contributory GLI (PERS & TPAF only) Changing a GLI Beneficiary Designation Seasonal Continuance of GLI Coverage GLI While on Leave of Absence Continuing GLI While on Leave through Member Payments GLI for PERS Members Suspended without Pay GLI and Workers' Compensation without Pay Filing for Disability Retirement and GLI GLI upon Termination of Employment
	Taxability of Group Life Insurance over $50,000
		The Value of GLI According to the IRS Determining the Taxable Amount for Members Who Have   Noncontributory Group Life Insurance Only Determining the Taxability of Both Contributory and Noncontributory GLI Waiving Noncontributory GLI over $50,000 Canceling the Waiver of Noncontributory GLI over $50,000
	Group Life Insurance Coverage Upon Retirement
		GLI Coverage upon Retirement Paid up GLI for Disability Retirements
	Conversion of Group Life Insurance
	Applying for Group Life Insurance Conversion
	When a Member Dies
		Instructions for Filing a Death Claim Group Life Insurance Payment Options "Alliance Accounts"

Employer Tasks Relating to Group Life Insurance

The employer is responsible for the following tasks regarding group life insurance:

Noncontributory Group Life Insurance

Noncontributory Group Life Insurance is underwritten by the Prudential Insurance Company of America, Inc., and is provided as a result of pension membership. There is no cost to the member for this coverage. The State Treasurer is the official policyholder for all the Noncontributory Group Life Insurance, which is issued as Policy Number G-14800. For the amount of insurance provided to active employees by each retirement system, click here.

Contributory Group Life Insurance (PERS and TPAF only) 

Contributory Group Life Insurance is underwritten by the Prudential Insurance Company of America, Inc., and is insurance for which the member pays a premium through payroll deductions. The appropriate Board of Trustees is the official policyholder for the Contributory Group Life Insurance for its system. 

The policy number for the PERS Contributory Group Life Insurance is G-13900; for the TPAF it is G-14300. The law requires that a retirement system member must be covered  by contributory insurance for the first 12 months of membership. After the 12 months have elapsed, the member may withdraw from this coverage by filing the proper form. Once the member withdraws from the Contributory Group Life Insurance coverage, it cannot be reinstated, nor can contributions that were made prior to the withdrawal be refunded.

The cost of the Contributory Group Life Insurance, which is set by the appropriate Board of Trustees, is:

The deduction from salary for a PERS/TPAF member's Contributory Group Life Insurance is made after taxes have been deducted.

PLEASE NOTE: In accordance with N.J.S.A. 18a:66-53(h), TPAF members are not required to pay Contributory Group Life Insurance premiums after attaining age 70. Such premiums must be paid by the employer. The Division bills the employer annually for premiums for TPAF members who are age 70 or older.

For information about delayed enrollments and back
Contributory Group Life Insurance premiums, click here.

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Optional Contributory Group Life Insurance (JRS Only)

All active judges of the Judicial Retirement System who work full-time on a regular basis are now eligible to participate in optional Contributory Group Life Insurance. This option became effective on May 1, 2001. For more information, follow this link.

The benefit value of the Contributory and Noncontributory Group Life Insurance is shown in the chart below.

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Enrolling in Group Life Insurance

Enrollment in group life insurance is accomplished through completion of the pension enrollment application, and coverage is effective beginning on the date of pension membership. 

Follow this link for instructions for making effective beneficiary designations (including "Do's and Don'ts") on the enrollment application and the Designation of Beneficiary form.

Note about Exceptions: Employees who are age 60 or older at the time the Enrollment Application is received are ineligible for coverage until they take and pass a medical examination to prove insurability For more information, see below. 

Additionally, employees who were previously enrolled and who converted their group life insurance to a private policy, and then return to work, are not eligible for coverage until they cancel their nongroup coverage or take and pass a medical examination.

The Division of Pensions and Benefits will notify the member in writing if proof of insurability is required and outline the necessary steps for completing this process (see below).

Group Life Insurance for Members Age 60 or Older (PERS and TPAF)

Employees who are age 60 or older at the time of enrollment are ineligible for both noncontributory or contributory group life insurance coverage until they prove insurability by taking and passing a physical examination.

The date of birth information on the Enrollment Application, submitted by the employer, is used to determine whether or not an enrolling member is ineligible for group life insurance information due to age.

When a member is found to be age 60 or older at enrollment, the following procedure is set in motion:

• The Division of Pensions and Benefits notifies the member in writing of his or her ineligibility for group life insurance coverage until insurability is proven through a physical examination.*
• The Division informs Prudential Life Insurance Company of America, Inc., (the present group life insurance underwriter), about the enrolling member's ineligibility for group life insurance coverage due to age.
• Prudential then provides the new member with information about completing the process of obtaining a physical examination to prove insurability. Prudential authorizes a third party to administer the physical examination.

*The member has 12 months from the date of the Division's written notification to take and pass the required physical examination. Failure to pass the physical examination within the prescribed time frame will render the member ineligible for group life insurance coverage.

Prudential notifies the Division when the member becomes eligible for group life insurance coverage as a result of proving insurability through a physical exam.

At that time, the Division provides certification to both the member and employer. The certification indicates the date on which salary deductions for group life insurance coverage will begin.

Members who fail to prove insurability have 45 days to submit an appeal of the decision to Prudential.

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Naming a Beneficiary for Group Life Insurance

The pension enrollment application contains a section in which members name beneficiaries for both group life insurance benefits and the return of pension contributions. The member may name any person, organization, estate or trust as beneficiary. This designation may be changed  at any time during membership by filing the Designation of Beneficiary form, or by completing the MBOS Designation of Beneficiary online (Members wishing to register for MBOS, click here). At retirement, the member will be asked to nominate beneficiaries on the Application for Retirement Allowance  (Also see the Retirements section of this manual).

Confirmation of Enrollment in Group Life Insurance

After the member's enrollment in the pension system has been accomplished, life insurance information is passed to Prudential Insurance Company, the administrator of the Division's group life insurance policies. The Division of Pensions and Benefits will send the member a certificate of insurance, or insurance rider, that gives the group policy number(s) of the coverage, the member's name, location number, membership number, effective date of insurance, and beneficiaries of record. This certificate is an important document and should be safeguarded by the member. 

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Withdrawal from Contributory Group Life Insurance:  PERS and TPAF only

A member may withdraw from Contributory Group Life Insurance coverage at any time after completing the mandatory first twelve months of membership.  Withdrawal is accomplished by completing a Notice of Withdrawal from Contributory Group Life Insurance card, available from the Division of Pensions and Benefits. 

PERS Notice of Withdrawal from Contributory Group Life Insurance Form

TPAF Notice of Withdrawal from Contributory Group Life Insurance Form

Unlike waiving Noncontributory Life Insurance coverage over $50,000, which can be reinstated annually, the withdrawal from Contributory Group Life Insurance is irrevocable.  See the section on Waiver of Noncontributory Life Insurance Coverage over $50,000 for more information on this topic.

Since this is term life insurance, contributions made for Contributory Group Life Insurance are not refundable.

Changing a Group Life Insurance Beneficiary Designation

A member may change group life insurance beneficiaries at any time.

For the protection of members and beneficiaries, the Division will only accept a designation change using a properly completed Designation of Beneficiary form, or by completing the MBOS Designation of Beneficiary (Members wishing to register for MBOS, click here). The Division will not accept a change over the telephone or through a letter.

For members who are retired or who have submitted an Application for Retirement Allowance: The beneficiaries designated on a retirement application supersede all prior designations once the application is on file at the Division, even if the member later decides to cancel the retirement process. Retired members wishing to update their GLI beneficiaries after retirement must submit a Designation of Beneficiary form.

The Designation of Beneficiary form can be obtained from the Internet or by calling the Division. Or, members may use the MBOS (Member Benefits Online System) to provide updated beneficiary information. Members wishing to register for MBOS should visit the MBOS Registration Information page, at: http://www.state.nj.us/treasury/pensions/mbos_webx.htm.

For instructions on completing a Designation of Beneficiary form, click here.

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Seasonal Continuance of Group Life Insurance Coverage

In the case of "ten month" members, group life insurance will continue during the months of July and August as long as the employer-employee relationship exists during this period. If a signed contract is necessary to continue the employer-employee relationship, it must be in place. If a signed contract is not required to continue the employer-employee relationship, the employer will be required to certify that the employee is expected to return and will be rehired during the month following the two months off.

Group Life Insurance While on a Leave Of Absence

Group life insurance coverage will continue in full force for an official leave of absence without pay, under the following conditions:

• For an Official Leave of Absence without Pay for Personal Illness

If the official leave of absence without pay is for personal illness, the member's group life insurance coverage will continue for up to two years.

PERS and TPAF members are not required to submit premiums for their Contributory Group Life Insurance coverage when taking an official leave of absence without pay for personal illness. Both Contributory and Noncontributory Group Life Insurance coverage will continue for up to two years, unless the member had previously elected to withdraw from Contributory Group Life Insurance coverage:

For PERS and TPAF members who had elected to withdraw from Contributory Group Life Insurance coverage prior to taking the leave, only Noncontributory Group Life Insurance coverage will be in effect during the leave of absence period.

If the leave of absence period extends beyond two years, group life insurance coverage ends. The member will have 31 days from the date the leave ends to convert to private coverage.

• For an Official Leave of Absence without Pay to Fulfill a Residency Requirement for either an Advanced Degree or as a Full-time Student at an Institution of Higher Education

If the official leave of absence without pay is to fulfill a residency requirement for either an advanced degree or as a full-time student at an institution of higher education, the member's group life insurance will continue for up to one year.

In such cases, PERS and TPAF members are required to remit monthly Contributory Group Life Insurance premium payments in order to continue both their Contributory Group Life Insurance and Noncontributory Group Life Insurance coverage. (Click here for payment information.) If the monthly Contributory Group Life Insurance premium payments are not remitted, only the Noncontributory Group Life Insurance component will continue; however, there is one exception:

For PERS and TPAF members who have only Noncontributory Group Life Insurance coverage at the time the leave is taken because they had previously elected to withdraw from Contributory Group Life Insurance coverage, no group life insurance will be in effect. The member will have 31 days from the start date of the leave to convert to private coverage.

If the leave of absence period extends beyond one year, group life insurance coverage ends. The member will have 31 days from the start date of the leave to convert to private coverage.

• For an Official Leave of Absence without Pay for Personal Reasons (Including Family Leave, Leave for Childcare)

If the official leave of absence without pay is for personal reasons (such as family leave or leave for childcare), the member's group life insurance will continue in full force for up to 93 days.

In such cases, PERS and TPAF members wishing to continue their Contributory Group Life Insurance are required to remit monthly Contributory Group Life Insurance premium payments in order to continue both their Contributory Group Life Insurance and Noncontributory Group Life Insurance coverage. (Click here for payment information.) If monthly Contributory Group Life Insurance premium payments are not remitted, only the Noncontributory Group Life Insurance component will continue, for up to a maximum of 93 days; however, there is one exception:

For PERS and TPAF members who have only Noncontributory Group Life Insurance coverage at the time the leave is taken because they had previously elected to withdraw from Contributory Group Life Insurance coverage, no group life insurance will be in effect. The member will have 31 days from the start date of the leave to convert to private coverage.

If the leave of absence period extends beyond 93 days, group life insurance coverage ends. The member will have 31 days from the start date of the leave to convert to private coverage.

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Determining the Taxable Amount for Members Who Have Both Contributory and Noncontributory Group Life Insurance

To determine the taxable amount, if any, add the amount of Noncontributory Group Life Insurance coverage to Contributory Group Life Insurance coverage (PERS and TPAF members only); then subtract $50,000 from that total. The premium rates are then applied to the remaining life insurance amount. The premium costs for the life insurance are determined by the IRS based on the member's age (see chart) and salary. The premiums paid for contributory life insurance coverage (.005 of base salary for PERS, .004 for TPAF) are subtracted from the premium costs determined by the IRS. The remaining premium cost (if any) is the taxable amount and is added to the member's W-2 for that year.

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Waiving Noncontributory Group Life Insurance over $50,000

Chapter 62, PL 1994 permits members of the State retirement systems to waive their Noncontributory Group Life Insurance over $50,000 to avoid a possible federal and State tax liability on that benefit. Any member who waives the Noncontributory Group Life Insurance, must waive the total amount of Noncontributory Group Life Insurance coverage in excess of $50,000. Waivers of partial amounts are not permitted.

To avoid taxation, a member may waive Noncontributory Group Life Insurance coverage by completing a Waiver Of Noncontributory Group Life Insurance in Excess of $50,000 form and submitting it to the Division of Pensions and Benefits. The waiver form, available from the Division of Pensions and Benefits, must be received by the Division before December 31 to be effective January 1 of the next calendar year. Once a waiver form has become effective, it shall be irrevocable for the entire calendar year.  

If a waiver is in effect at the time of termination of employment or retirement, the member will not be permitted to convert any amount of Noncontributory Group Life Insurance coverage over $50,000.

Before completing the waiver, the member should completely understand the ramifications of waiving Noncontributory Group Life insurance. For more information, refer them to Internal Revenue Service Publication 525, which is available through the IRS Forms Distribution Center at (800) 829-3676.

The Division of Pensions and Benefits will notify the employer on a periodic basis of the waivers processed for their employees. This will be done by sending a computerized report with the names and membership numbers of the members filing waivers.

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Cancelling the Waiver of Noncontributory Group Life Insurance over $50,000

Once a waiver form has become effective, it shall be irrevocable for at least an entire calendar year. The waiver will remain in effect until the member submits a reinstatement form, the Election to Reinstate Noncontributory Life Insurance in Excess of $50,000 to the Division of Pensions and Benefits. The reinstatement will become effective the following January 1. 

The Division of Pensions and Benefits will notify the employer on a periodic basis of the cancellation of any waivers (reinstatement of Noncontributory Group Life Insurance) processed for their employees. This will be done by sending a computerized report with the names and membership numbers of the members reinstating their Noncontributory Group Life Insurance.

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Group Life Insurance Upon Retirement

If a retiree was enrolled as a member on or after July 1, 1971, life insurance is payable only if the member retires with 10 or more years of pension membership credit or retires on a disability retirement. The amount of insurance provided in retirement for all but disability retirements is shown in the chart immediately below.

Paid up Group Life Insurance for Disability Retirements

If a member retires on a disability retirement, the Noncontributory Group Life Insurance benefit remains at a higher level until the member reaches normal retirement age: Age 60 for PERS, TPAF, and JRS; age 55 for PFRS and SPRS.  At normal retirement age the benefit amount is reduced to the normal retiree level. The member may elect then to convert the insurance that has been lost to a private, non-group policy through Prudential Life Insurance Company.

An ABP member with an approved long-term disability is treated as an active member for pension and life insurance; thus, the ABP member's group life insurance benefit will stay at 3.5 times salary until age 70, when the member must take a normal retirement.

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Conversion of Group Life Insurance

If a member is forced to terminate coverage under group life insurance, the member is entitled to convert the same amount of insurance coverage lost —to an individual, non-group policy issued by The Prudential Insurance Company of America, Inc. 

This conversion is guaranteed. The member cannot be refused coverage for health or other reasons, and no physical examination need be taken. The member may select any type of policy customarily offered by Prudential except term life insurance or a policy containing disability benefits. The individual policy will be effective at the end of the 31-day period following cessation of employment or termination of insurance. The premiums will be higher than the member would pay if otherwise able to qualify medically for an individual policy with any insurance carrier.

A member may convert any dollar amount of group life insurance up to the maximum amount he or she is permitted to convert.

Several examples showing the amount of insurance that may be converted are shown below.

	Upon a Service Retirement
	A TPAF member had a base salary of $60,000 during the year before retirement and had both Noncontributory and Contributory Group Life insurance.  Active coverage = 3.5 x $60,000 = $210,000.
		The member would receive a total of $26,250 in paid up group life insurance in retirement.	=	25% for the Noncontributory Insurance ($15,000) plus 18.75% for the Contributory insurance ($11,250)
		Difference in Group Life Insurance coverage: $210,000 - 26,250 = $183,750.
		$183,750 could be converted to an individual policy with Prudential at retirement.

Upon a Disability Retirement
	A PFRS member with a base salary of $46,000 the year before retiring on an Ordinary Disability Retirement at age 39.
		The member continues to have group life insurance coverage equal to 3.5 times salary, or $161,000 until reaching the service retirement age of 55.
		At age 55, the group life Insurance benefit would be reduced to 50% of final salary, or $23,000.
		The member may then convert $138,000 in coverage to a private, non-group policy with Prudential.

Upon a Deferred Retirement
	A PERS member has a base salary of $36,000 during his final year of employment.
		With Contributory and Noncontributory Group Life Insurance, the active death benefit is $108,000.
		The member leaves employment at age 36 and takes a Deferred Retirement, payable at age 60.
		When retired at age 60, the member will have paid up life insurance of $6,750 (18.75% of salary).
		Until age 60, the member has no group life insurance in effect.
		Within 31 days of terminating employment, the member would be allowed to convert $101,250 of insurance to a private, non-group policy with Prudential.

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Applying for Conversion of Group Life Insurance Coverage

To apply for conversion, the member must contact a representative of the Prudential Insurance Company. A toll free number is available, 1-800-262-1112, if the member lives in New Jersey. If the member lives outside of New Jersey, the contact should be with a local Prudential agent, who will be able to sell insurance policies in that state. The member will have to provide the Prudential agent with his/her group policy number and individual certificate number. The Group Policy number is shown in the chart below. The individual certificate number is the member's pension membership number.

 

If a member returns to public employment after conversion, and the individual policy is still in effect at the time of enrollment in the retirement system, the member will be required to discontinue the individual policy or submit satisfactory proof of insurability before the member can be covered by group life insurance through the retirement system.

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Group Life Insurance Claims for Death Benefits

When an active member or retiree with insurance coverage dies, the named beneficiaries are entitled to the payment of group life insurance. The amount of insurance will depend upon the retirement system, whether the member has Contributory Group Life Insurance or not, and whether the member is active or retired. For information on filing a death claim click here.

Group Life Insurance Payment Options

Death benefits under group life insurance can be paid as a Lump Sum, Annuity Certain, or Life Annuity. 

Lump Sum: All payments of a retiree's life insurance are made in a lump sum. If a lump sum is selected for an active employee's death benefit, it may be changed by the beneficiary to an Annuity Certain or Life Annuity. Lump sum payments of $5,000 or more will be made through an Alliance Account established by the Prudential Insurance Company. 

Annuity Certain: (A monthly payment over a specified period of years, e.g., 5, 10, 15). Should the beneficiary die before all installments have been made, the remaining balance is paid in a lump sum to the beneficiary's named beneficiaries or estate.

Life Annuity: The value of the annuity is actuarially determined using the benefit amount and the life expectancy of the beneficiary. Payment stops at the death of the beneficiary.

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Prudential Alliance Account - For Payments of Group Life Insurance Benefits of $5,000 or Greater

When a benefit offering letter is generated for a member's beneficiary  and the beneficiary is a recipient of a group life insurance benefit of $5,000 or more, the funds will be placed in an Alliance Account administered through the Prudential Insurance Company of America. The Alliance Account, similar to a checking account with a bank, provides the beneficiary with a no-fee checkbook, a ledger for accounting, and a monthly account balance statement. The Alliance Account is also an interest-bearing account, with an interest rate comparable to a six month CD.

Unlike a bank account, the Alliance Account is set up exclusively for the distribution of the group life insurance funds. The beneficiary can write one check for the full amount of the group life insurance, plus any interest, or write checks as needed for smaller amounts (there is no minimum allowable check amount). If the beneficiary withdraws the entire balance, or the balance drops to $0, the Alliance Account is automatically closed.

If there is more than one named beneficiary and the group life insurance is not distributed equally, any beneficiary with a benefit of $5,000 or more will receive an Alliance Account. Anyone receiving less than $5,000 is not eligible for an Alliance Account and will be paid by a draft.

An Alliance Account cannot be set up if:

• If the group life insurance benefit is under $5,000.
• If the beneficiary is an estate with more than one administrator or the estate is under the guardianship of the court.
• If the beneficiary resides outside of the United States.
• If, in the case of an active member's death, the beneficiary selects the annuity option for the group life insurance benefit on the Beneficiary Verification Form.
• If, in the case of an active member's death, the member selected the Group Life Insurance benefit to be paid as an annuity on the Designation of Beneficiary form.

The Group Life Insurance benefit is not taxable, but any interest that may be gained through an Alliance Account plus any pension benefits are considered taxable. The "Beneficiary Verification Form"  has been updated to reflect the tax obligations due as a consequence of the implementation of the Alliance Accounts.

Changes included in the Beneficiary Verification Form are:

• The paragraphs "Certification Instructions" and the "Taxpayer Identification Number/Form W9 Certification" have been added as required by Prudential and the Internal Revenue Service (IRS). These explain the rules regarding backup withholding.
• If a person is named as the beneficiary (not an estate, corporation, charity, or formal trust), only his or her Social Security number will be needed for tax purposes.
• If the named beneficiary is an estate, corporation, charity, or formal trust, a Taxpayer Identification Number will be supplied by the IRS and is required for Beneficiary Services to process the claim.
• A notary signature is no longer required for processing.

The Beneficiary Services Section at the Division will send the beneficiary an offering letter detailing the group life insurance and any pension benefits, along with a Beneficiary Verification Form. If eligible for an Alliance Account, a notice of the forthcoming Alliance starter kit will be included with the offering letter and form. When Beneficiary Services receives a certified death certificate and the return of all other forms required for processing, Prudential will be sent a transmittal notice within two days. An Alliance Account "Starter Kit" will be sent to the beneficiary within one week.

The Alliance Account Starter Kit contains an introductory letter, an informational pamphlet, and a checkbook. The member's name and address will be printed on the checks. A toll-free number for Prudential's Customer Service Department is also provided in the kit for any questions the beneficiary may have about their Alliance Account. 

The Customer Service phone number for all Alliance Accounts is: 1- 877-255- 4262.

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