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Pensions and Benefits
RULE CHANGES
2000
Proposed Rules Public Notices Adoptions

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The Division of Pensions and Benefits posts proposed rules — new rules, amended rules and readoptions of existing rules — on this Web site to inform members, retirants, employers and other interested parties.

Proposed rules are first published in the New Jersey Register, a bi-weekly publication prepared by the Office of Administrative Law. The Division then posts, on this site, summaries of the proposed rules. After adoption, a rule becomes part of the New Jersey Administrative Code.

If you would like to learn more regarding a proposed rule, the numbers in the parentheses before the proposed rule refer to the volume and page number in which the entire proposal is found in the Register. NJAC refers to the New Jersey Administrative Code, and the numbers identify the title and specific chapter citations.

Proposed changes are either in bold print or are underlined. Deletions are bracketed [so].


Public Notices

Notice of Administrative Change: N.J.A.C. 17:2-2.3 Public Employees' Retirement System - Ineligible Persons. Cite as 32 N.J.R. 2925(a) [PERS]


Proposed Rules

Proposed Amendment: N.J.A.C. 17:2-2.3 Ineligible Persons. Cite as 32 N.J.R. 4239. [PERS]

Proposed Amendment N.J.A.C. 17:9-3.1 and Proposed New Rule: N.J.A.C. 17:9-3.8 Dependents and Children Defined and Children with Disabilities Age 23 or Older; Determination of Eligibility for Continuation of Coverage. Cite as 32 N.J. Reg. 3383(a)

Proposed Amendment:: N.J.A.C. 17:2-3.14 Acceptable Designations of Beneficiaries. Cite as 32 N.J. Reg. 3213(a) [PERS]


Adoptions

Readoption with Amendments N.J.A.C 17:4 Cite as 32 N.J.R 4060(a). [PFRS]

Adopted Amendment N.J.A.C. 17:4-3.4 Survivor Benefits. Cite as 32 N.J.R. 3554(b). [PFRS]

Adopted Amendment: N.J.A.C. 17:9-6.9 Eligibility of State Payment of Retiree Coverage Under P.L. 1997, C.330 Cite as 32 N.J.R.. 4451(a) [SHBP]

Adopted Amendment N.J.A.C. 17:9-6.1 Retired Employee Defined. Cite as 32 N.J.R. 4450(b). [SHBP]

Adopted Repeal N.J.A.C. 17:9-5.6 Health Maintenance Organization Charges. Cite as 32 N.J.R. 4450(a) [SHBP]

Adopted New Rule: N.J.A.C 17:5-2.4 Acceptable Designation of Beneficiaries. Cite as 32 N.J.R. 3996(d) [SPRS]

Adopted Amendment: N.J.A.C. 17:3-3:13 Acceptable Designations of Beneficiaries. Cite as 32 N.J.R. 3996(c) [TPAF]

Adopted Amendment: N.J.A.C.17:3-1.2 Fiscal Year. Cite as 32 N.J.R. 3996(b) [TPAF]

Adopted New Rule: N.J.A.C. 17:2-1.2 Division of Pensions and Benefits Public Employees' Retirement System Fiscal Year. Cite as 32 N.J.R. 3966(a) [PERS]

Adopted New Rule: N.J.A.C. 17:6-1.4 Consolidated Police and Firemen's Pension Fund Election of Members--Commission. Cite as 32 N.J.R. 3863(a) [PFRS]

Adopted New Rule N.J.A.C. 17:4-3.6 Acceptable Designation of Beneficiaries. Cite as 32 N.J.R. 3581(a) [PFRS]

Adopted Amendment: N.J.A.C. 17:3-1.4 Election of Member-Trustee. Cite as 32 N.J.R. 2926(a). [TPAF]

Adopted Amendment: N.J.A.C. 17:4-1.4 Election of Active Member-Trustee. Cite as 32 N.J.R. 2598(a). [PFRS]

Adopted Amendment: N.J.A.C. 17:4-5.1 and Proposed Repeal and New Rule: N.J.A.C. 17:4-5.1 and 5.3 Eligibility for Purchase and Optional Purchases of Eligible Service. Cite as 32 N.J. Reg. 2600(a). [PFRS]

Adopted Amendment: N.J.A.C. 17:9-5.12 and 6.8 Premium Sharing for Active State health Benefit Coverage; Premium Sharing for Retired State Health Benefit coverage. Cite as 32 N.J.R. 2601(b). [SHBP]

Adopted New Rules: N.J.A.C. 17:1-4.10 and 5.12 Eligibility for a Loan; Outstanding Loans. Cite as 32 N.J.R. 2602(a) [JRS]

Adopted Amendment: N.J.A.C. 17:4-6.4 Outstanding loans. Cite as 32 N.J. Reg. 2601(a) [PFRS]

Adopted Amendment: N.J.A.C. 17:4-2.5 Age Requirements. Cite as 32 N.J.R. 2599(a). [PFRS]

Adopted Amendment N.J.A.C. 17:3-6.13 Disability Retirant; Annual Medical Examinations. Cite as 32 N.J.R. 2110(a) [TPAF], 32 N.J.R. 2257(a) [PERS]

Adopted New Rule: N.J.A.C. 17:2-2.8 Enrollment Eligibility Of Provisional, Temporary Employees Occupying Full Time Police And Fire Titles. Cite as 32 N.J.R. 1415(a). [PERS]

Amendment: N.J.A.C. 17:1-4.36 Peacetime Military Service. Cite as 32 N.J.Reg. 1045(a) [General]

New Rules, Amendments and Repeals: N.J.A.C. 17:2
Administration, enrollment, insurance and death benefits, membership, purchase, eligible service, retirement and transfer. Adopted December 15, 1999. Cite as 32 N.J. Reg. 304(a). [PERS]
Adopted New Rules: N.J.A.C. 17:2-3.9, 6.2 and 7.2
Adopted Recodification with Amendments: N.J.A.C. 17:2-5.9 as 4.15,5.10 as 4.16 and 6.2 as 6.3
Adopted Repeals: N.J.A.C. 17:2-1.10, 4.5, 5.7, 6.19 and 6.23

Repeal and New Rule: N.J.A.C. 17.2-1.4 Election of Member Trustee. Adopted March 6, 2000. Cite as 31 N.J.R. 3926(a)[PERS]

New Rule: N.J.A.C. 17:3-3.13
Acceptable Designations of Beneficiaries. Cite as 32 N.J. Reg. 1046(a) [TPAF]

Repeal: N.J.A.C. 17.3-6.19 Maximum Allowance Prescribed. Cite as 32 N.J. Reg. 1047(a) [TPAF]

Reproposed Repeal and New Rule: N.J.A.C. 17:4-4.1
Membership, Creditable Compensation. Adopted February 28, 2000. Cite as 32 N.J.R. 1246(a) [PFRS]

Amendments: N.J.A.C. 17:5-4.1 and 4.2
Eligibilty for Purchase and Optional Purchases of Eligible Service. Cite as 32 N.J. R. 1047(b) [SPRS]

Amendment: N.J.A.C. 17:5-5.5 Outstanding Loan. Cite as 32 N.J. Reg. 1047(c) [SPRS]

New Rule N.J.A.C. 17:9-6.10 Retiree Prescription Drug card Plan. Adopted February 23, 2000. Cite as 32 N.J. Reg. 1048(a) [SHBP]

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PUBLIC EMPLOYEES' RETIREMENT SYSTEM
INELIGIBLE PERSONS

Proposed Amendment; N.J.A.C. 17:2-2.3

Cite as 32 NJR 4239

The agency proposal follows:

Summary

The proposed amendment is necessary to clarify that those employed by the Federal Workforce Investment Act of 1998 are ineligible for enrollment in the Public Employees' Retirement System (PERS). The Federal Workforce Investment Act is the successor to the Job Training Partnership Act (JTPA).

N.J.S.A. 43:15A-7h specifically excludes employees of the JTPA from PERS enrollment. The Division of Pensions and Benefits recently requested advice from the Attorney General's Office asking whether Title I of P.L. 105-220 (112 Stat. 936 to 1059) effects any change on N.J.S.A. 43:15A-7h which provides that employees hired under the predecessor Federal law, the Job Training Partnership Act, are ineligible for membership in the PERS. The more recent federal law, approved August 7, 1998, repealed the JTPA as of July 1, 2000. The membership eligibility of local government employees hired pursuant to the Workforce Investment Act of 1998 has become an issue.

The Attorney General's Office response stated that section 199A(c) of the Workforce Investment Act of 1998 (112 Stat. 1059) provides that "all references in any other provision of law to a provision of the .JTPA.shall be deemed to refer to the corresponding provision of this title." Accordingly, employees hired under the Workforce Investment Act can be deemed to be JTPA employees and therefore ineligible for PERS membership pursuant to N.J.S.A. 43:15A-7h.

Full text of the proposal follows:

N.J.A.C. 17:2-2.3 Ineligible persons

(a) The following classes of persons are ineligible for membership in the system

1 through 8 (No change)

9. Any person hired under the Workforce Investment Act of 1998. Employees hired under the Workforce Investment Act shall be deemed to be Job Training Partnership Act (JTPA) employees and therefore ineligible for PERS membership pursuant to N.J.S.A. 43:15A-7h.


POLICE AND FIREMEN'S RETIREMENT SYSTEM

Proposed Readoption with Amendments: N.J.A.C. 17:4
Proposed Recodifications with Amendments: N.J.A.C. 17:4-1.9 as 1.12, 1.10 as 3.7, and 6.3 as 6.2
Proposed Repeals: N.J.A.C. 17:4-1.11, 3.3, 4.8 and 5.7
Proposed Repeal and New Rule: N.J.A.C. 17:4-6.13

Cite as 32 N.J. Reg. 4060(a)

The agency proposal follows:

Summary

The Board of Trustees of the Police and Firemen's Retirement System (Board) is responsible for reviewing the administrative rules within N.J.A.C. 17:4. When they become aware of a change in the laws or a court decision that possibly could affect the Police and Firemen's Retirement System (PFRS), the administrative rules are reviewed and, if changes therein are mandated, steps are taken to propose changes to those rules to conform to the new statute or court decision. Additionally, the rules are periodically reviewed by the Division of Pensions and Benefits, and the Board's staff to ascertain if the current rules are necessary and/or cost efficient. In 1999, the Public Employees' Retirement System (PERS) Board of Trustees completed an extensive review of their rules found at N.J.A.C. 17:2. Many of the proposed amendments which follow are being made to better correspond with the rules of the PERS.

Accordingly, the Board of Trustees of the Police and Firemen's Retirement System proposes to readopt the current rules within N.J.A.C. 17:4, which expire on April 1, 2001, with the following amendments, repeals and new rule, and to extend the expiration date for such rules under Executive Order No. 66(1978). The current rules deal with the administration, enrollment, insurance and death benefits, membership, purchases and eligible service, retirement and transfer aspects associated with the Police and Firemen's Retirement System. Members, participating employers, retirees and survivors of retirees rely on the efficient operation of the retirement system to administer retirement benefits and to provide the information they need regarding individual accounts. They rely upon the presence and predictability of the rules that guide the administration of benefits and the stability of the Retirement System. The protections and guarantees that these rules afford its members mandate their continued existence. The rules proposed for readoption and the proposed amendments, repeals and new rule reflect the requirements for eligibility and amounts of benefits available that are mandated within the statutes governing the Police and Firemen's Retirement System. The chapter originally became effective prior to September 1, 1969. Pursuant to Executive Order No. 66(1978), the chapter was readopted as new rules in 1990. Chapter 4 expired on June 8, 1995 pursuant to Executive Order No. 66(1978), and a new Chapter 4, Police and Firemen's Retirement System was adopted, effective April 1, 1996. Following is a discussion of the proposed amendments, repeals and new rule.

Subchapter 1. Administration

The Board proposes that N.J.A.C. 17:4-1.1(a) be amended to correspond to the language in the PERS rules found at N.J.A.C. 17:2-1.1. The amended rule provides that the Board shall meet on the third Monday of each month, adding "or at such other time as may be deemed necessary by the Board." Subsection (b) is added, providing that the chairperson may call for special meetings as necessary.

Proposed amendments at N.J.A.C. 17:4-1.3 would change "chairman" to "chairperson." This change is to be made throughout the chapter. "Each fiscal year" would be changed to "July" to better clarify when the election takes place.

N.J.S.A. 43:16A-13(6) requires six members in attendance and not five as previously stated because this statute also increased the size of the Board to 11 members instead of nine (N.J.S.A. 43:16A-13(2)). N.J.S.A. 43:16A- 13(8) requires that the Director of the Division of Pensions and Benefits appoint a Secretary to the Board. Therefore, N.J.A.C. 17:4-1.3(c) and (d) would be replaced with a new subsection (c) stating this requirement. N.J.A.C. 17:4-1.3(e) would become (d).

Proposed amendments to N.J.A.C. 17:4-1.5 would change certifying "agent" to certifying "officer" throughout this chapter because the participating employers are not agents of the Division. N.J.A.C. 17:4-1.5(d) would be added, stating upon the request of the Board, "the certifying officer shall be required to sign a statement, verifying that any information reported is accurate to the best of the officer's knowledge, and conforms with the statutes and rules governing the retirement system." This language will impress upon the certifying officers the importance of accuracy in the information they provide the Division.

Proposed amendments to N.J.A.C. 17:4-1.6 would add subsection (c) dealing with beneficiary information. The confidentiality of beneficiary information appears at N.J.A.C. 17:1-4.1 under General Administration, but the Board believes it also belongs in the PFRS rules. Advice from the Attorney General's Office has been interpreted to permit the Division to release beneficiary information once a member's death has been reported to the System; therefore, proposed new N.J.A.C. 17:4-1.6(c) provides as follows: "The designations of beneficiaries of all active and retired members are considered to be a part of the member's confidential files and shall only be released after the member's death." Existing subsection (c) would be recodified as (d). Proposed amendments at subsection (d) as recodified would establish the conditions under which the Division will release medical records.

Proposed amendments to N.J.A.C. 17:4-1.7 would change the words "his or her" to "claimant." The required notice is proposed to be expanded through the efforts of the Board Secretary and the Attorney General's Office to include more information regarding the appeals process. These new paragraphs are to replace the existing notice.

Proposed amendments to N.J.A.C. 17:4-1.8 would change the beginning of the first sentence from "[m]onthly retirement allowances will be suspended" to "[t]he disbursement of pension checks shall be suspended" to correspond with the language in the PERS rules. Paragraph (a)2 is amended to reflect certificates of eligibility being mailed periodically rather than annually. In paragraph (a)3, the word "event" would also be changed to "instance" for the above reason.

Proposed amendments at N.J.A.C. 17:4-1.9 would recodify it as N.J.A.C. 17:4-1.12 to correspond with the PERS rules. The proposed amendments would eliminate the word "State" from the section heading. In subsection (a), "State employees paid by centralized payroll" is replaced with "employees whose employers who report salary and contributions on a biweekly basis" because the computer reporting systems of employers are expected to be advanced enough at this time so as to permit the Division to request on-line reporting of information instead of paper-based reporting.

The Board proposes that N.J.A.C. 17:4-1.10 be recodified as N.J.A.C. 17:4-3.7 because it deals with survivor benefits. References to widowers would be eliminated and the last sentence of subsection (b) would be deleted because a widower no longer must prove dependency to receive a surviving spouse benefit.

The Board proposes to repeal N.J.A.C. 17:4-1.11 concerning travel as it is also found at N.J.A.C. 17:4-6.17(c)1. Proposed amendments to N.J.A.C. 17:4-1.12 would recodify it as N.J.A.C. 17:4-1.11 to correspond with the PERS rules. "May be required" would be replaced with "shall," because a member's age is required information. The next sentence would be deleted as the Division no longer requires birth date evidence within the first six years of membership. A new sentence detailing acceptable proofs of age would appear next to establish examples of acceptable proofs.

Subchapter 2. Enrollment

Proposed amendments at N.J.A.C. 17:4-2.1 would add provisions to clarify what information must be provided to the Division and the Board before a position may be classified as that of a firefighter. Employees from civil service locations must satisfy the requirements of the positions as set forth by the Department of Personnel, but non-civil service locations do not have any uniform requirements for these positions. A determination is made by the Board regarding eligibility for the PFRS on a case-by-case basis and the Board proposes to set forth the following information requirements in order to allow for employers and the Board to determine whether the position satisfies the definition of firefighter. The Board also proposes to change the words "policeman" and "fireman" to "police officer" and "firefighter" throughout this rule and to replace any gender specific pronouns. The "b" in Board and the "s" in "System" would also be capitalized throughout the proposed amendment. Finally, the proposed amendment at N.J.A.C. 17:4-2.1(b)9 would add quotation marks before and after "direct supervision" and would also add "as defined by (b)5 above" to clarify that specific usage of the term.

Proposed amendments at N.J.A.C. 17:4-2.2 would eliminate the references to N.J.S.A. 43:10 (county pension funds--closed for new enrollments), Chapter 92, P.L. 1973 and Chapter 156, P.L. 1973 because the positions covered by these laws have been enrolled in the PFRS for more than 25 years and no new enrollments are possible under these provisions. The proposed amendment would also change policeman and fireman to police officer and firefighter. Proposed amendment at N.J.A.C 17:4-2.3 would add the requirement that the examining physician's signature be less than a year old. The System requires proof of present physical condition, not the condition of an applicant more than a year ago. Proposed amendment would also delete the reference to the civil service commission, which no longer submits medical evidence to the Division.

Proposed amendments at N.J.A.C. 17:4-2.6, Enrollment date, would make this rule better correspond to the similar rule found in the PERS rules at N.J.A.C. 17:2-2.4. A new paragraph (a)1 would be established using the existing language regarding the enrollment date of monthly employees, while a new paragraph (a)2 would be added to define what the compulsory enrollment date will be for biweekly employees. A proposed amendment to subsection (b) would eliminate the gender specific pronouns. Existing subsection (c) would be deleted, and a new subsection (c) dealing with the same subject, enrollment dates for those not covered by Civil Service, would be added to better address monthly and biweekly enrollment dates for those not covered by Civil Service. Subsection (d) would be amended to include the requirement that temporary employees be enrolled in the PERS under the provisions of N.J.A.C. 17:2-2.8.

Subchapter 3. Insurance and Death Benefits

The Board proposes to amend N.J.A.C. 17:4-3.1(a) by changing "he" to "the member" and deleting the reference to contributions for insurance coverage. The life insurance coverage in the PFRS is noncontributory. If an employer reports pensionable income after a member's death, then the Board will bill the employer or the beneficiary. The deduction does not have to be made by the employer; therefore, the Board also proposes to delete "provided such deduction was made by the employer." The Board also proposes to amend N.J.A.C. 17:4- 3.1(b) by adding "and noncontributory insurance benefits" after "death benefits" to apply this subsection to both types of benefits as their base salary calculation is the same. The Board proposes to amend N.J.A.C. 17:4- 3.1(c) by changing the masculine pronouns to "the member." N.J.A.C. 17:4- 3.1(d) and (e) would be deleted because the members described therein are now paid in the same manner as outlined in N.J.A.C. 17:4-3.1(c). The proposed amendments to N.J.A.C. 17:4-3.1(f) would recodify it as subsection (d). The Board proposes to replace "indicate" with "indicates" to be grammatically correct and to delete the language regarding billing the employer for overpayment. This has not been the Division's practice for many years. The language regarding underpayment to the beneficiary would remain.

N.J.A.C. 17:4-3.1(g) would be recodified as subsection (e), and the Board proposes to add "If a deceased member does not have an eligible surviving spouse, child or parent" before current first word "refunds" to reflect that a deceased member's contributions will be used to fund an active death benefit under the provisions of P.L. 1999, c.428, and only if there is no eligible survivor will a refund be made. Refunds are only made to beneficiaries or a member's estate and are not refunded to the employer, therefore, the Board proposes to delete the last sentence of this section. The Board proposes to delete N.J.A.C. 17:4-3.1(h) because only members who are over 60 need to prove insurability now. The maximum enrollment age is 35 in PFRS; therefore, no members would have to prove insurability. The Board proposes to recodify N.J.A.C. 17:4-3.1(i) as (g). The Board proposes to delete N.J.A.C. 17:4-3.1(j) and (k) because there are no 10-month employees in the PFRS and these paragraphs only apply to the calculation of benefits for 10-month employees.

The Board proposes to repeal N.J.A.C. 17:4-3.3 because it deals with proof of insurability. At one time, member's had to prove insurability if they were late enrollees into the system. Now, the only time a member must prove insurability is when the member is age 60 at enrollment. Because the enrollment age is 35 in the PFRS, this situation cannot exist, and so the rule as written is no longer necessary.

The proposed amendment at N.J.A.C. 17:4-3.5 would change "his" to "the member's."

Subchapter 4. Membership

Proposed amendments at N.J.A.C. 17:4-4.3 would change "he" to "the member."

Proposed amendments at N.J.A.C. 17:4-4.5 would place a period after "full normal deduction" and add that if wages are sufficient, arrears and loan deductions should be taken. The Division will accept just pension contributions and will not reject the contribution if loan and arrears payments are not also made. The proposed amendment reflects this practice.

Proposed amendments at N.J.A.C. 17:4-4.6 would change the minimum adjustment amount to $2.00 per quarter to reflect the PERS rules at N.J.A.C. 17:2-4.6 and the general rules at N.J.A.C. 17:1-1.10.

Proposed amendments at N.J.A.C. 17:4-4.7(b) would delete "retirement" before "deductions" because no pension deductions of any type (loan, arrears, normal contributions) should be taken during a suspension without pay. The Division now refers to retirement credit as service credit, and so, the Board proposes this amendment as well. The Board also proposes, in subsection (c), to capitalize the "B" in Board and to move the word "entire" to modify suspension and not elimination.

The Board proposes to repeal N.J.A.C. 17:4-4.8, Military leave, because it has not been in effect since August 1, 1974, when the Vietnam War ended. The Board proposes to clarify N.J.A.C. 17:4-4.9 to match the language in the PERS rules at 17:2-4.9.

The Board proposes to amend N.J.A.C. 17:4-4.10 to match the language in the PERS rules at 17:2-4.11, replacing "he" with "the member."

The Board proposes to amend N.J.A.C. 17:4-4.11 by adding the words "the day" before "they return to service" to better clarify this section.

Subchapter 5. Purchases and Eligible Service

Proposed amendments at N.J.A.C. 17:4-5.5 would add the statutory cites for the referenced Chapter Laws. The Board proposes to delete paragraph (a)1 because there now exists a uniform contribution rate. Paragraph (a)2 would be recodified as (a)1, and would change the word "reinstate" to "purchase" to reflect current usage. The Board proposes to delete the references to rate of contribution and would add a cross-reference to the purchase rules to determine costs. The Board proposes to delete paragraphs (a)3 and 4 because delayed enrollees no longer need to prove insurability and the proration of purchases is covered in statute (N.J.S.A. 43:16A-11.4).

The Board proposes to amend N.J.A.C. 17:5-5.6 by deleting the gender specific pronouns. The Board also proposes to eliminate the reference to the current rate of contribution because the PFRS has had a uniform contribution rate since 1989.

The Board proposes to repeal N.J.A.C. 17:5-5.7 because it is no longer necessary. Purchases, whether in lump-sum or through payroll deduction, are credited at the time the purchase is agreed to.

Subchapter 6. Retirement

The Board proposes to amend N.J.A.C. 17:4-6.1 by changing the wording to match that in the PERS rules found at N.J.A.C. 17:2-6.1. Specifically, the Board proposes to change the word "prescribed" to "required" and capitalize the "s" in System. The Board also proposes to amend the rule by changing the requirement that the form be filed with the system, to the Division of Pensions and Benefits, to reflect actual practice. The Board proposes to add "on or" in front of "before" to clarify that the Division will accept a form received on the date of retirement. A sentence is added providing that the retirement application becomes effective on the first of the month following receipt of the application, unless a future date is requested. The Board proposes to remove all gender specific pronouns and change them to "the member." The Board also proposes to delete the words "acceptance for" in front of "processing." The Board proposes at paragraph (c) to add the requirements that a member submit proof of age before retirement. The Board does not want employers to make medical opinions; therefore, it proposes at subsection (d) to amend the requirement that the employer state that a member is incapable for further duty and replace it with a second source from either a doctor or hospital. Finally, the Board proposes to add subsection (e) which would deal with the situation when a member returns to employment, cancels the retirement allowance and then retires again. This amendment is necessary due to a recent Administrative Law Decision (Jan Astin for Harry Astin v. PERS, OAL Docket No. TYP 2603-99) which found that there was a lack of any specificity as to how a re-retiree was to go about reinstatement of the initial retirement allowance in the Administrative Code.

The Board proposes to recodify N.J.A.C. 17:4-6.2 as 6.3 to match the PERS rules, and also because it makes more sense to define the effective date and then changes to that date, instead of the reverse. The proposed amendment to existing N.J.A.C 17:4-6.2 would be to delete the gender specific pronouns and to change from 30 days from the effective date to "one month" from the effective date to make it clear that benefits start on the first of a month and not on the 30th or 31st. The Board proposes to delete subsection (c) because P.L. 1999, c.428 now provides for active survivor benefits and not just retired survivor benefits. The Board proposes at new subsection (c) to add that a member retire on the first of a month that the member turns 55 if the member's birthday is the first. The Board proposes to recodify N.J.A.C. 17:4-6.3 as 6.2 as stated above. The Board also proposes to amend the rule to state "one month" instead of "30 days." The Board proposes to delete subsection (b) because insurance coverage is covered in subchapter 3.

Proposed amendments at N.J.A.C. 17:4-6.6 would eliminate the gender specific pronouns.

Proposed amendments at N.J.A.C. 17:4-6.7 would eliminate the gender specific pronouns and delete paragraph (a)1 concerning "normal" retirement age because age restrictions for disability benefits were found to be discriminatory. The requirement that an applicant be considered a member at the time of filing would be added as new paragraph (a)1.

The Board proposes to amend N.J.A.C. 17:4-6.9 because P.L. 1999, c.428 eliminated the use of average final compensation in the calculation of PFRS benefits. Retirements are now all calculated on the last 12 months of service. Therefore, the Board proposes to add that final compensation includes pay in the 12 months before retirement and also proposes to delete references to 10 month employees because there are no 10 month employees in the PFRS.

Proposed amendments to N.J.A.C. 17:4-6.10 would amend the language to better match the PERS rules at N.J.A.C. 17:2-6.10. The proposed amendment includes adding the words "employer initiated" and deleting "employee notice" from the section heading to better reflect the subject matter of the rule. The proposed amendment would make this rule gender neutral and remove the requirement that the employer make a medical opinion as to the totality and permanency of an employee's disability. The proposed amendment would also remove the language at N.J.A.C. 17:4-6.10(a)6 regarding the selection of the type of allowance desired. Members of the PFRS do not select an option at retirement. This was changed in December, 1967 when the widows' pension was enacted (N.J.S.A. 43:16A-12.1).

Proposed amendments at N.J.A.C. 17:4-6.11 would delete the gender specific pronouns and add that a member may retire on the first of the month that the member turns 55 if the member's birthday is on the first, or when the member has a minimum of 20 years of service credit, if the member was enrolled in PFRS as of January 18, 2000.

Proposed amendments to N.J.A.C. 17:4-6.12 would delete any gender specific pronouns.

At N.J.A.C. 17:4-6.13, the Board proposes to repeal the existing rule and replace it with the rule language developed for the PERS at N.J.A.C. 17:2- 6.26. Changes include the deletion of references to specific membership directories from which physicians are to be designated by the Board to conduct medical examinations and would require those physicians to be independent except in the case of abbreviated life expectancies.

Proposed amendments to N.J.A.C. 17:4-6.14 would replace gender specific pronouns with "the member" and would replace "system" with "Division" to accurately reflect who will be sending notice. Proposed amendments at N.J.A.C. 17:4-6.14(b) would delete "if not voluntarily established before that date" because if a member has already retired, he or she would not be subject to mandatory retirement. N.J.A.C. 17:4-6.14(j) is proposed for deletion because P.L. 1999, c.428 eliminated the 30 day requirement for a member's survivor to receive a survivor's benefit.

Proposed amendments at N.J.A.C. 17:4-6.15 would change any gender specific pronouns, capitalize the "b" in Board and change "system" to "Division." The last sentence is proposed for deletion to conform to Division practice. The sentence provided that a copy of the notice of rejection of an application for accidental disability retirement, based on incapacity not the direct result of a traumatic event occurring during and as a result of performance of duties, would be returned and considered in future claims. Any medical information must be updated in order to file again.

Proposed amendments at N.J.A.C. 17:4-6.16 would eliminate "average" before "final compensation" because the provisions of P.L. 1999, c.428 eliminated the use of the average of the final three years of service and replaced it with the last 12 months or 26 pay periods of compensation. Proposed amendments would also delete references to "State" and "centralized payroll" and add "on a biweekly basis" because more employers are expected to report on a biweekly basis, and this would apply to them. The proposed deletions of N.J.A.C. 17:4-6.16(c) and (d) are necessary because there are no longer any 10-month employees in the PFRS.

Proposed amendments at N.J.A.C. 17:4-6.17 would change any gender specific pronouns and replace them with "the member."

Proposed new rule N.J.A.C. 17:4-6.18 would mimic that found at N.J.A.C. 17:2-6.22 and is necessary to address the situation where a member waived all or a portion of the member's retirement allowance.

Subchapter 7. Transfers

Proposed amendments at N.J.A.C. 17:4-7.1 would include a new subsection (a), stating that "[t]he receipt of a public pension or retirement benefit is expressly conditioned upon the rendering of honorable service by a public officer or employee. Therefore, the Board of Trustees shall disallow the transfer of all or a portion of prior service of any member of the System for misconduct occurring during the member's prior public service which renders that prior service, or part thereof, dishonorable." This is necessary to establish that only honorable service can be transferred. Paragraphs (b)1 and 2 (former (a)1 and 2) are amended to clarify that service credits and contributions transfer, and the form names have been changed. The Division now does wire transfers and not checks. Back deductions are scheduled in the new account. Paragraph (b)3 (former (a)3) allows the statement to be prepared and forwarded, but does not require it to accompany a check because we don't issue one. Paragraph (b)4 (former (a)4) would delete mention of the same rate of contribution because the Board now has standardized and not age based rates. Paragraph (b)5 (former (a)5) is amended to detail when a member is not eligible to transfer service credit. Paragraph (a)6 providing for transfer application copy forwarding would be deleted because it is no longer Division practice. A new paragraph (b)6 is proposed to reflect a change in Division practice, which is to use a data sheet indicating an interfund transfer. Subsection (c) (former (b)) is proposed to be amended to clarify the procedure for handling and valuation of accrued reserves. Subsection (c) would become subsection (d) and old subsection (d) would also be deleted because of the standardized rates now in effect. Proposed new subsection (e) would clarify that someone who transfers into the PFRS is subject to the age and physical requirements of enrollment.

Proposed new rule N.J.A.C. 17:4-7.2 would clarify when a member is eligible to do an intrafund transfer, and impose penalties on employers for late enrollment.

N.J.A.C. 17:4-7.3 is proposed for repeal as its substance is now addressed in N.J.A.C. 17:4-7.2.

Full text of the proposed amendments follows:

SUBCHAPTER 1. ADMINISTRATION

17:4-1.1 Board Meetings

(a) The Board of Trustees shall meet on the third Monday of each month [, unless a change is declared in order by the chairman at an appropriate time] or at such other time as may be deemed necessary by the Board.

(b) The chairperson may call for special meetings when necessary.

17:4-1.3 Officers and committees

(a) The [chairman] chairperson and vice [chairman] chairperson of the Board will be elected by a majority vote of the members in attendance at the first meeting of [each fiscal year] July, not less than [five] six members to be present at such meeting.

(b) The [chairman] chairperson of the Board shall preside at all of its meetings [that he or she attends and in his or her], or in the absence of the [vice chairman or, if] chairperson, the vice chairperson shall assume the chairperson's responsibilities if both are absent, another member selected by the majority of the members in attendance will preside for that single meeting.

[(c) The secretary of the Board will be the Chief of the Bureau of Police and Fire Funds, Division of Pensions.]

[(d) Upon recommendation of the Chief, the Board will also select from the staff of such Bureau, an assistant secretary who will serve in the absence of the secretary.]

(c) The Director of the Division of Pensions and Benefits shall appoint a qualified employee of the Division to be Secretary of the Board.

[(e) (d) The [chairman] chairperson will appoint such committees from the Board members as [he deems] deemed necessary to facilitate the Board's operations. Such committee appointments will be for a one year period, commencing each July 1.

17:4-1.5 Certifying [agent ] officer (employer)

(a) The chief fiscal officer or other officer duly designated by a resolution of each county, [or] municipality or public agency, and the personnel officer of the Division, Bureau or Institution of the State locations, shall serve as certifying [agent] officer for that unit.

(b) The certifying [agent] officer shall be responsible for the duties described by N.J.S.A. 43:16A-32.

(c) The certifying [agent] officer shall be responsible for all other duties relating to matters concerning the [system] System.

(d) Upon the request of the Board, the certifying officer shall be required to sign a statement, verifying that any information reported is accurate to the best of the officer's knowledge, and conforms with the statutes and rules governing the retirement system.

17:4-1.6 Records

(a)-(b) (No change.)

(c) The designations of beneficiaries of all active and retired members are considered to be a part of the member's confidential files and shall only be released after the member's death.

[(c)](d) All medical testimony obtained in connection with an application for disability retirement shall be restricted for the confidential use of the Board of Trustees. The Division shall release a copy of the examining physician's medical report to the member, the member's attorney or any person authorized by the member in writing to receive a copy of such report. In no event shall the report be released to any individual not authorized in writing to receive the report.

17:4-1.7 Appeal from Board decisions

The following statement shall be incorporated in every written notice setting forth the Boards determination in a matter where such determination is contrary to the claim made by the claimant or [his or her] the claimant's legal representative:

["If you disagree with the determination of the Board of Trustees in this matter, you may appeal by sending a written statement to the Board within 45 days from the date of this letter informing the Board of your disagreements and all of the reasons therefore. If no such written statement is received within the 45-day period, this determination shall be considered final."]

"(a) If you disagree with the determination of the Board, you may appeal by submitting a written statement to the Board within 45 days after the date of written notice of the determination. The statement shall set forth in detail the reasons for your disagreement with the Board's determination and shall include any relevant documentation supporting your claim. If no such written statement is received within the 45-day period, the determination by the Board shall be final.

(b) The Board shall determine whether to grant an administrative hearing based upon the standards for a contested case hearing set forth the Administrative Procedure Act, N.J.S.A. 52:14B-1 et seq., and the Uniform Administrative Procedure Rules, N.J.A.C. 1:1-1 et seq.

(c) Administrative hearings will be conducted by the Office of Administrative Law pursuant to the provisions of N.J.S.A. 52:14B-1 et seq. and N.J.A.C. 1:1-1.

(d) If the granted appeal involves a question of facts, the Board shall submit the matter to the Office of Administrative Law.

(e) If the granted appeal involves solely a question of law, the Board may retain the matter and issue a final administrative determination which shall include detailed findings of fact and conclusions of law based upon the documents, submissions and legal arguments of the parties. The Board's final determination may be appealed to the Superior Court, Appellate Division."

17:4-1.8 Suspension of pension checks

(a) [Monthly retirement allowances will] The disbursement of pension checks shall be suspended under the following circumstances and [the suspension will] such suspensions shall continue during the period [of] in default:

1. (No change.)

2. If a widow, widower, parent or guardian of a minor child(ren) fails to file a certificate of eligibility which is normally mailed to such beneficiaries on [an annual] a periodic basis;

3. If a retirant or beneficiary becomes mentally or physically incompetent. The disbursement of pension checks in this [event],instance shall be suspended until a proper legal representative has been appointed.

(Agency Note: N.J.A.C. 17:4-1.9 is proposed for recodification with amendments as N.J.A.C. 17:4-1.12.)

(Agency Note: N.J.A.C. 17:4-1.10 is proposed for recodification with amendment as N.J.A.C. 17:4-3.7)

[17:4-1.11 Travel]

[Travel to and from work when it is to and from the regular place of employment is not considered duty rendered in the course of employment for the purpose of determining eligibility for accidental disability or accidental death benefits.]

17:4[1.12]1.11 Proof of age

(a) All members [may be required to] shall establish proof of their age with the System. [A person enrolling in the System may be requested to submit proof of his or her age at the time of such enrollment and will be required to submit such proof of age before a period of six years has elapsed from the date of enrollment.] Acceptable proofs of age include birth or baptismal certificates, passports, naturalization papers, Biblical records, affidavits of older members of the immediate family or primary school records.

(b) In the event a member dies before satisfactory evidence of [his or her] the [member's] date of birth has been filed with the System, appropriate evidence may be required before any death claim is processed for settlement.

(c) (No change.)

17:4-[1.9]1.12 [State employees] Employees; biweekly salaries

(a) Retirement and death benefits as well as service credit will be determined on the basis of biweekly pay periods for [State employees paid by centralized payroll] employees whose employers report salary and contributions on a biweekly basis. This biweekly schedule should conform to the biweekly reporting schedule issued by the State's Centralized Payroll Office.

(b) In the event a member is reported on a combination of monthly and biweekly pay periods, [his] the member's last year's salary or final compensation as well as [his] the member's service credit will be computed on a proportional basis.

SUBCHAPTER 2. ENROLLMENT

17:4-2.1 Eligible positions

(a) All public employees actively employed in positions meeting the definition ["policeman"] "police officer" or ["fireman"]"firefighter" shall be members of the Police and Firemen's Retirement System of New Jersey.

(b) The following words and terms, as used in this section and in N.J.S.A. 43:16A-1 et seq., shall have the following meanings:

1.-2. (No change.)

3. "Board of Trustees" or ["board"]"Board" means the Board of Trustees of the Police and Firemen's Retirement System established pursuant to N.J.S.A. 43:16A-13.

4.-5. (No change.)

6. "Employer" means the State of New Jersey or the county, municipality or political subdivision thereof which pays the particular [policeman] police officer or [fireman] firefighter.

7. (No change.)

8. ["Fireman"]"Firefighter" shall have the meaning ascribed to that term by P.L. 1989, c.204 (N.J.S.A. 43:16A-1) as the same may be amended and supplemented from time to time.

9. "General supervision" means "direct supervision" of employees who perform "direct supervision" as defined by (b)5 above.

10. (No change.)

11. ["Policeman"]"Police officer" shall have the meaning ascribed to that term by P.L. 1989, c.204 (N.J.S.A. 43:16A-1) as the same may be amended and supplemented from time to time.

12.-13. (No change.)

14. "Retirement [system"] System" or ["system "] "System" means the Police and Firemen's Retirement System of New Jersey as defined in N.J.S.A. 43:16A-2.

(c) Determinations by the Director and the Board of whether an employee of a law enforcement unit or firefighting unit is an administrative employee with the meaning of the definitions of ["policeman"] "police officer" or ["fireman"]"firefighter" under the law and these rules shall be on a case-by-case basis. An employee may perform some administrative functions without being an administrative employee. In determining whether an employee is an administrative employee, the Board shall consider the following factors:

1.-2. (No change.)

3. Whether the career path to become an administrative employee begins with or includes positions as non-administrative [policemen or firemen] police officers or firefighters.

(d) Determinations by the Director and the Board of whether an employee of a law enforcement unit or firefighting unit is a supervisory employee within the meaning of the definitions of ["policeman"] "police officer" or ["fireman"] "firefighter" under the law and these rules shall be on a case-by-case basis. An employee may perform some supervisory functions without being a supervisor. In determining whether an employee is a supervisory employee, the Board shall consider the following factors:

1. Whether and to what extent the employee is responsible for conducting performance evaluations, disciplining, adjusting the grievances, rewarding, and assigning and directing the work of non-supervisory [policemen or firemen] police officers or firefighters or effectively recommending such actions;

2. Whether the individual [policemen or firemen] police officers or firefighters subject to some supervision by the employee have a primary supervisor other than the employee;

3. (No change.)

4. Whether the career path to become a supervisor begins with or includes positions as non-supervisory [policemen or firemen] police officers or firefighters.

(e) Employers shall not use the same job title for both individuals whose job functions meet the definition of ["policeman"] "police officer" or ["fireman"] "firefighter" and individuals whose job functions do not meet those definitions. In the event that the Board determines that an employee's primary duties qualify that employee as a ["policeman"] "police officer" or ["fireman,"] "firefighter," but that employee holds a position held by other individuals whose primary duties do not qualify those employees as a [ policeman] police officer or [fireman] firefighter, then the employer shall promptly take the necessary actions to create a new job title to ensure that the same job title is not used both for individuals whose job functions meet the definition of [ "policeman"] "police officer" or ["fireman"] "firefighter" and individuals whose job functions do not meet those definitions.

(f) In the event an employee, not currently included as a member of the system, believes that [he or she]the employee performs duties that meet the definition of ["policeman"]"police officer" or ["fireman,"] "firefighter," the employee may file an application for membership in the [system] System with the Director, stating in detail the basis for the employee's belief that the employee is a [policeman] police officer or [fireman] firefighter. A copy of the application shall be served on counsel for the employee's employer.

(g) The Director shall review the application and determine whether the employee meets the definition of ["policeman"]"police officer" or ["fireman."] firefighter." The Director shall then make a recommendation to the Board as to whether the employee should be included in the [system] System.

(h) If, after considering the recommendation of the Director, the Board determines that the employee meets the definition of ["policeman"] police officer" or ["fireman "] "firefighter" the Board shall, prior to making a final determination, publish in the New Jersey Register a notice that it proposes to include the employee's position in the System. Interested parties shall be given at least 30 days to comment on the proposal.

(i) If, after considering the recommendation of the Director, the Board determines that the employee does not meet the definition of [ "policeman"]"police officer" or ["fireman,"] "firefighter," the employee shall be offered an opportunity for a hearing in accordance with the Uniform Administrative Procedure Rules, N.J.A.C. 1:1.

(j) If the employee requests a hearing, the Board shall publish in the New Jersey Register a notice that a hearing will be conducted on the application of the employee that the employee's position be deemed to meet the definition of ["policeman"] "police officer" or ["fireman"]"firefighter" as the case may be, and that interested parties may seek to intervene in accordance with N.J.A.C. 1:1-16.

(k) Guidelines for fire districts that have not adopted the provisions of Title 11A of the New Jersey Statutes (non-civil service) are as follows:

1. A Board of Fire Commissioners created under the provisions of N.J.S.A. 40A:14-81 shall have the powers, duties and functions within said district to the same extent as in the case of municipalities, relating to the prevention and extinguishment of fires and the regulation of fire hazards.

2. When establishing an eligible position for the PFRS, the commissioners must comply with the employment guidelines stated in N.J.S.A. 40A:14-81.1, excerpted below:

i. The position must be established by resolution;

ii. The appointment of persons to the position, determination of the term and compensation and prescribed functions and duties of the position must also be established by resolution; and

iii. The resolution must be published at least once in a substantial newspaper in the district.

(l) To determine the eligibility of a non-civil service position for the PFRS, the Board requires the following items:

1. A description of the physical and mental requirements for the position including evidence of the completion of a test determined by the Board to be comparable to the Fire Fighters' Physical Performance Test required by civil service employers;

2. A description of the training requirements including but not limited to, the Fire Fighter's I certification issued by the Division of Fire Safety, Department of Community Affairs.

3. A table of organization for the employing entity;

4. A list of employees currently in the position, with present pension status and job title; and

5. Proof of compliance with the provisions of N.J.S.A. 40A:14- 81.1.

17:4-2.2 Compulsory enrollment

[(a)] Membership in the Police and Firemen's Retirement System of New Jersey is mandatory, a condition of employment for every [ "policeman"]"police officer" or ["fireman"] "firefighter" [appointed after July 1, 1944, in a county or municipality which had prior to July 1, 1944, adopted the provisions of N.J.S.A. 43:10, or in such county or municipality first providing coverage for such employees by referendum under N.J.S.A. 43:16A, or pursuant to the provisions of Chapter 92, P.L. 1973] under the provisions of N.J.S.A. 43:16A-1 et seq.

[(b) It shall also be mandatory for eligible employees of the State or counties as provided by Chapter 156, P.L. 1973.]

17:4-2.3 Medical requirements

(a) Applicants must furnish evidence of good health sufficient to satisfy the Board of Trustees:

1. In this connection, the Board may accept the medical determination [of the Civil Service Commission or] of the physician examining for the appointing [county or municipal] authority. If [either of these] this medical [sources] source indicates further examination is in order, the [ system] System will select and arrange an appointment with an independent physician.

2. Each question of [the] physical eligibility is decided individually and on the basis of recommendations and findings of the examiner.

3. The completed Report of Examining Physician shall be deemed unacceptable if there is more than one year's difference from the date of signature of the examining physician and the date of receipt time-stamped by the Division of Pensions and Benefits.

17:4-2.6 Enrollment date

(a) An employee who is appointed to a permanent position from a [Civil Service] civil service list shall be considered as having begun [his or her] eligibility for enrollment on the date of [his or her] regular appointment. [The compulsory enrollment date shall be fixed as the first of the month for an appointee whose regular appointment date falls between the first through the 16th of the month and the compulsory enrollment date shall be fixed as the first of the following month for an appointee whose regular appointment date falls between the 17th and the end of the month.]

1. For employers who report on a monthly basis, the compulsory enrollment date shall be fixed as the first of the month of regular appointment for an employee whose regular appointment date falls between the first through the 16th of the month and the compulsory enrollment date shall be fixed as the first of the following month for an employee whose regular appointment date falls between the 17th and the end of the month.

2. For employers who report on a biweekly basis, the compulsory enrollment date shall be fixed as the first day of the pay period of regular appointment for an employee whose appointment date falls on the first through seventh day of the biweekly pay period. The compulsory enrollment date shall be fixed as the first day of the following biweekly pay period for an employee whose appointment date falls on any subsequent date within that pay period.

(b) An employee in the unclassified service shall be considered as beginning service on the date [his or her] employment began. The compulsory enrollment date shall be fixed as the first of the month of hire for an appointee whose beginning employment date falls between the first through the 16th of the month and the compulsory enrollment date shall be fixed as the first of the following month for an appointee whose beginning employment date falls between the 17th and the end of the month.

[(c) The regular appointment of an employee appointed by a local employer not covered by Civil Service shall constitute the date the employee originally accepted employment in a regular budgeted position. The date of compulsory enrollment shall be fixed as the first of the month for an appointee whose beginning date of employment falls between the first through the 16th of the month and the compulsory enrollment date shall be fixed as the first of the following month for an appointee whose beginning employment date falls between the 17th and the end of the month.]

(c) For local employers not covered by civil service, a regular appointment shall constitute the date the employee originally accepted employment in a regular budgeted position.

1. For local employers not covered by civil service who report on a monthly basis, the compulsory enrollment date shall be fixed as the first of the month of hire for an employee whose beginning employment date falls between the first through 16th of the month and the compulsory enrollment date shall be fixed as the first of the following month for an employee whose beginning employment date falls between the 17th and the end of the month.

2. For local employers not covered by civil service who report on a biweekly basis, the compulsory enrollment date shall be fixed as the first day of the pay period of hire for an employee whose date of hire falls on the first through seventh day of the biweekly pay period. The compulsory enrollment date shall be fixed as the first day of the following biweekly pay period for an employee whose date of hire falls on any subsequent date within that pay period.

(d) An employee [who does not meet the requirements for enrollment cited in (a) (b) and (c) above] of a civil service employer who is not permanent in a classified position or an employee of a non-civil service employer who is not in a regular budgeted position may be considered a temporary employee by [his] the employer for [as long as a] the one-year period following the employee's date of hire, but if [his] the employment continues into [his] a second year, [he] the employee will be required to enroll immediately[; his compulsory enrollment date will be the first of the month following the end of the one year (12-month- period] in the Public Employees' Retirement System pursuant to the provisions of N.J.A.C. 17:2-2.8.

SUBCHAPTER 3. INSURANCE AND DEATH BENEFITS

17:4-3.1 Computation of insurance benefits

(a) Full salary credit will be given for the month or biweekly pay period in which a member dies, if [he] the member was paid salary to date of death and the salary paid was sufficient to permit a full normal month's or biweekly pension [and insurance contribution] deduction [, provided such deduction was made by the employer].

(b) Death benefits and noncontributory insurance benefits shall be based on the base salary upon which contributions to the Annuity Savings Fund were actually made during the 12 months or 26 biweekly pay periods immediately preceding the member's death. [The salary, in the month] Months or pay periods in which no salary was paid[,] shall ] be counted as zero] not be used in the calculation.

(c) If a member dies during the first year following [his] the date of enrollment , the insurance benefit shall be 3 1/2 times the member's base salary on which [he] the member contributed or would have contributed immediately prior to [his] death.

[(d) For a member dying after the first year following the date of his enrollment, the noncontributory insurance benefits shall be determined on the base salary on which contributions to the Annuity Savings Fund were made or would have been made during the 12 months or 26 biweekly pay periods preceding death.]

[(e) If a member has contributed pension contributions for less than a year but his enrollment has been in effect for more than a year, only those wages upon which pension contributions were based can be used as salary to determine the value of the noncontributory insurance benefit.]

[(f)](d) Where a post-audit of insurance claim payments indicates the pension contributions reported by an employer were incorrect and resulted in the [overpayment ]underpayment of an insurance claim to a member's designated beneficiary or estate, [the employer will be billed for the value of the overpayment of the insurance benefits. Where post-audits establish the insurance benefits were underpaid,] an additional check would be sent to the beneficiary for the value of the underpayment.

[(g)](e) [Refunds] If a deceased member does not have an eligible surviving spouse, child or parent, then refunds of a deceased member's pension contributions will be made to the member's designated beneficiary [or the employer after written confirmation is received from the employer setting forth the reason for the refund of pension contributions to either the beneficiary or to the employer].

[(h) Members who prove their insurability for the group life insurance benefits shall have their insurance benefit calculated on the basis of the salary they received or salary upon which pension contributions were based during their last year (12 months) of service prior to death, regardless of their effective date of insurance coverage.]

[(i)](f) (No change in text.)

[(j) In computing (i) above in the case of State employees reported on a 10-month basis, the total biweekly pays will include those pay periods in the third quarter of each year in which the member does not receive salary. The adjustment as specified in (i) above shall not be made.]

[(k) If a member was reported on a biweekly basis on any combination of 10 and 12-month contract years, the last year's salary prior to death or retirement shall be determined on a proportional basis. The biweekly pay periods for which no contributions were made shall be counted as zero.]

17:4-3.3 [Proof of insurability] (Reserved)

[When proof of insurability is required, the member's opportunity to prove such insurability shall expire one year (12 months) from the date the initial written notice is sent advising him that he must prove insurability by taking a medical examination.]

17:4-3.5 Beneficiary designation; pension contributions

Only a primary and a contingent designation of beneficiary may be made by the member for the payment of [his] the member's accumulated pension contributions.

17:4-[1.10]3.7 Survivor benefits; establishing dependency

(a) (No change.)

(b) A [widower or] parent will be deemed to be dependent on the member if they were accepted as dependents of the member for Federal income tax purposes. [If the member and spouse file separate or joint tax returns, the widower will be deemed dependent on the member, if the claimant's income was less than one-half of the total income of both spouses.]

SUBCHAPTER 4. MEMBERSHIP

17:4-4.3 Continuance of membership; transfer

Once an employee establishes membership in the retirement system, [he]the member is eligible to continue such membership should [he] the member be temporarily employed in a position covered by the system.

17:4-4.5 Deductions

(a) A full deduction shall be taken for the Police and Firemen's Retirement System in any payroll period in which the member is paid a sufficient amount to make a full normal deduction. [, plus any other] If wages are sufficient, deductions should also be made for any arrears or loan deductions then in effect.

(b) (No change.)

17:4-4.6 Minimum adjustment

In order to facilitate the reconciliation of a member's account, no rebates or additional contributions shall be made where an adjustment involves an amount of [$3.00] $2.00 or less during a calendar quarter.

17:4-4.7 Suspension

(a) (No change.)

(b) No [retirement] deductions will be made during such a break in service, nor will any [retirement] service credit accrue.

(c) If during the period of suspension or at the conclusion of the penalty period adjustment is made in favor of the member, the [board] Board may allow the payment of pension deductions to reflect the lesser penalty or the [entire] elimination of the entire suspension.

17:4-4.8 [Military leave](Reserved)

[(a) Military leave contributions remitted by an employer on behalf of an employee who does not return to the payroll for the minimum 90-day period required by N.J.S.A. 43:16A-11 shall be retained by the system. Such contributions shall be transferred from the Annuity Savings Fund to the Pension Accumulation Fund. Military leave contributions remitted by an employer shall be based on the employee's salary at the time he entered military service.]

[(b) Payroll as referred to in (a) above shall be interpreted to mean any public payroll in New Jersey, not necessarily the payroll of the employer where the member was employed when he entered military service.]

17:4-4.9 Eligibility for loan

Only [an] active contributing members of the System may exercise the privilege of obtaining a loan.[and the] The member's total outstanding loan balance [maximum loan] shall [be] not exceed 50 percent of the accumulated deductions posted to the member's account.

17:4-4.10 Termination; withdrawal

(a) Under the terms of the statutes, a member may withdraw from the System only if [he] the member terminates all employment.

(b) No application shall be approved if:

1. The member is on official leave of absence;

2. The member certifies that [his] employment has not ended or that [he] the member has taken another position subject to coverage;

3. The member has been dismissed or suspended from employment. In this event, such a member will be eligible to withdraw if [he] the member has formally resigned from [his] the position or there is no legal action contemplated or pending and the dismissal has been adjudged final; or

4. The member has a claim pending for Workers' Compensation benefits.

17:4-4.11 Active employment; membership requirement

All employees, otherwise eligible, who are not actively employed on the date of their enrollment, will not be covered by the group life insurance program until the day they return to service.

SUBCHAPTER 5. PURCHASES AND ELIGIBLE SERVICE

17:4-5.5 Reinstatement of membership credit

(a) A member, whose account has been terminated by the withdrawal of [his or her] contributions from the Annuity Savings Fund or whose account has been terminated because of a two-year lapse in contribution, may be reinstated to the [system] System under the provisions of Chapter 199, P.L. 1967 (N.J.S.A. 11A:4-9), Chapter 303, P.L. 1969 (N.J.S.A. 40:47-11.1 and 11.2), or Chapter 439, P.L. 1981 (N.J.S.A. 11A:4-9), provided that [he or she] the member meets the requirements of the System other than the age maximum:

[1. A member reinstated under Chapter 199, P.L. 1967, shall be enrolled at a rate appropriate to his or her age at original enrollment.]

[2.] 1. A member reinstated under Chapter 303, P.L. 1969 (N.J.S.A. 40:47-11.1 and 11.2), shall [reinstate] purchase the previous credit [he or she] the member had established in the Police and Firemen's Retirement System at enrollment. [The reinstatement will result in a rate assignment appropriate to his or her age at original enrollment.] The cost of [reinstating] purchasing the previous credit will be determined [by applying the factor certified by the actuary] using the formula for calculating shared-cost purchases found at N.J.A.C. 17:4-5.3(a).

[3. All members reinstated and reenrolled under these acts will be required to prove insurability to resume insurance coverages.]

[4. Should a member reinstating such credit retire or die before the completion of his or her payments, pension credits will be recognized in proportion to the amount paid to the total arrearage.]

17:4-5.6 Elected officials; continuation of membership

Any member accepting an elective position may continue [his or her] membership and contribute [at his or her current rate of contribution] on the salary being received as an elected official as long as [he or she] the member holds elective office and remains a member of the retirement system.

[17:4-5.7 Lump-sum purchases]

[If a purchase is paid in a lump-sum, the member shall receive full credit for the amount of service covered by the purchase upon receipt of the lump-sum payment. The service may be used for any purpose for which it is authorized under the law governing the Police and Firemen's Retirement System (N.J.S.A. 43:16A-1 et seq.) and the rules of the retirement system.]

SUBCHAPTER 6. RETIREMENT

17:4-6.1 Applications

(a) Applications for retirement must be made on forms [prescribed] required by the [system] System. Such forms must be completed in all respects and filed with the [system] Division of Pensions and Benefits (Division) on or before the requested date of retirement. A member's retirement application becomes effective on the first of the month following receipt of the application unless a future date is requested.

(b) In the event a member files an incomplete application, the [deficiency] deficiencies shall be brought to [his or her] the member's attention and [he or she] the member [will] shall be required to file a completed application with the [system] Division to enable [acceptance for] processing.

(c) Before an application for retirement may be [accepted for processing] processed, the Division must receive proof of the member's age, if none is already in the member's record, and[it must be supported by] a [certificate] completed Certification of Service and Final Salary form from the employer setting forth the employment termination date and the salaries reported for contributions in the member's final year[s] of employment.

(d) In addition to the [foregoing] requirements in (a) through (c) above, an application for disability retirement must be supported by at least two medical reports[a report of] one by the member's personal or attending physician and [a statement from the employer regarding the member's incapacity for further duty] the other in the form of either hospital records supporting the disability or a report from a second physician.

(e) If a member's previous retirement allowance has been cancelled due to the member's return to employment and reenrollment in the Retirement System pursuant to the provisions of N.J.S.A. 43:16A-15.3, a new retirement application must be filed with the Division in accordance with (a) through (d) above. The previous retirement allowance shall then be reinstated, and the new retirement allowance, based on the member's subsequent covered employment, shall commence. The previous and subsequent retirement allowances shall then be combined and paid in one monthly benefit check.

17:4[6.3]6.2 Effective date; death prior thereto

[(a)]A member's retirement allowance shall not become due and payable until 30 days after the date the [board] Board approved the application for retirement or [30 days] one month after the date of the retirement, whichever is later.

[(b) A member who files an application for retirement and whose insurance coverage has not lapsed prior to filing a retirement application is covered under the insurance program as an active member in the event of death prior to the date the retirement allowance becomes due and payable.]

17:4[6.2] 6.3 Effective dates; changes

(a) A member shall have the right to withdraw, cancel or change an application for retirement at any time before [his] the member's retirement allowance becomes due and payable by sending a written request signed by the member[; thereafter] Thereafter, the retirement shall stand as approved by the Board.

(b) Except in the event of deferred retirement, if a member requests a change in [his] the retirement application before [his] the retirement allowance becomes due and payable, said change will require approval of the Board and the revised retirement allowance shall not become due and payable until [30 days have] one month has elapsed following the effective date or 30 days after the date the Board met and approved the change in the member's retirement application, whichever is later.

[(c) If the applicant should die within 30 days following the date the board of trustees approved the revised application, the member shall be considered to be retired on the basis of the originally approved application for retirement, provided that the initial 30-day requirement was satisfied.]

[(d)](c) A deferred retirement shall become effective on the first of the month following the member's 55th birthday. If the member's 55th birthday falls on the first of a month, the retirement shall become effective on that date, provided the member files a timely retirement application pursuant to N.J.S.A. 43:16A-11.2 and requests that retirement date.

[(e)](d) In the case of deferred retirement, if an applicant desires to amend [his] the retirement application, the amended application must be filed with the [system] Division a minimum of one month prior to [his] the effective date of retirement.

[(f)](e) (No change in text.)

(Agency Note: N.J.A.C. 17:4-6.3 is proposed for readoption as N.J.A.C. 17:4-6.2.)

17:4-6.6 Retirement credit

(a) A member shall receive credit toward retirement for any month or biweekly pay period in which a full normal deduction is received by the [system] System.

(b) A member who appeals the suspension or termination of [his or her] the member's employment and is awarded back pay for all or a portion of [his or her] the member's employment for the period of such suspension or termination shall receive retirement credit for the period covered by the award, regardless of the amount of the back pay awarded, provided a full normal pension contribution is received from the member or deducted from the value of the award. The amount of the pension contribution will be determined by the provisions of the award. If the member receives full back pay, including normal salary increases, then the contribution will be computed on the base salaries that the employee would have earned for the reinstated, suspended or terminated period. When the settlement is less than the full back pay, the pension contribution will be based upon the salary that the member was receiving for pension purposes prior to the suspension or termination of employment. In the event that the amount of back payment is insufficient to deduct the value of the normal pension contributions due, such contribution shall be paid by the member.

(c) (No change.)

17:4-6.7 Disability determination

(a) A member for whom an application for accidental disability retirement allowance has been filed by the member, by [his] the member's employer or by one acting in behalf of the member, will be retired on an ordinary disability retirement allowance if the [board] Board finds that:

[1. The member was under the normal retirement age at the time of filing application for a disability retirement allowance; and]

1. The applicant was considered a member in service at the time of filing the application for a disability retirement allowance;

2. The member is physically or mentally incapacitated for the performance of duty; [and]

3. The member is not eligible for accidental disability since the incapacity is not a direct result of a traumatic event occurring during and as a result of the performance of [his] the member's regular or assigned duties; and

4. (No change.)

17:4-6.9 [Average final] Final compensation [; 10 and 12- month members]

(a) In order to determine the [average] final compensation [ (three-year average)] for benefits on a:

1. Member reported on a monthly basis, use the [creditable salaries]base salary upon which pension contributions were made to the [retirement system] Annuity Savings Fund for [his] the member's last [36] 12 months of service.

[2. If a member was reported on any combination of 10 and 12-month contract years in such three-year period, the final average compensation shall be determined on a proportional basis.]

2. Member reported on a biweekly basis, use the base salary upon which pension contributions were made to the Annuity Savings Fund for the member's last 26 pay periods of service multiplied by the factor supplied by the actuary to compensate for biweekly payroll schedules.

[3.] (b) The months or pay periods for which no contributions were made shall not be [counted as zero] used in the calculation.

17:4-6.10 Employer [disability application; employee notice] initiated disability retirement application

(a) If an application for an accidental disability retirement benefit or for an ordinary disability retirement benefit is filed by an employer for an [one of his or her] employee[s], the member will be promptly notified by letter that:

1. [His] The member's employer has properly initiated a disability application signed by the Certifying Officer or other designated officer of the employer, on the member's behalf; [and]

2. [His] The member's employer has [certified that the member is permanently and totally disabled for the continued performance of duty] submitted a written statement as to the grounds for the employer's request for the member's involuntary disability retirement and all available medical documentation; and, if appropriate;

3. [His]The member's employer has certified that the member should be retired as a direct result of a traumatic event occurring during and as a result of the performance of [his] the member's regular or assigned duties;

4. [He] The member has a period of 30 days to contest [his] the involuntary retirement before the [board] Board acts on [his] the employer's application;

5. [He] The member will be required to appear for an examination before a physician designated to conduct such an examination for the retirement system; and

6. In the event the [board] Board finds that [he] the member is totally and permanently incapacitated for the performance of duty, [he] the member shall be granted [the maximum] a retirement allowance [payable under the statute, if he does not file a completed "Application for Disability Retirement Allowance" setting forth the type of allowance he desires, before his retirement goes into effect]; and

7. In the event the [board] Board finds that [he] the member is not totally and permanently incapacitated for the performance of duty, the employer's application shall be disallowed and the employer shall be informed that the member should be returned to duty.

17:4-6.11 Service or special retirement; eligibility

(a) A member becomes eligible for "service" retirement [on]:

1. On the first of the month following [his] the member's 55th birthday. If the member's 55th birthday falls on the first of a month, the retirement shall become effective on that date, provided the member files a timely retirement application pursuant to N.J.S.A. 43:16A-5, and requests that date; or

2. When the member has a minimum of 20 years of service credit if the member was enrolled in the PFRS as of January 18, 2000.

(b) A member becomes eligible for "special" retirement on the first of the month following the establishment of 25 years of creditable service, regardless of [his] the member's age.

17:4-6.12 Disability retirant; annual medical examinations

(a) (No change.)

(b) Failure on the part of a retirant to submit to the required medical examination shall result in the automatic suspension of [his] the retirant's retirement allowance until [he] the retirant submits to a medical examination.

17:4-6.13 Medical examinations; physicians

[Where the statute prescribes that a physician be designated by the system to perform a medical examination, such physician shall be selected from the current membership directory of the Medical Society of New Jersey and the New Jersey Association of Osteopathic Physicians and Surgeons; however, in the cases of those members whose personal physician has identified them as having a probable abbreviated life expectancy, such "imminent death" cases may be processed without the necessity of an examination by a physician designated by the system if corroborating medical evidence of the diagnosis can be obtained.] N.J.S.A. 43:16A-13(11) requires the Retirement System or the Board to designate physicians to perform medical examinations. A designated physician shall not be a member's personal physician, except in the case of a member whose personal physician has identified the member as having a probable abbreviated life expectancy if sufficient corroborating medical evidence of the diagnosis can be obtained.

17:4-6.14 Compulsory retirement

(a) (No change.)

(b) The retirement will be effective on the first day of the month following the 65th birthdate [, if not voluntarily established before that date].

(c)-(d) (No change.)

(e) The [system] Division shall send written notice to the member and [his] the member's employer between 120 and 180 days in advance of the date on which the member shall be required to retire.

(f) A member shall be retired automatically by the Board as of [his] the member's compulsory retirement date following [his] the member's 65th birthday.

(g) Should a member fail to file an "Application for Retirement Allowance" before [his or her] the member's compulsory retirement date, no retirement checks will be disbursed until [he or she] the member files the required application.

(h) When such a member files [his] an application with the [system] Division [he] the member shall be eligible to receive retirement benefits for the months that have elapsed since [his] the compulsory retirement date, provided satisfactory evidence is received to show that [he] the member terminated employment as of [his] the compulsory retirement date.

(i) No retirement benefits shall be paid for any period the member continued in service beyond [his] the compulsory retirement date, nor shall [he] the member receive any credit for retirement purposes for salary received or for service rendered beyond [his] the compulsory retirement date.

[(j) If a member's death occurs after the 30-day waiting period has been satisfied, but before he has filed the required application for retirement, the member shall be considered to be retired for death benefit purposes. His estate shall be entitled to the retroactive retirement allowance due, in addition to any insurance and survivorship benefits payable.]{

17:4-6.15 Employer and employee notices

If an applicant for accidental disability retirement is found to be physically or mentally incapacitated for the performance of duty but is rejected for accidental disability retirement because the [board] Board finds that the disability was not a direct result of a traumatic event occurring during and as a result of the performance of [his] the applicant's regular or assigned duties, and if the applicant does not meet the minimum statutory requirements for any other type of retirement allowance, the [system] Division will notify both the member and [his] the member's employer that the member was found to be physically or mentally incapacitated for the continued performance of duty, as was previously certified to the [system] Division by both the employee and his employer. [Both the employer and the employee will also be advised that a copy of such notice will be placed in the member's file and will be given full consideration in any future claim for disability retirement benefits].

17:4-6.16 [Average final] Final compensation; [biweekly] salary computation for [State] employees reported by centralized payroll on a biweekly basis

(a) In computing [average] final compensation upon which pension contributions were based in the case of a 12-month [State] employee reported on a biweekly basis, a total of [78] 26 biweekly pays will be used, including any retroactive salary payments [made within the prescribed] attributable to the covered period.

(b) In computing (a) above, the total salary will be adjusted by the factors

supplied by the actuary to convert biweekly salaries to compensate for [State] biweekly payroll schedules. Application of the factors to the salaries reported for pension purposes will develop "final compensation."

[(c) In computing (a) above in the case of State employees reported on a 10-month basis, the total biweekly pays will include those pay periods in the third quarter of each year in which the member does not receive a salary. The adjustment as specified in (b) above shall not be made.]

[(d) If a member was reported on a biweekly basis on any combination of 10 and 12-month contract years, the final average compensation prior to retirement shall be determined on a proportional basis. The biweekly pay periods for which no contributions were made shall be counted as zero.]

17:4-6.17 Work-related travel; accidental disability retirement and accidental death benefit coverage

(a) A member whose duties include regular or occasional travel in the course of employment will be considered in the "performance of [his] regular or assigned duties" for the purposes of accidental disability retirement or "in the actual performance of duty" for the purposes of accidental death benefits during employment-related travel as provided in this section. For the purposes of this section, "in performance of duty" means and includes both "performance of regular or assigned duties" and "in the actual performance of duty."

(b) (No change.)

(c) If a member's duties require or authorize the member to travel between [his or her] the member's place of residence and a location other than an office or workplace of the employer to which the member is regularly assigned or near to the regularly assigned office or workplace to perform the duties of the employment, the member is in performance of duty when [he or she] the member completely leaves the property of [his or her] the member's residence and begins to travel to the other location, or until [he or she] the member begins entry to the property of residence after travel from the other location, and all expenses of the travel are paid for by the employer. A member's duties are considered to authorize or require travel from the place of residence to a location other than a regularly assigned office or workplace of the employer in the following situations:

1. The member's regular or assigned duties involve field work which requires or authorizes the member to travel to locations other than a regularly assigned office or workplace of the employer to perform [his or her] the member's duties and do not require the member to report to a regularly assigned office or workplace before or after traveling to other locations. Travel by the member between a regularly assigned office or workplace of the employer and the place of residence of the member is not considered part of the member's duties.

2. (No change.)

3. The member is authorized or required by [his or her] the member's employer to respond to an emergency situation outside of the member's regularly scheduled work hours, regardless of whether the member goes to a regularly assigned office or workplace or another location, or whether the expenses of the travel are paid for by the employer or the member.

4. (No change.)

(d) (No change.)

17:4-6.18 Waiver

(a) If for any reason a retirement allowance or portion thereof has been waived by a retired member or beneficiary, the benefit waived shall remain in the retirement reserve fund.

(b) Retired members or beneficiaries may cancel the waiver effective as of the first day of any month subsequent to the receipt of the notice of cancellation; however, they may not make a claim for retroactive payment of any benefits waived prior thereto.

SUBCHAPTER 7. TRANSFERS

17:4-7.1 Interfund transfers/State-administered retirement systems

(a) The receipt of a public pension or retirement benefit is expressly conditioned upon the rendering of honorable service by a public officer or employee. Therefore, the Board of Trustees of the present System shall disallow the transfer of all or a portion of prior service of any member of the System for misconduct occurring during the member's prior public service which renders that prior service, or part thereof, dishonorable.

[(a)](b) The system will transfer membership to any State- administered [retirement system] Retirement System as follows:

1. A member, desiring to transfer [his or her credits] service credit and contributions from one [to any] State-administered retirement system to another, [must] shall file an [-application for "Transfer of Membership Credit"] "Application of Interfund Transfer" and an "Enrollment Application" in place of the customary [application for withdrawal of accumulated contributions.]"Application for Withdrawal." This application will void all possible claims against the present system when approved and the new membership is commenced in the new system.

2. [A check covering the] The member's accumulated contributions, [full interest included,] less any outstanding loan, shall be [drawn payable] transferred to the new system for the account of the respective member. Any outstanding loan, back deductions or arrears obligation will be scheduled for repayment.

3. A statement reflecting the member's status as of the date of transfer shall [accompany the check] be prepared by the Withdrawal Section of the Division and a copy forwarded to the old account.

4. The [member shall enjoy the same rate of contribution and] member's service credits established in the present system[, subject to the provisions of] shall be transferred to the new system.

5. [This procedure would not apply where a] The member is not eligible to transfer service credit if any of the following conditions apply:

i. The member has withdrawn the previous membership;

ii. The member has credit in the present system for service earned after the date of enrollment in the new system (concurrent service); or

iii[where a person has ceased to be a member of the present system before establishing] The account has expired; that is, it has been more than two years from the date of the last contribution and there was notsufficient service credit to be eligible for deferred retirement.

6. [A copy of the transfer application, together with a check covering the withdrawal value and a statement of the service credits being transferred, is to be forwarded to the new system.] A data sheet shall be created for the member's new account that will indicate an interfund transfer from the member's previous retirement system and the service credit transferred into the new membership account.

[(b)](c) [The new system will cause to be valued the reserves accrued for such employee as compared to the reserves required in the second system.] The reserves accrued in the present system will be valued and compared to the reserves required in the new system.

1.-2. (No change.)

[(c)](d) (No change in text.)

[(d) A member who makes a timely transfer in accordance with N.J.S.A. 43:2-1 et seq. will contribute to the new system at a rate based on his or her age at the time of enrollment in the present system and no refund of pension contributions will be made except for those contributions made by veterans covering service prior to January 1, 1955, where applicable. The contribution rate for a member granted a deferred retirement in the present system who makes a timely transfer at the time of enrollment in the new system will be determined in accordance with the rules concerning enrollment after deferred retirement in the new system. A member who does not make a timely transfer will contribute to the new system at a rate based on his or her age at the time of enrollment in the new system.]

(e) A member is subject to all age and medical requirements for enrollment into the Police and Firemen's Retirement System before an interfund transfer into the PFRS shall take effect.

17:4-7.2 [(Reserved)]Intrafund transfers; State-administered retirement systems

a) Members who leave one public employer and take a position with another public employer covered by the same retirement system are immediately eligible to transfer their membership to their new employers, as long as the following conditions are met:

1. The member has not withdrawn from the System;

2. The account has not expired; that is, it has not been more than two years between the date of the last contribution received from the old employer and the starting date of contributions with the new employer or there was enough service credit to be eligible for a deferred retirement; and

3. The account has not been canceled due to Board of Trustees action. It is the responsibility of the employer to establish the employee's pension account status. For accounts that are withdrawn, expired or canceled, an enrollment application is needed, and the age and medical requirements for enrollment are again in effect;

(b) To transfer the member's account to the new employer, the new employer should file a Report of Transfer with the Division of Pensions and Benefits within 10 working days of the date employment begins. If more than one year elapses between the date that the member was required to contribute to the retirement system and the date contributions were first certified, the employer shall be assessed a late enrollment employer liability penalty plus delayed appropriation costs.

[17:4-7.3 Intrafund transfers]

[(a) A member who terminates employment with an employer but transfers as a policeman or fireman with another participating employer may continue his membership without interruption.

b) A member transferring from the police to the fire department of the same employer may likewise continue his or her membership. Such a member may withdraw at such an occasion, but his or her reenrollment will be subject to age and physical requirements]


POLICE AND FIREMEN'S RETIREMENT SYSTEM
SURVIVOR BENEFITS

Proposed Amendment: N.J.A.C. 17:4-3.4

Cite as 32 N.J. Reg. 3554(b)

Adopted December 21, 2000

Summary

Currently, should a survivor of a deceased member of the Police and Firemen's Retirement System remarry or attain the age of 18, the survivor's benefit is terminated as of the first of the month prior to the event which removed the survivor from qualification for benefits.

The proposed amendment would provide for the payment of the benefit for the month in which the qualifying event takes place. For example, at the present time, should a widow remarry on July 15, the survivor's benefit would cease as of July 1 and there would be no entitlement to benefits for the month of July. The proposed amendment would provide for a benefit for the month in which the event occurred so that the survivor in the above example would receive a benefit for July and the entitlement for benefits would end on July 31.

P.L. 1993, c.335, which became effective on December 27, 1993, provided for the payment of the full retirement allowance in the month in which a retiree died. Previously, if a retiree died during the month, only the widow's portion of 50 percent was payable. The proposed amendment to the rule would clarify that the survivor's benefit becomes effective on the first of the month after the retiree's death because the full amount of the benefit is payable in the month that the retiree died.

The Board proposes in N.J.A.C. 17:4-3.4(a) to delete the words "Payment of benefits to" and begin this section with "Eligible survivors are entitled to benefits" to more clearly reflect to whom the rule applies. The word "following" would replace "of" to clarify to which date the rule refers. The Board proposes to add the sentence: "The pension payment shall begin on the first of the month following the survivor's eligibility for benefits date," to clarify that benefits are paid the first of the month following a member's eligibility date. Payments are made the first of the month for the immediately previous month. The Board proposes to make the last clause a new sentence, beginning with "Survivor benefits," and to also add "the last day of" before "the month" to further clarify when benefits cease.

The Board proposes to delete subsection (b) because a pension is now paid to eligible survivors under PL 1999, c.428 regardless of whether the death was a result of a member's job duties. The benefits are paid in the same manner as in subsection (a). The Board also proposes to eliminate the subsection codification "(a)" because, with the deletion of subsection (b), there is no longer any need for codification within the section.

Full text of the proposal follows:

17:4-3.4 Survivor benefits

[(a) Payment of benefits to eligible] Eligible survivors shall become [effective] entitled to benefits on the first of the month [of] following the member's death [ and]. The pension payment shall begin on the first of the month following the survivor's eligibility for benefits date. Survivor benefits shall terminate as of the last day of the month in which the survivor no longer qualifies for such benefits.

[(b) In the instance of an active member who died in the performance of duty (accidental death), the initial pension payment will be for the month following the month in which the member died and the last payment will cover the month immediately preceding the month the survivor dies or ceases to qualify for the continuance of benefits.]


POLICE AND FIREMEN'S RETIREMENT SYSTEM
ACCEPTABLE DESIGNATIONS OF BENEFICIARIES

Adopted New Rule: N.J.A.C. 17:4-3.6

Filed: August 28, 2000 as R.2000 d.388, with a substantive change not requiring additional public notice and comment (see N.J.A.C. 1:30-4.3)

Cite as 32 NJ Reg. 3581(a)

Summary of Agency-Initiated Change:

The issue was recently raised within the Division as to whether beneficiaries designated on a retirement application that subsequently is withdrawn prior to the effective date of retirement remain the member's beneficiaries. The purpose of N.J.A.C. 17:4-3.6 when originally proposed was to ensure that members' most recent expression of beneficiary designation is given effect. When members file for retirement, they designate current beneficiaries which supersede prior beneficiary designations. The proposed amendment will allow the Division to recognize beneficiaries properly designated on a retirement application filed with and accepted by the Division, even if the member withdraws the retirement application prior to retirement. The Division will send written notification to members who withdraw their retirement applications that beneficiaries designated on their retirement applications will remain in effect. Therefore, because this clarification does not negatively impact any participant, the Division asserts that this addition is appropriate at adoption.

Full text of the adoption follows:

17:4-3.6 Acceptable designations of beneficiaries

(a) A member's designation of beneficiary or beneficiaries of group life insurance on a duly executed retirement application:

1. Is effective upon filing with and acceptance by the Division, even if the retirement date on the application is in the future or the member withdraws the retirement application; and

2. Supersedes any previous beneficiary designation on file.

(b) If a deceased member has an eligible surviving spouse, child or parent, then the deceased member's aggregate contributions at the time of death shall be applied toward the payment of the benefit established at N.J.S.A. 43:16A- 9(1).

(c) If a deceased member has no eligible surviving spouse, child or parent, then pursuant to N.J.S.A. 43:16A-9(2), the deceased member's designated beneficiary or beneficiaries of group life insurance also shall be the beneficiary or beneficiaries of the deceased member's aggregate contributions at the time of death.

(d) If a deceased member has no eligible surviving spouse, child or parent, and the deceased member has not made an effective designation of beneficiary or has designated no beneficiary for group life insurance, then the Division shall pay the group life insurance and the deceased member's aggregate contributions to the deceased member's estate.


STATE HEALTH BENEFITS COMMISSION
RETIRED EMPLOYEE DEFINED

Proposed Amendment: N.J.A.C. 17:9-6.1

Cite as 32 N.J. Reg. 3385(a)

Summary

The purpose of the proposed amendment is to amend the definition of "retired employee" for State Health Benefits Program purposes, to reflect statutory changes made in the last 10 years and to better organize this rule. This proposed amendment is necessary to better explain and define who is an eligible retired employee for health benefits purposes.

The State Health Benefits Commission proposes to break down and expand existing subsection (a) into subsections (a), (b) and (c). Subsection (a) will restate the definition found in the existing subsection (a) regarding a retired employee. Proposed subsection (b) would include the definitions of retired employee as they pertain to retired employees of the State and State agencies pursuant to N.J.S.A. 52:14-17.26, retired employees of educational and local employers, retired employees of educational employers and county colleges pursuant to N.J.S.A. 52:14-17.32f, 52:14-17.32f1 and 52:14-17.32f2, and retired employees of boards of education who become eligible for Medicare. Proposed subsection (b) would also include the definitions of retired employees who are eligible for participation due to their employer's election to join the State Health Benefits Program or through the inclusion of retired law enforcement personnel in the State Health Benefits Program under the provisions of P.L. 1997, c.330.

Proposed subsection (c) would retain the exception for continuation of coverage for an employee who was on a leave of absence for personal illness and would add the requirement that an employee be retired on a disability retirement to receive the benefit of continuation of coverage.

The proposed amendment to existing subsection (b) would recodify it as (d) and also delete "his or her" and add "the spouse" in its stead. The Commission also proposes to add the word "State" before Health Benefits Program to more accurately reflect the title of this program. The proposed amendments would also break this section into requirements for active and retired coverage for a spouse and codify the new paragraph as (e).

Existing subsection (c) is proposed to be recodified as (f) and "he and she" is replaced with "the employee." "His or her" would be deleted. Paragraph (c)1 would be consolidated as the second sentence in new subsection (f). Existing paragraphs (c)2 and 3 would be deleted because Rutgers no longer acts as a collection officer for these charges and retirees are billed directly.

The Commission proposes to recodify existing subsection (d) as (g), eliminate gender specific pronouns as stated above and delete references to the Teacher's

Insurance and Annuity Association (TIAA) because there are now multiple providers of this plan pursuant to P.L. 1993, c.385. Members are now billed directly and not through their annuities; therefore, that provision in this paragraph is also proposed to be deleted.

The Commission proposes to recodify existing subsection (e) as (h). "He or she" would become "the employee." The Commission proposes to delete the date, July 1, 1964, which was made obsolete by P.L. 1987, c.384 (N.J.S.A. 52:14-17.32f). This law which established the State-paid coverage for retirees from the TPAF, repealed the section of the statute limiting coverage to those who retired on or after that date.

The Commission proposes to recodify existing subsection (f) as (i). "He or she" would become "the employee." The Commission proposes to recodify existing subsection (g) as (j), and to add that pursuant to the provisions of P.L. 1987, c.384 or P.L. 1992, c.126 (N.J.S.A. 52:14-17.32f and 52:14-17.32f1), deferred retirements for employees who qualify under these provisions are eligible for continuation of coverage. The Commission proposes to recodify existing subsection (h) as (k), and delete the word "charge" before "payments" because this term is no longer used by the Program.

Full text of the proposal follows:

17:9-6.1 Retired employee defined

[(a) "Retired employee" means a person who is eligible for coverage under the program, or under the health insurance plan of the person's employer where the employer is not participating in the program and the person is eligible to participate under P.L. 1987, c.384, immediately preceding retirement and receives a periodic retirement allowance from a State or locally administered retirement system or plan upon retirement. This "retired employee" status, once established, will continue in effect even though the employer is subsequently disbanded and no successor agency is created upon the dissolution of such employer. An employee who continued his or her coverage while on an official leave of absence for illness without pay but whose coverage terminated when his or her leave exceeded the period established by the statute for the continuation of coverage for such leave, will be permitted to elect to continue health benefits coverage into retirement provided such leave was in effect immediately preceding the date of his or her retirement.]

  1. "Retired employee" means a person who is eligible for coverage under the State Health Benefits Program's retiree group. This "retired employee" status, once established, shall continue in effect even though the employer is subsequently disbanded and no successor agency is created upon the dissolution of such employer.

  2. The definition of "retired employee" also includes the following classes of retired employees who are eligible for coverage:

1. Retired employees of the State of New Jersey and of employers defined as State agencies in N.J.S.A. 52:14-17.26, who were eligible for coverage as active employees immediately prior to retirement and who continued coverage at retirement;

2. Retired employees of educational and local employers participating in this Program who were eligible for employer-paid coverage as active employees immediately prior to retirement and who continued coverage at retirement;

3. Retired employees of educational and county college employers, regardless of the employer's participation in the State Health Benefits Program (SHBP) who:

i. Were full-time employees as defined by N.J.A.C. 17:9-4.6;

ii. Were eligible for employer-paid group health plan coverage prior to leaving employment; and

iii. Retired on disability retirements or on benefits based upon 25 or more years of service credit in the Teachers' Pension and Annuity Fund, the Public Employee's Retirement System, the Alternate Benefits Program, or in a locally administered pension fund established by N.J.S.A. 18A:66-94 et seq. under the provisions of P.L. 1987, c.384, P.L. 1992, c.126 or P.L. 1995, c.357 (N.J.S.A. 52:14-17.32f, 52:14-17.32f1 and 52:14- 17.32f2);

4. Qualified retired employees of boards of education who receive a retirement benefit from a State or locally administered retirement system and who:

i. Have continued their employer's plan;

ii. Become entitled to and enroll in the full Federal Medicare program; and

iii. Elect to join the SHBP under the provisions of P.L. 1993, c.8 (N.J.S.A. 52:14-17.32h);

5. Qualified retired employees of local or educational employers who are enrolled for coverage in that employer's plan and who enroll in the State Health Benefits Program when the employer joins the SHBP;

6. Qualified retired employees of participating local employers who retired before the employer joined the State Health Benefits Program but who enroll when offered coverage due to the employer's adoption of the provisions of P.L. 1979, c.54 (N.J.S.A. 52:14-17.38);

7. Qualified retired employees of participating local employers who did not continue coverage into retirement but who elect to enroll in the State Health Benefits Program when offered coverage due to the employer's adoption of the provisions of P.L. 1981, c.436 (N.J.S.A. 52:14-17.38); and

8. Qualified retired employees under the provisions of P.L. 1997, c.330 (N.J.S.A. 52:14-17.32i) codified at N.J.A.C. 17:9-6.9.

(c) "Retired employee" also means an employee whose coverage terminated prior to retirement, if that employee is awarded a disability retirement allowance. Eligibility for retired coverage in the State Health Benefits Program shall begin on the employee's retirement date, but should the approval of the retirement allowance be delayed, coverage shall not be retroactive for more than one year.

[(b)] (d)the definition of "retired employee" shall include the spouse of [the] an active or retired employee, provided [he or she ]the spouse was covered as a dependent under the State Health Benefits Program immediately preceding the [retirement or the] death of the active or retired employee, and further provided that in the case of death of an active employee, the spouse is receiving a periodic pension or survivorship benefit from a State or locally administered retirement system or plan.

(e) The definition of "retired employee" shall also include the spouse of the employee, provided the spouse was eligible for coverage immediately preceding retirement and is enrolled for coverage when the employee retires or is added to coverage pursuant to N.J.A.C. 17:9-6.3(a).

[(c)] (f) The definition of "retired employee" shall include an employee who is eligible to receive a Federal pension based upon employment with the Cooperative Extension service staff of Rutgers University. [1.] This coverage is contingent upon the employee applying for and receiving a Federal pension immediately following the cessation of employment and further provided that the pension to which [he or she] the employee is entitled is being granted by reason of [his or her] age or disability and coverage based on [his or her] employment with Rutgers University.

[2. The Personnel Office of Rutgers University shall act as a collection officer for the collection of the charges required on a direct payment basis from the employees]

[3. This payment shall be required from the employee on a quarterly basis in advance of coverage paid with the monthly billing.]

[(d)] (g) The definition of "retired employee" shall also include an employee who is eligible to receive a monthly annuity [from the Teachers' Insurance and Annuity Association] or long-term disability benefits based on [his or her] the employee's participation in the New Jersey Alternate Benefit Program, provided the employee who is receiving a monthly annuity applied for and began receiving [a TIAA] the annuity immediately following the termination of [his or her] employment in a position covered by the Alternate Benefit Program [, and further provided, that TIAA agrees to deduct the appropriate charge from the retired employee's monthly TIAA annuity and remits it promptly to the State Health Benefits Program as a remitting officer].

[(e)] (h) The definition of "retired employee" shall include any former employee, who retired from a State or locally administered retirement system [on or after July 1, 1964,] or the spouse of the former employee of an employer who becomes a participating employer if the employee or spouse:

1. Is receiving a periodic retirement allowance or survivorship benefit from a State or locally administered retirement system;

2. Was insured under a group medical insurance plan of the employer immediately prior to the date the employer became a participating employer; and

3. Elects to enroll in the State Health Benefits Program at the time the employer becomes a participating employer.

[(f)] (i) The definition of "retired employee" shall include an employee who is eligible for continuation of coverage in the program at the time of retirement who terminates coverage at that time because [he or she] the employee is covered as a dependent of another covered employee or as an active employee and who applies for continuation of coverage within a reasonable time after termination of coverage as a dependent or active employee.

[(g)] (j) The definition of "retired employee" shall not include an employee who on cessation of employment, elects a vested, deferred retirement benefit under which payments begin at a future date unless that employee is eligible for coverage under the provisions of P.L. 1987, c.384 or P.L. 1992, c.126 (N.J.S.A. 52:14-17.32f and 52:14-17.32f1).

[(h] (k) The employer liability for [charge] payments on behalf of eligible retired employees which includes those employees who are eligible to receive long-term disability benefits is payable in accordance with the provisions of N.J.S.A. 52:14-17.32 and 17.38.


STATE HEALTH BENEFITS COMMISSION
HEALTH MAINTENANCE ORGANIZATION CHARGES

Proposed Repeal: N.J.A.C. 17:9-5.6

Cite as 32 N.J. Reg. 3384(a)

The agency proposal follows:

Summary

When Health Maintenance Organization coverage was first offered in 1973, (N.J.S.A. 26:2J-29) the law stated that the employer could not pay more for HMO coverage than for "existing" coverage type. Under N.J.A.C. 17:9-3.6, any HMO cost that exceeded the cost of the State program was to be collected by payroll deductions from the employee enrolled in such HMO coverage. Beginning with the rates for July 2000, the State Health Benefits Commission considers HMOs as part of the State Health Benefits Program (SHBP) and no longer views HMOs as alternatives to traditional coverage. Presently, no distinction is made in the rate charts for local and educational employers. An employer paying the full cost of coverage for the member and dependents for the Traditional Plan and NJ Plus, should also pay for the full cost of HMO coverage.

There are several reasons for this. First, the SHBP recognizes that HMOs are no longer alternative plans. Overall membership of active employees is split relatively evenly among the three plan types (Traditional, NJ PLUS and HMO).

Further, the State Health Benefits Program Act was amended to specifically mention HMOs as part of the SHBP (N.J.S.A. 52:14-17.26). Finally, beginning July 1, 1998, several of the HMOs, including Horizon HMO, AETNA US Healthcare and CIGNA Health Care, have entered into administrative services only (ASO) contracts with the SHBP that changed the relationship of the HMOs to the SHBP.

The Commission does not expect many HMOs to charge more than Traditional Plan coverage. The market for health care is very competitive. The SHBP and the plans are working to maintain the lowest possible rates by containing costs while still offering the highest quality of care. However, if the HMO rate is higher than Traditional Plan coverage, the Commission no longer expects that the member pay the difference. For the above stated reasons, the State Health Benefits Commission believes that it is necessary to repeal the rule.

Full text of the proposed repeal follows:

17:9-5.6 [Health maintenance organization charges] (Reserved)

[For purposes of State and local coverage, the employer who pays any portion of the cost for the employee and for dependent coverage cannot pay any more for the same type of coverage if the employee enrolls himself or herself and his or her dependents in a health maintenance organization as an alternative program. If the cost of the coverage in the alternative plan exceeds the cost of the State program, the additional charge would be collected by payroll deductions from the employee.]


STATE HEALTH BENEFITS COMMISSION
ELIGIBILITY FOR STATE PAYMENT OF RETIREE COVERAGE UNDER P.L. 1997, C.330

Proposed Amendment: N.J.A.C. 17:9-6.9

Cite as 32 N.J. Reg. 3387(a)

The agency proposal follows:

Summary

The proposed amendment is necessary to better identify the retirees who are eligible for coverage under P.L. 1997, c.330. This statute provides for the partial State payment of health benefits for eligible retirees of the Police and Firemen's Retirement System (PFRS), the Consolidated Police and Firemen's Pension Fund (CPFPF) and the Public Employees' Retirement System (PERS). The proposed amendment revises the State Health Benefits Commission's interpretation of P.L. 1997, c.330 eligibility by allowing retirees who were in a police and fire eligible position, but could not enroll in the PFRS because their employers did not join the PFRS by referendum, and who retired prior to the enactment of P.L. 1989, c.204 (N.J.S.A. 43:16A-1.2), to be covered under the provisions of the rule. There are approximately 15 to 20 retired members who could have received this coverage if they had retired after the enactment of Chapter 204. The proposed amendment would allow these members to receive the benefit of the partial State-paid coverage.

17:9-6.9 Eligibility for State payment of retiree coverage under P.L. 1997, c.330

(a) For the purposes of this section, "qualified retiree" means a person who:

1. Is a retiree from:

i.-ii. (No change.)

iii. The Public Employees' Retirement System of New Jersey (N.J.S.A. 43:15A-6 et seq.), hereinafter referred to as PERS, from a position included in the definition of "law enforcement officer" under section 1 of P.L. 1955, c.257 (N.J.S.A. 43:15A-97), from a PFRS covered position that would have made the member eligible for enrollment in the PFRS but for age, from a position that would have been eligible for enrollment in the PFRS had the employer joined the PFRS by referendum under the provisions of N.J.S.A. 43:16A-3(2) or from a position that is eligible for participation in PFRS as provided in section 9 of P.L. 1989, c.204 (N.J.S.A. 43:16A-1.2);

2.-4. (No change.)

(b)-(d) (No change.)


STATE HEALTH BENEFITS COMMISSION
DEPENDENTS AND CHILDREN DEFINED AND
CHILDREN WITH DISABILITIES AGE 23 OR OLDER;
DETERMINATION OF ELIGIBILITY FOR CONTINUATION OF COVERAGE

Proposed Amendment: N.J.A.C. 17:9-3.1

Proposed New Rule: N.J.A.C. 17:9-3.8

Cite as 32 N.J. Reg. 3383(a)

The agency proposal follows:

Summary

The purpose of the proposed amendment and new rule is to clarify when children with disabilities who are age 23 or older when their parents become eligible for health benefits coverage under the State Health Benefits Program (SHBP) are eligible to join the SHBP and when they may not join.

The statutes governing the SHBP permit employees to enroll dependent children under the age of 23 for coverage. The SHBP also provides, at N.J.S.A. 52:14-17.32a, that the Commission may establish regulations prescribing an extension of coverage when an employee or dependent is totally disabled at termination of coverage.

The proposed new rule would permit the enrollment of children with disabilities who are age 23 or older in two instances involving New Jersey public employers who could have participated in the SHBP local employer group, thus entitling their employees to continuation of coverage for disabled dependents under the existing rule. The two instances are: (1) if the parent's employer is joining the SHBP and the employer's group coverage had covered the child prior to joining the SHBP, and (2) if the parent joined the SHBP at retirement due to meeting the requirements of N.J.S.A. 52:14-17.32f, as a qualified retiree of the Teachers' Pension and Annuity Fund (those with 25 years of service or a disability retirement), N.J.S.A. 52:14-17.32f1, as a qualified retiree of the Public Employees' Retirement System who retired from boards of education or county colleges (25 years of service or a disability retirement) or N.J.S.A. 52:14-17.32i, as a qualified retiree from the Police and Firemen's Retirement System, Public Employees' Retirement System and Consolidated Police and Firemen's Pension Fund (25 years of service or a disability retirement in a firefighter or law enforcement officer position), and had the child covered under the former group plan.

Both exceptions pertain to local public employer group coverage and permit a continuation of group coverage in the SHBP for the overage dependent with disabilities as though the local employer was covered under the SHBP. The proposed new rule would codify these two exceptions to the enrollment of children with disabilities into the SHBP.

The proposed amendment would also better define an eligible dependent child who is disabled by adding the requirements for continuation of coverage similar to those found under the general insurance statutes at N.J.S.A. 17B:27-30. The proposed amendment would change the term "wholly dependent" to "substantially dependent" because the Commission recognizes that the child may be receiving limited funds from other sources. The proposed amendment would delete subsection (b) and move the language under that subsection to the proposed new rule. The phrase "rather than before they attain age 19, as given in the general statute" would be deleted from the moved language because the insurance statutes are not at issue and this phrase merely serves to confuse the reader.

Full text of the proposal follows:

17:9-3.1 Dependents and children defined

[(a)] The following words and terms, when used in this chapter, shall have the following meanings unless the context clearly indicates otherwise.

"Children" includes stepchildren, legally adopted children and foster children who are [wholly] substantially dependent upon the employee for support and maintenance. This includes children in a guardian-ward, legal relationship who are living with the employee.

"Dependents" means an employee's spouse and the employee's unmarried children through the end of the calendar year in which they reach the age of 23 years who live with the employee in a regular parent-child relationship. "Dependents" also means unmarried children, covered by their parents under the State Health Benefits Program prior to the attainment of age 23, who:

1. Are incapable of self-sustaining employment by reason of mental or physical disabilities;

2. Became so incapable prior to attainment of age 23; and

3. Are substantially dependent upon such employees for support and maintenance while the insurance of the employees remain in force and the dependents remain in such conditions.

"Living with" shall be defined so as to include children in the case of divorce who may not actually be living with the covered parent, but where such covered parent is required to provide for the support and maintenance of such children, and the parent's application for dependent coverage is documented by a copy of an appropriate court order.

[(b) The determination as to the continuation of certain mentally retarded or physically handicapped children will be made before they attain age 23 rather than before they attain age 19, as given in the general statute.]

17:9-3.8 [(Reserved)] Children with disabilities age 23 or older; determination of eligibility for continuation of coverage

(a) The determination as to the continuation of certain children with disabilities as "dependents" as defined by N.J.A.C. 17:9-3.1 shall be made by the State Health Benefits Program's medical advisor. A form requesting continuance of enrollment for an eligible dependent with disabilities must be submitted to the State Health Benefits Program no later than January 31 of the year following the calendar year in which the child attained the age of 23.

(b) Children with disabilities who are age 23 or older at the time their parents obtain coverage under the State Health Benefits Program who are determined by the State Health Benefits Program's medical advisor to be incapable of self-sustaining employment by reason of mental or physical disabilities and who meet the requirements of "dependents" as defined by N.J.A.C. 17:9-3.1, shall not be enrolled for coverage as "dependents" as defined by N.J.A.C. 17:9-3.1 unless:

1. They were covered as dependents under a public employer's group plan immediately preceding that employer's entrance into the State Health Benefits Program; or

2. They were covered as dependents under a public employer's group plan immediately preceding their parents' entrance into the State Health Benefits Program under the provisions of N.J.S.A. 52:14-17.32f (qualified retirees of the Teachers' Pension and Annuity Fund), N.J.S.A. 52:14-17.32f1 (qualified retirees of the Public Employees' Retirement System who retired from boards of education or county colleges) or N.J.S.A. 52:14-17.32i (qualified firefighter or law enforcement retirees from the Police and Firemen's Retirement System, Public Employees' Retirement System and Consolidated Police and Firemen's Pension Fund).


PUBLIC EMPLOYEES' RETIREMENT SYSTEM
ACCEPTABLE DESIGNATIONS OF BENEFICIARIES

Proposed Amendment: N.J.A.C. 17:2-3.14

Cite as 32 N.J. Reg. 3213(a)

The agency proposal follows:

Summary

The issue was recently raised within the Division as to whether the designated beneficiaries on a retirement application, which is subsequently canceled by the member prior to the effective date of retirement, remain the designated beneficiaries. The initial purpose of this rule when originally adopted was to ensure that the member's most recent expression of beneficiary designation is given effect.

When members file for retirement, they designate the current beneficiaries. This proposed amendment will allow the Division to recognize the beneficiary properly designated on a form acceptable by the Division, the retirement application, even if the retirement is later canceled. The Division will send written notification to members who cancel their retirement that their designated beneficiaries on the retirement application will remain in effect.

17:2-3.14 Acceptable designations of beneficiaries

(a) The beneficiary designation on a duly executed retirement application that is filed with and accepted by the Division supersedes any older designation of beneficiary on file. The designation is effective upon acceptance by the Division, even if the retirement date on the application is in the future or the member cancels the retirement

1.-2. (No change.)

(b) (No change.)


TEACHERS' PENSION AND ANNUITY FUND
FISCAL YEAR

Adopted Amendment: N.J.A.C. 17:3-1.2

Cite as 32 N.J.R. 3996(b)

Adopted November 6, 2000

Summary

The proposed amendment to N.J.A.C. 17:3-1.2 is necessary to remove the exception to the Fund's fiscal year of the actuarial valuation of the Teachers' Pension and Annuity Fund. Under the existing rule, the actuarial valuation is prepared on the basis of the membership payroll status of all account results as of March 31 of each year. The proposed amendment would change this date from March 31 of each year to July 1 of each year. This change would make all retirement systems administered by the Division have a uniform valuation date. The Teachers' Pension and Annuity Fund and the Public Employees' Retirement System are the only systems valued as of March 31. All other systems are valued as of July 1. Having a uniform date would help to make the overall operation of the Division more efficient. The proposed amendment would. This change also would render unnecessary the preparation of one of the two sets of comprehensive financial statements required under the existing rule. TPAF and PERS comprehensive financial statements are prepared as of March 31 of each year, thereby providing each respective system's actuary the basis for determining the appropriation payable by employers for the fiscal year beginning July 1. A change in the actuarial date to July 1 would eliminate the need to prepare March 31 financial statements.

Full text of the proposal follows:

17:3-1.2 Fiscal year

The transaction of business and control of funds shall be conducted on a July 1 to June 30 fiscal year [, with the exception of the actuarial valuation, which shall be prepared on the basis of the membership payroll and status of all accounts as of March 31 of each year.]


TEACHERS' PENSION AND ANNUITY FUND
ACCEPTABLE DESIGNATIONS OF BENEFICIARIES

Adopted Amendment: N.J.A.C. 17:3-3.13

Cite as 32 N.J. Reg. 3996(c)

Adopted November 6, 2000

Summary

The issue was recently raised within the Division as to whether beneficiaries designated on a retirement application that subsequently is withdrawn prior to the effective date of retirement remain the member's beneficiaries. The purpose of N.J.A.C. 17:3-3.13 when originally adopted was to ensure that members' most recent expression of beneficiary designation is given effect.

When members file for retirement, they designate current beneficiaries which supersede prior beneficiary designations. The proposed amendment will allow the Division to recognize beneficiaries properly designated on a retirement application filed with and accepted by the Division, even if the member withdraws the retirement application prior to retirement. The Division will send written notification to members who withdraw their retirement applications that beneficiaries designated on their retirement applications will remain in effect.

17:3-3.13 Acceptable designations of beneficiaries

(a) The beneficiary designation on a duly executed retirement application that is filed with and accepted by the Division supersedes any older designation of beneficiary on file. The designation is effective upon acceptance by the Division, even if the retirement date on the application is in the future or the member withdraws the retirement application.

1.-2. (No change.)

(b) (No change.)


STATE POLICE RETIREMENT SYSTEM
ACCEPTABLE DESIGNATIONS OF BENEFICIARIES

Adopted New Rule: N.J.A.C. 17:5-2.4

Cite as 32 N.J. Reg. 3996(d)

Adopted November 6, 2000

Summary

At the present time, when a member files for a retirement allowance, the beneficiaries designated on the retirement application are not in effect until the member's retirement date, even though the designation has been duly executed on a form acceptable to the Division.

If members neglect to change beneficiaries when necessary, problems may arise. In some cases, members have not changed their designated beneficiaries since their enrollment into the retirement system, some 25 or 30 years earlier. They may have their parents or friends named as beneficiaries and not their spouses or children.

When members file for retirement, they designate current beneficiaries, but if those members die before retirement or otherwise withdraw a retirement application, the Division must pay the previously designated beneficiaries and not those named on the retirement application. The proposed new rule would allow the Division to recognize beneficiaries properly designated on a retirement application as beneficiaries, even if the member dies or withdraws a retirement application prior to the retirement having become effective.

17:5-2.4-[(Reserved)]Acceptable designations of beneficiaries

(a) A member's designation of beneficiary or beneficiaries of group life insurance on a duly executed retirement application:

  1. Is effective upon filing with and acceptance by the Division, even if the retirement date on the application is in the future or the member withdraws the retirement application; and

  2. Supersedes any previous beneficiary designation on file.

(b) If a deceased member has an eligible surviving spouse, child or parent, then the deceased member's aggregate contributions at the time of death shall be applied toward the payment of the benefit established pursuant to N.J.S.A. 53:5A-12a.

(c) If a deceased member has no eligible surviving spouse, child or parent, then pursuant to N.J.S.A. 53:5A-12b, the deceased member's designated beneficiary or beneficiaries of group life insurance also shall be the beneficiary or beneficiaries of the deceased member's aggregate contributions at the time of death.

(d) If a deceased member has no eligible surviving spouse, child or parent, and the deceased member has not made an effective designation of beneficiary or has designated no beneficiary for group life insurance, then the Division shall pay the group life insurance and the deceased member's aggregate contributions to the deceased member's estate.


PUBLIC EMPLOYEES' RETIREMENT SYSTEM
NOTICE OF ADMINISTRATIVE CHANGE

INELIGIBLE PERSONS

Notice of Admnistrative Change N.J.A.C. 17:2-2.3

Cite as 32 N.J. Reg. 2925(a)

August 7, 2000

Take notice that the Public Employee's Retirement System Board of Trustees has requested, and the Office of Administrative Law has agreed to permit, an administrative change to N.J.A.C. 17:2-2.3(a)7, revising the cross- reference therein to the rule establishing when a member's retirement allowance becomes due and payable from N.J.A.C. 17:2-6.3 to 6.2. As adopted effective January 18, 2000, it is N.J.A.C. 17:2-6.2 that establishes when a member's retirement allowance becomes due and payable, and revision of this cross-reference was overlooked in the promulgation of that rule. This notice of administrative change is published pursuant to N.J.A.C. 1:30-2.7.

Full text of the changed rule follows:

17:2-2.3 Ineligible persons (a) The following classes of persons are ineligible for membership in the System: 1.-6. (No change.)

7. Any retired member who returns to a PERS eligible position for which the calendar year compensation is less than the calendar year compensation limit for exclusion from membership pursuant to N.J.S.A. 43:15A-57.2b. To determine if the calendar year compensation for employment received by a retired member is below the calendar year compensation limit, all of the calendar year compensation received from employment with the same employer shall be combined, and all of the calendar year compensation from employment with more than one employer shall be considered separately. For the purposes of this paragraph, a "retired member" is a former member who has terminated all employment covered by the retirement system, who has not received compensation from employment covered by the retirement system for at least 30 consecutive calendar days, who is not receiving a disability retirement allowance and whose retirement benefit has become due and payable as provided in N.J.A.C. 17:2[6.3] 6.2; and

8. (No change.)


DIVISION OF PENSIONS AND BENEFITS
PUBLIC EMPLOYEES' RETIREMENT SYSTEM

FISCAL YEAR

Adopted Amendment: N.J.A.C. 17:2-1.2

Cite as 32 N.J. Reg. 3996(a)

Adopted November 6, 2000

The agency proposal follows:

Summary

The proposed amendment to N.J.A.C. 17:2-1.2 is necessary to remove the exception to the System's fiscal year of the actuarial valuation of the Public Employees' Retirement System. Under the existing rule, the actuarial valuation is prepared on the basis of the membership payroll status of all account results as of March 31 of each year. The proposed amendment would change this date from March 31 of each year to July 1 of each year. This change would make all retirement systems administered by the Division have a uniform valuation date. The Teachers' Pension and Annuity Fund and the Public Employees' Retirement System are the only systems valued as of March 31. All other systems are valued as of July 1. Having a uniform date would help to make the overall operation of the Division more efficient.

The proposed amendment also would render unnecessary the preparation of one of the two sets of comprehensive financial statements required under the existing rule. TPAF and PERS comprehensive financial statements are prepared as of March 31 of each year, thereby providing each respective system's actuary the basis for determining the appropriation payable by employers for the fiscal year beginning July 1. A change in the actuarial date to July 1 would eliminate the need to prepare March 31 financial statements.

Full text of the proposal follows (deletions indicated in brackets [thus]):

17:2-1.2 Fiscal year

The transaction of business and control of finance shall be conducted from a July 1 to June 30 fiscal year [, with the exception of the actuarial valuation, which shall be prepared on the basis of the membership payroll status of all account results as of March 31 of each year].


CONSOLIDATED POLICE AND FIREMEN'S PENSION FUND
ELECTION OF MEMBERS — COMMISSION

Adopted Amendment: N.J.A.C. 17:6-1.4

Cite as 32 N.J.R. 3863(a)

Adopted October 16, 2000

Summary

The Consolidated Police and Firemen's Pension Fund (CPFPF) was established in 1952 to place 212 local police and firemen pension funds on an actuarial basis. The membership of the Fund consists of police and firemen appointed prior to July 1, 1944. There are no active members of the Fund, and the retired membership totals 311; with beneficiaries, it totals just 1,646. The average age of the retired members is approximately 90 years old. It is becoming increasingly more difficult for someone interested in running for election to the Commission (as established by N.J.S.A. 43:16-6.1) to obtain five signatures on a petition as required by N.J.A.C. 17:6-1.4(b)3. Therefore, the Commission is proposing that the number of signatures required on a petition be reduced to two members instead of five.

The Commission is proposing to better organize this rule by eliminating redundant text and consolidating the election process provisions. The Commission has not sent out ballots under the existing rule in 20 years. Election notices now appear as a message on a member's monthly retirement allowance check stub. The Commission is also proposing to eliminate references to "active members" because the last active member retired 10 years ago.

At N.J.A.C. 17:6-1.4, the Commission proposes to amend existing subsection (b) to address the matters covered by existing subsection (a), to delete existing subsection (a), and to recodify existing subsection (b) as new subsection (a). The Commission proposes to combine the requirements and rules of election notices and nominating petitions, which appear in both existing subsections (b) and (d), as part of new subsection (a).

The Commission proposes to recodify ballot requirements contained in existing subsections (c) and (e) as new subsection (b). Proposed new N.J.A.C. 17:6-1.4(a)9 would deal with what will occur in those elections in which only one candidate runs.

The Commission proposes the elimination of references to colored forms or different forms. Only one form is now used, so both N.J.A.C. 17:6-1.4(d)2 and (e)2 would be deleted. Current N.J.A.C. 17:6-1.4(f) would become N.J.A.C. 17:6-1.4(c)7 and references to a "sealed container" and use of election judges would be eliminated. No ballots have been needed for 20 years and are expected not to be needed in the future. Election judges are also not necessary where there is no ballot. The Commission proposes that the results go before the entire Commission and not just the police or fire members in N.J.A.C. 17:6-1.4(i). The Commission also proposes eliminating the word "certified" before "statement" and changing the word "advice" to "notice" in the last line of this section.

The Commission is also proposing to change the word "register" to "Social Security" number in N.J.A.C. 17:6-1.4(f). Register numbers are no longer used by the Division to identify members of the CPFPF. Finally, the Commission proposes to add "or she" after the use of a male pronoun in N.J.A.C. 17:6-1.4(b)6.

Full text of the proposal follows:

17:6-1.4 Election of members--Commission [(a) The election of Commission members will include the use of nominating petitions]

[1. This will entail the distribution to retired members of at least two forms.]

[2. The first will be an election notice setting forth the rules for filing nominating petitions and other pertinent data.]

[3. The second will be the ballot, containing the names of the candidates who have been properly nominated as well as the rules governing the election.]

[(b)] (a) The election of Commission members shall include the use of election notices and nominating petitions. Requirements for the election notice and petition shall include:

1. A notice [will be] prepared and forwarded to retired members advising [the retired members] them of the position to be voted upon. All present members of the Commission and the expiration of their terms will be shown.

2. (No change.)

3. The election notice will also indicate that at least [five] two eligible retired members must sign the petition in order for a candidate's name to be placed on the ballot.

4. Petitioners [should] shall indicate their Social Security or retirement number, and sign the petition.

5. A retired member may sign a petition for only one candidate.

6. The candidate named on the petition must sign the petition in a designated space indicating that he or she is willing to be a candidate.

7. The instructions will indicate the closing date for the filing of such petitions and also indicate that a ballot bearing the names of such candidates will be forwarded to each eligible voter.

8. The qualified candidates will be invited to a drawing to determine the order in which the candidates' names will appear on the ballot.

9. If only one candidate is nominated for a position, the candidate shall be deemed elected to the position without balloting.

[(c)] (b)The requirements for the ballot shall include the following: [1. Each eligible voter will have a ballot bearing his name.]

1. Ballots bearing the name and retirement number of retired members shall be forwarded directly to retired members.

2.-6. (No change.)

[(d) Rules concerning election notice and petition include:]

[1. The election notice will be forwarded directly to retired members.]

[2. Police and firemen notices will be differentiated by colored forms or by some other mark explained in the instructions.]

[(e) Rules concerning ballots, forwarding include:]

[1. The ballots bearing the name and retirement number of retired members will be forwarded directly to the retired members.]

[2. Police and firemen ballots and return envelopes will be differentiated by colored forms or by some other symbol.]

[(f)] 7. The returned ballot-bearing envelop is to be examined for proper signature. A record will be maintained to identify the [register] Social Security or retirement number of the members who have voted. [The sealed ballot will then be deposited in a locked container. Immediately prior to the counting of the ballots, the information identifying the individual voters will be separated from the still sealed ballot in the presence of the election judges.]

Recodify existing (g) and (h) as (c) and (d) (No change in text.)

[(i)] (e) In the event there is but one qualified candidate who has indicated his or her willingness to be such a candidate, the Secretary will call for a vote cast in favor of the candidate by [a policeman and/or fireman member] the members of the Commission [whichever is appropriate]. In the event that the candidate is so elected, a [certified] statement as to the ineligibility of any other candidate will be filed with the Secretary of State, together with [advice] notice that the candidate has been so elected.


TEACHERS' PENSION AND ANNUITY FUND
ELECTION OF MEMBER TRUSTEE

Adopted Amendment to N.J.A.C. 17:3-1.4

Cite as 32 N.J. Reg. 2926(a)

Adopted August 7, 2000

Summary

The proposed amendment to N.J.A.C. 17:3-1.4 is being made to include retired members of the Teachers' Pension and Annuity Fund in the election process. Prior to the enactment of P.L. 1999, c.230 (N.J.S.A. 18A:66-56), retired members were not permitted to participate in the election of trustees to the Board. Although retired members now may participate in the election process and have representation on the Board, the rules regarding the election procedures have not been amended to reflect these changes.

Until five years ago, the convention to elect new members was held in Trenton on a Saturday morning. Members found this time and place to be inconvenient to them, and the convention was moved to Atlantic City to coincide with an annual gathering of education professionals. This move ensured greater convenience to the members and higher participation for the convention. The proposed amendment would reflect the changes to the election process. Because retired members are now permitted to participate in this process, an additional 50,000 people are eligible to become delegates. Because space is limited on the convention floor, the number of members represented by each delegate is proposed to be changed from 400 per member to 550 per member in N.J.A.C. 17:3-1.4(g) to reflect this large increase in eligible participants. The Secretary of the Board handles much of the procedures of running the convention, and so changes are also proposed to reflect the Secretary's responsibilities. N.J.A.C. 17:3- 1.4(p) is proposed to be amended to include the dates provided in N.J.S.A. 18A:66-56.1 for the terms of office of elected members of the Board. These dates would replace those in effect since 1958. Finally, reimbursements for travel expenses are proposed to be determined by the Department of Treasury and are subject to change. Mileage reimbursement will not exceed 150 miles each way, which is the distance from High Point to Atlantic City.

Full text of the proposal follows:

17:3-1.4 Election of member-trustee

(a) (No change.)

(b) Such [annual] convention shall be held [each year at 10:30 A.M., on a Saturday in November designated by the trustees,] annually at a time and [at a] location [to be announced] designated by the Board.

(c)-(d) (No change.)

(e) The delegates to the convention must be active members of or former members receiving a retirement allowance from the Fund.

(f) The delegates shall be [elected at a meeting of] selected from the membership [in] of each county [to be called by the county superintendent no later than the 27th day of May]. The selection date shall be determined by the Board.

1. (No change.)

[2. The meeting shall organize by the election of a chairman and secretary.]

[3.]2. The [secretary, shall,] County Superintendent within five days after the meeting [and no later than the 10th day of June], shall forward to the secretary of the Board a certificate containing the membership [register] numbers, retirement numbers, names, addresses and school districts of the delegates and alternates.

(g) Each county shall be entitled to one delegate for each [400] 550 members employed in or retired from the county or major fraction thereof [; provided, however, that each county shall have at least one delegate].

(h) (No change.)

(i) The secretary of the Board shall forward to each delegate and alternate his or her identification for admission to the convention, a copy of the election rule, convention agenda, annual report of the Board of Trustees for the preceding fiscal year and the name of the trustee whose term is expiring.

(j) The candidate for trustee must be employed in or retired from one of the counties of the group so designated for electing a trustee that year and must be a resident of New Jersey.

(k) The secretary of the Board shall also notify each delegate and alternate of the names of the candidates to be nominated for trustee that have been registered [with him before the first day of November].

(l)-(o) (No change.)

(p) The trustee for the three-year term commencing January 1, [1958] 1997, must be employed in a county in Group A; for the three-year term commencing January 1, [1959] 1998, in a county in Group B; for the [three] two-year term commencing January 1, [1960] 1997, in a county in Group C and so forth. Members elected thereafter shall serve three-year terms.

(q)-(r) (No change.)

(s) The secretary of the convention will conduct a roll call of the delegates. Alternates will be seated in the place of respective county absentee delegates in the order in which they are listed by the secretary of the county meeting:

[1. Delegates, as well as alternates, shall be seated by 10:30 A.M.]

[2.]1. The election of the member-trustee shall require a majority vote among the delegates actually seated in the convention.

(t) (No change.)

(u) The minutes of the convention [will be forwarded to each delegate as soon as possible following the conclusion of the convention, but only those delegates who clearly identify themselves and the county they represent will be recorded in the minutes as having participated in the convention] shall be submitted by the secretary for approval at the next annual meeting.

(v) (No change.)

(w) Delegates and alternates will be reimbursed for actual travel expenses incurred in connection with the convention [at the rate of $0.18 per mile for travel by auto, actual tax exempt fare for travel by bus or train, and meals not in excess of $2.50 per day] in accordance with State of New Jersey, Department of Treasury reimbursement schedules. Mileage reimbursement shall not exceed 150 miles each way.


POLICE AND FIREMEN'S RETIREMENT SYSTEM
ELECTION OF ACTIVE MEMBER TRUSTEE

Adopted Amendment N.J.A.C. 17:4-1.4

Cite as 32 N.J.R. 2598(a)

Adopted July 17, 2000

Summary

The Police and Firemen's Retirement System (PFRS) proposes to amend N.J.A.C. 17:4-1.4 due to the advent of electronic voting. The Division currently uses an outside vendor to mail and tabulate paper ballots for approximately 40,000 police and 6,500 fire members of the PFRS. The proposed amendment will serve as a guideline for the Division's move to a more automated voting system. While the initial ballots and their distribution remain similar to old requirements, the voting method through telefacsimile, touch-tone phone and internet access has changed. Paper ballots are still an option, but the new method should save time and resources while efficiently and accurately getting the job done.

References to "retirees" are proposed to be deleted because their voting procedures are found at N.J.A.C. 17:4-1.13 and they will not be affected initially by the advent of electronic balloting. N.J.S.A. 43:16A-13 changed the voting procedures and provided for a retiree to sit on the Board. Retirees may only vote for the retired seat and active members may only vote for active seats. The requirement of a written request for challenges and questions is proposed to be added.

Some of the requirements found at N.J.A.C. 17:4-1.4(e) are proposed to be rearranged to better organize the rule. The Board proposes to add subparagraph (j) to cover the situation where an elected candidate is unable or unwilling to serve as a member-trustee prior to taking the oath of office. The Division is currently issuing an RFP (Request for Proposals) to obtain a vendor for this electronic process, and would like the rules which will guide the voting process in place before the vendor begins.

Full text of the proposal follows:

17:4-1.4 Election of active member-trustee

  1. The procedures for the election of a police or fire trustee representative to the Police and Firemen's Retirement System (PFRS) Board of Trustees are set forth in this section.

  2. Eligible candidates shall include any active [or retired] member of the Police and Firemen's Retirement System. Only police members may seek police seats, and only fire members may seek firemen seats on the Board of Trustees. All candidates shall comply with any and all requirements as provided by law and these rules. Any candidate who fails to comply with the law and these rules is automatically disqualified as a candidate.

  3. The following apply to election notices:

1. At least [four] nine months prior to the expiration of the term of each elected trustee or immediately upon a vacancy on the Board, a notice shall be prepared and distributed by the Secretary of the Board or a contracted vendor through the certifying officers to each member who is eligible to vote. [The notice shall also inform the members that petition forms are available at the office of the retirement system.]

2. The election notice shall also:

i.-ii. (No change.)

iii. State that nominating petitions are required and that petition forms are available from the Board Secretary at the Division of Pensions and Benefits;

iv. State the date[s] of the election;

v. (No change.)

vi. [Contain] Include any other information regarding that election as specified by the Board of Trustees.

3. (No change.)

4. A [receipt and report] confirmation form shall also be forwarded to each certifying officer or appropriate fiscal officer. Such form shall be returned to the Board Secretary or contracted vendor and shall include documentation of:

i.-ii. (No change.)

5. Election notices shall be distributed to each member who is eligible to vote, as shown on a master list of members that shall be compiled by the Board Secretary stored and made available for review to any candidate at the office of the [Division of Pensions and Benefits] Board Secretary. Only active members of the PFRS may vote in an election of member-trustee of the Board of Trustees of the PFRS. Any challenge of questions concerning eligible voters shall be made in writing, prior to the close of the voting deadline. Failure to challenge the list or any part of it prior to [this] the voting deadline shall disallow any challenges or questions raised after the close of voting.

  1. The following apply to nominating petitions:

    1. Nominating petition forms shall be available at the office of the Board Secretary of the Police and Firemen's Retirement System.

    2. Nominating petitions shall be forwarded to each active [or retired] member [requesting] who requests them after the Division verifies the member's eligibility to run for such election.

    3. (No change.)

    4. The petition form shall require the candidate's name and employer, and the pension membership number or Social Security number of each petitioner.

    5. The form shall explain that an active member shall sign only one petition, with police members petitioning for a police candidate and fire members petitioning for a fire candidate.

    6. (No change.)

    7. [A candidate] Candidates named on a petition shall sign the petition in a designated space indicating [that he or she is willing] their willingness to be [a] candidates.

    8. If only one candidate is nominated for a position, the candidate shall be deemed elected to the position without balloting. A notice to the [respective membership] certifying officers shall be distributed for posting at the employing locations, indicating no contest since only one candidate was nominated by petition.

  2. The following [apply to distribution of ballots] apply to distribution of election packets:

    1. The Board reserves the right to authorize a vendor to collect votes through one or more of the following election processes. All active eligible members shall have an opportunity to cast a ballot through one of the following:

    i. Telephone (voice retrieval system-electronic vote);

    ii. Internet access (electronic vote);

    iii. Telefacsimile server (electronic vote); or

    iv. Color-coded paper ballot (postage-paid, self seal return mailer).

    [1.] 2. For each eligible voter, there shall be forwarded to the certifying officer [a ballot] individual member packets with instructions for balloting which shall include the following information [and instructions]:

    i. The eligible member's name [of the eligible voter], pension membership number, pension location number, ballot number and personal identification number (PIN);

    ii. (No change.)

    iii. The name of each candidate nominated [and the name of his or her] including a biographical sketch listing the candidate's background and employer;

    iv. Instructions [to the voter for the proper casting of the ballot shall be shown upon the ballot or upon a separate sheet; and] on how to properly cast a vote, including notification that shall advise the member that the vendor shall sever the envelope containing the voter's signature from the ballot, thus assuring a secret ballot. Unsigned ballots, mutilated ballots, illegible ballots, ballots with write-in votes, ballots with multiple votes or ballots where it cannot be determined for whom the member intended to vote shall be declared invalid and not considered in the final election count;

    v. Instruction on how to properly cast an electronic vote;

    vi. Instruction on proper use of the PIN number;

    [v. Instructions] vii. Notification that the candidate receiving a plurality of the legal votes cast shall be declared elected to the position[.];

    viii. Notification that the first vote cast shall be counted as the official vote and subsequent votes shall be rejected; and

    ix. A statement regarding the confidentiality and security used by the vendor to protect the election process against fraudulent and/or multiple voting.

    [2.] 3. The ballot positions shall be determined by a drawing conducted at a time and place determined appropriate by the Board Secretary [of the retirement system]. All candidates [shall be invited to] may attend such drawing by contacting the Board Secretary.

    [3. The ballots, together with postage-paid return envelopes, shall be distributed by the certifying officers.]

    4. A receipt shall be signed by each certifying officer acknowledging the receipt and distribution of the [ballots] election packets.

  3. The Board shall assess the percentage of returned votes after the conclusion of each election and determine based upon an analysis of the frequency of use of the paper ballots versus the cost of providing the paper ballots whether or not a paper ballot should continue to be incorporated in the election packet in future elections as denoted in (e) above. The Secretary shall notify the vendor handling the next election of the Board's decision regarding continued inclusion of the paper ballot in the initial election packet. If members cannot cast an electronic ballot, they shall have an opportunity to cast a paper ballot. If the Board determines that paper ballots shall no longer be included in the initial election packet, then the following apply to the distribution of paper ballots upon member request:

    1. Active members may contact the vendor handling the election to request a paper ballot if the voter is unable to cast a ballot through any of the other electronic methods mentioned in (e) above. Members shall provide the vendor with their proper ballot and pension numbers and home address.

    2. Upon proper request by an eligible voter, the vendor shall mail a paper ballot to the voter's home address, together with instructions for casting the ballot, biographical information about the candidates, and a postage-paid return envelope.

    [5.] 3. The instructions shall also advise that the [signature identifying the voter shall be severed from the ballot before it is removed from the envelope] vendor shall sever the envelope containing the voter's signature from the ballot, thus assuring a secret ballot.

    [6. Failing to sign a ballot or voting for more candidates than instructed shall be cause for rejection of the ballot.]

    [7. Mutilated] 4. Unsigned ballots, mutilated ballots, illegible ballots, ballots with a write-in vote, multiple votes or any other ballot where it cannot be determined whom the voter intended to vote for shall be declared invalid and not considered in the final election count.

    [8. The candidate receiving the highest number of legal votes shall be elected to the position.]

    [9. The Secretary of the Board shall oversee the election process to ensure that the vendor complies with all of the requirements and assures the validity of the final election count.]

    [10. The candidates whose names are printed upon the ballots shall be informed as to the method and the date of counting the ballots and shall be invited to be present or to be represented at the counting of the ballots.]

    [(f)] (g) The following apply to biographical information:

    1. An informational sheet of biographical information regarding each candidate shall be prepared by the [Division of Pensions and Benefits. The information regarding each candidate shall be] candidate and submitted [by the candidate and the informational sheet shall also be approved by the Board of Trustees] to the Board Secretary.

    2. The Board Secretary shall inform each candidate that [a background may be included with or upon the ballot and provide them with the opportunity to submit information regarding such material] the biographical information shall be included with the election packet.

    3. [If not included upon the ballot, the] The biographical information shall be distributed to the certifying officer of each employing agency at the time of distribution of the [ballots or notice of election without balloting] election packets, or otherwise distributed as approved by the Board of Trustees. The employer should post this information at appropriate places throughout the workplace of each employing agency so that the members of the retirement system shall have a reasonable opportunity to read and consider the biographical information regarding the candidates.

    [4. Copies of the informational sheet shall be distributed to the certifying officer of each employing agency at the time of distribution of ballot or notices of election without balloting.]

    [5. The informational sheets shall be posted by the employer at appropriate places throughout the workplace of each employing agency or be otherwise distributed as approved by the Board of Trustees so that the members of the retirement system shall have reasonable opportunity to read and consider the biographical information regarding the candidates.]

  4. The following apply to vote tabulation:

1. Only a member's first vote shall be counted as the official electronic or paper ballot. All duplicate or subsequent votes shall be considered invalid and not included in the final election count.

2. The candidate receiving the highest number of all legal votes contained in (e) and (f) above shall be elected to the position.

3. The Secretary of the Board shall oversee the election process to ensure that the vendor complies with all of the requirements and to assure the validity of the final election count.

4. The eligible candidates for the election shall be informed as to the method and the date of counting the ballots and shall be invited to be present or to be represented at the counting of the ballots.

[(g)] (i) The following apply to recount procedures:

  1. Any candidate or member[,] who shall have reason to believe that an error has been made in counting or declaring the vote[,] may request, in writing, within 20 days of the certification of the results of the election, [request, in writing,] that the Board of Trustees [shall], at its next regular meeting or at a special meeting, hold a hearing to consider the request and determine whether a recount shall be held. The Board shall notify all candidates of its decision within 10 days thereafter. At such hearing, any member of the Board[,] who is a candidate on the contested ballot[,] shall not vote in the Board's decision on the request. [Each candidate] Candidates on the contested ballot shall be invited to attend the Board's meeting and may present evidence to support [his or her] their beliefs.

2. If a candidate or other interested party requests a recount in writing within the prescribed time, this request shall be reviewed and granted by the Board of Trustees if a recount could possibly affect the results of the election. All ballots received shall then be recounted and the recount shall be supervised by the [election board] Board Secretary. The [election board] Board Secretary shall certify the results of the recount to the Board of Trustees. If a recount is not requested within 20 days, the ballots may be destroyed.

3. Upon election and the taking of an oath of office, police and fire member-trustees shall serve for a term of four years. In the event that no member is certified as the winner of an election, the incumbent trustee shall serve until a successor is certified by the Board of Trustees.

(j) If there are at least two candidates in an election for member- trustee and the victorious candidate dies or is unable or unwilling to serve as such member-trustee prior to the beginning of the candidate's term as trustee, the candidate who obtained the next highest number of votes in that election (that is, the first runner-up) shall be selected to fill the Board vacancy caused by the death or inability or unwillingness to serve of the successful candidate. If the Board selects the first runner-up in such election and that person is unable or unwilling to accept the position, then the Board shall select the candidate who obtained the next highest number of votes in that election. If there is no second runner-up, the Board shall conduct a new election to fill the Board vacancy. For purposes of this provision, a member- trustee's term begins upon the taking of the oath of office.


POLICE AND FIREMEN'S RETIREMENT SYSTEM
AGE REQUIREMENTS

Adopted Amendment

Cite as 32 N.J.R. 2599(a)

Adopted July 17, 2000

Summary

The Retirement System and the Division recently have been receiving many questions regarding what military service is permissible to use to reduce one's age for meeting the maximum age requirements for enrollment in the Police and Firemen's Retirement System (PFRS). The statute which provides for this age reduction, N.J.S.A. 38:23A-2, was written many years ago, and did not cover any conflicts after Vietnam. The Department of Personnel requested clarification of the applicability to this statute to later conflicts, and regarding which types of service could be used to reduce age. The reply the Department of Personnel received, Opinion No. 97-0074, Follow Up Questions to Attorney General Formal Opinion 1 (1997), clarified these issues, but this clarification was never reflected in the rule. Therefore, the PFRS is proposing to amend N.J.A.C. 17:4-2.5, Age requirements, to include the clarifications provided by the Attorney General's Office.

At N.J.A.C. 17:4-2.5(c), the Board proposes to add "conflicts as defined in N.J.S.A. 43:16A-11.7," which statute provides the dates of the conflicts for determining veteran status. The Board proposes to delete existing subsection (d) through paragraph (d)2 and replace it with the clarification that the period of time to be deducted from an individual's age is limited to actual time served during the war or conflict. The limitation previously found at paragraph (d)1 will be combined with this subsection. Paragraph (d)2 regarding merchant marine service will be deleted as Federal law regarding this type of service during specific dates changed and, in 1991, N.J.S.A. 43:16A-11.7(16) were corrected by the Legislative Council to reflect this Federal change. Paragraph (d)3 would become subsection (e).

Full text of the proposal follows:

17:4-2.5 Age requirements

(a)-(b) (No change.)

(c) N.J.S.A. 38:23A 1 et seq. is recognized as a modification of the age maximum for certain "veterans". Persons having served in the active military service of the United States during "time of war " and conflict as defined in N.J.S.A. 43:16A-11.7 can for the purpose of meeting the maximum age requirement for entrance into this retirement system[,] reduce their actual age by the stipulated period of such military service. Should this reduced age meet the age maximum in effect [at the time of entrance into such military service], the applicant will be considered as having met the age maximum for enrollment.

[(d) An initial period of military service, a part of which was rendered in "time of war," will be credited in full for such purpose:]

[1. Any succeeding periods of military service will not be considered.]

[2. Maritime service or service with the merchant marine is not considered.]

(d) The period of time to be deducted from an individual's age is limited to actual time served during the war or conflict. Earlier or later periods of military service cannot be used to reduce individuals' ages so as to enable them to meet any maximum age limits.

[3.](e) Any active military service terminating in dishonorable discharge is not creditable.


POLICE AND FIREMEN'S RETIREMENT SYSTEM
ELIGIBILITY FOR PURCHASE AND
OPTIONAL PURCHASES OF ELIGIBLE SERVICE

Adopted Amendment: N.J.A.C. 17:4-5.1

Adopted Repeal and New Rule: N.J.A.C. 17:4-5.3

Cite as 32 N.J.R. 2600(a)

Adopted July 17, 2000

Summary

The proposed amendment to N.J.A.C. 17:4-5.1 would delete the word "contributing" and thus eliminate the requirement that an active member of the Police and Firemen's Retirement System also be on payroll to purchase service. This requirement has resulted in a number of people being placed on payroll for one pay period to be eligible to make a purchase. It makes more sense to allow the member to purchase time without having to return to payroll in order to do so. Payment for purchases by members not on active payroll would have to be by lump sum because they would not be on payrolls from which installment payments could be deducted. Another change would delete the word "temporary" and the one-year limitation of temporary purchases from N.J.A.C. 17:4-5.1(b) as this limitation was removed by P.L. 1991, c.138. Proposed N.J.A.C. 17:4-5.1(c) would provide that the Board of Trustees may disallow the purchase of all or a portion of former service it deems dishonorable as provided under N.J.S.A. 43:1-3.

The proposed repeal and new rule at N.J.A.C. 17:4-5.3 would categorize purchases into "shared-cost" and "full-cost" purchases to correspond with adopted amendments to the rules governing the Teachers' Pension and Annuity Fund (TPAF) and the Public Employees' Retirement System (PERS). See N.J.A.C. 17:3-5.1, 5.5 and 5.8 (TPAF rules) and N.J.A.C. 17:2-5.1, 5.5 and 5.11 (PERS rules).

Existing subsection (a) of N.J.A.C. 17:4-5.1 governing the purchase of temporary service would be addressed at proposed N.J.A.C. 17:4-5.3(a)3. The types of service eligible for purchase and the classification of those purchases as shared cost or full cost purchases, and the formula for calculating the cost of those purchases would be added to this paragraph.

N.J.S.A. 43:16A-11.10 gave members the ability to purchase leaves of absence. Proposed N.J.A.C. 17:4-5.3(a)4 reflects the authority provided to members under the statute and would establish that childcare is classified for purchase by the Division as a leave for personal reasons and that the Division may require proof that an illness existed for the length of a leave. Proposed N.J.A.C. 17:4-5.3(a)5 would articulate members' ability to purchase out-of-State public employment pursuant to N.J.S.A. 43:16A-11.10, and that out-of-State service cannot be used toward an ordinary disability retirement, pursuant to N.J.S.A. 43:16A-6(1). N.J.S.A. 43:16A-11.9, 11.11 and 11.12 provides PFRS members with the ability to purchase certain periods of service with public agencies, military services before enrollment and United States Government service, but also provide that employers should not be liable for any of the costs associated with these types of purchases. Proposed new rule N.J.A.C. 17:4-5.3(b)1 and 2 provide that this type of service cannot be used to qualify for ordinary disability retirement, pursuant to N.J.S.A. 43:16A-6(1).

In addition, recent legislation, P.L. 1999, c.338, N.J.S.A. 43:16A- 11.13, authorized police members to purchase service credit during a period of layoff. Proposed new N.J.A.C. 17:4-5.3(b) reflects these statutory authorizations. N.J.S.A. 43:16A-11.11 limits the total amount of service a member is able to purchase to 10 years unless the member is a veteran, in which case the member may purchase an additional 5 years of service during periods of war as defined by N.J.S.A. 43:16A-11.7. Proposed new N.J.A.C. 17:4-5.3(c) reflects this statutory provision.

Full text of the proposal follows:

17:4-5.1 [Temporary service] Eligibility for purchase

(a) Only active [contributing] members of the [system] System shall be eligible to make application for [the] purchase of credit. Active members who are not currently contributing to the Retirement System must purchase their requested service in a lump sum.

(b) In order to be eligible to purchase [temporary] service, a member must submit a written request to purchase such service [within one year from the date of his initial pension contributions are certified to begin] and such purchase must be authorized by the member before the expiration date indicated on the [latter which quotes the terms of the purchase] quotation letter.

(c) The receipt of a public pension or retirement benefit is expressly conditioned upon the rendering of honorable service by a public officer or employee. Therefore, the Board of Trustees shall disallow the purchase of all or a portion of former service it deems to be dishonorable in accordance with N.J.S.A. 43:1-3.

17:4-5.3 Optional purchases of eligible service

[(a) Members, who purchase temporary service, must purchase all such service immediately preceding enrollment. The purchase will be calculated on the basis of the member's current salary multiplied by the factor established by the actuary. "Special Police" service cannot be purchased.]

[(b) The cost of purchase of former Police and Firemen's Retirement System or any other State-administered retirement system membership credit will be calculated on the basis of the actuarial factor established for the member's age at the time of purchase multiplied by his or her current salary. All of the service from a former membership must be included in the purchase of such service.]

(a) A shared-cost purchase is one in which the member pays only the employee's share and not the employer's share of the purchase. A member may purchase all or a portion of such eligible service. A shared-cost purchase will be calculated on the basis of the actuarialpurchase factor established for the member's age at the time of the purchase request times the higher of either the member's current annual base salary or highest fiscal year base salary. The following types of purchases are shared-cost purchases:

1. Former membership credit with a State-administered retirement system;

1. Former service with any other employer that was not certified for membership but which would have qualified on an optional or compulsory basis at the time the service was rendered;

3. Continuous temporary service as a police officer or firefighter immediately preceding enrollment. "Special Police" service cannot be purchased;

2. Leaves of absence without pay:

i. The period of the leave for personal reasons which does not exceed 93 days. Childcare is considered leave for personal reasons.

ii. The period of the leave up to two years for personal illness. The Division may require proof that the illness existed for the length of the leave.

5. Eligible out-of-State public employment, up to a total purchase of 10 years. Out-of-State service cannot be used to qualify for an ordinary disability retirement.

  1. The types of purchases indicated in (b)1 through 5 below are considered to be full-cost purchases. A member may purchase all or a portion of such eligible service. The lump sum purchase cost shall be calculated on the basis of the actuarial purchase factor established for the member's nearest age at the time of the purchase request times the higher of either the member's current annual base salary or highest fiscal year base salary. The computed lump sum purchase cost shall then be doubled to establish the full cost to the member. This cost is calculated in this manner as N.J.S.A. 43:16A-11.9, 11.11 and 11.12 provide that the employer shall not be liable for any costs of purchasing this service; therefore the member must pay both the employee and employer share.
  1. Active duty military service prior to enrollment. Military service before enrollment cannot be used to qualify for an ordinary disability retirement;

  2. Employment with the Federal government. United States government service cannot be used to qualify for an ordinary disability retirement;

  3. Service established under a local municipal or county retirement system within the State of New Jersey;

  4. Up to three years of service established for certain periods of employment with public agencies or private non-profit agencies pursuant to N.J.S.A. 43:16A-11.9;

  5. Up to three years of service credit for police officer members who were laid off in good standing and not by removal for cause or charges of misconduct or delinquency from employment as police officers and subsequently rehired in PFRS police service positions in accordance with P.L. 1999, c.338, N.J.S.A. 43:16-11.13. The purchase cost is based on the actuarial purchase factor established for the member's nearest age at the time of the purchase request and the member's salary during the 12 months preceding the layoff. The computed lump sum purchase cost will then be doubled to establish the full cost to the member.

(c) A member shall be eligible to purchase an aggregate of up to 10 years of out-of-State public employment, military service and Federal employment provided that the member is not receiving nor is entitled to receive a retirement allowance for such service from any other public retirement system and provides proof to the Division of Pensions and Benefits that the member has withdrawn from such other system. A qualified veteran shall be eligible to purchase an additional five years of military service rendered during periods of war for an aggregate of 15 years of such service.


STATE HEALTH BENEFITS PROGRAM
PREMIUM-SHARING FOR ACTIVE STATE HEALTH BENEFIT COVERAGE;
PREMIUM-SHARING FOR RETIRED STATE HEALTH BENEFIT COVERAGE

Adopted Amendments: N.J.A.C. 17:9-5.12 and 6.8

Cite as 32 N.J.R. 2601(b)

Adopted July 17, 2000

Summary

The purpose of the proposed amendments is to continue to fulfill the responsibility of the State Health Benefits Commission ("Commission") established by P.L. 1996, c.8, which provided, among other things, that the Commission may modify the payment obligations for premiums or periodic charges for health benefits coverage under the State Health Benefits Program (SHBP) for the State and State employees and retirees for whom there is no majority representative for collective negotiations purposes ("nonaligned employees") in a manner consistent with the terms of any collective negotiations agreement binding upon the State. P.L. 1996, c.8, § 6; N.J.S.A. 52:14-17.28b. The proposed amendments affect all nonaligned personnel and some future retirees for whom the State pays the cost of health benefits coverage. This includes not only employees paid through the State's centralized payroll unit, but employees of State colleges and universities for whom there is no majority representative for collective negotiations purposes. The proposed amendments modify the payment obligations for these employees and retirees based on the recently negotiated labor agreements between the State and the unions representing the majority of State employees.

The proposed amendments provide that nonaligned monthly and biweekly employees and retirees (who reached 25 years of service credit after July 1, 2000 or retired on a disability benefit after July 1, 2000) who elect to remain in the Traditional Plan under the SHBP shall pay 25 percent of the cost of the premium of that Plan as established by the Commission effective July 1, 2000 and thereafter. Nonaligned monthly and biweekly employees who elect coverage in an HMO must pay five percent of the cost of the premium of that Plan as established by the State Health Benefits Commission effective July 1, 2000 and thereafter.

The State will continue to pay the full cost for coverage for employees and dependents who elect coverage in NJ PLUS, the State of New Jersey Managed Care/Point of Service plan. Presently, 50 percent of State employees participate in HMOs, 30 percent in NJ PLUS and 20 percent in the Traditional Plan. Employee deductions will begin in accordance with normal payroll schedules to pay for coverage effective July 1, 2000.

Full text of the proposal follows:

17:9-5.12 Premium-sharing for [Traditional Plan] active employee State Health Benefits Coverage

  1. All State employees for whom there is no majority representative for collective negotiations purposes shall be subject to payroll deductions for Traditoinal Plan and HMO coverage in advance of the coverage period in accordance with standard payroll procedures as set forth in this section.

  2. For employees hired before December 11, 1995, payroll deductions for Traditional Plan coverage shall be determined as follows:

    1. Effective with the coverage period commencing on July 1, 1996 for State monthly sub-groups, and July 6, 1996 for State bi-weekly sub-groups and ending June 30, 1997 for monthly sub-groups and the last day of the payroll period closest to July 1, 1997 for bi-weekly sub-groups, employees with a base salary of $50,000 or more shall pay the difference between the cost of the Traditional Plan and the average cost to the State for NJ PLUS and participating HMOs as determined hereafter. Employees with a base salary of less than $50,000 shall pay, on a monthly basis, one percent of base salary but not less than $20.00 per month.

    2. Effective with the coverage period commencing on July 1, 1997 for State monthly sub-groups, and the first day of the bi-weekly coverage period closest to July 1, 1997 for State bi-weekly sub-groups and ending June 30, 2000 for monthly and bi-weekly sub-groups, employees with a base salary of $40,000 or more shall pay the difference between the cost of the Traditional Plan and the average cost to the State for NJ PLUS and participating HMOs as determined hereinafter. Employees with a base salary of less than $40,000 shall pay, on a monthly basis, one percent of base salary but not less than $20.00 per month.

  3. Employees hired on or after December 11, 1995 shall pay the difference between the cost of the Traditional Plan and the average cost to the State for NJ PLUS and participating HMOs as determined hereinafter, effective with the coverage period commencing on July 1, 1996 for State monthly sub-groups, and July 6, 1996 for State bi-weekly sub-groups <<+and ending June 30, 2000 for monthly and bi-weekly sub-groups.

  4. (No change.)

  5. Effective with the coverage period commencing on July 1, 2000, for State monthly and bi-weekly sub-groups:

1. Employees who elect coverage in the Traditional Plan shall pay 25 percent of the cost of that plan's premium as established by the State Health Benefits Commission pursuant to N.J.S.A. 52:14-17.32b;

2. Employees who elect coverage in an HMO Plan shall pay five percent of the cost of that plan's premium as established by the State Health Benefits Commission pursuant to N.J.S.A. 52:14-17.32b; and

3. Employees who elect coverage in NJ PLUS, the State of New Jersey Managed Care/Point of Service plan, shall have no premium payment.

17:9-6.8 Premium-sharing for [Traditional Plan] retired employee State Health Benefit Coverage

  1. (No change.)

  2. For employees hired before December 11, 1995, who accrue 25 years of service credit in a State-administered retirement system or retire on a disability retirement after July 1, 1997 but before July 1, 2000, payroll deductions for Traditional Plan coverage shall be determined as follows:

    1.-2. (No change.)

  3. Employees hired on or after December 11, 1995 who accrue 25 years of service credit in a State-administered retirement system after July 1, 1997 but before July 1, 2000 or retire on a disability retirement after July 1, 1997 but before August 1, 2000, shall upon retirement pay the difference between the cost of the Traditional Plan and the average cost to the State for NJ PLUS and participating HMOs as determined hereinafter.

    (d) (No change.)

  4. For retirees who accrue 25 years of service credit in a State- administered retirement system on or after July 1, 2000 or retire on a disability retirement after July 1, 2000, payroll deductions for Traditional Plan coverage shall be determined as follows:

1. Retirees electing the Traditional Plan shall pay 25 percent of the cost of that plan's premium as established by the State Health Benefits Commission pursuant to N.J.S.A. 52:14-17.32b; and

2. Retirees electing NJ PLUS, the State of New Jersey Managed Care/Point of Service Plan, or an HMO shall have no premium payment.


POLICE AND FIREMEN'S RETIREMENT SYSTEM
OUTSTANDING LOAN

Adopted Amendment: N.J.A.C. 17:4-6.4

Cite as 32 N.J.R. 2601(a)

Adopted July 17, 2000

Summary

Until recently, if a member retired with an outstanding loan balance, either that balance had to be paid in full at retirement, or the member's entire pension check was withheld until the loan was satisfied. The only way loan repayment at the same amount the member was paying as an active employee could be carried into retirement was if the member retired on a disability retirement allowance or retired on another type of benefit but was ill or disabled. Proof of the disability had to be provided before loan deductions could be carried into retirement.

P.L. 1999, c.132 changed the repayment method of outstanding loans at retirement. The new law provides that a member who retires with an outstanding loan will repay the loan through deductions from the retirement benefits payable in the same monthly amount that was deducted from the member's compensation immediately before retirement until the balance of the loan together with the interest is repaid. If the retiree dies before the loan with interest is repaid, the remaining loan balance will be repaid from the proceeds of any other benefits payable on the account of the retiree either in the form of monthly payments due to the beneficiaries or in the form of a lump sum payment from the pension or group life insurance. This proposed amendment will reflect this statutory change. The proposed deletion of N.J.A.C. 17:4- 6.4(b) and (c) will eliminate any redundancies from this rule because the proposed amendment will make the repayment option available to all retirees regardless of disability.

The proposed amendment at N.J.A.C. 17:4-6.4(a)2i provides that withholding for New Jersey State income tax is an authorized deduction that will be taken prior to withholdings for a loan. P.L. 1989, c.328 permitted withholding State income tax from retirement allowances. The Division began implementing voluntary State income tax withholding in 1989 and proposes to update the rule to reflect this change.

Full text of the proposal follows:

17:4-6.4 Outstanding loan

(a) A member who has an outstanding loan balance at the time of retirement may repay the loan balance, with interest, as follows:

1. In full before the retirement allowance becomes due and payable as provided in N.J.A.C. 17:4-6.3; [or]

2. By retention of retirement benefit payments, excluding authorized deductions, by the [retirement system] Retirement System until the loan balance, with interest, is repaid.. . . .

i. Authorized deductions include Federal tax liens, health benefit premiums, and Federal and State income tax withholding. [If the member does not request repayment in full, repayment is by retention of retirement benefits.]; or

3. By deductions from retirement benefit payments of the same monthly amount deducted from the member's compensation immediately preceding retirement until the loan balance, with interest, is repaid as authorized by P.L. 1999, c.132. If the member does not request repayment in full, repayment is by deductions in the same monthly amount deducted from the member's compensation immediately preceding retirement.

[(b) A member who retires on a disability pension or because of medical illness or disability as determined by the board of trustees with an outstanding loan balance may repay the balance as follows:]

[1. In the manner prescribed in (a) above; or]

[2. By deductions from retirement benefit payments of the same monthly amount deducted from the member's compensation immediately preceding retirement until the loan balance, with interest, is repaid.] . . . .

[i. If a member who retires on a disability pension does not request another repayment option, repayment is by deductions in the same monthly amount deducted from the member's compensation immediately preceding retirement.] . . . .

[(c) A member whose retirement is other than a disability retirement and who wants to establish that the retirement is necessitated by medical illness or disability shall submit an application acceptable to the retirement system together with a report of the member's personal or attending physician and all other physicians and all other physician's reports, hospital records or other medical evidence which the member can supply pertaining to the illness or disability. The medical evidence shall be sufficient to show to the satisfaction of the board of trustees that the member is totally and permanently disabled and would qualify on a medical basis for ordinary disability retirement. The board may require the member to be examined by a physician designated by the retirement system, and may refer the medical evidence to the medical panel for its report on whether the member is totally and permanently disabled and retirement is necessitated by medical illness or disability.]

[(d)] (b) If a retirant dies before the loan balance, with interest, is repaid, the remaining balance is paid first from the group life insurance proceeds, and then from the proceeds of any other benefits payable on account of the retirant in the form of monthly payments or the balance of the Option I reserves or the balance of the retirant's accumulated deductions and regular interest that are due to the beneficiary or estate. If the retirant designated multiple beneficiaries to receive these benefits, each beneficiary shares in repaying the remaining balance in the same proportion in which they are entitled to the benefits.


TEACHERS' PENSION AND ANNUITY FUND
INSURANCE DEATH BENEFITS;
BENEFITS PAYABLE UNDER CHAPTER 96, LAWS OF 1984,
AS AMENDED BY CHAPTER 221, LAWS OF 1995

Proposed New Rule: N.J.A.C 17:3-3.13

Summary

The purpose of this proposed new rule is to clarify the death benefits payable under the Teachers' Pension and Annuity Fund (TPAF) when beneficiaries request that retirements become effective under Chapter 221, Laws of 1995. This law amended Chapter 96 of the Laws of 1984 which first authorized beneficiaries to request that retirements become effective under certain circumstances where members died before retirements became effective. Prior to Chapter 96, a retirement was not effective until 30 days after the date specified by the member or the date of Board action on the retirement, whichever was later. Chapter 221 eliminated all the requirements for beneficiaries to be eligible to make such requests other than the requirement that a member file a retirement application.

Chapter 96 was interpreted by the Division of Pensions and Benefits as giving the beneficiaries of members who met the requirements of the law the option of receiving the death benefits payable on behalf of a member who died in active service (1 1/2 or 3 1/2 times final year salary) and the return of the member's contributions plus accrued interest, or a retirement allowance under an optional retirement benefit selection and the death benefits payable on behalf of a retiree (3/16 or 7/16 times final year salary). If a member took the steps necessary to convert the difference between the amount of active and retired death benefits, the beneficiary would also receive the converted death benefit.

After the enactment of Chapter 221, questions arose concerning the appropriate interpretation of these laws and the benefits which should be paid under them. Clarifying advice was requested from the Attorney General. The advice confirmed that the interpretation and practice of the Division was the correct application of the law.

The proposed new rule provides that the beneficiary designated for an optional settlement on a retirement application may request that the retirement take effect and that the optional settlement be made under Chapter 221. If there is no such beneficiary, the beneficiary designated to receive the return of contributions or unpaid benefits at the date of death may make the request.

If a beneficiary requests that a retirement become effective, the death benefits payable on behalf of the member shall be the benefits payable on behalf of a member who dies after retirement as provided under the laws governing the retirement system. If a member files the required application to convert some or all of the difference between the amount of active and retired death benefits and pays the initial premium, the amount of the converted death benefits shall be paid as claims under the group insurance policies for noncontributory and contributory death benefits.

The premiums paid shall be retained by the carrier and shall be applied to the premiums payable by the State and the retirement system for the group policies.

Full text of the proposed new rules follows:

17:3-3.13 Benefits payable under Chapter 96, Laws of 1984, as amended by Chapter 221, Laws of 1995

1. For the purposes of section 1 Chapter 96, Laws of 1984, as amended by section 2 of Chapter 221, Laws of 1995 (N.J.S.A. 18A:66-47), the person designated as the beneficiary for an optional settlement on the retirement application may request that a retirement become effective and that a selection of an optional settlement be made as authorized by the law. If there is no designated beneficiary for an optional settlement, the person designated as the beneficiary to receive the return of contributions or unpaid benefits due to a retiree at the date of death may make this request. If a beneficiary requests that an optional settlement be made, the death benefits payable on behalf of the member shall be the death benefits payable on behalf of a member who dies after retirement as otherwise provided in the Teachers' Pension and Annuity Fund Law, as amended and supplemented (N.J.S.A. 18A:66-1 through 93).

2. Where a beneficiary of a member requests that a retirement take effect and that a selection of an optional settlement be made as authorized under section 2 of Chapter 96 Laws of 1984, as amended by section 1 of Chapter 221, Laws of 1995, an additional amount of insurance, not to exceed the amount of insurance that could be converted under the group policies for noncontributory and contributory death benefits, shall be paid as claims under the group policies only if the member files an application for conversion of the insurance upon retirement as provided under N.J.S.A. 18A:66-79 and pays the initial premium for the converted insurance. The premiums paid for the converted insurance shall be retained by the carrier and be applied to the premiums payable by the State and the retirement system for benefits provided under the group policies.


PUBLIC EMPLOYEES' RETIREMENT SYSTEM
ELECTION OF MEMBER TRUSTEE

Proposed Repeal and New Rule: N.J.A.C. 17:2-1.4

Cite as 31 N.J.R. 3926(a)

Summary

The Division is proposing to revise completely N.J.A.C. 17:2-1.4 due to the advent of electronic voting. The Division currently uses an outside vendor to mail and tabulate approximately 236,000 paper ballots for members of the Public Employees' Retirement System. The proposed new rule will serve as a guideline for the Division's move to a more automated voting system. While the initial ballots and their distribution remain similar to old requirements, the voting method through fax, touch-tone phone and internet access has changed. Paper ballots are still an option, but the new method should save time and resources while efficiently and accurately getting the job done. The voting process itself remains the same except for the addition of a new mechanism by which voters may vote and ballots may be collected.

The Division has issued an RFP (Request for Proposals) to obtain a vendor for this electronic process, and would like the rule which will guide the voting process in place before the vendor begins.

Full text of the proposed new rule follows:

17:2-1.4 Election of member-trustee

(a) The procedures for the election of a State, municipal, or county trustee representative to the Public Employees' Retirement System (PERS) Board of Trustees are set forth in this section.

(b) Eligible candidates shall include any active or retired member of the PERS. Only State members may seek State seats, only municipal members may seek municipal seats, and only county members may seek county seats on the Board of Trustees. All candidates shall comply with any and all requirements as provided by law and these rules. Any candidate who fails to comply with the law and these rules is automatically disqualified as a candidate.

(c) The following apply to election notices:

1. At least nine months prior to the expiration of the term of each elected trustee or immediately upon a vacancy on the Board, a notice shall be prepared and distributed by the Secretary of the Board or a contracted vendor through the certifying officers to each member who is eligible to vote.

2. The election notice shall:

i. Advise the member of the election;

ii. State the position and term to be filled;

iii. State that nominating petitions are required and that the petition forms are available from the Board Secretary at the Division of Pensions and Benefits;

iv. State the date of the election;

v. Identify all present members of the Board; and

vi. Include any other information regarding a particular election as specified by the Board of Trustees.

3. Election notices shall be forwarded in bulk and in appropriate number to the certifying officer or other appropriate fiscal officer of each employing agency, together with instructions as to who is to receive the notices.

4. A confirmation form also shall be forwarded to each certifying officer or appropriate fiscal officer. Such form shall be returned to the Secretary or contracted vendor and shall include documentation of:

i. Receipt of the notice by the certifying officer or other appropriate fiscal officer; and

ii. The extent to which the certifying officer or other appropriate fiscal officer has distributed the notice to eligible members.

5. Election notices shall be distributed to each member who is eligible to vote, as shown on a master list of members that shall be recorded and stored at the Board Secretary's Office and made available for review to any candidate at the Division of Pensions and Benefits. Only active members of the PERS may vote in the election of member-trustees of the Board of Trustees of the PERS. Any challenges or questions concerning eligible voters shall be made prior to the close of the voting deadline. Failure to challenge the list or any part of it in writing prior to the voting deadline shall disallow any challenges or questions raised after the close of voting.

(d) The following apply to nominated petitions:

1. Nominating petition forms shall be available from the Secretary of the PERS.

2. Nominating petitions shall be forwarded to each active or retired member who requests them after the Division verifies the member's eligibility to run for such election.

3. The petition forms shall explain that:

i. For State trustee, at least 500 active State members, who are eligible to vote for the position, are required to sign the petition for the candidate.

ii. For municipal trustee, at least 500 active municipal members, who are eligible to vote for the position, are required to sign the petition for the candidate.

iii. For county trustee at least 500 active county members, who are eligible to vote for the position, are required to sign the petition for the candidate.

4. The petition form shall require the candidate's name and employer, and the pension membership or Social Security number of each petitioner.

5. The form shall explain that an active member shall sign only one petition, with State members petitioning for a State candidate, municipal members petitioning for a municipal candidate, and county members petitioning for a county candidate.

6. The dates for filing and returning the petitions shall be identified, as well as the approximate date that ballots shall be sent to employers for distribution to voters.

7. Candidates named on the petitions shall sign each petition in a designated space indicating their willingness to be a candidate.

8. If only one candidate is nominated for a position, the candidate shall be deemed elected to the position without balloting. A notice to the certifying officers shall be distributed for posting at the employing locations, indicating no contest since only one candidate was nominated by petition.

(e) The following applies to distribution of election packets:

1. The Board reserves the right to authorize a vendor to collect votes through one or more of the following election processes. All active eligible members shall have an opportunity to cast a ballot through one of the following:

i. Telephone (voice retrieval system--electronic vote);

ii. Internet access (electronic vote);

iii. Fax server (electronic vote); or

iv. Color-coded paper ballot (postage-paid, self-seal return mailer).

2. For each eligible voter, there shall be forwarded to the certifying officer individual member packets with instructions for balloting which shall include the following information:

i. The eligible member's name, pension membership number, pension location number, ballot number and personal identification number (PIN);

ii. The closing date of the election;

iii. The name of each candidate nominated including a biographical sketch listing the candidate's background and employer;

iv. Instructions on how to properly cast a paper ballot, including notification that shall advise the member that the vendor shall sever the envelope containing the voter's signature from the ballot, thus assuring a secret ballot. Unsigned ballots, mutilated ballots, illegible ballots, ballots with write-in votes, ballots with multiple votes or ballots where it cannot be determined whom the member intended to vote for shall be declared invalid and not considered in the final election count;

v. Instruction on how to properly cast an electronic vote;

vi. Instruction on proper use of the PIN number;

vii. Information stating that the candidate receiving a plurality of all the legal votes cast shall be declared elected to the position subject to approval by the Board;

viii. Information on how the first vote cast shall be counted as the official vote and subsequent votes will be rejected; and

ix. A statement regarding the confidentiality and security used by the vendor to protect the election process against fraudulent and/or multiple voting.

3. The ballot positions shall be determined by a drawing conducted at a time and place determined by the Board Secretary. All candidates may attend such drawing by contacting the Board Secretary's Office.

4. A receipt shall be signed by each certifying officer or representative, acknowledging the receipt and distribution of the election packets.

(f) The Board shall assess the percentage of returned votes after the conclusion of each respective election and determine whether or not the paper ballot should continue to be incorporated in the election packet as denoted in (e) above. The Secretary shall notify the vendor handling the election of the Board's decision regarding continued inclusion of the paper ballot in the initial election packet. If members cannot cast an electronic ballot, they shall have an opportunity to cast a paper ballot. If the Board determines that paper ballots no longer need to be included in the initial election packet, then the following apply to the distribution of paper ballots upon member request:

1. Active members may contact the vendor handling the election to request a paper ballot if the voter is unable to cast a ballot through any of the other electronic methods mentioned in (e) above. Members shall provide the vendor with their proper ballot/pension number and home address.

2. Upon proper notification or request by an eligible voter, the vendor shall mail a paper ballot to the voter's home address, together with instructions for casting the ballot, biographical information about the candidates, and a postage-paid return envelope.

3. The instructions shall also advise that the vendor shall sever the envelope containing the voter's signature from the ballot, thus assuring a secret ballot.

4. Unsigned ballots, mutilated ballots, illegible ballots, ballots with write-in votes, ballots with multiple votes or ballots where it cannot be determined whom the member intended to vote for shall be declared invalid and not considered in the final election count.

(g) The following applies to biographical information:

1. An informational sheet of biographical information regarding each candidate shall be prepared by the candidate and submitted to the Secretary for approval.

2. The Secretary shall inform each candidate that the approved biographical information will be included with the ballot packet.

3. The biographical information shall be distributed to the certifying officer of each employing agency at the time of distribution of the election packets, or otherwise distributed as approved by the Board of Trustees. The employer should post this information at appropriate places throughout the workplace of each employing agency so that the members of the retirement system shall have a reasonable opportunity to read and consider the biographical information regarding the candidates.

(h) Vote tabulation shall be as follows:

1. Only a member's first vote shall be counted as the official electronic or paper ballot. All duplicate or subsequent votes shall be considered invalid and not included in the final election count.

2. The candidate receiving the highest number of all legal votes contained in (e), and (f) above shall be elected to the position.

3. The Secretary of the Board shall oversee the election process to ensure that the vendor complies with all of the requirements and to assure the validity of the final election count.

4. The eligible candidates for the election shall be informed as to the method and the date of counting the ballots and shall be invited to be present or to be represented at the counting of the ballots.

(i) The following applies to recount procedures:

1. Any candidate or member, who shall have reason to believe that an error has been made in counting or declaring the vote, may request, in writing, within 20 days of the certification of the results of the election, that the Board of Trustees, at its next regular meeting or at a special meeting, hold a hearing to consider the request and determine whether a recount shall be held. The Board shall notify all candidates of its decision within 10 days thereafter. At such hearing, any member of the Board who is a candidate on the contested ballot shall not vote in the Board's decision on the request. All candidates on the contested ballot shall be invited to attend the Board's meeting and may present evidence to support their beliefs.

2. If a candidate or other interested party requests a recount, in writing, within the prescribed time, this request shall be reviewed and granted by the Board of Trustees if a recount could possibly affect the results of the election. All ballots received then shall be recounted and the recount shall be supervised by the Board Secretary. The Secretary shall certify the results of the recount to the Board of Trustees. If a recount is not requested within 20 days, the ballots may be destroyed.

3. Upon election and the taking of an oath of office, the State, municipal or county member-trustees shall serve for a term of three years. In the event that no member is certified as the winner of an election, the incumbent trustee shall serve until a successor is certified by the Board of Trustees.

(j) If there are at least three candidates in an election for member- trustee and the victorious candidate dies or declines to serve as such member- trustee prior to the beginning of the candidate's term as trustee, the candidate who obtained the next highest number of votes in that election (that is, the first runner-up) shall be selected to fill the Board vacancy caused by the death or inability or unwillingness to serve of the successful candidate. If the Board selects the first runner-up in such election and that person is unable or unwilling to accept the position, then the Board shall select the candidate who obtained the next highest number of votes in that election. If there is no second runner-up, the Board shall conduct a new election to fill the Board vacancy. For purposes of this provision, a member-trustee's term begins upon the taking of the oath of office.

Please send your comments to: Division of Pensions and Benefits


TEACHERS' PENSION AND ANNUITY FUND
ACCEPTABLE DESIGNATIONS OF BENEFICIARIES

Proposed New Rule: N.J.A.C. 17:3-3.13

The agency proposal follows:

Summary

At the present time, when a member files for a retirement allowance, the beneficiaries designated on the retirement application are not in effect until the member's retirement date, even though the designation has been duly executed on a form acceptable to the Division. If members neglect to change beneficiaries when necessary, problems may arise. In some cases, members have not changed their designated beneficiaries since their enrollment into the retirement system, some 25 or 30 years earlier. They may have their aunts or uncles named as beneficiaries and not their spouses or children that were acquired after enrollment.

When members file for retirement, they designate current beneficiaries, but if those members die before retirement, the Division must pay the previously designated beneficiaries and not the current ones named on the retirement application. The proposed new rule would allow the Division to recognize the beneficiary properly designated on the retirement application, even if the retirement has not yet become effective.

17:3-3.13 Acceptable designations of beneficiaries

(a) The beneficiary designation on a duly executed retirement application that is filed with and accepted by the Division supersedes any older designation of beneficiary on file. The designation is effective upon acceptance by the Division, even if the retirement date on the application is in the future.

1. The beneficiary or beneficiaries designated on the retirement application for the retirement allowance shall be the beneficiary or beneficiaries for the return of the member's accumulated contributions.

2. If no beneficiary designation is in effect at the time of the member's death, or if no one is named as beneficiary for the retirement allowance, the Division shall pay the benefit to the member's estate.

(b) The beneficiary or beneficiaries of the group life insurance designated on the retirement application shall be the beneficiary or beneficiaries of the active group life insurance.

1. If no beneficiary designation is in effect at the time of the member's death, or if no one is named as beneficiary for life insurance, the Division shall pay the benefit to the member's estate.

Cite as 31 N.J. Reg. 3930(a)

Please send your comments to: Division of Pensions and Benefits


POLICE AND FIREMEN'S RETIREMENT SYSTEM
MEMBERSHIP, CREDITABLE COMPENSATION

Reproposed Repeal and New Rule: N.J.A.C. 17:4-4.1

Summary

The Police and Firemen's Retirement System Board of Trustees, upon further review of the proposed repeal and new rule regarding creditable compensation originally published in the March 1, 1999 New Jersey Register, 31 N.J.R. 591(a), has determined that a revision to the proposed new rule is necessary. The Board also determined that the proposed revision is sufficiently substantive to require the republication of this proposed rule for comment.

The grandfather clause found at proposed subsection (i), after much review and discussion by the Board, is modified on reproposal to state that the rule shall not be applicable to longevity pay, holiday pay, or education pay which is included in the creditable compensation of a retiree or member on a mandatory basis in accordance with the provisions of a collective negotiations agreement or employment policy of an employer which has been approved and executed on or before March 1, 1999 until the termination date of the agreement or policy or December 31, 2000, whichever occurs first. Subsection (i) as originally proposed was effective for participants who retired on or before the effective date of the rule; or for participants who retired on or before January 1, 2002 and whose total compensation was based on collective bargaining agreement provisions in effect on the effective date of the rule. This change is being made due to advice received from the Division's legal advisor as well as in response to some of the comments received during the original comment period, as discussed below.

Subparagraph (a)2xi is modified on reproposal to add "or employment policy" to the collective bargaining agreement, to include those not covered by collective bargaining. Subsection (c) is modified on reproposal to include the word "employee" before "contributions" to clarify whose contributions are to be returned. Finally, subsection (d) is modified on reproposal to allow for additional sources of information to be used to determine if a percentage increase in salary is excessive.

The purpose of the reproposed repeal and new rule is to clarify the compensation of members which shall be used for the purposes of employer and employee contributions to the Police and Firemen's Retirement System, and for the determination of benefits under the system. The basic design of the retirement system is that employers and members pay contributions to the retirement system based upon the salaries of the members during their active service to pay for statutorily defined death and retirement benefits. These benefits are based in large measure upon the salaries upon which the contributions are made. The law governing the retirement system, at N.J.S.A. 43:16A-1, defines compensation for the purposes of the system as follows: "Compensation" shall mean the base salary, for services as a member as defined in this Act, which is in accordance with established salary policies of the member's employer for all employees in the same position but shall not include individual salary adjustments which are granted primarily in anticipation of the member's retirement or additional remuneration for performing temporary duties beyond the regular workday.

It is clear from the basic design of the retirement system and the definition of "compensation" that the law contemplates a system of employer and employee contributions on the regular weekly, bi-weekly or monthly base salary of members to fund death or retirement benefits based upon such regular salary in the year before death or
retirement. "Compensation" for pension purposes is not intended to include temporary remuneration such as bonuses or overtime pay, or adjustments in anticipation of retirement to enhance retirement benefits.

The proposed new rule attempts to clarify this area by indicating specific types of remuneration which are not includable for pension purposes. Unfortunately, there is still a significant amount of misunderstanding or lack of understanding among employers, members, and member representatives on this subject. The lack of clarity on what types of remuneration may be included in compensation for pension purposes has led to many cases where the Board of Trustees has had to review the compensation of members about to retire or already retired, and to deny the use of certain remuneration in the calculation of retirement benefits. In some cases, the benefits of retirees had to be recalculated and the retirees had to repay the retirement system for benefits they received based upon the excluded remuneration. These cases have usually involved situations where some forms of compensation, such as longevity or holiday pay, were not included in members' base pay for most of their working careers, but were included when the members' service was close to eligibility for retirement, for example, beginning in the 20th year of service. The benefits based upon the compensation were not adequately funded through employer and employee contributions. If compensation handled in this manner is not excluded from benefit calculations, the unfunded liability of the retirement system is increased and must be paid for by all employers.

In the decision in Wilson v. Board of Trustees of the Police and Firemen's Retirement System, Dkt. No. A-002123-96T2 (App. Div. 1992), which upheld the Board's denial of inclusion of longevity pay after 20 years of service, the Appellate Division clearly stated the problem for the retirement system as follows:

"Utilizing uniform salaries enables the actuary of the fund to predict with greater precision the amount of monies necessary to fund benefits and to adjust contribution rates in order to maintain the stability and sufficiency of available fund assets. The soundness of the fund is directly related to the certainty and predictability of past transactions from which certain assumptions are derived. Not only can the fund not predict whether an employee will or will not choose to exercise the option to receive longevity payments in his salary shortly before retirement, but a pension calculated on these payments that have been unfunded for a minimum of twenty years can only threaten the actuarial soundness of the fund." (Wilson, at 8 and 9).

The New Jersey Employer Employee Relations Act, N.J.S.A. 34:13A-8.1, provides that: "nor shall any provision hereof annul or modify any pension statute or statutes of this State." In interpreting this provision, the State Supreme Court has stated that public "employees and employee representatives may neither negotiate nor agree upon any proposal which affect the sacrosanct subject of employee pensions." See State v. State Supervisory Emp. Ass'n, 78 N.J. 54, 83 (1978). The law providing for binding arbitration when collective bargaining between employers and representatives of policemen and firemen reach an impasse specifically prohibits an arbitrator from considering and ruling on matters related to employee pensions. See N.J.S.A. 34:13A-18.

The primary purpose of the reproposed repeal and new rule is to clarify what types of remuneration may be included in compensation for pension purposes to serve as a guide to employers, members, and member representatives. Hopefully, it will help to eliminate situations in the future where negotiated compensation is excluded from the compensation used for pension purposes with significant hardship to the members, retirees and employers involved.

The Board received a number of comments to the original proposal. A summary of the public comments and the agency's responses are as follows:

COMMENT: Martin M. McElroy, of Millburn, NJ, responded on March 16, 1999 to this proposed new rule. The commenter, who is a Chief Financial Officer and a member of the PERS Board, noted that he objected to subsection (i) and added that "the Board is, in effect, advocating member mismanagement by permitting inclusion of disqualifying pension contributions." He added that this paragraph "would require management to negotiate these illegal contributions into the labor contract until the year 2002." He offered the opinion that because there is no municipal representation on the Board, that this action is "tantamount to State mandated, State pay." The commenter concluded that this rule would "hinder the collective bargaining process and the unanticipated pension cost would trigger local property tax increases for a number of years."

RESPONSE: The Police and Firemen's Retirement System Board of Trustees thanks Mr. McElroy for his comments, but believes that this proposed new rule is necessary to clarify what is includable in compensation, and believes that its adoption will actually limit costs to the retirement system. Paragraph (i) has been modified on reproposal to include only collective negotiations agreements approved and executed on March 1, 1999, the date of the original publication of the proposed repeal and rule. Labor contracts negotiated after that date would be subject to its provisions until the contract's expiration or December 31, 2000, whichever is earlier Subparagraph (i), as reproposed, is necessary because some members and employers previously have been authorized by the Board to include compensation in base salary which would not be permitted under the rule as proposed. Other members and employers made similar provisions in their labor contracts based upon these approvals. To make such inclusions impermissible now without some transition for employers and members who acted in good faith based upon the previous approvals would be inequitable to the members and the employers.

COMMENT: Arthur Biber, from Springfield, NJ, responded on March 25, 1999 to the proposed new rule. The commenter expressed support for the proposal and stated that he found the rule to be "comprehensive, reasonable and fair."

RESPONSE: The Police and Firemen's Retirement System Board of Trustees thanks the commenter for his support of this proposed new rule.

COMMENT: Brian Hagal, of Rutherford, NJ, responded on March 31, 1999 to the proposed new rule. The commenter, who writes for the membership of PBA Local 300, expressed support for the proposal. The commenter supported a grandfather clause to "allow for those retired or about to retire to remain secure in their pensions." The commenter added that "the proposed rule would certainly provide for equal treatment by all members of the system" and urged that the rule be adopted.

RESPONSE: The Police and Firemen's Retirement System Board of Trustees thanks the commenter for his support of this proposed new rule.

COMMENT: David J. Kowalski, from East Rutherford, NJ, responded on March 15, 1999 to the proposed new rule. The commenter, who represents PBA Local 275, expressed concern for the proposed new rule's treatment of holiday pay, which is not included in a member's base salary during some of the member's service and is included in the member's base salary upon attainment of a specified number of years of service (see proposed subparagraph (a)2xiii). The commenter's location had received an interest arbitration award which did not disallow such additions of holiday pay to base salary in the 23rd or greater year of service. The commenter states that taking away this "would deprive the conscientious police officers who enjoy their work and wish to continue to give service to the people of E. Rutherford."

RESPONSE: The Police and Firemen's Retirement System Board of Trustees thanks Mr. Kowalski for his comments, but points out that the benefits based upon the type of compensation referred to in the comment were not adequately funded through employer and employee contributions. If this type of compensation is not excluded from benefit calculations, the unfunded liability of the retirement system is increased and must be paid for by all employers. The Board of Trustees is the body responsible for determining the compensation to be used to determine benefits and contributions under the retirement system. Furthermore, the law governing interest arbitration specifically prohibits an arbitrator from considering or ruling on matters related to employee pensions. The pertinent provision, N.J.S.A. 34:13A-18, reads as follows:

The arbitrator shall not issue any finding, opinion or order regarding the issue of whether or not a public employer shall remain as a participant in the New Jersey State Health Benefits Program or any governmental retirement system or pension fund, or statutory retirement or pension plan; nor, in the case of a participating public employer, shall the arbitrator issue any finding, opinion or order regarding any aspect of the rights, duties, obligations in or associated with the New Jersey State Health Benefits Program or any governmental retirement system or pension fund, or statutory retirement or pension plan; nor shall the arbitrator issue any finding, opinion or order reducing, eliminating or otherwise modifying retiree benefits which exist as a result of a negotiated agreement, ordinance or resolution because of the enactment of legislation providing such benefits for those who do not already receive them.

COMMENT: Timothy Gordon, Business Administrator for Millburn Township, NJ, responded on March 30, 1999 to this proposed new rule. The commenter stated that his concerns regarding the originally proposed subsection (i) were three- fold: that "the proposed amendment would result in a substantial increase in unfunded liability which would be imposed on the 566 municipalities and financed by local property tax," that "the absence of municipal representation on the police and fire pension system results in a 'state mandate, state pay' condition" and that "the continued efforts to enhance pension benefits will erode the financial integrity of the pension system." The commenter asks why this is not considered a legislative matter. He also asks who pays the unfunded liability due to the increases in pension cost, and why a financial analysis of the cost, both present and future, was not performed. He asks why this is not a "state mandated, state pay" item?

RESPONSE: The Police and Firemen's Retirement System Board of Trustees thanks Mr. Gordon for his comments. One of the purposes of the proposed new rule as reproposed is to limit unfunded liabilities by specifically listing what cannot be includable in base salary; therefore it should reduce costs to municipalities, and not increase them. The reasons for subparagraph (i) are indicated in the response to the comments of Mr. McElroy above. Compensation is already defined by statute at N.J.S.A. 43:16A-1(26). It is one of the duties of the Police and Firemen's Retirement System's Board to establish rules consistent with the statutory requirements. N.J.S.A. 16A-13(7). Therefore, this is an appropriate subject for rulemaking.

COMMENT: Paul Kleinbaum, Esq., Newark, NJ, whose firm is counsel to the New Jersey State Policemen's Benevolent Association (State PBA), responded on March 29, 1999 to the proposed new rule. The commenter, noted that it is the State PBA's position that the proposed rules defining extra compensation "violate the statutory mandate defining creditable compensation." Specifically, the commenter objects to subparagraph (b)2xiii of the proposed new rule which "interprets compensation to deny creditability to salary which include benefits in base pay after a specified number of years of service." The commenter uses the example of a contract provision which incorporates a benefit into base pay for all officers for a particular employer after 20 years of service. He states that "it is part of an established salary policy which has been negotiated for all officers, and is not an individual salary adjustment granted in anticipation of retirement. Even if for the sake of argument only, it is granted in anticipation of retirement, it is not an individual salary adjustment but an adjustment granted across the board for all employees of the bargaining unit." "Thus," he concludes, "the salary established by such a provision must be considered as creditable." The commenter then adds that "many of the examples of extra compensation go beyond statutory definition." He notes that the Board has over the years consistently credited salary based on the inclusion of benefits into base pay after a specified number of years of service. He concludes this portion of his comments with the statement that "quite apart from the substantial legal questions raised by the proposed new rules, it is just plain wrong to change the rules."

Alternatively, the commenter notes that should the Board adopt the new rule, that it should include subsection (i) as previously proposed which was "proposed by the State PBA to soften the impact of the new rules and to protect the retirement benefits of those who are already retired, and those who intend to retire prior to January 1, 2002, and to give local PBAs the opportunity to negotiate revised provisions."

RESPONSE: The Police and Firemen's Retirement System Board of Trustees thanks Mr. Kleinbaum for his comments. As stated in the Summary of the original proposal, the basic design of the retirement system is that employers and members pay contributions to the retirement system based on the salaries of the members during their active service. 31 N.J.R. 591. When these salaries are inflated during the last few years of service due to fold-ins of extra compensation, the benefits based upon these final salaries have not been adequately funded through contributions throughout the course of employment, thereby incurring an unfunded liability which must be paid for by all employers. Although the Board has approved some fold-ins of extra compensation in the past, it believes that it is necessary for the system's continued financial health to limit such unfunded liabilities. The Board is revising subparagraph (i) on reproposal for the reasons indicated in the response to the comments of Mr. McElroy above.

Mr. Kleinbaum's analysis as to the proposed new rule's compliance with legislative mandate is limited to the definition of "compensation" under N.J.S.A. 43:16A-1(26). The Board believes that the appropriate interpretation of the compensation which should be included for pension purposes should be based upon the entire law governing the retirement system, and not on the definition of "compensation" alone. The general responsibility for the administration of the system is vested in the Board, and accordingly, the Board has the responsibility to interpret the statutes applicable to the system. N.J.S.A. 43:16A-13(1). In the Summary of the original proposal, the Board set forth what it considered to be the appropriate interpretation of the law for compensation to be included for pension purposes. The Board said:

The basic design of the retirement system is that employers and members pay contributions to the retirement system based upon the salaries of the members during their active service to pay for statutorily defined death and retirement benefits. These benefits are based in large measure upon the salaries upon which the contributions are made. The law governing the retirement system defines compensation for the purposes of the system as follows:

"Compensation" shall mean the base salary, for services as a member as defined in this act, which is in accordance with established salary policies of the member's employer for all employees in the same position but shall not include individual salary adjustments which are granted primarily in anticipation of the member's retirement or additional remuneration for performing temporary duties beyond the regular workday.

It is clear from the basic design of the retirement system and the definition of "compensation" that the law contemplates a system of employer and employee contributions on the regular weekly, bi-weekly or monthly base salary of members to fund death or retirement benefits based upon such regular salary in the year before death or retirement. The "compensation" for pension purposes is not intended to include temporary remuneration such as bonuses or overtime pay, or adjustments in anticipation of retirement to enhance retirement benefits.

31 N.J.R. 591.

The Summary further indicates why this interpretation is appropriate and necessary as follows:

The benefits based upon the compensationwere not adequately funded through employer and employee contributions. If compensation handled in this manner is not excluded from benefit calculations, the unfunded liability of the retirement system is increased and must be paid for by all employers. Id. Mr. Kleinbaum further states that the Board cannot fund support for the proposed rule in the Wilson decision because the important element in that case was that employees had the option of having longevity pay folded-in to their base pay after 20 years.

The Board believes that the Wilson case not only supports the proposed rule, but also provides a clear statement of why it is necessary. The Summary of the original proposal clearly sets forth the basis for the Board's reliance on it.

In the recent decision in Wilson v. Board of Trustees of the Police and Firemen's Retirement System, Dkt. No. A-002123-96T2, (App. Div. 1992) which upheld the Board's denial of inclusion of longevity pay after 20 years of service, the Appellate Division clearly stated the problem for the retirement system as follows:

Utilizing uniform salaries enables the actuary of the fund to predict with greater precision the amount of monies necessary to fund benefits and to adjust contribution rates in order to maintain the stability and sufficiency of available fund assets. The soundness of the fund is directly related to the certainty and predictability of past transactions from which certain assumptions are derived. Not only can the fund not predict whether an employee will or will not choose to exercise the option to receive longevity payments in his salary shortly before retirement, but a pension calculated on these payments that have been unfunded for a minimum of twenty years can only threaten the actuarial soundness of the fund. (Wilson, at pages 8 and 9)

The Board feels that the important element of the Wilson case is not that the employees had the option of the fold-in, but that the fold-in would be unfunded for 20 years and this would "only threaten the actuarial soundness of the fund."

Mr. Kleinbaum further states that the Board has consistently approved fold-ins after a specified number of years. This has not been the case. Fold-ins have been approved in some cases and denied in others. This is one of the primary reasons why the proposed new rule is necessary. Mr. Kleinbaum's analysis illustrates the nature of the problem. The pertinent portion of his analysis is as follows:

"These types of 'fold-in' provisions benefit both parties. For the PBA, it is a way to enhance salaries for overtime, pension, and other purposes. For the employer, it is a way to avoid percentage increases in base salaries. PBAs often give up something in the give and take of negotiations. For example, a PBA might forego the opportunity to obtain a higher salary increase to obtain a provision folding a benefit into base pay. Such provisions, through the negotiations process, benefit both sides." (Emphasis added)

The problem with this analysis is that while fold-ins may be a benefit to both the employers and employees who negotiate them, they clearly threaten the actuarial soundness of the pension fund and require all the other employers participating in the retirement system to fund the "benefit" enjoyed by the parties to the fold-in agreement. Using the negotiations process to "enhance salaries for ... pension ... purposes" is precisely what both the pension laws and the laws governing collective bargaining were designed to prevent.

Mr. Kleinbaum's analysis further states that the suggestion in the Summary that Public Employment Relations Commission (PERC), court and arbitrator decisions which have approved fold-in provisions modify pension statutes and are contrary to N.J.S.A. 34:18A-8.1 is incorrect. The analysis states that the decisions have upheld fold-ins in labor contracts and seems to offer them as support for their inclusion as creditable salary for pension purposes. However, it does indicate that none of the cases made a determination that the fold-ins were creditable for pension purposes, and that PERC carefully noted that that responsibility belonged to the Board of Trustees. It was not the intent of the Summary of the original proposal to suggest that the decisions in these other forums were contrary to N.J.S.A. 34:13A-8.1, but to indicate that it was the Board's understanding that collective bargaining agreements were not supposed to intentionally affect pension benefits. The State Supreme Court stated this principle emphatically as follows:

Public "employees and employee representatives may neither negotiate nor agree upon any proposal which affects the sacrosanct subject of employee pensions." See State v. State Supervisor Emp. Ass'n, 78 N.J. 54, 83 (1978).

The Legislature reiterated this principle in the law governing interest arbitration.

The Summary cites these provisions of the collective bargaining laws and the related case above because it believes that it is the Board's responsibility to administer the retirement system consistent with both the pension laws and the collective bargaining laws. If the fold-in provisions are not designed to affect pensions, then there should be no problem with the new rule as reproposed which is designed to ensure that they do not affect pensions.

COMMENT: Henry Zerella, Esq., Vineland, NJ, on behalf of the City of Vineland, NJ, responded on March 30, 1999 to the proposed new rule. The commenter notes that "prior to the unpublished decision the Board of Trustees had routinely advised that items such as holiday pay could be included in base salary for pension purposes." He adds that if this rule is to be changed, "it is of the utmost importance to the orderly administration of the various departments that are covered by collective bargaining agreements that these rules not be given retrospective application." The commenter was pleased with subparagraph (i) which provides for some retroactive application of the proposed new rule. He expressed concern relative to subparagraph (a)2xi which excludes compensation which is not uniformly included in base pay for all employees in the same position or covered by the same collective bargaining agreement. He pointed out that not all employees receive some types of compensation, such as compensation for college credits. The commenter also expressed concern over subparagraph (a)2xiii which would generally exclude compensation that was treated differently during a member's service. He was concerned that this might exclude longevity increases. The commenter also felt that the administrative provisions denying interest on return of contributions and denying return of employer contributions for excluded compensation should be prospectively applied.

RESPONSE: The Police and Firemen's Retirement System Board of Trustees thanks Mr. Zerella for his comments. Subparagraph (a)2xi would not require that all employees be entitled to a type of compensation for it to be includable for pension purposes. It provides that all employees entitled to a form of compensation be treated uniformly for the compensation to be included. Subparagraph (a)2xiii would not exclude forms of compensation, such as longevity increases, because they are not paid throughout a member's service. It would be included if it were included in base for the entire time period for which it is paid. The purpose of subparagraph (a)2xiii is to generally exclude from the compensation used for pension purposes any form of compensation which is treated differently during a member's service. If the compensation is included in base pay for the entire time period for which it is paid, it would be included. With respect to the prospective application of the administrative provisions, they would be prospectively applied for members affected by subparagraph (i).

COMMENT: Dennis Alessi, Esq., Livingston, NJ, whose firm is general counsel to the New Jersey State Firemen's Mutual Benevolent Association (State FMBA), responded on March 31, 1999 to the proposed new rule. The commenter states that the proposed new rule "must be revised to clarify that increases in base salary which result from a 'bona fide' longevity plan are included as creditable compensation for the calculation of retirement and death benefits." He adds that subparagraph (a)2xiii "provides that any form of compensation which is not included in a member's base salary for some portion of his employment but is included upon the attainment of a specific number of years of service will similarly be considered as extra compensation." The commenter says that the State FMBA is very concerned that "these two subsections raise the specter that periodic increases in base salary resulting from a bona fide longevity plan will be excluded from the calculation of retirement and death benefits." He suggests that this rule include a definition of a "bona fide longevity plan" and that it specify that increases due to a "bona fide longevity plan" are includable as base salary.

The commenter then states that "the proposed rule must be revised to provide that increases in base salary which result from the incorporation of certain stipends upon the employee reaching the maximum salary for his position, are creditable compensation for the calculation for retirement and death benefits." He then adds that "subsection (d) of the proposed new rule must be amended to include consideration of statistics from the public employment relations commission on interest arbitration awards in determining whether compensation reported for credit appears excessive, thereby lefting an investigation." He concludes that paragraph (i)2 "must be clarified to protect the retirement benefits of all members, regardless of their years of service credit, whose total compensation is based on collective bargaining agreements in effect on the effective date of this rule and who retire on or before January 1, 2002."

RESPONSE: The Police and Firemen's Retirement System Board of Trustees thanks Mr. Alessi for his comments. There is nothing in the proposed rule which would exclude longevity increases which are included in base pay for all of the time period of a member's service for which the increases are received. If the comment concerning inclusion of certain stipends in base pay after a member has reached the maximum salary for his position means stipends which had been paid previously but not a part of base pay, the Board does not accept this proposed change because it is contrary to the basic purpose of the proposed new rule. The commenter's recommendation concerning consideration of PERC statistics on compensation increases under interest arbitration cases in determining a threshold for investigation of salary increases is accepted and will be incorporated into the rule on reproposal. The final comment, that all persons affected by the revised rule, not just those who retire by January 1, 2002, be grandfathered under subsection (i), is not acceptable to the Board. Subsection (i) as reproposed provides a liberal grandfather provision. Many of the members affected by fold-in provisions which take effect when they are close to retirement will be protected by the paragraph. Those who are not will be entitled to a return of their contributions on the fold-in compensation.

COMMENT: Charles Schlager, Jr., Esq., Hackensack, NJ, on behalf of the Professional Firefighters Association of New Jersey (IAFF), responded on March 29, 1999 to the proposed new rule. The commenter opposes the proposed repeal and new rule. He states that "we do not believe that there exists a 'significant misunderstanding' of what is considered 'creditable salary.' " He adds that "our position is that the Board and the Courts have established what type of remuneration may be included in compensation for pension purposes" and that "the Legislature has clearly delineated the definition of compensation." The commenter asserts that "the Legislature would not intend that an executive agency adopt so far-reaching a policy without express statutory authorization" and that the "Board's proposed rule change violates the expressed and implied legislative policies."

The commenter notes that the proposed repeal and new rule "not only circumvented the legislative process, but operate to limit the collective bargaining process as provided under N.J.S.A. 34:13A-1 et seq.," that the rule will cause an "extreme hardship" upon the members of the PFRS and that it will have a "negative economic impact upon participating employers and members of the system." The commenter concludes that "while we believe that this issue is best left with the Legislature to revise, repeal or create, should the Board be opposed to such a course of action, then we would request that the Board modify, revise or amend this proposed new rule to allow for the grandfathering of all current contracts which contain contractual provisions which the Board is now seeking to eliminate, except those provisions which have been statutorily or legally excluded."

RESPONSE: The Police and Firemen's Retirement System Board of Trustees thanks Mr. Schlager for his comments. The Board believes that the Legislature and the courts have already addressed the matter in a clear and emphatic manner. There was ambiguity and confusion because some fold-in provisions were approved and others were denied. There is currently a rule on includable compensation. It is within the authority of the Board to clarify the rule for the benefit of all the members and employers participating in the retirement system.

COMMENT: Leslie Houston, from Beach Haven Park, NJ, responded on March 9, 1999 to this proposed new rule. The commenter, who is a member PBA Local 175, states that she does not approve of this proposal and that it would "severely and ambiguously restrict credible salary which is currently used to calculate one's pension." She adds that the Board would be granted "omniscient authority to determine what constitutes extra compensation through contract benefits," and that "voiding a PBA member of a benefit that is covered by a collective bargaining agreement ... is wrong." She urges that the Board withdraw the proposal.

RESPONSE: The Police and Firemen's Retirement System Board of Trustees thanks Ms. Houston for her comments. The necessity for the revision of the rule by the Board and its authority to do so are clearly indicated in the "Summary" to the initial proposal and in the responses to other comments above.

COMMENT: James Morley, from the State Commission of Investigation, commented on March 26, 1999 to this proposed new rule. The commenter stated that the proposal "is a commendable response" to the Commission's December 1998 report entitled Pension and Benefit abuses. He adds that "nevertheless," subparagraph (i) "is ill-advised and possibly unlawful." The commenter states that the Commission's report had recommended that the
Division articulate the kinds of extra compensation that may not be reported, but that subparagraph (i) "would render the rest of the rule inapplicable to retirements that occur either before its effective date or before January 1, 2002." He concludes that this "attempts to validate, albeit for a limited period, the inclusion of extra compensation in the calculation of benefits" and that "in addition to undermining the proposal, these exclusions appear to conflict with the statutory provisions that limit creditable compensation to base salary."

RESPONSE: The Police and Firemen's Retirement System Board of Trustees thanks Mr. Morley for his comments. The grandfather provision has been tightened in this reproposal.

COMMENT: Charles Schlager, Jr., Esq., Hackensack, NJ, responded on March 30, 1999 to this proposed new rule. The commenter, who writes on behalf of the Professional Firefighters Association of New Jersey-IAFF, Atlantic City IAFF Local 198 and Trenton PBA Local 11, opposes the proposed new rule and asserts that "(1) the Board acted ultra vires to the State statutes in seeking to change this rule, (2) that the Board's action greatly expanded the determination reached in the Wilson case, (3) that the Board's action will have a strong negative economic (impact) upon the covered members and (4) that the Board's action violates the Doctrines of Laches and Estoppel." The commenter concludes that "while we believe that this issue is best left with the Legislature to revise, repeal or create, should the Board be opposed to such a course of action, then we would request that the Board modify, revise or amend this proposed new rule to allow for the grandfathering of all current contracts which contain contractual provisions which the Board is now seeking to eliminate, except those provisions which have been statutorily or legally excluded (e.g. lump sum payments, overtime, bonuses, and/or employee option inclusions.)"

RESPONSE: The Police and Firemen's Retirement System Board of Trustees thanks Mr. Schlager for his comments. The comments of Mr. Schlager are similar to his comments on behalf of the IAFF and are responded to above. To his comment that the revised rule violates the doctrines of laches and estoppel, subsection (i) should eliminate most of the concerns to which these doctrines are addressed. The principle of equitable estoppel is rarely applied to public agencies and when it is, it is usually under clearly limited circumstances.

17:4-4.1 Creditable [salary] compensation

[(a) Only a member's base salary shall be subject to pension contributions and creditable for retirement and death
benefits in the system.]

[(b) The board shall reserve the right to question any salary to determine its creditability where it is evident from the record that a salary reported for benefits includes extra compensation.]

[(c) Such extra compensation shall not be considered creditable for benefits and all contributions made thereon shall be returned.]

[(d) Some of the forms of compensation that have been defined as extra compensation include overtime; bonuses; longevity lump sum payments; individual retroactive salary adjustments or individual adjustments to place a member at the maximum of his or her salary range in the final year of service; increments granted for retirement credit or in recognition of the member's forthcoming retirement or in recognition of the member's years of service in the community.]

[(e) All claims involving an increase in compensation of more than 15 percent over that of the previous year, as reported to the retirement system, shall be investigated. Those cases where a violation of the statute is suspect shall be referred to the board.]

(a) The compensation of a member subject to pension contributions and creditable for retirement and death benefits in the system shall be limited to base salary, and shall not include extra compensation.

1. "Base salary" means the annual compensation of a member, in accordance with established salary policies of the member's employer for all employees in the same position, or all employees covered by the same collective bargaining agreement, which is paid in regular, periodic installments in accordance with the payroll cycle of the employer.

2. "Extra compensation" means individual salary adjustments which are granted primarily in anticipation of a member's retirement or as additional remuneration for performing temporary duties beyond the regular workday. Forms of compensation that have been identified as extra compensation include, but are not limited to:

i. Overtime;

ii. Pay for extra work, duty or service beyond the normal work day or normal duty assignments;

iii. Bonuses;

iv. Lump-sum payments for longevity, holiday pay, vacation, compensatory time, accumulated sick leave, or any other purpose;

v. Any compensation which the employee or employer has the option of including in base salary;

vi. Sell-backs, trade-ins, waivers, or voluntary returns of accumulated sick leave, holiday pay, vacation, overtime, compensatory time, or any other payment or benefit in return for an increase in base salary;

vii. Individual retroactive salary adjustments where no sufficient justification is provided that the adjustment was granted primarily for a reason other than retirement;

viii. Individual adjustments to place a member at the maximum of his or her salary range in the final year of service where no sufficient justification is provided that the adjustment was granted primarily for a reason other than retirement;

ix. Increments or adjustments granted for retirement credit;

x. Increments or adjustments in recognition of the member's forthcoming retirement;

xi. Any form of compensation which is not included in the base salary of all employees in the same position or covered by the same collective bargaining agreement or employment policy who are members of the retirement system
and who receive the compensation;

xii. Retroactive increments or adjustments made at or near the end of a member's service, unless the adjustment was the result of an across-the-board adjustment for all similarly situated personnel; and

xiii. Any form of compensation which is not included in a member's base salary during some of the member's service and is included in the member's base salary upon attainment of a specified number of years of service.

(b) The Board may question the compensation of any member or retiree to determine its credibility where there is evidence that compensation reported as base salary may include extra compensation.

(c) Extra compensation shall not be considered creditable for benefits and all employee contributions made thereon shall be returned without interest.

(d) With respect to all claims for benefits, the Division of Pensions and Benefits shall investigate increases in compensation reported for credit which exceed reasonably anticipated annual compensation increases for members of the retirement system based upon consideration of the Consumer Price Index for the time period of the increases, the table of assumed salary increases recommended by the actuary and adopted by the Board, and the annual percentage increases of salaries as indicated in data from the Public Employment Relations Commission, or through other reliable industry sources of information regarding average annual salary increases. Those cases where a violation of the statute or rules is suspected shall be referred to the Board.

(e) In connection with an investigation of an increase in compensation, the Board:

1. May require that a notarized statement under oath be obtained from the member's employer that the reported compensation was not granted primarily in anticipation of retirement, and conforms with the statutes and rules governing the retirement system;

2. May require an employer to provide any record or information it deems necessary for the investigation, including, but not limited to, collective bargaining agreements, employment contracts, ordinances, resolutions, minutes of public meetings (closed or open), or any other record or information related to the increase in compensation; and

3. May refer any suspected submission of false information in violation of N.J.S.A. 43:16A-18, these rules, or other laws of the State of New Jersey to the Attorney General for review and initiation of criminal proceedings, if warranted.

(f) Failure to satisfactorily respond to a request by the Board for documents or information related to an increase in compensation may result in the denial of credit for the increase in compensation.

(g) A determination by the Board that a member's compensation for pension purposes includes extra compensation
may result in:

1. A denial of credit for the extra compensation;

2. An audit of the retirees and the active employees of the employer to identify any additional cases of such extra compensation;

3. A return of contributions to the active members and retirees on the extra compensation without interest;

4. A recalculation of the retirement benefits of retirees to eliminate benefits based upon the extra compensation; and

5. Repayment to the system by the retiree of any benefits received based upon the extra compensation.

(h) Employer contributions shall not be revised or refunded because of a determination by the Board that a denial of credit for increases in compensation is warranted under this section.

(i) This section shall not be applicable to longevity pay, holiday pay, or education pay which is included in the creditable compensation of a retiree or member on a mandatory basis in accordance with the provisions of a collective negotiations agreement or employment policy of an employer approved and executed on or before March 1, 1999, until the termination date of the collective negotiations agreement or employment policy, or December 31, 2000, whichever occurs first.


POLICE AND FIREMEN'S RETIREMENT SYSTEM
MEMBERSHIP; CREDITABLE COMPENSATION

Adopted Repeal and New Rule: N.J.A.C. 17:4-4.1

32 N.J. Reg. 1246(a)

Proposed: December 6, 1999 at 31 N.J.R. 3930(a)

Adopted: February 28, 2000

Summary of Public Comments and Agency Responses

COMMENT: Mr. Ronald Evans and Msgr. Robert McDermott, representing Camden Churches Organized for People, commented on November 3, 1999, to the proposed new rule. The commenters stated that they were concerned regarding the actions taken by the pension board and how these actions might affect public safety in Camden. They noted their belief that many of Camden's most senior officers would retire due to the proposed new rule, thereby creating a public safety crisis in Camden.

COMMENT: Lawrence Dostanko, Jr., President of the Passaic Fire Fighters Association, commented on November 22, 1999, that sufficient time was not given to the members of the Police and Firemen's Retirement System (PFRS). The Passaic Fire Fighters Association (Association) was unaware of the effective date of the new proposal and settled a contract after it. He states that the Association would have held off on negotiations with the city had it been aware of the proposed effective date of the rule. He adds that the actual effective date should not be March 1, 1999 but the date the proposal is adopted.

COMMENT: Police Officer Richard T. McConnell, of the Denville Township Police, commented on November 5, 1999, that the proposed date December 31, 2000, by which members would have to retire to have education pay, holiday pay and longevity pay creditable, is simply not enough time to prepare for retirement and that December 31, 2001, would be a better date.

COMMENT: Paul Palumbi, Vice President of the Trenton Firefighters, Firemen's Mutual Benevolent Association (FMBA) Local No. 6, commented on November 22, 1999, that the Local's contract with the City of Trenton was signed after March 1, 1999 and includes holiday pay. He requested that the grandfather clause be expanded to include the City of Trenton. In closing he added that this issue has major financial impact on senior firefighters who are ready to retire.

COMMENT: Herbert C. Leary, Chief of the Fire Department of the City of Camden, commented on October 8th and 20th, 1999, regarding the possible adverse impact the proposed rule would have on the City of Camden. Specifically, Mr. Leary commented that the jobs impact as stated in the proposal is erroneous. Mr. Leary added that in Camden as many as 45 senior members of the fire department might retire should the rule be adopted. He concluded by cautioning the Division to carefully consider the ramifications of the proposed action.

COMMENT: Lee A. Solomon, Camden County Prosecutor, commented on October 15, 1999, regarding the possible adverse impact this rule would have on the City of Camden and the possible exodus of experienced officers from the City.

RESPONSE: The Police and Firemen's Retirement System Board of Trustees thanks Mr. Evans, Msgr. McDermott, President Dostanko, Mr. McConnell, Vice President Palumbi, Chief Leary and Prosecutor Solomon for their comments. The Board believes that the proposed new rule is necessary to clarify what is includable in compensation, and believes that its adoption will limit costs to the retirement system. This proposed new rule has not led to mass retirements by the end of 1999 as feared by the commenters. The Board is amending the grandfather clause on adoption to allow compensation under provisions in contracts executed on or before January 1, 2000 to be creditable provided the member retires prior to the expiration of the contract or December 31, 2001, whichever comes first, to allow for an orderly transfer of power if members choose to retire. These dates will resolve the situation raised by Vice President Palumbi.

COMMENT: Charles Schlager, Jr., Esq., of the law firm, Loccke and Correia, representing the International Association of Fire Fighters (IAFF), Trenton Policemen's Benevolent Association (PBA) Local No. 11, Atlantic City IAFF Local No. 198, Camden Organization of Police Superiors, Camden Firefighters IAFF Local No. 788, Camden Fire Officers IAFF Local No. 2578, Somerset PBA Local No. 177, Bloomfield PBA 32 and Paterson Fire Officers, commented on October 28, 1999, regarding the proposal. Mr. Schlager noted that the proposed new rules could adversely affect the City of Camden if all who are eligible to retire, do. Mr. Schlager suggested changing the proposed language in subsection (i) to include all benefits determined to be creditable compensation by the Board prior to December 1, 1999, such as clothing allowances. He concluded by suggesting that the grandfather period be extended.

RESPONSE: The Police and Firemen's Retirement System Board of Trustees thanks Mr. Schlager for his comments. With regard to Mr. Schlager's comment concerning the effect on the City of Camden, the Board refers Mr. Schlager to its response to the first set of comments. The Board cannot comply with Mr. Schlager's suggestion that the benefits under subsection (i) include clothing allowances. This issue was specifically addressed in Cox v. Police and Firemen's Retirement System, 96 N.J. Admin. Rep. 2d (TYP) 191 (1996). In Cox, New Jersey Administrative Law Judge Futey found that a clothing allowance constitutes a reimbursement for out-of-pocket expenses and is not creditable compensation. The Board adopted Judge Futey's findings of fact and conclusions of law. Id. at 195.

COMMENT: Mr. Schlager submitted a second comment on January 5, 2000 regarding the reproposal, containing four points. His first point was that "the Board acted ultra vires to the State statutes in seeking to change this rule."

RESPONSE: It is within the Board's statutory rulemaking authority and obligation to clarify the rule on creditable compensation for the benefit of all members and employers participating in the retirement system, and for the purpose of securing the financial soundness of the system.

COMMENT: Mr. Schlager's second point in his January 5, 2000 letter was "that the Board's action greatly expanded the determination reached in the Wilson v. Board of Trustees of the Police and Firemen's Retirement System, Dkt. No. A- 002123-96T2 (App. Div. 1992) case."

RESPONSE: The adopted new rules will eliminate ambiguity and confusion that existed previously regarding creditable compensation resulting from the Board approving some fold-in provisions and denying others. The Board believes that the Wilson case not only supports the proposed rule, but also provides a clear statement of why it is necessary.

Wilson upheld the Board's denial of inclusion of longevity pay after 20 years of service. The Appellate Division articulated the problem for the retirement system as follows:

Utilizing uniform salaries enables the actuary of the fund to predict with greater precision the amount of monies necessary to fund benefits and to adjust contribution rates in order to maintain the stability and sufficiency of available fund assets. The soundness of the fund is directly related to the certainty and predictability of past transactions from which certain assumptions are derived. Not only can the fund not predict whether an employee will or will not choose to exercise the option to receive longevity payments in his salary shortly before retirement, but a pension calculated on these payments that have been unfunded for a minimum of twenty years can only threaten the actuarial soundness of the fund. Wilson, slip op. at 8-9.

COMMENT: Mr. Schlager's third point in his January 5, 2000 letter was "that the Board's action will have a strong negative economic [impact] upon the covered members."

RESPONSE: The Board disagrees. The Board previously credited some members with types of compensation (holiday, education and longevity pay) that will not be credited under the revised rule. Some members and their employers entered into labor contracts based on these previous approvals. For the reasons addressed in the Summary of the reproposal, the reproposed repeal and new rules are necessary to preserve the actuarial soundness of the system. To the extent members held justifiable expectations of their holiday, education and longevity pay being includable for purposes of creditable compensation despite corresponding deductions not having been contributed to the system, the grandfather clause ameliorates any resulting hardship to members by permitting eligible members to retire within the prescribed time frames without affecting their pensions.

COMMENT: Mr. Schlager's fourth point in his January 5, 2000 letter was "that the Board's action violates the Doctrines of [Laches] and Estoppel."

RESPONSE: The Board disagrees. These doctrines are rarely invoked against public agencies, and not to the same extent as against private entities, as their application might interfere with valid and significant governmental objections and essential functions. See, for example, Citizens for Equity v. New Jersey Department of Environmental Protection, 126 N.J. 391, 398 (1991). The purpose of the adopted repeal and new rules is of a remedial nature: to eliminate the existing inconsistent treatment of members and to protect the financial stability of the fund. Moreover, subsection (i) is intended to eliminate any hardship or inequity to members resulting from the adopted repeal and new rules.

COMMENT: Marty Barrett, Vice-Chairman of the PFRS Board of Trustees, commented on December 31, 1999 to this proposal. In his comment, he first presented a brief history of the Board's attempts to amend this rule and some examples of what types of extra
compensation had been allowed by the Board over the years. Mr. Barrett then commented that he had expected provisions to allow certain benefits to be included in members' compensation at or after 20 years of service as long as those benefits were for all employees and were not the result of an option or trade-in to be in the final draft of the revised rule. Because this language was not included, Mr. Barrett suggests that subsection (i) be amended to better clarify the intent of the Board and that its implementation be delayed until at least December 31, 2002.

RESPONSE: The Police and Firemen's Retirement System Board of Trustees thanks Vice-Chairman Barrett for his comments. The date by which members need to retire has been extended until December 31, 2001. The Board did not extend the grandfather clause to include retirements up to December 31, 2002 as suggested by the commenter because it believed that the extension until December 31, 2001 gave members adequate time to make plans and retire without providing too large a window.

COMMENT: Stephen C. Richman, Esq., and Charles F. Szymanski, Esq., whose firm represents the State of NJ Fraternal Order of Police (NJ FOP), commented on January 3, 2000 that, in their opinion, the Board's exclusion of certain longevity, holiday or education pay from an officer's creditable compensation for pension purposes is contrary to N.J.S.A. 43:16A-1(26) and violates the New Jersey Constitution's prohibition on the impairment of contracts. They also argue that the Board's decision to narrow the grandfather clause is unreasonably harsh.

RESPONSE: The Police and Firemen's Retirement System Board of Trustees thanks Mr. Richman and Mr. Szymanski for their comments. It is the Board's understanding that the law governing interest arbitration, the New Jersey Public Employer-Employee Relations Act, N.J.S.A. 34:13A-1 et seq., prohibits collective bargaining agreements from intentionally affecting pension benefits. The Board believes that its responsibility is to administer the retirement system consistent with both the pension laws and the collective bargaining laws. The adopted new rules effectuate and comply with the statute by ensuring that fold-in provisions do not affect pensions.

COMMENT: Paul Kleinbaum, Esq., commented on January 4, 2000 on behalf of the New Jersey State PBA. He reiterated his comments to the original proposal of this rule. He then stated that the reproposal continues to violate the statutory definition of "compensation" found at N.J.S.A. 43:16A-1(26). He then commented that the fold-in provisions addressed in the decision in Wilson v. Board of Trustees of the Police and Firemen's Retirement System No. A- 002123-96T2 (App. Div. 1992) were not the problem, but the fact that employees had the option to choose to fold in monies into base salary. Finally, he comments that should the Board adopt the reproposed new rule, that it should take into account contract provisions that were in effect on the date of the reproposal's publication, December 6, 1999, and not March 1, 1999, the date of the original proposal. He adds that the retirement deadline of December 31, 2000 is simply too soon, and that it is essential that PBAs have the opportunity and time to renegotiate contract provisions to make sure that they are not contrary to the reproposed new rule. He recommends a deadline of December 31, 2002.

RESPONSE: The Police and Firemen's Retirement System Board of Trustees thanks Mr. Kleinbaum for his comments. The Board feels that the important element of the Wilson case is not that the employees had the option of the fold-in, but that the fold-in would be
unfunded for 20 years and this would only threaten the actuarial soundness of the fund.

COMMENT: Mr. Kleinbaum stated that the Board consistently has approved fold- ins after a specified number of years.

RESPONSE: This has not been the case. Fold-ins have been approved in some cases and denied in others. This inconsistency is one of the primary reasons why the proposed new rules are necessary.

Summary of Change Upon Adoption:

After much discussion within the Division and the Board of Trustees, as well as a review of the many comments received regarding the reproposed repeal and new rule, the Board determined that it would be an equitable solution to many of the comments if the grandfather clause in subsection (i) were extended to include contracts signed before January 1, 2000, the first day of the first month after the publication date of the reproposal.

The last date to retire under the grandfather clause is extended through December 31, 2001, instead of December 31, 2000. By the time the adoption of this rule is published, members will have a very limited time to decide to retire. This will be a burden to members, as well as to employers who must ensure that they have proper staffing levels to effectively run their departments. The date by which contracts must have been signed on or before is extended from March 1, 1999 to January 1, 2000 because that proposal as written was not timely adopted, and the Board felt that the better course would be to use the first day of the first month after the publication date of the reproposal.

Full text of the adoption follows:

17:4-4.1 Creditable compensation

(a) The compensation of a member subject to pension contributions and creditable for retirement and death benefits in the system shall be limited to base salary, and shall not include extra compensation.

1. "Base salary" means the annual compensation of a member, in accordance with established salary policies of the member's employer for all employees in the same position, or all employees covered by the same collective bargaining agreement, which is paid in regular, periodic installments in accordance with the payroll cycle of the employer.

2. "Extra compensation" means individual salary adjustments which are granted primarily
in anticipation of a member's retirement or as additional remuneration for performing
temporary duties beyond the regular workday. Forms of compensation that have been
identified as extra compensation include, but are not limited to:

i. Overtime;

ii. Pay for extra work, duty or service beyond the normal work day or normal duty assignments;

iii. Bonuses;

iv. Lump-sum payments for longevity, holiday pay, vacation, compensatory time, accumulated sick leave, or any other purpose;

v. Any compensation which the employee or employer has the option of including in base salary;

vi. Sell-backs, trade-ins, waivers, or voluntary returns of accumulated sick leave, holiday pay, vacation, overtime, compensatory time, or any other payment or benefit in return for an increase in base salary;

vii. Individual retroactive salary adjustments where no sufficient justification is provided that the adjustment was granted primarily for a reason other than retirement;

viii. Individual adjustments to place a member at the maximum of his or her salary range in the final year of service where no sufficient justification is provided that the adjustment was granted primarily for a reason other than retirement;

ix. Increments or adjustments granted for retirement credit;

x. Increments or adjustments in recognition of the member's forthcoming retirement;

xi. Any form of compensation which is not included in the base salary of all employees in the same position or covered by the same collective bargaining agreement or employment policy who are members of the retirement system and who receive the compensation;

xii. Retroactive increments or adjustments made at or near the end of a member's service, unless the adjustment was the result of an across-the-board adjustment for all similarly situated personnel; and

xiii. Any form of compensation which is not included in a member's base salary during some of the member's service and is included in the member's base salary upon attainment of a specified number of years of service.

(b) The Board may question the compensation of any member or retiree to determine its
credibility where there is evidence that compensation reported as base salary may include
extra compensation.

(c) Extra compensation shall not be considered creditable for benefits and all employee
contributions made thereon shall be returned without interest.

(d) With respect to all claims for benefits, the Division of Pensions and Benefits shall
investigate increases in compensation reported for credit which exceed reasonably
anticipated annual compensation increases for members of the retirement system based
upon consideration of the Consumer Price Index for the time period of the increases, the
table of assumed salary increases recommended by the actuary and adopted by the Board, and the annual percentage increases of salaries as indicated in data from the Public Employment Relations Commission, or through other reliable industry sources of
information regarding average annual salary increases. Those cases where a violation of the statute or rules is suspected shall be referred to the Board.

(e) In connection with an investigation of an increase in compensation, the Board:

1. May require that a notarized statement under oath be obtained from the member's employer that the reported compensation was not granted primarily in anticipation of retirement, and conforms with the statutes and rules governing the retirement system;

2. May require an employer to provide any record or information it deems necessary for the investigation, including, but not limited to, collective bargaining agreements, employment contracts, ordinances, resolutions, minutes of public meetings (closed or open), or any other record or information related to the increase in compensation; and

3. May refer any suspected submission of false information in violation of N.J.S.A. 43:16A-18, these rules, or other laws of the State of New Jersey to the Attorney General for review and initiation of criminal proceedings, if warranted.

(f) Failure to satisfactorily respond to a request by the Board for documents or information
related to an increase in compensation may result in the denial of credit for the increase in
compensation.

(g) A determination by the Board that a member's compensation for pension purposes
includes extra compensation may result in:

1. A denial of credit for the extra compensation;

2. An audit of the retirees and the active employees of the employer to identify any additional cases of such extra compensation;

3. A return of contributions to the active members and retirees on the extra compensation without interest;

4. A recalculation of the retirement benefits of retirees to eliminate benefits based upon the extra compensation; and

5. Repayment to the system by the retiree of any benefits received based upon the extra compensation.

(h) Employer contributions shall not be revised or refunded because of a determination by the Board that a denial of credit for increases in compensation is warranted under this section.

(i) This section shall not be applicable to longevity pay, holiday pay, or education pay which is included in the creditable compensation of a retiree or member on a mandatory basis in accordance with the provisions of a collective negotiations agreement or employment policy of an employer approved and executed on or before [March 1,1999] January 1, 2000, until the termination date of the collective negotiations agreement or employment policy, or December 31, [2000] 2001, whichever occurs first.


TEACHERS' PENSION AND ANNUITY FUND
MAXIMUM ALLOWANCE PRESCRIBED

Proposed Repeal: N.J.A.C. 17:3-6.19

31 N.J. Reg. 4234(a)

The agency proposal follows:

Summary

N.J.A.C. 17:2-6.19 as currently written has more of a punitive than beneficial effect on Teachers' Pension and Annuity Fund members who are unable to handle their own affairs. The rule requires that anyone acting on behalf of a member, other than a legal guardian, must elect the maximum allowance for the member and name the member's estate as beneficiary. The maximum allowance ceases at a retiree's death and does not include a survivor's benefit or any employer contributions. It provides the highest monthly benefit, but for those who have a short life expectancy, or are in ill health, a high monthly benefit is usually not as important as providing for those a retiree may leave behind.

By repealing this rule, the agent of a member with a valid power of attorney will not be limited to selecting just the maximum allowance, thereby allowing for the election of a survivor's option in the cases of spouses, or the use of the reserve from an Option 1 benefit. The agent would also not be limited to naming the estate as beneficiary. For taxation purposes, when life insurance is paid to a named beneficiary it passes without taxation, but if it is paid to an estate it is taxed as part of that estate, thereby decreasing the benefit. Retirees and their beneficiaries would benefit from the removal of this restriction.

The Public Employees' Retirement System Board of Trustees has also recently proposed the repeal of the comparable provision at N.J.A.C. rule. See 31 N.J.R. 3229(a). For the above stated reasons, the Teachers' Pension and Annuity Fund Board of Trustees believes it is necessary to repeal this rule.

Full text of the proposed repeal follows:

[17:3-6.19 Maximum allowance prescribed-(Reserved)

Where someone, other than a legal guardian, acting in behalf of a member makes application for a retirement allowance, such individual may not elect other than the maximum allowance for the member and the member's estate must be designated as the beneficiary for all death benefits payable on the member's account.]

Cite as 31 N.J.R. 4234(a)

Please send your comments to: Division of Pensions and Benefits


STATE POLICE RETIREMENT SYSTEM
ELIGIBILITY FOR PURCHASE AND OPTIONAL PURCHASES OF ELIGIBLE SERVICE

Proposed Amendments: N.J.A.C. 17:5-4.1 and 4.2

Cite as 32 N.J. Reg. 27(a)

Summary

The proposed amendments to N.J.A.C. 17:5-4.1 would eliminate the requirement that an active member also be on payroll to purchase service. This requirement has resulted in a number of people being placed on payroll for one pay period to be eligible to make a purchase. It makes more sense to allow the member to purchase time without having to return to payroll in order to do so. Payment for purchases by members not on active payroll would have to be by lump sum because they would not be on payrolls from which installment payments could be deducted. Proposed subsection (b) would be added which would state that the Board of Trustees may disallow the purchase of all or a portion of former service it deems dishonorable as provided under N.J.S.A. 43:1-3.

The proposed amendments to N.J.A.C. 17:5-4.2 would change "his current salary" to "the member's current salary" and would provide that a portion of the service may be purchased. Clarification that a member may purchase all or a portion of such time would be added. References to the State Police Retirement and Benevolent Fund which ceased existence in 1965 would be deleted. A sentence regarding the value of former membership service not in the State Police Retirement System, that it shall be included in the computation of a retirement allowance on the basis of one percent of final compensation for each year of such service credit, would be added to clarify this section and is in accordance with N.J.S.A. 53:5A-6. "Without pay" would be added to clarify the types of leaves of absence paragraph (a)3 applies to State troopers must request a purchase of a leave of absence within one year of returning from the leave, and language regarding this limitation has been added. The two-month limitation of a leave for personal reasons would be changed to "less than three months" to correspond with N.J.S.A. 53:5A-6. Child care is proposed to be added to this section to clarify that it is classified for purchase by the Division as a leave for personal reasons. The Division may require proof that an illness existed for the length of a leave. This proposed amendment would establish this requirement.

Full text of the proposal follows:

17:5-4.1 Eligibility for purchase

(a) Only active [contributing] members of the system shall be eligible to make application for purchase of credit. Active members who are not currently contributing to the system must purchase their requested service in a lump sum.

(b) The receipt of a public pension or retirement benefit is expressly conditioned upon the rendering of honorable service by a public officer or employee. Therefore, the Board of Trustees shall disallow the purchase of all or a portion of former service it deems to be dishonorable in accordance with N.J.S.A. 43:1-3.

17:5-4.2 Optional purchases of eligible service

(a) The types of purchases indicated below will be calculated on the basis of the actuarial factor established for the member's age at the time of the purchase times [his] the member's current salary:

1. Former State Police Retirement System membership credit: Service covered by former membership in this system will be included in the computation of retirement benefits in the same manner and value as current service. All or a portion of the service from a former membership [must] may be included in the purchase of such service.

2. Former membership service established in another State-supported retirement system: Such service cannot be used to qualify [former members of the State Police Retirement and Benevolent Fund] for retirement under the minimum service requirements of 20 years at age 50 or "Special Retirement." All or a portion of the service from a former membership [must] may be included in the purchase of such service. This service shall be included in the computation of a retirement allowance on the basis of one percent of final compensation for each year of such service credit.

3. Leaves of absence without pay: A member must request to purchase a leave of absence without pay within one year following the member's return to service. A member may purchase:

i. All or a portion of the period of the leave for personal reasons which [does not exceed two months] is less than three months. Child care is considered a leave for personal reasons.

ii. All or a portion of the period of the leave up to two years for personal illness [or maternity]. The Division may require proof that the illness existed for the length of the leave.

Please send your comments to: Division of Pensions and Benefits


STATE POLICE RETIREMENT SYSTEM
OUTSTANDING LOAN

Proposed Amendment: N.J.A.C. 17:5-5.5

Cite as 32 N.J. Reg. 28(a)

The agency proposal follows:

Summary

Until recently, if a member retired with an outstanding loan balance, that balance had to either be paid in full at retirement, or the member's entire pension check was withheld until the loan was satisfied. The only way loan repayment at the same amount the member was paying as an active employee could be carried into retirement was if the member retired on a disability retirement allowance or retired on another type of benefit but was ill or disabled. Proof of the disability had to be provided before loan deductions could be carried into retirement.

P.L. 1999, c.132 changed the repayment method of outstanding loans at retirement. The new law provides that a member who retires with an outstanding loan will repay the loan through deductions from the retirement benefits payable in the same monthly amount that was deducted from the member's compensation immediately before retirement until the balance of the loan together with the interest is repaid. If the retiree dies before the loan with interest is repaid, the remaining loan balance will be repaid from the proceeds of any other benefits payable on the account of the retiree either in the form of monthly payments due to the beneficiaries or in the form of a lump sum payment from the pension or group life insurance. The proposed amendment will reflect this statutory change. The proposed deletion of N.J.A.C. 17:5-5.5(b) and (c) will eliminate any redundancies from this rule because the proposed amendment will make the repayment option available to all retirees regardless of disability.

The proposed amendment will also provide at N.J.A.C. 17:5-5.5(a)2i that withholdings for State of New Jersey income taxes are an authorized deduction that will be taken prior to withholding for a loan. P.L. 1989, c.328 permitted withholdings for State income taxes from retirement allowances. The Division began implementing these voluntary State withholdings in 1989 and proposes to update the rule to reflect this change.

Full text of the proposal follows:

17:5-5.5 Outstanding loan

(a) Any member who has an outstanding loan balance at the time of retirement shall repay the loan balance, with interest, as follows:

1. In full as provided by N.J.S.A. 53:5A-29; [or]

2. By retention of retirement payments, excluding authorized deductions by the retirement system, until the loan balance, with interest is repaid.

i. Authorized deductions include Federal tax liens, health benefit premiums, and Federal and State income tax withholding [If the member does not request repayment in full, repayment shall be made by retention of retirement benefits]; or

3. By deductions from retirement benefit payments of the same monthly amount deducted from the member's compensation immediately preceding retirement until the loan balance, with interest, is repaid as authorized by P.L. 1999 c.132. If the member does not request repayment in full, repayment is by deductions in the same monthly amount deducted from the member's compensation immediately preceding retirement.

[(b) A member who retires on a disability pension or because of medical illness or disability as determined by the Board of Trustees with an outstanding loan balance may repay the balance as follows:]

[1. In the manner prescribed in (a) above; or]

[2. By deductions from retirement benefit payments of the same monthly amount deducted from the member's compensation immediately preceding retirement until the loan balance, with interest, is repaid.]

[i. If a member who retires on a disability pension does not request another repayment option, repayment is by deductions in the same monthly amount deducted from the member's compensation immediately preceding retirement.]

[(c) A member whose retirement is other than a disability retirement and who wants to establish that the retirement is necessitated by medical illness or disability shall submit a retirement application containing identifying information acceptable to the retirement system together with a report of the member's personal or attending physician and all other physicians' reports, hospital records or other medical evidence which the member can supply pertaining to the illness or disability. The medical evidence shall be sufficient to show to the satisfaction of the Board of Trustees that the member is totally and permanently disabled and would qualify on a medical basis for ordinary disability retirement. The Board may require the member to be examined by a physician designated by the retirement system, and may refer the medical evidence to the medical panel for its report on whether the member is totally and permanently disabled and retirement is necessitated by medical illness or disability.]

[(d)] (b) If a retirant dies before the loan balance, with interest, is repaid, the remaining balance shall be paid first from the pension system group life insurance proceeds, and then from the proceeds of any returned contributions payable on account of the retirant to the beneficiary or estate and then from the proceeds of any surviving spouse benefit. If multiple beneficiaries are to receive these benefits, each beneficiary shall share in repaying the remaining balance in the same proportion in which they are entitled to the benefits.

Please send your comments to: Division of Pensions and Benefits.


GENERAL ADMINISTRATION
PEACETIME MILITARY SERVICE; SERVICE CREDIT

Proposed Amendment: N.J.A.C. 17:1-4.36

Cite as 32 N.J.R. 170(a)

The agency proposal follows:

Summary

The proposed amendment to N.J.A.C. 17:1-4.36 is needed to comply with Uniformed Services Employment and Reemployment Rights Act of 1994 (USERRA), 38 U.S.C. §§ 4301 et seq. which provides that an employee who leaves a civilian employer, and after serving in the uniformed services, returns to employment with the employer, is entitled to restoration of certain pension, profit-sharing, and similar benefits that would have accrued but for the employee's absence due to qualified military service.

USERRA imposes a uniform five-year limit on the cumulative amount of military service allowable with respect to the employer relationship for which a person seeks reemployment. Exceptions include active duty during war or declared national emergency. Under current rules, a service member must apply to the employing agency within 90 days following discharge from military duty, although some reservists must apply within 31 days. USERRA discards distinctions based on the type of service and substitutes an application period based on the duration of service.

Under both former law and USERRA, an employee who leaves a job for military service is entitled to return to a job of similar seniority, status and pay. Only employees in positions not reasonably expected to continue indefinitely, such as temporary employees, fall outside the law's protections.

USERRA requires an employee to give advance written or oral notice to the public employer of the absence. USERRA takes the position that an ERISA defined contribution plan is a perquisite of seniority and, thus, upon the service member's reemployment, requires the college, university, or public employer to make up employer contributions that were not made to the plan while the member was in the uniformed services. This requirement extends to sponsors of government plans. If the service member elects not to return to work within the time limits allowed, no pension or defined contribution rights accrue. If the plan calls for matching employer contributions, make-up matching contributions are not required unless the service member makes the accompanying employee contribution. Repayment of the missed contributions must be made in the period beginning with the date of reemployment, extending to three times the military service period, not to exceed five years. In applying the makeup rules, USERRA imputes compensations for the period of military service based on the service member's preservice pay or the average earnings over the 12 months immediately preceding the period of military service.

Section 414(u) of the Internal Revenue Code also generally provides that an employer maintaining a plan shall be treated as meeting the requirements of USERRA only if an employee reemployed under USERRA is treated as not having incurred a break in service because of the period of military service, the employee's military service is treated as service with the employer for vesting and benefit accrual purposes, the employee is permitted to make additional elective deferrals and employee contributions in an amount not exceeding the maximum amount the employee would have been permitted or required to contribute during the period of military service if the employee had actually been employed by the employer during that period, and the employee is entitled to any accrued benefits that are contingent on employee contributions or elective deferrals to the extent the employee pays the contributions or elective deferrals to the plan.

Although the Public Employees' Retirement System (PERS), the Teachers' Pension and Annuity Fund (TPAF) and the Police and Firemen's Retirement System (PFRS) have allowed the purchase of service credit accrued during leaves of absences for military reasons, the Alternate Benefits Program (ABP) has not. Therefore, the proposed amendment makes specific provisions regarding the ABP to allow for credit for peacetime military service to become compliant with the requirements of USERRA. Also, the employee will be permitted to make additional elective deferrals under Supplemental Annuity Collective Trust (SACT), Deferred Compensation, and voluntary contributions under ACTS and the ABP not exceeding the maximum amount the employee would have been permitted to contribute during the period of military service if the employee had actually been employed by the employer during that period.

17:1-4.36 Peacetime military service; service credit

(a) A member or former member, or a person required to be a member, of a State-administered retirement system who leaves employment covered by a State- administered retirement system to enter [military] the uniformed services of the United States and returns to covered employment within the time period and under the circumstances required for entitlement to reemployment rights under [federal] Federal law (38 U.S.C. [sec. 2021] §§ 4301 et seq.), may obtain service credit in the State-administered retirement system [covering the employment after military service] as provided in this section.

(b) A member reemployed under this section shall be treated as not having incurred a break in service with the employer by reason of the member's period of service in the uniformed services for the purposes of vesting or determining eligibility for retirement and health benefits, even if the member does not make contributions to the retirement system for the period of service.

(c) The types of service or situations eligible for reemployment rights include regular active duty, initial active duty for training, active and inactive duty training for members of reserve components and National Guard units, and situations where an employee leaves employment for [military] the uniformed services or for examination of fitness for [military] the uniformed services and is not taken into [military] the uniformed services.

1. The person must be a member or be required to be a member of a State- administered retirement system prior to leaving employment to enter [military] the uniformed services, must give advance written or oral notice of such service to the employer, unless precluded by military necessity, and must leave the covered employment to enter [military] the uniformed services.

2.The person must return to employment or submit an application for reemployment covered by a State-administered retirement system within the time periods prescribed by [federal] Federal law. [A person may serve only four years, plus an additional year, or other additional, limited time periods in the case members of the National Guard or military reserve units called to active duty,] The cumulative length of the absence and of all previous absences with that employer shall not exceed five years unless otherwise permitted under 38 U.S.C. § 4312(c) to be eligible for reemployment rights. The person must seek reemployment within the time period prescribed by [federal] Federal law which is generally 90 days following release from [military] the uniformed services but which differs based on the length and type of service as provided in 38 U.S.C. § 4312(e). [A reservist or guardsman returning from initial active duty for training must seek reemployment within 31 days after release from duty. A person returning from other training duty or who leaves employment for military service or for examination of fitness for military service and is not taken into military service must report to work at the next regularly scheduled work period after release from duty.] In all cases, the time limit for return to employment or to submit an application for reemployment is [tolled] extended for up to [one] two years for any injury or illness [related to military] incurred in or aggravated during the uniformed service requiring hospitalization or convalescence which continues after release from [military] the uniformed service.

3. The person's [military] uniformed service must have been honorable or satisfactory. [This requirement is not applicable to military service training other than initial active duty for training.]

4. The person [may] shall be denied reemployment rights if [the]:

i. The person is not qualified to perform the duties of the position for which reemployment is sought [or if the];

ii. The accommodation, training or effort referred to in 38 U.S.C. § 4313(a)(3), (a)(4) or (b)(2)(B) would impose an undue hardship on the employer;

iii. The employer's circumstances have so changed as to make it impossible or unreasonable to reemploy the person;

iv. The employment from which the person leaves to serve in the uniformed services is for a brief, nonrecurrent period (temporary employment) and there is no reasonable expectation that such employment will continue indefinitely; or

v. The person knowingly provides written notice of intent not to return to a position of employment after service in the uniformed services.

5. The person will not be entitled to service credit in a State- administered retirement system if reemployment is validly denied.

6. The employer shall have the burden of proving that (c)4i, ii, iii, iv or v above justified the denial of reemployment rights. For the purposes of (c)4v above, the employer must show that the person knowingly provided clear written notice of intent not to return to a position of employment after service in the uniformed service and in doing so was aware of the specific rights and benefits to be lost.

[5.]7. To receive service credit in a State-administered retirement system for peacetime military service, prior to October 13, 1994, the person must [apply] have applied within one year following the date of return to employment or the date initial pension contributions are certified to begin in the retirement system if the person's former membership was terminated or was in a different retirement system.

8. The employer shall notify the Division in writing within 30 days that a member has returned from service in the uniformed services and the dates of such service.

[6. To obtain service credit for the military service, the person must]

9. The member may make contributions to the retirement system for all of the period of [military] service in the uniformed services to obtain credit in the pension system for inclusion of such service in the calculation of benefits. The member must file a written request with the Division so that a schedule of back deductions will be generated. The schedule of back deductions shall be based upon the [person's current salary and full percentage contribution rate. The contributions must be authorized by the person within one year following the date of return to employment or the date initial pension contributions are certified to begin, or the expiration date indicated on the quotation letter, whichever is later.] employee's rate of contribution in effect on the date the employee returned to employment multiplied by the salary the employee would have received but for the period of service; or, if the determination of such salary is not reasonably certain, on the basis of the employee's average rate of compensation during the 10 or 12-month period immediately preceding such service for the period of time in which no credit was received in the system for that service. Any payment to the plan described in this paragraph shall begin as soon as practicable after the date of reemployment and shall continue for the lesser of five years or three times the period of the uniformed service. If the member does not request in writing back deductions at the time of return to employment, the member may request to receive credit for such service until the expiration of either five years or three times the period of the uniformed service, whichever is shorter. Repayment still must be made in the above referenced time frame.

10. The member is permitted to make additional elective deferrals to the Supplemental Annuity Collective Trust (SACT), the New Jersey Employees Deferred Compensation Plan, Additional Contributions Tax-Sheltered Programs (ACTS) and the Alternate Benefit Program in an amount not exceeding the maximum amount the employee would have been permitted to contribute during the period of military service if the employee had actually been employed by the employer during that period.

[7. A person who returned to employment covered by a State-administered retirement system after December 3, 1974 and on or before January 24, 1986, and was eligible for reemployment rights under federal law with respect to the employment, may obtain service credit for the military service by applying, on or before January 24, 1987, to:]

[i. The retirement system of which the person is a member, or was a member in the case of a retired person; or]

[ii. The Division of Pensions in the case of a former member of a State- administered retirement system who is not retired or is not a current member.]

[8. The contributions required to obtain the service credit shall be based upon the person's salary and full percentage contribution rate at the time of return to employment.]

[9. The contributions required to obtain the service credit may be paid by any method authorized for purchases of service credit under the retirement system.]

[10.] 11. If a person retires prior to paying the total amount of contributions required to obtain service credit for the [ military] uniformed service, the total amount of service credit shall be in direct proportion as the amount paid bears to the total amount of contribution obligation.

12. An employer who participates in the Alternate Benefit Program (ABP), reemploying a person under this section, with respect to the period served by a person in the uniformed services, upon reemployment of that person, shall be liable to the employee pension plan for funding any obligation of that plan to provide benefits under that plan, and shall allocate the amount of any employer contribution for that person in the same manner and extent that the allocation occurs for other employees during the same period of service. However, the employer is not required to make up the earnings that those contributions would have made had the person reemployed under this rule been employed continuously.

i. An employee reemployed under this paragraph who is a member of the defined contribution plan shall be entitled to the above accrued benefits only to the extent that the person makes payments to the plan with respect to such employee contributions.

ii. For the purposes of computing the employer's liability and the employee's contributions, the employee's compensation during the period of service shall be computed at:

(1) The rate the employee would have received but for the period of service; or

(2) If the determination of such rate is not reasonably certain, on the basis of the employee's average rate of compensation during the 10 or 12-month period immediately preceding such service.

iii. Make-up contributions shall begin on the date of reemployment and shall continue for five years or three times the period of uniformed service, whichever is shorter.

iv. Any employer who reemploys a person under this section shall, within 30 days after the date of reemployment, provide information in writing of such reemployment to the Division of Pensions and Benefits.

Please send your comments to: Division of Pensions and Benefits.


JUDICIAL RETIREMENT SYSTEM
ELIGIBILITY FOR A LOAN; OUTSTANDING LOANS

Adopted New Rules: N.J.A.C. 17:10-4.10 and 5.12

Cite as 32 N.J.R. 2602(a)

Adopted July 17, 2000

The agency proposal follows:

Summary

P.L. 1997, c.25, N.J.S.A. 43:6A-34.3 permits members of the Judicial Retirement System to borrow from the retirement system if they have at least three years of service credit. Proposed new rule N.J.A.C. 17:10-4.10 would establish procedures for the application of this statute.

Until recently, if a member retired with an outstanding loan balance, that balance had to either be paid in full at retirement, or the member's entire pension check was withheld until the loan was satisfied. The only way loan repayment at the same amount the member was paying as an active employee could be carried into retirement was if the member retired on a disability retirement allowance or retired on another type of benefit but was ill or disabled. Proof of the disability had to be provided before loan deductions could be carried into retirement.

P.L. 1999, c.132, amending N.J.S.A. 43:6A-34.4, changed the repayment method of outstanding loans at retirement. The new law provides that a member who retires with an outstanding loan will repay the loan through deductions from the retirement benefits payable in the same monthly amount that was deducted from the member's compensation immediately before retirement until the balance of the loan together with the interest is repaid. If the retiree dies before the loan with interest is repaid, the remaining loan balance will be repaid from the proceeds of any other benefits payable on the account of the retiree either in the form of monthly payments due to the beneficiaries or in the form of a lump sum payment from the pension or group life insurance. Proposed new rule N.J.A.C. 17:10-5.12 would reflect this statutory change.

Proposed new rule N.J.A.C. 17:10-5.12(a)2i provides that withholding for authorized deductions include Federal tax liens, health benefit premiums, and Federal and State income tax withholding. State health benefit premiums, Federal tax liens and withholding have been allowable deductions from retirement allowances for many years. P.L. 1989, c.328 permits withholding for State income taxes from retirement allowances and the Division began implementing voluntary State withholding in 1989.

17:10-4.10 Eligibility for loan

Only active contributing members of the System may exercise the privilege of obtaining a loan and the maximum loan shall be 50 percent of the accumulated deductions posted to the member's account.

17:10-5.12 Outstanding loan

(a) Any member who has an outstanding loan balance at the time of retirement shall repay the loan balance, with interest, as follows:

1. In full as provided by N.J.S.A. 43:6A-34.4;

2. By retention of retirement payments, excluding authorized deductions by the retirement system, until the loan balance, with interest, is repaid.

i. Authorized deductions include Federal tax liens, health benefit premiums, and Federal and State income tax withholding; or

3. By deductions from retirement benefit payments of the same monthly amount deducted from the member'scompensation immediately preceding retirement until the loan balance, with interest, is repaid as authorized by N.J.S.A. 43:6A-34.4. If the member does not request repayment in full, repayment is by deductions in the same monthly amount deducted from the member's compensation immediately preceding retirement.

(b) If a retirant dies before the loan balance, with interest, is repaid, the remaining balance shall be paid first from the pension system group life insurance proceeds, and then from the proceeds of any returned contributions payable on account of the retirant to the beneficiary or estate and then from the proceeds of any other benefits payable on account of the retirant in the form of monthly payments that are due to the beneficiaries or the estate. If multiple beneficiaries are to receive these benefits, each beneficiary shall share in repaying the remaining balance in the same proportion in which they are entitled to the benefits.

Please send your comments to: Division of Pensions and Benefits.


PUBLIC EMPLOYEES' RETIREMENT SYSTEM
Enrollment Eligibility Of Provisional, Temporary Employees
Occupying Full Time Police And Fire Titles

Adopted New Rule: N.J.A.C. 17:2-2.8

Cite as 32 N.J.R. 1415(a)

The agency proposal follows:

Summary

Although full-time employees hired provisionally or on a temporary basis are required to enroll in the Public Employees' Retirement System (PERS) after the completion of one year of service, employees serving on a temporary or provisional basis in a Police and Firemen's Retirement System (PFRS) covered position have not been enrolled in the PERS. Without pension membership, there are no death benefits or disability benefit available to an employee. Also, if an employee does become eligible for membership in the PFRS, the employee must purchase the earlier service at PFRS rates that are much higher than PERS contribution rates.

This proposed new rule is intended to protect those employees who are not yet eligible for enrollment in the PFRS, but whose employment does qualify them for enrollment in the PERS. Employees must be under age 35 to work in a PFRS title and must be able to meet the physical requirements of the position.

Full text of the proposed new rule follows:

17:2-2.8 Enrollment eligibility of provisional or temporary employees occupying full-time police and fire titles

(a) Any full-time employee hired provisionally or on a temporary basis into an eligible Police and Firemen's Retirement System (PFRS) title who is under the age of 35 shall enroll in the Public Employees' Retirement System (PERS) after the completion of one year of continuous service.

1. For employees whose employers report on a monthly basis, the compulsory enrollment date shall be the first of the month following the end of the one-year (12-month) period.

2. For employees whose employers report on a bi-weekly basis, the compulsory enrollment date shall be the first of the pay period following the end of the one-year (12-month) period.

(b) Once appointed to a permanent PFRS title, the employee shall be required to enroll in the PFRS if all other eligibility requirements are met. The employee shall have the option of interfund transferring the PERS service into the PFRS.

(c) Any employee who has an active membership in the PERS and becomes employed provisionally or on a temporary basis in an eligible PFRS title and is under age 35 shall continue membership in the PERS until meeting the eligibility requirements for entry in the PFRS. This applies to both employees continuing employment with the same employer, and those leaving one public employer and taking a position with another.

1. State and county employees holding provisional or temporary PFRS titles who cannot meet the maximum age requirement for membership in the PFRS (age 35) shall remain in the PERS after attaining permanent appointments.

2. Municipal employees holding provisional or temporary PFRS titles who cannot meet the maximum age requirements associated with those positions shall not remain in the PFRS titles.

(d) Any full-time employee hired provisionally or on a temporary basis in an eligible PFRS title prior to (the effective date of this rule) who will be eligible for enrollment into the PFRS upon the attainment of permanent status and who has worked for 12 or more months must be enrolled in the PERS with an enrollment date of (the first of the month following the effective date of this rule). Once enrolled, a member may purchase any provisional or temporary service with the same employer which led to enrollment in the PERS.

Cite as 32 N.J.R. 392(a)

Please send your comments to: Division of Pensions and Benefits.


PUBLIC EMPLOYEES' RETIREMENT SYSTEM
TEACHERS' PENSION AND ANNUITY FUND
Disability Retirant, Annual Medical Examinations

Cite as 32 N.J.R. 2257(a) [PERS]

Cite as 32 N.J. Reg. 2110(a) [TPAF]

Adopted Amendment N.J.A.C. 17:2-6.13 and 17:3-6.13

Adopted: May 8, 2000 by the Teachers' Pension and Annuity Fund Board of Trustees.
Effective Date: June 5, 2000.

Adopted: June 19, 2000 by the Public Employees' Retirement System Board of Trustees.
Effective Date: June 19, 2000.

Summary

The proposed amendment is necessary to comply with a recent decision of the New Jersey Superior Court, Appellate Division. New Jersey Education Association v. Board of Trustees, Public Employees' Retirement System and Board of Trustees, Teachers' Pension and Annuity Fund, 327 N.J. Super. 326 (App. Div. 2000). In that decision, the court determined that the rule as written exceeds the legislative requirements and that "the Board's well-intended efforts to expand the reach of the Statute are better addressed to the Legislature." Id. at 333-334. The court ruled that to the extent that the rule requires a physical examination for disabled retirees after five years or over the normal retirement age of 60, it is invalid. Id.

The Board is proposing to amend the rule to limit the Board's authority to require disability retirants to undergo medical examinations to 5 years and until the normal retirement age of 60.

17:2-6.13 Disability retirant; annual medical examinations

(a) All disability retirants under the normal retirement age of 60 may be required to undergo a medical examination each year for [at least] a maximum period of five years [or for good cause thereafter] by a physician designated by the System as of the anniversary date of their retirement, unless such examination requirement has been waived by the Board. [Good cause means the receipt by the Board of creditable information that a member who is receiving a disability retirement allowance is no longer disabled.]

(b) (No change.)

Cite as 32 N.J. Reg. 2110(a)

Please send your comments to: Division of Pensions and Benefits.


STATE HEALTH BENEFITS PROGRAM
RETIREE PRESCRIPTION DRUG CARD PLAN

Adopted New Rule: N.J.A.C. 17:9-6.10

31 N.J. Reg. 1048(a)

The agency proposal follows:

Summary

The purpose of this proposed new rule is to establish as a pilot program for five years a retiree prescription drug card plan to provide for payment of eligible prescription drug expenses of retirees and eligible dependents who participate in the Traditional Plan or the State managed care plan (NJ PLUS) under the State Health Benefits Program (SHBP). Eligible prescription drug expenses for these retirees and eligible dependents and the co-payments required under the card plan will not be eligible for submission and payment under the major medical portion of the Traditional Plan and NJ PLUS for the duration of the pilot program.

The State Health Benefits Commission's goals are two-fold: first, to improve retiree access to prescription drugs by making them more affordable by reducing the up-front cost to retirees, and second, to provide more cost-effective management of future costs. The cost of providing prescription drug coverage is growing faster than the cost of any other health benefit.

At present, all SHBP retirees receive prescription drug coverage under their medical plan. While retirees enrolled in HMOs have card plans with low co-pays and access to mail-order programs, retirees in the Traditional Plan and NJ PLUS must pay the full cost of prescriptions at a retail pharmacy and receive reimbursement, subject to an annual deductible amount and coinsurance, at a later date from the carrier under contract with the Commission to administer the medical plans, Horizon Blue Cross Blue Shield of NJ (Horizon). The majority of SHBP retirees are in the Traditional Plan. The annual major medical deductible amount is $100.00 per participant under the Traditional Plan. The co-insurance requirement is 20 percent of the next $2,000 of eligible medical and prescription drug expenditures. When a participant satisfies the deductible and coinsurance amounts, medical and prescription drug expenditures are reimbursed in full. The current total out-of-pocket maximum for medical services and supplies including prescription drugs is $500.00.

At present, 78 percent of Traditional Plan participants do not reach their out-of-pocket maximums for the year. These individuals, after satisfying the $100.00 major medical deductible for the year, pay coinsurance of 20 percent for their prescriptions. For most Medicare eligible retirees, the combination of $100.00 deductible and 20 percent coinsurance equates to a 29 percent cost- sharing for prescription costs under the present arrangement.

If a member uses the PAID Direct identification card supplied by Horizon to fill a prescription, the claim is submitted to Horizon electronically by the pharmacy, and reimbursement is mailed to the member in about two weeks. If the retiree does not use the PAID Direct identification card, he or she must submit a paper claim in order to receive reimbursement. Approximately 80 percent of retirees in the Traditional Plan and NJ PLUS take advantage of the electronic filing and discounted pricing through PAID Direct. At this time, retirees enrolled in the Traditional Plan and NJ PLUS do not have access to the SHBP's mail-order program.

The prescription drug card plan will have a three-tiered co-payment requirement and maximum out-of-pocket expense limit as follows:

Plan Type

Retail Pharmacy
Retiree Cost

(Maximum 30 day supply)

Mail-Order Pharmacy
Retiree Cost
(Maximum 90 day supply)

3 tiered copayment

generic - $5
preferred brand - $10
all other brand - $20

generic - $5
preferred brand - $15
all other brand - $25

Calendar Year Out-of-Pocket Maximum

$300 Per Individual


The new card plan includes a mechanism to calculate annual increases in both the co-payments and the maximum out-of-pocket expense to allow the ratio of the costs between the members and the program to remain constant over time. Therefore, as prescription costs rise, the members' co-pays and out-of-pocket costs will increase to maintain the members' share of costs. Proposed N.J.A.C. 17:9-6.10(f) prescribes how the co-payment amounts will be increased. Co-payment amounts will increase generally at the same rate as the average wholesale cost of prescription drugs covered under the plan. The co- payment amounts will remain the same for calendar years 2000 and 2001, and the rate of increase in the co-payment amounts for calendar years 2002 and 2003 will be limited to seven percent.

An example of the increased co-payment amount for preferred brands at a retail pharmacy for the five years from 2000 to 2004 is provided by the following table. It is assumed that the initial amount of the average wholesale price for a one-day supply of prescription drug products under the card plan is $2.00 and rate of increase in the average wholesale price is eight percent a year over the period.

Calendar Year Copayment AWP/Day Actual Rate of Increase AWP/Day Rate of Increase Under Card Plan Results of Actual Amount of Increased Copayment Cost of 30-Day Supply

2000

10

2.00

     

60.00

2001

10

2.16

8.00%

   

64.80

2002

11

2.33

8.00%

7.00%

10.70

69.90

2003

11

2.52

8.00%

7.00%

11.45

75.60

2004

12

2.72

8.00%

8.00%

12.36

81.60

The annual out-of-pocket expense of retirees and eligible dependents for prescription drugs will be limited under the card plan. The initial limit for calendar years 2000 and 2001 will be $300.00. Thereafter, the maximum annual out-of-pocket expense will increase generally at the same rate as prescription drug expenses paid by the plan per member. For calendar years 2002 and 2003, the rate of increase in the maximum out-of-pocket expense will be limited to 15 percent. If the actual rate of increase in prescription drug expenses per member increases by 15 percent or more for calendar years 2002 and 2003, the maximum out-of-pocket expense for these years would be $345.00 and $397.00, respectively.

The Commission may limit the increases in the co-payments and maximum out-of- pocket expense to prevent excessive annual increases, to maintain the spread between the co-payment amounts, and to prevent undue hardship to retirees. While the co-payment increases are based on the projected increases in the cost of the drugs, the projected increases to the out-of-pocket expenses are not only reflective of drug costs, but of increased member utilization of the program.

Because this drug card will be easy to use, more retirees will use it. The increased utilization will increase per member expenses, thereby increasing the out-of-pocket expenses by a higher percentage than the co-payment increases. Employer-based health plans are turning to three-tiered approaches to prescription drug co-pays in an effort to encourage employees/retirees to make more cost-effective choices in their drug purchasing. The Commission considers this approach to be superior to a two-tiered plan, such as the State employee prescription drug plan, in that the lower co-pay would encourage the use of the more cost-effective generic and preferred brand drugs while still allowing State Health Benefits Program retirees access to all the brand drugs currently available under their present reimbursement arrangement.

"Preferred brands" are the drugs that are more cost effective alternatives within a therapeutic class of brand drugs with comparable therapeutic efficacy. The formulary being proposed includes 80 percent of all brand name drugs. If there is no other drug that is therapeutically equivalent to a particular brand drug, that drug becomes a preferred brand drug. New drugs approved by the FDA would be included in the category "other brands" (non-preferred brands) until they could be reviewed for possible inclusion in the formulary, a process that usually takes three to six months but may be expedited in appropriate situations. A review of the brand drugs currently being utilized by existing retirees indicates that 87 percent fall in the preferred brand category.

Summary of Public Comments and Agency Responses:

Of the more than 80,000 retired participants of the Traditional and NJ PLUS plans in the State Health Benefits Program who were notified of these proposed changes, the agency received 76 public comments on this proposal from the following people:

1. William Ansbro, Valrico, FL
2. Antoinette Anweiller, Livingston, NJ
3. Judith H. Betten, Rochelle Park, NJ
4. Allan Bevere, Jackson, NJ
5. Sidney Bey, Monroe Twp., NJ
6. Robert Bonazzi, Executive Director, NJEA
7. John P. Callahan, Avalon, NJ
8. Mary A. Casella, Kenvil, NJ
9. John Chopan, Yardville, NJ
10. William J. Clark, Bayville, NJ
11. H.R. Conover, Emerald Isle, NC
12. William Cost, Trenton, NJ
13. Jim Costanza, Stanhope, NJ
14. Ernest Davis, Jr., Trenton, NJ
15. Peter DiMascio, Brodherdsville, PA
16. Veronica DiMascio, Brodherdsville, PA
17. Carl Dohm, Brooksville, FL
18. George Dorsey, Maywood, NJ
19. Rosann J. Dugas, Manahawkin, NJ
20. Arthur Fisherman, Hillsborough, NJ
21. Jeanine Forcella, Hanover Twp., NJ
22. Maurice J. Frank, Summit, NJ
23. Evelyn French, Toms River, NJ
24. Rolin A. Gaessle, W. Caldwell, NJ
25. Raymond Geneske, Perth Amboy, NJ
26. Patricia Giambo, Lakewood, NJ
27. Henry Gieseler
28. Donald J. Gilbert
29. George Goldy, Trenton, NJ
30. Harvey S. Halberstadter, Great Barrington, MA
31. Ruth Handelson. River Edge, NJ
32. Donald E. Hendrickson, New Egypt, NJ
33. Charles T. Hibbard
34. Max Kass, Lakewood, NJ
35. Andrew C. Kistulentz, State College, PA
36. Nancy J. Kistulentz, State College, PA
37. Eleana Klopper, Scotch Plains, NJ
38. Nancy Kolyer, Lanoka Harbor, NJ
39. Marion Kump, Rockaway, NJ
40. Loarraine Lenggel, Pocasset, MA
41. Lorena J. Linhares, Sarasota, FL
42. Thomas P. Martin, Westwood, NJ
43. Alberta S. Moore, Newton, NJ
44. Robert Melillo, Fort Lauderdale, FL
45. Sheila Murray
46. Mildred Neylon, Scotch Plains, NJ
47. John North, Holmdel, NJ
48. Alex Ockrymiek, Forked River, NJ
49. Angela Orrico
50. Lillian Ostrin, Livingston, NJ
51. Ruth Palmer, President, NJREA
52. Maureen J. Pampaloni, Ocean Grove, NJ
53. Frank M. Pelly, NJ Pharmacists Association
54. Eileen Phelan. Naples, FL
55. Edna L. Plishka, Toms River, NJ
56. Joanne Puco, Dover, NJ
57. Robert Pursell, NJ Area Director, CWA
58. Sydell Rappaport, Brookeville, MD
59. Alan Rothstein, Rutherford, NJ
60. Seymour Rubenstein, Pittsford, NY
61. Patrick A. Russo, Ringwood, NJ
62. Pearl Schechter, Lakehurst, NJ
63. June R. Schlachman
64. George Schwartz, Boynton Beach, FL
65. Diane Schwarz, Teaneck, NJ
66. Julianna Smith, Brick, NJ
67. Arthur Stender, Springfield, NJ
68. Marc Stewart
69. Richard Summers, Blythewood, SC
70. Carole A. Taylor, Kinnelon, NJ
71. Thomas Taylor, Kinnelon, NJ
72. Jane Tucker, Hayesville, NC
73. Barbara Venezia, Guttenberg, NJ
74. Sanford Wolff, Wellington, FL
75. Melvin Wolock, Metuchen, NJ
76. Frank J. Zimmerman, Clifton, NJ

In some instances, e-mails with comments pertaining to this rulemaking did not contain addresses; therefore, those addresses are not listed. Multiple comments from the same person were counted only once. Because of the large number of comments, there were a considerable number of similar, identical and/or related comments from different people. The Commission has made an effort to group together comments that deal with the same issue. This will give the reader the opportunity to get a sense of the related issues.

Costs

COMMENT: Many people commented that the proposed plan actually would increase their costs for prescription drugs. Mr. Maurice Frank comments that, "It becomes obvious to me that my costs are increasing and not decreasing." Mr. Sidney Bey adds that, "the new NJ prescription plan will not save me any money." Many commenters stated that the new plan would cost them more in prescription costs and that the only savings they could see were for the carrier and the drug companies.

RESPONSE: Under the existing rules, 78 percent of Traditional Plan participants do not reach their out-of-pocket maximums for the year. These individuals, after satisfying the $100.00 major medical deductible for the year, pay a net co-insurance of 20 percent for their prescriptions after reimbursement. For these retirees, the combination of $100.00 major medical deductible and 20 percent co-insurance equates to a more than 20 percent cost sharing for prescription costs. These individuals will have a lower cost share under the new rule. Further, the cost of all prescriptions must be deducted from each member's lifetime $1,000 major medical maximum or the mental health maximum for conditions that are not biologically based. While few retirees exceed these maximums at present, these limitations will become more restrictive over time as costs rise. By eliminating prescription drug coverage from the medical plan and providing coverage through a separate plan, the major medical plan limitations will not apply to drug costs, thus allowing retirees to maximize their medical benefits.

Many NJ PLUS members will also benefit under the new arrangement. In the past, NJ PLUS retirees who filled prescriptions written by participating network physicians received 90 percent reimbursement. They paid a net 10 percent for prescriptions regardless of the total cost, since no cap applies to in-network prescriptions. This means that high utilizers in NJ PLUS who receive more than $3,000 in prescriptions in 2000 will be better off under the new plan. Also, prescriptions prescribed through out-of-network providers were only reimbursed at 70 percent after the $100.00 deductible had been met for NJ PLUS members.

The Commission recognizes that there may be an increase in costs to some retirees in NJ PLUS and the 22 percent of Traditional Plan participants who do reach their out-of-pocket maximums, but believes that a significant majority of retirees will benefit from this plan. Not having to pay full prescription costs up-front will benefit all retirees and may increase utilization.

Co-payment costs and out-of-pocket expenses

COMMENT: Robert Pursell, NJ Area Director of the CWA, comments that the proposed pilot program is "promising in many regards and in the near term will benefit the majority of retirees. The elimination of the need to pay prescription drug costs and then wait for reimbursement is an administrative benefit to the plan and to retirees." The commenter expresses his concern that future increases in co-payments and the total out-of-pocket expenses will be greater than increases in retiree income. He suggests that increases to these expenses be limited to the cost of living formula applied to public employee pensions (60 percent of the change in the cost of living from retirement date to present). The NJEA also suggests this formula.

RESPONSE: The cost of drugs is increasing at such a high percentage that limiting increases would not be effective management of future costs. The cost of providing prescription drug coverage is growing faster than the cost of any other health benefit. The new card plan includes a mechanism to calculate annual increases in both the co-payments and the maximum out-of-pocket expense to allow the ratio of the costs as between the members and the program to remain constant over time. Therefore, as prescription costs rise, the members' co-payments and out-of-pocket costs will increase to maintain the members' share of costs. Co-payment amounts will increase generally at the same rate as the average wholesale cost of prescription drugs covered under the plan.

Local pharmacy loyalty

COMMENT: Mr. William Cost commented that "Our pharmacist is important to us." Ms. Nancy Kolyer adds that she has "a very strong objection to the insurance plan telling me what drugs--generic or original--I can use and telling me where I have to buy them to receive the benefits for which I pay." Ms. Mildred Neylon comments that, "I am upset that I will no longer be able to patronize my local pharmacy." Frank Pelly, R.PH, Director of Government Affairs of the NJ Pharmacists Association, comments that his organization opposes many of the provisions in the proposed new rule. He states that the proposed new rule "effectively 'directs' retirees away from community pharmacies into distant 'mail order' health care environments which provides no direct contact with a NJ registered pharmacist." He adds that, "Access to quality pharmaceutical care will be greatly compromised, with retirees who often have extremely comprehensive prescription requirements being without the direct professional advice and counsel of a NJ registered pharmacist."

Mr. Charles Hibbard comments that "this set-up discourages the use of local pharmacists. I would prefer to continue all my prescriptions with the same pharmacist for control purposes." Mr. Alan Rothstein comments that, "you lose that all important relationship with your pharmacist." Mr. Melvin Wolock adds, "we vigorously protest the new program. It is not the copay dollars. It is the fact that the program cuts off major business from our local pharmacist, on whom we have depended in many ways for many years. It is shameful that NJ would do this to small businesses." Ms. Lorena J. Linhares asks, "will your mail order firm be available for advice and suggestions when needed?"

RESPONSE: This plan does not prohibit the use of a local pharmacy. If retirees wish to use local pharmacists, they have the option to do so. It is more cost- effective to use mail-order; therefore, retirees will experience greater savings by using the mail-order plan.

The Mail Service Plan offers convenience and cost savings on medications retirees take on a regular, ongoing basis. Strict quality and safety controls are followed for every prescription filled. The Plan is staffed with registered, licensed pharmacists that are available 24 hours a day to answer questions. When prescriptions are filled through the Mail Service Plan, they are reviewed for any potential drug interactions based on the retiree's personal medication profile. If there ever is a question about a prescription, a mail service plan pharmacist will contact the retiree's physician prior to dispensing the medication.

30-day versus 90-day supply

COMMENT: Mr. Harvey Halberstadter comments "to now find that I can only obtain a thirty-day supply of these medications from a local pharmacist is creating a burden." Ms. Lorena J. Linhares adds that, "Remaining on thirty-day prescriptions would raise the cost immensely." Many commenters asked why they couldn't continue to receive a 90-day supply from their pharmacist.

RESPONSE: The Commission, after much consideration, decided to allow for only a 30-day supply at the pharmacy level upon initiation of this pilot program, in part to benefit from the discounted fees available through Merck Medco for the bulk purchase of drugs through mail order that are lost at the local pharmacy level. To keep the costs as low as possible for this program, the Commission wished to encourage the use of mail order, and permitting to obtain a 90-day supply at a discounted amount only through mail order is one way to encourage its use. The Commission will be considering the possibility of permitting a 90-day supply to be available from local pharmacists at a Commission meeting in the near future.

Mail order limitations

COMMENT: Mr. Harvey Halberstadter urges the Commission to make arrangements with other drug companies other than Merck Medco. Mr. Charles Hibbard expressed concerns regarding the danger of overheating or freezing during shipment of the mail order prescriptions. Another commenter adds that requiring the physician to fax the prescription to the mail order company is not realistic and that the patient should be allowed to fax or mail the prescription as AARP allows. Mr. Rolin Gaessle comments that, "our local druggist checks any new prescription to see if it is compatible with the present drugs we are on. Will the mail order company do this?" He also suggests that a 90-day supply from the druggist would fix this problem. Mr. George Schwartz comments that "this is a backdoor way to coerce people into the netherland of mail order." He adds, "I do not want a mail-order house handling my medications. Nor do I want to deal with the delays inherent with mail, and the accompanying inability to deal promptly with any problems that might arise."

RESPONSE: Traditional and NJ PLUS coverage is currently provided through Horizon, Blue Cross/Blue Shield of NJ (BCBS). BCBS sub-contracts with Merck Medco for the provision of mail-order prescription drug services. The proposed new rule establishes a pilot program of five-year duration. The Commission is tailoring this pilot program to be consistent with the existing BCBS contractual structure for the provision of services. The existing contract expires prior to the expiration of the pilot program. Upon the expiration of the existing contract, the Division shall issue a request for proposals through the New Jersey Department of the Treasury, Division of Purchase and Property. The Commission shall review proposals submitted at that time and determine whether to change mail-order prescription drug service providers.

As stated in the response regarding local pharmacy loyalty, allprescriptions are reviewed for potential drug interaction based on retirees' personal medical profiles. The Commission addresses the 90-day supply issue above in "30-day versus 90-day supply." Postage-paid envelopes are now available for retirees to mail new prescriptions or refill requests directly to the mail order pharmacy, or doctors may fax prescriptions. Refills are available through the Internet. Most retirees will save at least 50 percent in co-payment costs by using mail order. Prescriptions will be delivered directly to retirees' homes, making the service convenient as well as cost-effective. Payments may be made either by credit card or direct billing. Prescriptions are delivered within 10 to 14 days of a retiree's request. While AARP allows patients to fax prescriptions directly to its service, AARP verifies telefacsimilied prescriptions with patients' doctors before filling any prescription. This may cause delays.

Merck Medco likely would undertake the same verification process if it accepted faxed prescriptions directly from retirees. Requiring physicians to fax prescriptions directly to Merck Medco eliminates the verification step and any delays thereto attendant. At this time, the adopted pilot program allows prescriptions to be either faxed by physicians or mailed by patients to Merck Medco. The Commission invites retirees to write to the Commission and indicate their interest in being able to fax their prescriptions themselves. If retirees indicate widespread interest in being able to fax their prescriptions themselves, the Commission will revisit its position at a future Commission meeting.

Drugs that have special temperature-sensitive requirements are handled according to those requirements. Insulin is packaged in improved premium packaging and shipped for delivery within 48 hours via United States Postal Service Priority Mail during the months of November through March to specifically identified locations where the average temperature is below freezing. In June, July and August, insulin shipped to all states utilizes improved premium packaging. Orders are shipped second day air or overnight standard delivery according to Merck Medco's standard operating procedures for insulin shipping.

Drugs that require special handling are packed in various types of packaging as required by the manufacturer. Calls are placed to the patient to insure receipt of next-day shipping. Packages are not sent until confirmation is received that someone will be home to accept or alternate shipping instructions are given. Normal extreme temperatures do not affect most medications. If a patient is on vacation for an extended period of time and medication is left in their mailbox, the patient should call Merck Medco to speak to a registered pharmacist regarding the safety of the medication. Regardless, the same shipping precautions are taken for mail order drugs as are taken for delivering drugs from the manufacturer to the pharmacy.

The proposed new rule encourages the use of mail order due to the cost savings to members and to the plan, and theconvenience to members, but, as addressed above in "local pharmacy loyalty," it does not preclude the use of local pharmacies.

Elimination of prescription drug expenses from major medical benefits

COMMENT: NJREA President Ruth Palmer comments that, "retirees will no longer be able to submit prescription drug expenses to major medical to satisfy deductibles and co-insurance requirements. This change will increase a retiree's out-of-pocket non-prescription drug medical expenses under major medical, potentially offsetting any savings under the new prescription drug card." Mr. William Clark adds that, "nothing indicates that the applicable bargaining units agreed to elimination of prescription drugs from major medical benefits."

RESPONSE: While the Commission recognizes that some retirees will pay more for prescriptions under this plan, the great majority will benefit. For example, in 1999, the prescription drug cost share for all retirees in the Traditional Plan was about 17 percent of the total prescription drug cost. Under the new plan, the overall cost share for retirees in the Traditional Plan is expected to be approximately 13 to 14 percent of the total cost, depending on the use of the mail-order option. Eliminating prescription drugs from major medical coverage will provide many retirees with a way to better utilize their lifetime benefits. For example, a member of our Traditional Plan has only $20,000 in lifetime mental health benefits for non-organic disorders. Since the present prescription coverage is provided through the major medical plan, the costs of mental health prescriptions, such as anti-depressants, must be deducted from this lifetime maximum. Further, the cost of all prescriptions must be deducted from each member's lifetime $1,000 major medical maximum. While few retirees exceed these maximums at present, these limitations will become more restrictive over time as costs rise. By eliminating prescription drug coverage from the medical plan and providing coverage through a separate plan, the major medical plan limitations will not apply to drug costs, thus allowing retirees to maximize their medical benefits.

Coordination of benefits

COMMENT: Mr. Richard Summers asks, "what compensation does a couple who previously coordinated benefits get relative to thenew prescription plan?" He suggests allowing those who previously coordinated benefits to pay the lowest co-payment available. Mr. Andrew Kistulentz comments that "the terms and conditions regarding health benefits once described to retirees should not be changed if the changes adversely affect them." He concludes, "my wife and I would not mind the new system at all if you would let us coordinate the benefits we have earned."

RESPONSE: Most retirees who were able to coordinate health benefit coverage with their spouses are those who are both receiving free coverage at taxpayer expense, an immense benefit in today's economy. While the Commission recognizes that there will possibly be an increase to those lucky enough to have double coverage, they are confident that this plan will benefit the many retirees who must pay, not only for their health benefits coverage, but also prescription coverage.

Choice of plans

COMMENT: Ms. Eileen Phelan recommends that "retirees be given a choice as to which type of prescription plan they want, either reimbursement through major medical, or co-payments." Mr. Rolin Gaessle also recommends that retirees be given a choice.

RESPONSE: The Commission thanks those who made this comment, but believes that this plan makes strong economic sense to the Commission as well as to a great majority of retirees to adopt the provisions of this plan. It will result in lower out-of-pocket expenses, and eliminates the need to satisfy the $100.00 deductible before drugs are covered. Allowing for a choice of plans would require an immense premium increase. The Commission decided that it is more fiscally prudent to adopt this rule as proposed than to dramatically increase premiums.

Changes in plan

COMMENT: Mr. David Hendrickson expresses his displeasure that these changes were made after he had understood that he would get free coverage after 25 years of service. Ms. Eileen Phelan requests that no other changes be made and that "nothing further be done to chip away at the health benefits of New Jersey's retirees."

RESPONSE: If plans always remained the same, many benefits taken for granted today would never be covered; for example, the requirement of a 48-hour hospital stay after mastectomies or births or the coverage of new lifesaving therapies or of the hundreds of new drugs recently introduced that enhance the quality of life, such as Viagra. It is the responsibility of the Commission to provide the best, most cost-effective coverage available. The Commission believes that this Plan will be a benefit to all in the future as prescription drug costs continue to increase at ever greater percentages. The cost of prescription drugs increased by over 50 percent in the past two years and by 400 percent over the past 10 years. To control these costs and to avoid serious diminution of plan benefits or avert crushing rate increases that may cause those retirees paying for their own coverage to drop it as unaffordable, the Commission decided this change is in the best interest of the program and the majority of plan participants.

The Commission considered all possible alternatives to address increased prescription drug costs and the need to ensure the plan's fiscal stability and continued existence for the benefit of existing and future retirees. The Commission determined that restructuring the plan as adopted is the alternative least detrimental to the greatest number of retirees.

Full text of the proposed new rule follows:

17:9-6.10 Retiree prescription drug card plan

(a) The following terms, as used in this section, shall have the following meanings:

"Brand name" means the proprietary or trade name assigned to a drug product by the manufacturer or distributor of the drug product.

"Generic drug products" means prescription drug products and insulin approved and designated by the U.S. Food and Drug Administration as therapeutic equivalents for reference listed drug products. It includes drug products listed in the New Jersey Generic Formulary by the Drug Utilization Review Council pursuant to N.J.S.A. 24:6E-1 et seq.

"Mail-order pharmacy" means the mail order program available through the provider.

"Preferred brands" means brand name prescription drug products and insulin determined by the provider, to be more cost effective alternatives for prescription drug products and insulin with comparable therapeutic efficacy within a therapeutic class, as defined or recognized in the United States Pharmacopeia or the American Hospital Formulary Service Drug Information, or by the American Society of Health Systems Pharmacists. A drug product for which there is no other therapeutically equivalent drug product shall be a preferred brand. Determinations of preferred brands by the provider shall be subject to review and modification by the Commission.

"Prescription drug card plan" or "card plan" means the plan for providing payment for eligible prescription drug expenses of retired members of the State Health Benefits Program and their eligible dependents who participate in the Traditional Plan or the State managed care plan (NJ PLUS) as prescribed by this section.

"Provider" means an insurance company, hospital, medical, or health service corporation, or health maintenance organization under agreement or contract with the Commission to administer the card plan.

"Retail pharmacy" means a pharmacy, drug store or other retail establishment in this State at which prescription drug products are dispensed by a registered pharmacist under the laws of this State, or a pharmacy, drug store or otherretail establishment in another state at which prescription drug products are dispensed by a registered pharmacist under the laws of that state if expenses for prescription drug products dispensed at the pharmacy, drug store or other retail establishment are eligible for payment under the card plan.

"Other brands" means prescription drug products which are not preferred brands or generic drug products. A new drug product approved by the U.S. Food and Drug Administration which is not a generic drug product shall be included in this category until the provider makes a determination concerning inclusion of the drug product in the list of preferred brands.

(b) As a pilot program for five years (from (the effective date of this rule) to (five years from the effective date of this rule)), payment for eligible prescription drug expenses of retired members of the State Health Benefits Program and their eligible dependents who participate in the Traditional Plan or NJ PLUS shall be provided under the prescription drug card plan. Payment for prescription drug expenses or the co-payments required under the card plan shall not be made under the major medical portion of the Traditional Plan or NJ PLUS. There shall be no annual deductible amount that retired members or their eligible dependents shall satisfy before eligibility for payment of prescription drug expenses under the card plan.

(c) Eligibility of prescription drug expenses for coverage under the card plan shall be determined on the same basis as reasonable and necessary medical expenses under the major medical portion of the Traditional Plan and NJ PLUS.

(d) A co-payment shall be required for each prescription drug expense until a retired member or eligible dependent satisfied the maximum annual out- of-pocket expense for a calendar year prescribed in (g) and (h) below. The initial amounts of the co-payments for calendar years 2000 and 2001 shall be as follows:

Type of Drug Product Retail Pharmacy Mail-Order Pharmacy
Generic

$5.00

$5.00

Preferred Brands

$10.00

$15.00

Other Brands

$20.00

$25.00

(e) The supply of a drug product eligible for coverage under the card plan for each prescription drug expense shall be limited to 30 days if the prescription is filled at a retail pharmacy, and 90 days if the prescription is filled through the mail-order pharmacy.

(f) The co-payment amounts under (d) above shall be reviewed annually and shall be increased by the rate of increase of the average wholesale price for a one-day supply of prescription drug products covered under the card plan for the immediately preceding fiscal year over the second preceding fiscal year rounded to the nearest whole dollar. The basis for determining an increase in the amounts of co-payments from year to year from the initial amounts shall be the actual results of the calculations to determine the increased amounts, and not the rounded amounts of co-payments applicable for any year or years. The co-payments shall be reviewed initially for calendar year 2002. Since there will not be a full fiscal year of experience for fiscal year 2000 under the card plan, the experience for fiscal year 2000 shall be annualized on an actuarial basis. The rate of increase in the co-payment amounts for calendar years 2002 and 2003 shall not exceed seven percent.

(g) The amount of out-of-pocket expense that a retired member or eligible dependent shall pay for a calendar year for eligible prescription drug expenses under the card plan shall be limited initially for calendar years 2000 and 2001 to $300.00.

(h) The maximum amount of annual out-of-pocket expense under (g) above shall be reviewed annually and shall be increased by the rate of increase in the amount of prescription drug expenses paid per member under the card plan for the immediately preceding fiscal year over the second preceding fiscal year rounded to the nearest whole dollar. The maximum amount of annual out-of-pocket expense shall be reviewed initially for calendar year 2002. Since there will not be a full fiscal year of experience for fiscal year 2000 under the card plan, the experience for fiscal year 2000 shall be annualized on an actuarial basis. The rate of increase in the maximum amount of annual out-of-pocket expense for calendar years 2002 and 2003 shall not exceed 15 percent.

(i) Notice of increases in the amounts of the co-payments and the maximum out-of-pocket expense shall be published in the New Jersey Register and shall be sent to all retirees affected by the increases.

(j) The provider administering the card plan shall comply with N.J.A.C. 11:4-37.3(c)1 through 4, 6 and 7 in administration of the card plan.

(k) The Commission may limit the annual increases in the co-payments and the maximum out-of-pocket expense for the following reasons:

1. To limit excessive annual increases which are significantly higher than the trends for the increases over the preceding five years;

2. To maintain an appropriate spread between the categories of co- payment amounts; or

3. To prevent undue hardship to retirees if general economic circumstances in the State or economic circumstances relative to health care for retirees are such that strict application of the formulas for the annual increases in the co-payments or the maximum out-of-pocket expense would produce such hardship.

Cite as 31 N.J.R. 1048(a)


 
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