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Pensions and Benefits
RULE CHANGES
2001
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

Public Notice N.9-6.10(i) Notice of Increases in the Amounts of Co-payments and the Maximum Out of Pocket Expenses Under the Retiree Prescription Drug Card Plan. Cite as 33 N.J. Reg. 3774(a) [General]


Proposed Rules

There are no Proposed Rules for 2001.


Adoptions

Adopted Repeal and New Rule: N.J.A.C. 17:3-4.1 Creditable Compensation. Cite as 33 N.J. Reg. 3907(c) [TPAF] 11/19/01

Adopted Amendment: N.J.A.C. 17:2-5.6 Methods of Payment. Cite as 33 N.J. Reg. 3907(b) [PERS] 11/19/01

Adopted New Rule: N.J.A.C. 17:1-6.1 and Proposed Recodification with Amendment: N.J.A.C. 17:1-4.25 as 6.2 General Administration Honorable Service. Cite as 33 N.J. Reg. 1872(a) [General] 11/5/01

Adopted Amendment N.J.A.C. 17:4-5.3 Optional Purchases of Eligible Service. Cite as 33 N.J. Reg. 2254(a) [PFRS] 11/5/01

Adopted Amendment: N.J.A.C. 17:4-1.3 Officers and Committees. Cite as 33 N.J. Reg. 2611(a) [PFRS] 11/5/01

Adopted Amendment: N.J.A.C. 17:4-5.4 Methods of Payment. Cite as 33 N.J. Reg. 2612(a) [PFRS] 11/5/01

Adopted Amendment: N.J.A.C.
17:10-5.11 Compulsory Retirement. Cite as 33 N.J. Reg. 2613(a) [JRS] 10/15/2001

Adopted Amendment: N.J.A.C. 17:3-5.6 Methods of Payment. Cite as 33 N.J.Reg 2402(a) [TPAF] 10/15/2001

Adopted New Rule: N.J.A.C. 17:3-3.14 Benefits Payable Under P.L. 1984, C.96, as Amended by P.L. 1995, C.221. Cite as N.J. Reg 2401a [TPAF] 10/15/01

Adopted Amendment: N.J.A.C. 17:3-2.6 Ineligible Positions; Interim Appointment to Boards of Education. Cite as N.J.Reg 2400(a) [TPAF] 10/15/01

Adopted Amendments: N.J.A.C. 17:3-5.5 and 7.1 Optional Purchases of Eligible Service and Interfund Transfers; State-Administered Retirement Systems. Cite as 33 NJR 2677(b) [TPAF] 8/6/01

Adopted new rule : N.J.A.C. 17:2-5.5 and 17:2-7.1 Optional Purchase of Eligible Service and Interfund Transfers; State Administered Retirement Systems. Cite as 33 NJR 2677(a) [PERS] 8/6/01

Adopted Amendment N.J.A.C. 17:1-4.39 Workers Compensation. Cite as 33 NJR 1605(a) [GENERAL] 5/21/01

Adopted Readoption and Recodification with Amendments: N.J.A.C. 17:1-2 as 17:7
Adopted New Rules: N.J.A.C. 17:7-1.10, 1.12, 1.13, 1.14, 3.2, 3.5 and 3.8
Adopted Repeals: N.J.A.C. 17:1-2.15, 2.25, 2.27, 2.30, 2.31, 2.34 and 2.35
Adopted Repeals and New Rules: N.J.A.C. 17:1-2.9, 2.18 and 2.23 Division of Pensions and Benefits Alternate Benefit Program. Cite as 33 NJR 1601(a). [ABP] 5/21/01

Adopted Readoption N.J.A.C. 17:8 Supplemental Annuity Collective Trust Program. Cite as 1399(a) N.J.R. 212(a) [GENERAL] 4/5/01

Adopted Amendment: N.J.A.C. 17:3-6.1 Applications. Cite as 33 N.J.R. 1398(b) [TPAF] 4/6/01

Adopted Amendment: N.J.A.C. 17:2-6.1 Applications. Cite as 33 N.J. Reg. 1398(a) [PERS] 3/22/01

Adopted Readoption N.J.A.C.17:5 State Police Retirement System Rules. Cite as 33 N.J.R. 1205(a)[SPRS] 4/16/01

Readoption with Amendments N.J.A.C 17:4 Cite as 33 N.J.R 684(a). [PFRS]

Adopted Amendment and Adopted New Rule N.J.A.C. 17:9-3.1 and 17:9-3.8. State Health Benefits Commission. Cite as 33 N.J.R.291(b) [GENERAL]

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PUBLIC NOTICE

TREASURY-GENERAL
DIVISION OF PENSIONS AND BENEFITS
STATE HEALTH BENEFITS COMMISSION
STATE HEALTH BENEFITS PROGRAM

NOTICE OF INCREASES IN THE AMOUNTS OF COPAYMENTS AND THE MAXIMUM
OUT-OF-POCKET EXPENSES UNDER THE RETIREE PRESCRIPTION DRUG CARD PLAN

Cite as 33 N.J. Reg. 3774(a)

Take notice that N.J.A.C. 17:9-6.10(i) requires the State Health Benefits Commission to publish notice of any increases in the amounts of the co-payments and the maximum out-of-pocket expenses under the retiree prescription drug card plan.

After a review of the rising costs of prescription drugs and consultation with the Commission's actuarial consultant, the Commission has determined that an increase in co-payments and the maximum out-of-pocket expenses is necessary (see N.J.A.C. 17:9-6.10(f) and (h)).

Therefore, effective January 1, 2002, co-payments for retirees enrolled in the Traditional Plan and NJ PLUS will be as follows:

Type of Drug Product Retail Pharmacy Mail-order Pharmacy
Generic $ 5.00 $ 5.00
Preferred Brand $11.00 $16.00
Other Brands $21.00 $26.00

The maximum annual out-of-pocket expenses for prescription drug benefits for a participant will increase from $300.00 to $345.00.


PUBLIC EMPLOYEES' RETIREMENT SYSTEM
METHODS OF PAYMENT

Adopted Amendment: N.J.A.C. 17:2-5.6

Cite as 33 N.J. Reg. 3907(b)

Adopted November 19, 2001

The agency proposal follows:

Summary

The Public Employees' Retirement System proposes to eliminate the minimum payment requirement for the initial partial lump sum payment for purchases. Currently, if a member wishes to make an initial partial lump sum payment toward a purchase, that sum must be at least $250.00. Many years ago, when the $250.00 minimum was adopted, it represented a large percentage of the entire purchase cost. Now, in many cases, it is less than the monthly minimum payment amount of one half of a full regular pension deduction.

Computer systems are also now more advanced and more flexible, and can calculate repayment schedules based on any partial lump sum payment. Therefore, the PERS proposes to eliminate the requirement that any initial partial lump sum payment toward a purchase be $250.00 or more, and will accept any amount as an initial partial lump sum payment.

17:2-5.6 Methods of payment

(a) Methods of payment include the following:

1. (No change.)

2. Partial lump sum [of $250.00 or more]; balance by extra payroll deductions;

3.-4. (No change.)


TEACHERS' PENSION AND ANNUITY FUND
CREDITABLE COMPENSATION

Adopted Repeal and New Rule: N.J.A.C. 17:3-4.1

Cite as 33 N.J. Reg. 3907(c)

Adopted November 19, 2001

The agency proposal follows:

Summary

In 1999, the Public Employees' Retirement System (PERS) revised its rule on creditable compensation, N.J.A.C. 17:2-4.1. In April 2000, the Police and Firemen's Retirement System (PFRS) adopted a substantially similar rule at N.J.A.C. 17:4-4.1. The Teachers' Pension and Annuity Fund (TPAF) Board, after reviewing the existing TPAF rule and experiencing several cases involving creditable salary, has determined the necessity of repealing the current TPAF rule on creditable compensation, and proposing a new rule.

The purpose of the proposed new rule is to clarify the meaning of "compensation" of members, for purposes of calculating employee contributions to the Teachers' Pension and Annuity Fund ("Fund" or "retirement system"), and for determining benefits under the Fund. The basic design of the retirement system is that 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. 18A:66-2d, defines "compensation" for the purposes of the Fund as follows: "Compensation" means the contractual salary, for services as a teacher as defined in this article, 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 or extracurricular duties beyond the regular school day or
the regular school year.

It is clear from the basic design of the retirement system and the definition of "compensation" that the law contemplates a system of employee contributions on the regular weekly, biweekly or monthly base salary of members to fund death or retirement benefits based upon such regular salary in the years 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. The current 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 in which 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, 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. As a result, benefits based upon the compensation were not adequately funded through employee or employer contributions. If compensation handled in this manner is not excluded from benefit calculations, the unfunded liability of the retirement system is increased.

In the recent decision in Wilson v. Board of Trustees of the Police and Firemen's Retirement System, 322 N.J. Super. 477 (App. Div. 1998), which upheld the Police and Firemen's Retirement System Board's denial of inclusion of longevity pay after 20 years of service, the Appellate Judge of the New Jersey Superior Court, 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. Id. at 484.

The New Jersey Employer-Employee Relations Act, N.J.S.A. 34:13A-8.1, provides in part that: "[No] provision hereof [shall] 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 current rule, as previously stated, attempted to clarify this area by indicating specific types of compensation that should not be included in base salary for pension purposes. The significant amount of misunderstanding or lack of understanding of this subject requires the proposed clarification of the current rule. The proposed rule is more specific and includes definitions of terms used such as "base salary" and "extra compensation" to indicate exactly what is meant by these terms. It also elaborates on the types of compensation that have been identified as extra compensation to eliminate any possible gray areas that previously existed.

Hopefully, the proposed rule will help to eliminate situations in the future where negotiated compensation is excluded from the compensation used for pension purposes and will relieve the resultant hardship to the members, retirees and employers involved.

While the proposed repeal and new rule is almost identical to the PERS rule found at N.J.A.C. 17:2-4.1 and the PFRS rule found at N.J.A.C. 17:4-4.1, there are certain types of compensation which are unique to boards of education. For example, the creditability for pension purposes of compensation received by members for teaching a sixth period during the regular school day has appeared on the Board's agenda repeatedly over the last year. In all but a few instances where the opportunity to teach a sixth period was only offered to those in their last years of employment, the Board has determined this compensation to be creditable. Therefore, the Board proposes to specifically address this issue at subsection (i). The Board also proposes to retain much of subsection (f) of the existing rule, as recodified in the proposed new rule as subsection (h), which deals with the specific situation of a member who has been suspended from employment, but is awaiting a determination from the Commissioner of Education.

Full text of the proposed repeal may be found in the New Jersey Administrative Code at N.J.A.C. 17:3-4.1.

Full text of the proposed new rule follows:

17:3-4.1 Creditable compensation

(a) The compensation of a member subject to pension and group life insurance contributions and creditable for retirement and death benefits in the Fund shall be limited to base salary, and shall not include extra compensation. For purposes of this section:

1. "Base salary" means the annual compensation of a member, in accordance with contracts, ordinances, resolutions, or other established salary polices of the member's employer for all employees in the same position, or all employees covered by the same collective bargaining agreement, which is reported in regular, periodic installments in accordance with the payroll cycle of the employer; and

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 work day or work year. 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, work year for the position, or normal duty assignment;

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;

ii. 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 years 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;

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;

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;

xiv. Compensation paid for coaching sports;

xv. Compensation paid for teaching summer school;

xvi. Compensation paid for performing clerical or other duties;

xvii. Compensation in the absence of services;

xviii. Compensation paid for working during vacation periods; and

xix. Compensation paid for serving as a bedside instructor or for leading extracurricular activities.

(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 the reasonably anticipated annual compensation increases for members of the Fund based upon either the increase in the Consumer Price Index for the time period of the increases and the table of assumed salary increases recommended by the actuary and adopted by the Board or based on the averages of the regular increases in the employees' compensation preceding the periods in which the extra compensation was received. 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 may:

1. 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 Teachers' Pension and Annuity Fund;

2. 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), job descriptions, salary histories, promotional lists or notices or any other record or information related to the increase in compensation; and

3. Refer any suspected submission of false information in violation of N.J.S.A. 18A:66-64, 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) A member shall receive service credit for that base salary received during the period of suspension in which the member is awaiting a determination by the Commissioner of Education as provided under N.J.S.A. 18A:6-14.

(i) To be creditable, compensation for teaching sixth period shall be reported in regular, periodic installments in accordance with the payroll cycle of the employer.


POLICE AND FIREMEN'S RETIREMENT SYSTEM
OFFICERS AND COMMITTEES

Adopted Amendment: N.J.A.C. 17:4-1.3

Cite as 33 N.J. Reg. 2611(a)

Adopted November 5, 2001

The agency proposal follows:

Summary

The Police and Firemen's Retirement System proposes to add to the officers of the Police and Firemen's Retirement System Board of Trustees, the positions of first and second vice chairperson. The current rule requires a chairperson and vice chairperson. Should both of these officers be absent, another member selected by the members in attendance presides.

The proposed amendment would allow for the first vice chairperson to preside at the Board's meeting in the absence of the chairperson. It would also provide that the second vice chairperson preside in the absence of the chairperson and first vice chairperson, thereby eliminating the necessity of electing a presiding member for one meeting. In the rare instance that all three of these officers were absent, a presiding member could still be selected by the members present at that meeting.

Full text of the proposal follows:

17:4-1.3 Officers and committees

  1. The chairperson [and], first vice chairperson, and second vice chairperson of the Board will be elected by a majority vote of the members in attendance at the first meeting of July, not less than six members to be present at such meeting.

  2. The chairperson of the Board shall preside at all of its meetings, or in the absence of the chairperson, the first vice chairperson shall assume the chairperson's responsibilities [if]. If both are absent, the second vice chairperson shall assume the chairperson's responsibilities. In the absence of the chairperson and first and second vice chairperson, another member selected by the majority of the members in attendance will preside for that single meeting.

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


POLICE AND FIREMEN'S RETIREMENT SYSTEM
METHODS OF REPAYMENT

Adopted Amendment: N.J.A.C. 17:4-5.4

Cite as 33 N.J. Reg. 2612(a)

Adopted November 5, 2001

The agency proposal follows:

Summary

The Police and Firemen's Retirement System proposes to eliminate the minimum payment requirement for the initial partial lump sum payment for purchases. Currently, if a member wishes to make an initial partial lump sum payment toward a purchase, that sum must be at least $250.00.

Many years ago, when the $250.00 minimum was adopted, it represented a large percentage of the entire purchase cost. Now, in many cases, it is less than the monthly minimum payment amount of one half of a full regular pension deduction. Computer systems are also now more advanced and more flexible, and can calculate repayment schedules based on any partial lump sum payment. Therefore, the PFRS proposes to eliminate the requirement that any initial partial lump sum payment toward a purchase be $250.00 or more, and will accept any amount as an initial partial lump sum payment.

Full text of the proposal follows:

17:4-5.4 Methods of repayment

(a) Methods of repayment include:

1. (No change.)

2. Partial lump sum [of $250.00 or more]; balance by extra payroll deductions;

3.-4. (No change.)


JUDICIAL RETIREMENT SYSTEM
COMPULSORY RETIREMENT

Adopted Amendment: N.J.A.C. 17:10-5.11

Cite as 33 N.J. Reg. 2613(a)

Adopted and effective October 15, 2001

The agency proposal follows:

Summary

Members of the Judicial Retirement System cannot be on the active payroll on the effective date of their retirement. For judges who have not attained age 70, the effective date of their retirement is the first day of a calendar month. These judges are paid their full retirement allowance for the month. When judges reach age 70, they are retired upon the attainment of age 70 in accordance with N.J.A.C. 17:10-11. However, unlike the judges who retire earlier than age 70, judges who are mandatorily retired at age 70 are penalized one day's retirement allowance due to the same Administrative Code provision which provides for benefits, "beyond" the date of attaining age 70, and not "as of" this date. These judges are terminated from service and receive no compensation as of the date of their 70th birthday.

There should be some compensation for judges who are mandatorily retired. Therefore, the Commission is proposing to amend the rule to make benefits payable as of the member's 70th birthday, and not beyond that birthday.

Full text of the proposal follows:

17:10-5.11 Compulsory retirement

Compulsory retirement will be effective upon the attainment of age 70. The retired member will receive a pension prorated by the number of days in the month of retirement [beyond] as of the date of attaining age 70.


TEACHERS' PENSION AND ANNUITY FUND
BENEFITS PAYABLE UNDER P.L. 1984, C.96, AS AMENDED BY P.L. 1995, C.221

Adopted New Rule: N.J.A.C. 17:3-3.14

Cite as 33 N.J. Reg. 2401(a)

Adopted and effective October 15, 2001

The agency proposal follows:

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 P.L. 1995, c.221. This law amended P.L. 1984, c.96, 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 makes the initial payment, the amount of the converted death benefits shall be paid as claims under the group insurance policies for noncontributory and contributory death benefits. The payments made 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.

The Superior Court, Appellate Division in its decision, New Jersey Education Association v. Board of Trustees, Public Employees' Retirement System and Division of Pensions and Benefits, 327 N.J. Super. 405, 743 A.2d 859 (App. Div. 2000), upheld the validity of the identical rule found at N.J.A.C. 17:2-3.13 which applies to the Public Employees' Retirement System. The Supreme Court of New Jersey denied the NJEA's petition for certification on June 7, 2000 (New Jersey Educ. Ass'n v. Board of Trustees, 165 N.J. 135, 754 A.2d 1211 (2000). The Teachers' Pension and Annuity Fund Board of Trustees has waited until all avenues of appeal regarding the PERS rule have been resolved to propose their rule on this subject. Because the validity of the PERS rule has been upheld at all levels of appeal, the Board is proposing an identical rule for the TPAF.

17:3-3.14Benefits payable under P.L. 1984, c.96, as amended by P.L. 1995, c.221

(a)For the purposes of P.L. 1984, c.96, section 1, as amended by P.L. 1995, c.221, section 2, (N.J.S.A. 18A:66-47), the person designated as the beneficiary of 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 Act, N.J.S.A. 18A:66-1 through 93, as amended and supplemented.

(b)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 P.L. 1984, c.96, section 1, as amended by P.L. 1995, c.221, section 2, (N.J.S.A. 18A:66-47), 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.


TEACHERS' PENSION AND ANNUITY FUND
INELIGIBLE POSITIONS; INTERIM APPOINTMENT TO BOARDS OF EDUCATION

Adopted Amendment: N.J.A.C. 17:3-2.6

Cite as 33 N.J. Reg. 2400(a)

Adopted and effective October 15, 2001

The agency proposal follows:

Summary

In 1998, the Teachers' Pension and Annuity Fund Board of Trustees requested advice from the Attorney General's Office as to whether a consultant or independent contractor can fill a certificated interim position with a board of education under the pension statutes. After applying a detailed analysis using the 20 factors set forth in IRS Revenue Ruling 87-41, 1987-1 C.B. 296 to the certificated interim position, the memorandum concluded that the interim position in question was not that of a consultant, but that of an employee. It added that public employers should not be permitted to skirt the statutes governing the retirement system by classifying their workers as independent contractors or consultants.

The Board of Trustees, in conjunction with the above mentioned memorandum, determined that an amendment to the current rule was necessary to clarify when a certificated employee in an interim or temporary position with a board of education is ineligible for enrollment into the retirement system, and when enrollment is required.

Since the promulgation of N.J.A.C. 17:3-2.6, there have been a number of appeals brought to the TPAF Board of Trustees requesting an extension of the six-month period in which a retiree is ineligible for membership in the TPAF. The Board, after reviewing many of these requests for extensions, has determined that amendment of the rule is necessary. The proposed amendment would provide for, at the TPAF Board's discretion, an additional extension of no more than six months. The proposed amendment would provide factors for the Board to consider when determining whether an extension is warranted. The proposed amendment would also replace the reference to "retired" and replace it with a reference to the definition of due and payable as provided by N.J.A.C. 17:3-6.3 in order to indicate that a member must be effectively retired before the provisions of the rule apply.

17:3-2.6 Ineligible positions; interim appointment to Boards of Education

(a) Any person [retired] whose benefit has become due and payable as provided by N.J.A.C. 17:3-6.3 from the Teachers' Pension and Annuity Fund who is temporarily appointed to any position listed in N.J.A.C. 17:3-2.1 or the functional equivalent thereof shall be ineligible for enrollment in the retirement system if the total time for all interim appointments with one board of education does not exceed six months. If the total time for all the interim appointments with one board of education exceeds six months, the individual shall be declared an employee for pension purposes and shall be enrolled in the Fund effective the first day of the seventh month of service.

(b) At the TPAF Board's discretion, an extension of no more than six months of service with one board of education may be granted on a case-by-case basis. The retired member must submit the request for an extension. Factors to be considered by the TPAF Board when considering an extension include, but are not limited to, the following:

1. The availability of an on-site replacement;

2. External factors such as:

i. Pending litigation;

ii. Medical leaves/death;

iii. Construction/reconstruction;

iv. Disasters; and

v. Rapid turnover of interims in the position;

3. The degree of student contact;

4. Whether a contract has been issued for the position (interim to fill gap until new hire is able to start position);

5. The time of year; and

6. The board of education's policy on hiring including:

i. Quality of search;

ii. Length of search; and

iii. Rejection factors.


TEACHERS' PENSION AND ANNUITY FUND
METHODS OF PAYMENT (TPAF)

Adopted Amendment: N.J.A.C. 17:3-5.6

Cite as 33 N.J. Reg. 2402(a)

Adopted and effective October 15, 2001

The agency proposal follows:

Summary

The Teachers' Pension and Annuity Fund proposes to eliminate the minimum payment requirement for the initial partial lump sum payment for purchases. Currently, if a member wishes to make an initial partial lump sum payment toward a purchase, that sum must be at least $250.00.

Many years ago, when the $250.00 minimum was adopted, it represented a large percentage of the entire purchase cost. Now, in many cases, it is less than the monthly minimum payment amount of one half of a full regular pension deduction. Computer systems are also now more advanced and more flexible, and can calculate repayment schedules based on any partial lump sum payment. Therefore, the TPAF proposes to eliminate the requirement that any initial partial lump sum payment toward a purchase be $250.00 or more, and will accept any amount as an initial partial lump sum payment.

17:3-5.6 Methods of payment

(a) Methods of payment include the following:

1. (No change.)

2. Partial lump sum [of $250.00 or more]; balance by extra payroll deductions;

3.-4. (No change.)


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

Adopted Amendment: N.J.A.C. 17:4-5.3

Cite as 33 N.J. Reg. 2254(a)

Adopted November 5. 2001

The agency proposal follows:

Summary

Recently, a number of appeals have been presented to the Police and Firemen's Retirement System Boards of Trustees regarding an employee's right to purchase service from a previous membership in a system other than PFRS which would have been eligible for purchase if the employee had continued enrollment in the previous system. The types of purchases under review include temporary, substitute or provisional service immediately preceding enrollment in the previous membership.

The statutory authority for the purchase of temporary service leading to enrollment in the PFRS, N.J.S.A. 43:16A-4, is found in the definition of creditable service for the PFRS. At one time, creditable service for the calculation of retirement benefits in the PFRS only included service as a police officer or fire fighter. It did not include prior service in another State-administered retirement system, but it did include any purchased temporary service as a police officer or fire fighter which lead to enrollment in the PFRS.

In 1982, N.J.S.A. 43:16A-11.6 was enacted to permit prior service credit in another State-administered retirement system to be transferred or purchased in the PFRS. Because temporary, substitute and provisional service leading without interruption to enrollment are permissible purchases in the PERS and TPAF, the Board proposes to extend its definition of service credit under this statute to include temporary, substitute or provisional time leading to that previous membership in the PERS or TPAF. This is an equitable solution for those PFRS members who have been denied purchases that they could have made (and probably would have made), but for their transfers into the PFRS.

Temporary service leading to enrollment in the PFRS as defined in N.J.S.A. 43:16A-4 must still be in a PFRS eligible position to be eligible for purchase.

The Board also proposes to amend N.J.A.C. 17:2-5.3(b)5 by deleting references to service as a police officer and replacing it with police service. There are many positions in the PFRS that qualify for enrollment in the System as police service which are not police officers (that is, corrections officers, parole officers, investigators, etc.) P.L. 1999, c.338, N.J.S.A. 43:16A-11.13, specifically refers to police service and not police officers. Therefore, the Board proposes to amend this paragraph.

17:4-5.3 Optional purchases of eligible 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 actuarial purchase 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 New Jersey State-administered retirement system and any service which would have been eligible for purchase under that membership;

2.-5. (No change.)

(b) 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.-4. (No change.)

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] in police service positions and subsequently rehired in PFRS police service positions in accordance with P.L. 1999, c.338, N.J.S.A. 43:16A-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) (No change.)


GENERAL ADMINISTRATION
HONORABLE SERVICE

Adopted New Rule: N.J.A.C. 17:1-6.1

Proposed Recodification with Amendment: N.J.A.C. 17:1-4.25 as 6.2

Cite as 33 N.J. Reg. 1872(a)

Adopted November 5, 2001

Summary

The Public Employees' Retirement System, Teachers' Pension and Annuity Fund, Police and Fireman's Retirement System and State Police Retirement System Boards of Trustees provide oversight and direction to the New Jersey administered benefits programs. These Boards, on a case-by-case basis, review the 11 factors listed in this statute (referred to as the Uricoli factors from Uricoli v. PFRS, 91 NJ 62 (1982)) and determine whether a total forfeiture, partial forfeiture, or no forfeiture is warranted, given the nature of the conduct. In a partial forfeiture, the Boards generally take service credit away from the member from the date of the misconduct. In some cases, this partial forfeiture of service credit results in a greater penalty to the member than seems fair, and in other cases, such as disability retirements, a partial forfeiture does not impose any economic sanctions on the member.

The Public Employees' Retirement System Board requested a review of the statute and case law to determine whether different methods are available for use by the various Boards within the confines of the law. The Attorney General's Office concluded that the Pension Boards do have the statutory authority under N.J.S.A. 43:1-3 to use their discretion to forfeit salary or any other form of retirement benefits, including health benefits, and that the Boards should use flexible and reasonable approaches in certain circumstances. The Attorney General's Office also recommended that the Division adopt a rule which would recognize the taking away of service credit as the most practical method to effect a partial forfeiture, while listing alternate methods if the taking away of service credit does not provide the appropriate results.

Because the determination of honorable service should be treated uniformly across the Boards which administer the public retirement systems in New Jersey, the Division of Pensions and Benefits is proposing this new rule under the General Administration section of the Administrative Code. This is an important and very visible issue. As such, the Division recognizes that a new subchapter is required under General Administration. Therefore, the Division proposes new N.J.A.C. 17:1-6, Honorable Service. The Division also proposes to recodify N.J.A.C. 17:1-4.25, which deals with indictments, litigation and appeals, as N.J.A.C. 17:1-6.2 in the new Honorable Service subchapter and add dismissals and suspensions to its section heading.

The Division proposes to amend proposed N.J.A.C. 17:1-6.2(a) by adding the words "dismissed or suspended" after "indicted" to indicate that these types of action regarding employment will also be brought to the Board's or Division's attention. The Division proposes to delete the requirement of a crime involving moral turpitude, because all indictments and suspensions should be brought to the Board's attention before benefits are paid. The Board Secretary, and not the Attorney General's Office, determines the status of claims; therefore, the Division proposes to make this correction throughout the rule. Subsection (b) would remain unchanged. The Division proposes to amend subsection (c) by adding that the matter must be resolved to the satisfaction of the Board, and that the resolution must be verified by the County Prosecutor's Office or the agencies already listed. The Division proposes to add subsection (e) which would codify the Board's ability to suspend retirement benefits should an indictment regarding a member's employment be received. This ability to suspend benefits was stated in Mount v. Trustees of the Public Employees' Retirement System, 133 N.J. Super. 72 (1975), and was clarified by advice by the Attorney General's Office, but was never codified.

Full text of the proposal follows:

(Agency Note: N.J.A.C. 17:1-4.25 is proposed for recodification with amendment as N.J.A.C. 17:1-6.2.)

SUBCHAPTER 6. [(RESERVED)] HONORABLE SERVICE

17:1-6.1 Honorable service

(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. Pursuant to N.J.S.A. 43:1-3, the Boards of Trustees of the State- administered retirement systems are authorized to order the forfeiture of all or part of the pension or retirement benefit of a member of the fund or system for misconduct occurring during the member's public service which render the member's service or part thereof, dishonorable.

(b) Whenever the Board of Trustees determines that a partial forfeiture of pension or retirement benefits is warranted, it shall order that benefits be calculated as if the accrual of pension rights terminated as of the date the misconduct first occurred unless (c) below applies.

(c) In the limited circumstances where the termination of pension rights as of the date of the misconduct results in no reduction, or a minimal reduction of pension or retirement benefits, or in an excessive forfeiture, as compared to the nature and extent of the misconduct and the years of honorable service, the Board may, in its sole discretion, provide a more equitable relief. Alternate methods available to the Board when a forfeiture of service renders an unreasonable or unjust result include, but are not limited to:

1. Forfeiture of salary credit upon which retirement benefits are based;

2. Forfeiture of system-paid retired State Health Benefits;

3. Forfeiture of right to participate in the retired State Health Benefits Program;

4. Reduction in monthly retirement allowance;

5. Forfeiture of service and/or salary credit in a specific title or rank;

6. Forfeiture of service in excess of that needed to qualify for a specific retirement benefit; or

7. Forfeiture of a percentage of the retirement benefit based on the calculation of the percentage of time which was dishonorable service as compared to the total years and months of service credit.

17:1 [4.25] 6.2 Indictments, dismissals, suspensions, litigation or appeals

(a) When a member is indicted [and has been accused of a crime involving moral turpitude], dismissed or suspended, the matter shall be referred to the [Attorney General's] Board Secretary's office to determine the status of any claim which may be filed by the member.

(b) (No change.)

(c) All claims for retirement, death benefits and the return of contributions cannot be processed until the matter has been completely resolved [and this has been] to the satisfaction of the Board of Trustees. Resolution of the indictment, dismissal, suspension or other charges must be verified by contact with the County Prosecutor's Office, the Attorney General's [office] Office, the Department of Education, the [Civil Service Commission] Department of Personnel or other responsible agencies.

(d) Likewise in cases where anything pertaining to a member's employment is in litigation, or under appeal, the matter [should be referred to the Attorney General's office to determine] shall be held in abeyance until the Division determines if claims can be processed or whether the processing of such claims are to be postponed pending a final resolution of the litigation or appeal.

(e) If an indictment regarding charges related to a member's public employment is received by the Boards or Division after the member's date of retirement, the Boards may suspend retirement benefits pending the outcome of the indictment.


TEACHERS' PENSION AND ANNUITY FUND
OPTIONAL PURCHASES OF ELIGIBLE SERVICE AND INTERFUND TRANSFERS;
STATE- ADMINISTERED RETIREMENT SYSTEMS

Adopted Amendments: N.J.A.C. 17:3-5.5 and 7.1

Cite as 33 N.J. Reg. 2677(b)

Adopted August 6, 2001

The agency proposal follows:

Summary

P.L. 2001, c.6 (N.J.S.A. 18A:66-15.1) now provides for the purchase or transfer of service credit from the Teachers' Pension and Annuity Fund (TPAF) to the Public Employees' Retirement System (PERS) or PERS to TPAF for concurrent service if the period of concurrent service is less than two years. Previously, if there was any concurrent service, the previous membership could not be transferred into the new retirement system. The new law provides that a member of the PERS at the time of enrollment in the TPAF who has less than two years of concurrent service, and who then ceases to be an active contributing member of PERS, may transfer all of the non-concurrent service into the TPAF upon application and transfer of the member's contributions from the PERS to the TPAF. The law also provides that if a member has withdrawn the contributions to the PERS, that member may purchase credit for service in the TPAF in the same manner as one who purchases previous member service as provided by N.J.S.A. 18A:66-9. The proposed amendments to the purchase and transfer rules are necessary to bring these rules into conformance with the new law.

The TPAF Board would also like to take this opportunity to amend the purchase and interfund transfer rules. The TPAF Board of Trustees has historically interpreted N.J.S.A. 18A:66-14 as prohibiting the purchase of temporary service which did not lead to enrollment in the retirement system with the same employer, arguing that a change of employer constitutes an interruption of service. Recently, a number of appeals have been presented to the TPAF, PERS and Police and Firemen's Retirement System (PFRS) Boards of Trustees regarding the denial of the employee's right to purchase temporary service for a position that ended on a Friday with one employer, and a new permanent position that started on a Monday with a different employer. The employees argued that the previous service led, without interruption, to the permanent employment. The TPAF Board has reconsidered its position on this subject and would like to no longer deny purchases of temporary service which resulted, without a break in service, in permanent employment. Therefore, the Board proposes to delete the portion of N.J.A.C. 17:3-5.5(a)3 which required that the continuous temporary employment be with the same employer.

The Board also proposes to amend N.J.A.C. 17:3-5.5(a)5 to add the statutory reference (N.J.S.A. 18A:66-39(b)) that requires 10 years of New Jersey service to qualify for an ordinary disability retirement.

The proposed amendments to N.J.A.C. 17:3-7.1 will include a new subsection (a), stating that, "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 transfer of all or a portion of prior service of any member of the Fund for misconduct occurring during the member's prior public service which renders that prior service, or part thereof, dishonorable." This is necessary to clarify that only honorable service can be transferred. Existing subsection (a) will be recodified as (b). The Board proposes to amend paragraph (b)1 by clarifying that service credits and contributions transfer, and by correcting the form names which have been changed.

Processes within the Division have also changed. The Division no longer issues checks, but rather, conducts wire transfers. Back deductions are scheduled in the new account. The proposed amendments to paragraph (b)2 reflect these changes. Proposed amendments to paragraph (b)3 allow the statement to be prepared and forwarded, but does not require it to accompany a check because the Division no longer issues checks. Proposed amendments to paragraph (b)4 will clarify that the service credits are transferred into the new system. Paragraph (a)5 is deleted; paragraph (b)5 details when a member is not eligible to transfer service credit. Recent legislation (P.L. 2001, c.6) now provides for the transfer of service credit from TPAF to PERS or PERS to TPAF for concurrent service if the period of concurrent service is less than two years. The Board proposes to add information regarding this new law to this section.

Paragraph (a)6 concerning what is forwarded to the new system is deleted because it is no longer Division practice. New paragraph (b)6 provides the current Division practice regarding transfers, that a data sheet will 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.

Existing (b) will be recodified as (c) and the proposed amendments would clarify what reserves are transferred. Existing subsection (c) would be recodified as (d). Existing subsection (d) would be deleted because the TPAF now has standardized, and not age-based, rates.

17:3-5.5 Optional purchases of eligible 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 shall be calculated on the basis of the actuarial purchase 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 in a New Jersey State-administered retirement system;

2. (No change.)

3. [Continuous] After the effective date of this amendment, continuous temporary or substitute service as a teacher immediately preceding enrollment [with the same employer];

4. (No change.)

5. Eligible out-of-State public employment, or employment in schools within and outside the United States operated by a department of the United States Government for the instruction of the children of United States Government employees, up to a total purchase of 10 years. [This] Pursuant to N.J.S.A. 18A:66-39(b) this service cannot be used to qualify for an ordinary disability retirement; [and]

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

7. Non-concurrent Public Employees' Retirement System service if a dual member of TPAF and PERS pursuant to P.L. 2001, c.6 (N.J.S.A. 18A:66- 15.1). All or a portion of non-concurrent service in the PERS from an expired or withdrawn account may be purchased.

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

17:3-7.1 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 as follows:

1. A member, desiring to transfer [his or her credits to any] service credit and contributions from one State-administered retirement system to another, must file an [application for "Transfer of Membership Credit"] "Application for 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 and a copy forwarded to the old account.

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

5. [This procedure would not apply where a member has credit in the present system for service after the date of enrollment in the new system or where a person has ceased to be a member of the present system before establishing sufficient service credit to be eligible for a deferred retirement.] 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) unless the member meets the criteria established by P.L. 2001, c.6 (N.J.S.A. 43:15A-14). P.L. 2001, c.6 provides that a member of the Public Employees' Retirement System (PERS) at the time of enrollment in the Teachers' Pension and Annuity Fund (TPAF) may transfer the non-concurrent PERS service if the member ceased to be an active contributing member of the PERS two or less years from the date of enrollment in the TPAF. The member must apply to transfer this service no more than two years from the date of the last contribution in the PERS unless the member is vested in the PERS, or the member's PERS account has not expired due to the provisions of N.J.S.A. 43:15A-8. A member who transfers service under this provision shall receive credit for the salaries earned in both the TPAF and PERS during the period of concurrent service; or

iii. The account has expired (it has been more than two years from the date of the last contribution, and the member is not vested, nor has the member's account remained active due to the provisions of N.J.S.A. 18A:66- 8).

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 shall indicate an interfund transfer from the member's previous retirement system and the service credit transferred into the new membership account.

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


PUBLIC EMPLOYEES' RETIREMENT SYSTEM >
OPTIONAL PURCHASES OF ELIGIBLE SERVICE AND INTERFUND TRANSFERS;
STATE ADMINISTERED RETIREMENT SYSTEMS

Cite as 33 N.J. Reg. 2677(a)

Adopted August 6, 2001

The agency proposal follows:

Summary

P.L. 2001, c.6 (N.J.S.A. 18A:66-15.1) now provides for the purchase or transfer of service credit from the Teachers' Pension and Annuity Fund (TPAF) to the Public Employees' Retirement System (PERS) or PERS to TPAF for concurrent service if the period of concurrent service is less than two years. Previously, if there was any concurrent service, the previous membership could not be transferred into the new retirement system. The new law provides that a member of the TPAF at the time of enrollment in the PERS who has less than two years of concurrent service and who then ceases to be an active contributing member of the TPAF may transfer all of the non-concurrent service into the PERS upon application and transfer of the member's contributions from the TPAF to the PERS. The law also provides that if a member has withdrawn the contributions to the TPAF, that member may purchase credit for service in the PERS in the same manner as one who purchases previous member service as provided by N.J.S.A. 43:15A-8. The proposed amendments to the purchase and transfer rules are necessary to bring these rules into conformance with the new law.

The Public Employees' Retirement System Board of Trustees has historically interpreted N.J.S.A. 43:15A-11 as prohibiting the purchase of temporary service which did not lead to enrollment in the retirement system with the same employer, arguing that a change of employer constitutes an interruption of service. Recently, a number of appeals have been presented to the TPAF, PERS and Police and Firemen's Retirement System (PFRS) Boards of Trustees regarding the denial of the employee's right to purchase temporary service for a position that ended on a Friday with one employer, and a new permanent position started on a Monday with a different employer. The employees argued that the previous service led, without interruption, to the permanent employment. The PERS Board has reconsidered its position on this subject and would like to no longer deny purchases of temporary service which resulted, without a break in service, in permanent employment. Therefore, the Board proposes to eliminate the requirement that the continuous temporary employment be with the same employer which is found at N.J.A.C. 17:2-5.5(a)3.

The Board proposes to amend N.J.A.C. 17:2-5.5(a)1 by changing the words "with another" to "in a New Jersey" State-administered retirement system. This subsection was meant to permit the purchase of prior membership in a State- administered retirement system including the Public Employees' Retirement System, but the words "with another" seem to preclude the purchase of prior service in the same system. Therefore, the Board proposes to amend this subsection.

Full text of the proposal follows:

17:2-5.5 Optional purchases of eligible 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 actuarial purchase 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 another] in a New Jersey State-administered retirement system;

2. (No change.)

3. [Continuous] After the effective date of this amendment, continuous temporary service immediately preceding enrollment [with the same employer];

4.-6. (No change.)

7. Eligible out-of-State public employment, up to a total purchase of 10 years. As provided in N.J.S.A. 43:15A-42, out-of-State service cannot be used to qualify for an ordinary disability retirement; [and]

8. Intermittent service, as defined by N.J.A.C. 17:2-2.3(a)8, which resulted, without interruption, in permanent employment with the same employer. The intermittent service shall have been in a position which satisfied, in whole or in part, the job's requirement for experience needed to qualify for the permanent title[.] ; and

9. Non-concurrent Teachers' Pension and Annuity Fund service if a dual member of TPAF and PERS pursuant to P.L. 2001, c.6 (N.J.S.A. 43:15A-14). All or a portion of non-concurrent service in the PERS from an expired or withdrawn account may be purchased.

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

17:2-7.1 Honorable service; interfund transfers; State-administered retirement systems

(a) (No change.)

(b) The system will transfer membership to any State-administered retirement system as follows:

1.-4. (No change.)

5. The member is not eligible to transfer service credit if any of the following conditions apply:

i. (No change.)

ii. The member has credit in the present system for service earned after the date of enrollment in the new system (concurrent service) unless the member meets the criteria established by P.L. 2001, c.6 (N.J.S.A. 43:15A-14). P.L. 2001, c.6 provides that a member of the Teachers' Pension and Annuity Fund (TPAF) at the time of enrollment in the Public Employees' Retirement System (PERS) may transfer the non-concurrent TPAF service if the member ceased to be an active contributing member of the TPAF two or less years from the date of enrollment in the PERS. The member must apply to transfer this service no more than two years from the date of the last contribution in the TPAF unless the member is vested in the TPAF, or the member's TPAF account has not expired due to the provisions of N.J.S.A. 18A:66-8. A member who transfers service under this provision shall receive credit for the salaries earned in both the TPAF and PERS during the period of concurrent service; or

iii. The account has expired; that is, it has been more than two years from the date of the last contribution and [there was not enough service credit to be eligible for a deferred retirement] the member is not vested, nor has the member's account remained active due to the provisions of N.J.S.A. 43:15A-8.

6. (No change.)

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


TREASURY-GENERAL
DIVISION OF PENSIONS AND BENEFITS ALTERNATE BENEFIT PROGRAM


Adopted Readoption and Recodification with Amendments: N.J.A.C. 17:1-2 as 17:7
Adopted New Rules: N.J.A.C. 17:7-1.10, 1.12, 1.13, 1.14, 3.2, 3.5 and 3.8
Adopted Repeals: N.J.A.C. 17:1-2.15, 2.25, 2.27, 2.30, 2.31, 2.34 and 2.35
Proposed Repeals and New Rules: N.J.A.C. 17:1-2.9, 2.18 and 2.23

Cite as 33 N.J. Reg. 1601(a)

Adopted May 21, 2001

The agency proposal follows:

Summary

When the Division becomes aware of a change in the laws or a court decision that possibly could affect the Alternate Benefit Program, 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's staff to ascertain if the current rules are necessary and/or cost efficient. After careful scrutiny of the current rules in N.J.A.C. 17:1-2, the Division is satisfied that they are necessary and needed for the efficient operation of the Program. Accordingly, the Division of Pensions and Benefits proposes to amend and readopt existing rules, as well as to add new rules, repeal existing rules and repeal and replace with new rules certain areas of subchapter 2, the Alternate Benefit Program. Because of the growth of this subchapter of the Administrative Code, the Division also proposes to recodify this subchapter as N.J.A.C. 17:7 to be entitled the Alternate Benefit Program.

The Division of Pensions and Benefits proposes to recodify and readopt the current rules for the Alternate Benefit Program now found in subchapter 2 within the General Administration Chapter at N.J.A.C. 17:1, which expires on April 22, 2003, and to extend the expiration date for such rules under Executive Order No. 66(1978). The recodified rules deal with the administration; enrollment; membership, insurance, death benefits and retirement; and transfer aspects associated with the Alternate Benefit Program. Members, participating employers, annuity providers, and survivors of members and retirees, rely on the efficient operation of the Alternate Benefit Program which is a defined contribution plan to administer their retirement benefits. They rely upon the presence and predictability of the rules that guide the administration of benefits and the stability of the Alternate Benefit Program. 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 rules reflect the requirements for enrollment eligibility, membership, insurance and death benefits and transfer rights that are mandated within the
statutes governing the Alternate Benefit Program. The chapter originally became effective prior to September 1, 1969.

The addition of "and Benefits" to the Division's name has been made throughout this new chapter. The "D" in Division has also been capitalized throughout the proposal. Any references to his/her, himself/herself and any other gender specific pronouns have been replaced with gender neutral pronouns or "the participant" or "the member."

The contents of the proposed amendments, repeals of rules and new rules being proposed follow. The proposed new chapter will be organized into five subchapters: Administration; Enrollment; Membership; Insurance, Death Benefits and Retirement; and Transfers.

Proposed subchapter 1, Administration, will include: N.J.A.C. 17:1-2.1, which will be recodified as N.J.A.C. 17:7-1.1, will be amended to replace the Teachers' Insurance and Annuity Association and the College Retirement Equities Fund (hereinafter, "TIAA/CREF") with "the annuity providers," as there are now multiple providers of this plan pursuant to P.L. 1993, c.385. The proposed amendment will also add "to participants of" so as to clarify to whom this applies, and the word "for" is replaced with "of." In subsection (b), the proposed amendments will replace "The Prudential Insurance Company of America is the designated agency for providing the" with "A designated provider shall provide" added, to allow for any future changes in the agency which provides insurance. The proposed amendment will also add "to participants of," to clarify to whom this applies, and the word "for" is replaced with "of." "Alternate Benefit Programs" is changed to "Alternate Benefit Program" to accurately reflect the name of the Program. N.J.A.C. 17:1-2.2 will be recodified as N.J.A.C. 17:7-1.2 and will be amended to delete "authorized" and add "authorization and termination" to the section heading. The current section's paragraph is codified as subsection (a) and references to TIAA/CREF will be deleted and replaced with the "selected providers of retirement or annuity contracts." "And the regulations thereunder" would be added after the reference to P.L. 93-406. The voluntary salary reduction is outlined and explained in the new subsections (b) through (e). Proposed subsection (b) explains how the participants' mandatory pension contributions and Section 125 contributions are calculated. Proposed subsection (c) describes the requirement of entering into a salary reduction agreement. Proposed subsection (d) allows for multiple salary reduction agreements in a year and that the employer may determine the number of times a salary reduction agreement may be filed annually. Proposed subsection (e) describes how long the salary reduction agreement will be in effect. N.J.A.C. 17:1-2.3 will be recodified as N.J.A.C. 17:7-1.3 and references to TIAA/CREF would be deleted.

N.J.A.C. 17:1-2.5 and 2.6 will be recodified as 17:7-1.4 and 1.5. N.J.A.C. 17:1-2.7 will be recodified as N.J.A.C. 17:7-1.6. The proposed amendment will better outline the appeal process by adding subsection (a) to state who may appeal and who will reply to an appeal, and subsection (b) will provide the time frames for appeal.

N.J.A.C. 17:1-2.8 will be recodified as N.J.A.C. 17:7-1.7. "The office of" would be deleted before Division of Pensions and Benefits. Proposed new rule N.J.A.C. 17:7-1.8, replacing repealed N.J.A.C. 17:2- 1.8, will change TIAA/CREF to the annuity providers and the one year limitation on changes of the optional amount of withholdings. The proposed new rule explains voluntary additional contributions under the new tax laws, and provides requirements regarding employer reporting.

N.J.A.C. 17:1-2.29, Travel, is proposed for recodification without amendment as N.J.A.C. 17:7-1.9.

Proposed new rule N.J.A.C. 17:7-1.10, Fiscal year, will define fiscal year as used in the Program rules.

N.J.A.C. 17:1-2.37 will be recodified as N.J.A.C. 17:7-1.11 and revised concerning the employer liability for failing to withhold pension contributions, the interest required, and the penalty for not withholding contributions within the first year.

Proposed new rules N.J.A.C. 17:7-1.12 and 1.13 set forth when the Division may authorize existing annuity providers to add additional investment options. They also allow the Division to designate a default annuity provider. N.J.A.C. 17:7-1.13 also establishes when transfers are permitted between annuity providers, and when amounts distributed may not be transferred into a Program account.

Proposed new rule N.J.A.C. 17:7-1.14, Domestic relations orders, states that domestic relations orders must meet the applicable Federal standards to be acceptable for implementation.

Proposed subchapter 2, Enrollments, will include N.J.A.C. 17:1-2.10, Enrollment eligibility; general provisions, recodified as N.J.A.C. 17:7-2.1, amended to add information regarding when vesting occurs.

N.J.A.C. 17:1-2.16 will be recodified as N.J.A.C. 17:7-2.2 and amended to clarify enrollment dates. The proposed amendments also set forth when an employer must file a compulsory enrollment form and also where monies go should an employee fail to designate a carrier.

N.J.A.C. 17:1-2.9, Part-time faculty members, is proposed for repeal and a new rule N.J.A.C. 17:2-2.3 on the subject proposed to clarify when part-time faculty members may make contributions to the Program for concurrent part-time salary.

Subchapter 3, Membership, will include N.J.A.C. 17:1-2.20 recodified as N.J.A.C. 17:7-3. The proposed amendment clarifies the definition of base salary, and outlines what salary to use when calculating voluntary additional contributions. Since the late 1980s the guaranteed portion of faculty practice income has been deemed part of base salary. The proposed amendment will clarify that these monies are indeed includable in base salary.

Proposed new rule N.J.A.C. 17:7-3.2 explains when delayed vesting occurs and the limitations on the participant during such a time. N.J.A.C. 17:1-2.14, Leave without pay or change in status, will be recodified as N.J.A.C. 17:7-3.3 without amendment.

N.J.A.C. 17:1-2.17, Termination; withdrawal, will be recodified as N.J.A.C. 17:7-3.4 and amended to eliminate the references to an escrow account and substitutes delayed vesting status to conform to actual practice. Proposed new rule N.J.A.C. 17:7-3.5 sets forth what mandatory and voluntary contributions are required for a participant on a leave of absence with pay, and what salaries to use to calculate these contributions.

N.J.A.C. 17:1-2.28 will be recodified as N.J.A.C. 17:7-3.6 and language from repealed N.J.A.C. 17:1-2.27 added regarding upon what salary contributions should be based.

N.J.A.C. 17:1-2.33 will be recodified as N.J.A.C. 17:7-3.7 and will increase the minimum adjustment to $50.00 or less from $3.00 to also reflect current practice. This increase corresponds with the minimum adjustments required by N.J.A.C. 17:1-1.10 which provides the general administration practices for the Division.

Proposed new rule N.J.A.C. 17:7-3.8, Hardship withdrawals, establishes when a participant may withdraw funds from the section 403(b) voluntary contributions, and who is responsible for determining whether a hardship
exists.

N.J.A.C. 17:1-2.4 will be recodified as N.J.A.C. 17:7-4.1 in proposed subchapter 4, Insurance and Death Benefits, and will add "of participant" to the section heading. In subsection (b), the Division proposes to delete "notify the insurers and" and add, "notify the insurer providing life insurance coverage" so as to specify which insurer is notified at the death or retirement of a participant.

N.J.A.C. 17:1-2.13, Assignments; group life insurance, is proposed for recodification as N.J.A.C. 17:7-4.2, with technical amendments. N.J.A.C. 17:1-2.19, Death before payment to insurer, will be recodified as N.J.A.C. 17:7-4.3. The proposed amendments would also require the employer to pay any deductions to the annuity provider for disbursement instead of to the beneficiary.

N.J.A.C. 17:1-2.21 will be recodified as N.J.A.C. 17:7-4.4 and will clarify what base salary to use when calculating a disability benefit. N.J.A.C. 17:1-2.22 and 2.25 will be combined and recodified as N.J.A.C. 17:7-4.5 and amended to clarify when a participant is insured and the salary to be used to calculate death benefits.

The proposed repeal and proposed new rule at N.J.A.C. 17:1-2.23 will be recodified as N.J.A.C. 17:7-4.6 and will clarify eligibility of disability benefits and when they begin and end. It will also clarify the pension rights of a participant on disability and the requirement that employer contributions must continue. N.J.A.C. 17:1-2.26 will be recodified as N.J.A.C. 17:7-4.7 and the reference to section 10 of Chapter 242, P.L. 1969 replaced with N.J.A.C. 17:1-2.12 will be recodified as N.J.A.C. 17:7-5.1 in subchapter 5, Transfer. N.J.A.C. 17:1-2.36, Transfers, interest, will be recodified as N.J.A.C. 17:7-5.2.

The proposed repeal of N.J.A.C. 17:1-2.15 is necessary because that section is no longer the way terminations and returns are handled by the Division. The Division proposes to repeal N.J.A.C. 17:1-2.30, Voluntary back contributions, and 2.31, Repurchases; employee's share, as they no longer reflect current Division practice.

The Division proposes to repeal N.J.A.C. 17:1-2.34. The State bears the cost of the noncontributory life insurance. Employers are not billed for this coverage; therefore, because the rule as stated has not been in actual practice since the early 1980's, the Division proposes its repeal. The Division proposes to repeal N.J.A.C. 17:1-2.35.

Full text of the readoption may be found in the New Jersey Administrative Code at N.J.A.C. 17:1-2.

Full text of the proposed repeal may be found in the New Jersey Administrative Code at N.J.A.C. 17:1-2.9, 2.15, 2.18, 2.23, 2.25, 2.27, 2.30, 2.31, 2.34 and 2.35.

Full text of the proposed readoption and recodification with amendments follows:

Recodification Table

Existing Codification New Codification

17:1-2.1 Designated Carriers 17:7-1.1

17:1-2.2 Salary Reduction Agreements 17:7-1.2

17:1-2.3 Salary Reduction Agreements; Salary Deductions; Limitations 17:7-1.3

17:1-2.4 Death or Retirement; Notice 17:7-4.1

17:1-2.5 Proof of Age 17:7-1.4

17:1-2.6 Certifying Officer 17:7-1.5

17:1-2.7 Appeal from Division Decisions 17:7-1.6

17:1-2.8 Records 17:7-1.7

17:1-2.9 Part-time Faculty Members 17:7-2.3

17:1-2.10 Enrollment Eligibility 17:7-2.1

17:1-2.12 Interprogram Transfers 17:7-5.1

17:1-2.13 Assignments; Group Life Insurance 17:7-4.2

17:1-2.14 Leave Without Pay or Change in Status 17:7-3.3

17:1-2.15 Termination; Return (proposed repeal)

17:1-2.16 Retention of Contributions 17:7-2.2

17:1-2.17 Termination Withdrawal 17:7-3.4

17:1-2.18 Contributions 17:7-1.8

17:1-2.19 Death Before Payment to Insurer 17:7-4.3

17:1-2.20 Base or Contractual Salary 17:7-3.1

17:1-2.21 Base Monthly Salary for Disability Benefits 17:7-4.4

17:1-2.22 Life Insurance 17:7-4.5

17:1-2.23 Long Term Disability Insurance 17:7-4.6

17:1-2.25 Ten-month participants (proposed repeal)

17:1-2.26 Life Insurance Coverage During Leave for Illness 17:7-4.7

17:1-2.27 Military Leave (proposed repeal)

17:1-2.28 Military Leave, Withdrawal 17:7-3.6

17:1-2.29 Travel 17:7-1.9

17:1-2.30 Voluntary Back Contributions (proposed repeal)

17:1-2.31 Repurchases; Employer's share (proposed repeal)

17:1-2.33 Minimum Adjustment 17:7-3.7

17:1-2.34 Insurance Liability for Unenrolled Members (proposed repeal)

17:1-2.35 County Colleges, Agents (proposed repeal)

17:1-2.36 Transfers, Interest 17:7-5.2

17:1-2.37 Contributions; Late Payment 17:7-1.11

17:7-1.10 Fiscal Year (proposed new rule)

17:7-1.12 Additional Investment Products and Default Annuity Provider (proposed new rule)

17:7-1.13 Transfers, Direct Rollovers (proposed new rule)

17:7-1.14 Domestic Relations Orders (proposed new rule)

17:7-3.2 Delayed Vested Contribution (proposed new rule)

17:7-3.5 Leave of Absence with Pay (proposed new rule)

17:7-3.8 Hardship Withdrawals (proposed new rule)

CHAPTER 7

[(RESERVED)]

[SUBCHAPTER 2.] ALTERNATE BENEFIT PROGRAM

SUBCHAPTER 1. ADMINISTRATION

[17:1-2.1] 17:7-1.1 Designated [carriers] providers

(a) [The Teachers' Insurance and Annuity Association and the College Retirement Equities Fund] The providers approved by the Division of Pensions and Benefits to offer annuity investment accounts for Alternate Benefit Program participants (annuity providers) are [the] designated [insurers for providing] to provide retirement annuity contracts [for] to participants of the Alternate Benefit Program[s].

(b) [The Prudential Insurance Company of America is the designated agency for providing the] A designated provider shall provide group life and disability insurance coverage [for] to participants of the Alternate Benefit Program[s].

[17:1-2.2] 17:7-1.2 Salary reduction agreements [ authorized] ; authorization and termination

(a) The State and participating institutions are authorized to enter into agreements with Alternate Benefit Program participants for [basic] mandatory and [/or] voluntary salary reductions to the maximum limitations set forth in P.L. 93-406 (Employment Retirement Income Security Act of 1974 and the Internal Revenue Code of 1954, 26 U.S.C. 415(c), as amended for such year) of the employee's base salary and the regulations thereunder, in order to purchase from the [Teachers' Insurance and Annuity Association and the College Retirement Equities Fund annuities] selected annuity providers retirement or annuity contracts which are tax deferred under section 403(b) of the Federal Internal Revenue Code as amended.

(b) The voluntary salary reduction contribution shall be computed on the participant's actual base salary after adjusting for the participant's mandatory pension contribution in accordance with 26 U.S.C. 414(h)(2) and contributions made in accordance with 26 U.S.C. 125.

(c) A participant electing to make such contributions shall enter into a salary reduction agreement with the employing institution in accordance with Internal Revenue Code of 1954, as amended and supplemented, 26 U.S.C 402(g)(4).

(d) A participant shall be permitted to enter into more than one salary reduction agreement with the employer during a calendar year by replacing one salary reduction agreement with another agreement. The employer shall determine the number of times during the course of the calendar year that such a change is permitted.

(e) The salary reduction agreement between the participant and institution shall continue indefinitely until amended or terminated by due notice to the institution by the participant, subject to the following conditions:
1. If the participant terminates employment with the institution, the salary reduction agreement, or any amendments made thereon, shall automatically terminate.

2. If the Division of Pensions and Benefits terminates the Plan of the Alternate Benefit Program 26 U.S.C. 403(b), the salary reduction agreement shall automatically terminate.

[7:1-2.3] 17:7-1.3 Salary reduction agreements; salary deductions; limitations

(a) Limitations concerning salary reduction agreements are:

1. The entry into a salary reduction agreement between an employee and [his or her] the employing institution shall not be available to any participant during the period of time in which no employer contributions are made on [his or her] the employee's behalf to any retirement annuity contract.

2. If a participant earns less than 50 percent of [his or her] full base salary during a pay period, no salary reductions will be reported to the Division of Pensions and Benefits.

3. If a participant earns 50 percent or more of [his or her] full base salary during a pay period, the salary reduction will be calculated on the base salary earned.

(b) Limitations concerning salary deductions are:

1. Salary deductions [for TIAA/CREF] will be calculated on the full base salary if the participant earns 50 percent or more of [his or her] base salary during a pay period.

2. If a person earns less than 50 percent of [his or her] full base salary during a pay period, no base salary deductions [for TIAA/CREF] will be reported to the Division of Pensions and Benefits.

(Agency Note: N.J.A.C. 17:1-2.4 is proposed for recodification with amendment as N.J.A.C. 17:7-4.1.)

[17:1-2.5] 17:7-1.4 Proof of age

Documentary proof of the age of a participant and [his] designated beneficiary may be required by the Division of Pensions and Benefits or the insurers if the age of a participant or [his] beneficiary is material in determining eligibility for benefits.

[17:1-2.6] 17:7-1.5 Certifying officer

The business manager or other official designated by the institution shall be the certifying officer for the Alternate Benefit Program and shall be responsible for all duties prescribed by statute and by rules and regulations of the Divisions of Pensions and Benefits.

[17:1-2.7] 17:7-1.6 Appeal from [division] Division decisions

(a) An Alternative Benefit Program participant may appeal a preliminary administrative determination from the Division to the Director of the Division of Pensions and Benefits. The Director of the Division of Pensions and Benefits shall reply to an appeal with an administrative determination.

(b) An Alternate Benefit Program participant may appeal the initial administrative determination of the Director of the Division of Pensions and Benefits within 45 days from the date of the Director's determination. If no such written statement is received within the 45-day period, then the Director's initial administrative determination shall be considered a final administrative determination.

(c) The following statement shall be incorporated in every written notice setting forth the [division's] Division of Pensions and Benefit's determination in a matter where such determination is contrary to the claim made by the claimant or his or her legal representative:

"If you disagree with the determination of the Division of Pensions and Benefits in this matter, you may appeal by sending a written statement to the Division within 45 days from the date of this letter, informing the Division of your disagreement and all of the reasons therefor. If no such written statement is received within the 45-day period, this determination shall be considered final."

[17:1-2.8] 17:7-1.7 Records

(a) The records of the Alternate Benefit Programs are public record, and may be inspected during regular business hours at [the office of] the Division of Pensions and Benefits under supervision of the assistant director or other representatives of the office.

(b) Records considered confidential include medical reports submitted for any purpose, mailing addresses of active and retired participants and individual files relating to beneficiary designation, where no official purpose or reason for inspection is indicated.

17:7-1.8 Reporting of employee and employer contributions

(a) Effective January 1, 1995 mandatory contributions are subject to the provisions of Section 414(h)(2) of the Internal Revenue Code of 1954, 26 U.S.C. 414(h)(2), as amended.

(b) A participant may have voluntary additional tax-deferred contributions withheld by entering into a salary reduction agreement with the employer. These voluntary additional contributions cannot exceed the employee's statutory exclusion allowance under 26 U.S.C. 403(b) or the limitations of Section 415 of the Internal Revenue Code, (26 U.S.C. 415), and the regulations thereunder. Voluntary tax-deferred contributions should be computed on the participant's actual salary less mandatory pension contribution and Section 125 contribution, (26 U.S.C 125).

(c) To the extent that mandatory employee contributions and employer contributions required by the Alternate Benefit Program exceed the limits established pursuant to Section 415 or Section 403(b) of the Internal Revenue Code, (26 U.S.C. 415 and 403(b)) and the regulations thereunder, the excess shall be made to participant's non-qualified plan.

(d) An employer claiming reimbursement of employer contributions for its employees enrolled in the Alternate Benefit Program shall certify to the Division of Pensions and Benefits the number of active and delayed vested participants for whom employer contributions were paid to the annuity provider. Such certification shall be made by the fifth day of the month following the month for which deductions were made. Copies of the annuity provider's report summary supporting employer and employee contributions shall accompany the Employer Contribution Report certification.

(e) No later than July 5th, the employer shall provide the Division of Pensions and Benefits with a duplicate report(s) of the employer and employee contributions that it sends to each of the respective annuity providers for the last month of the school year.

(f) No later than July 31, the Division of Pensions and Benefits shall submit to employers the Annual Salary Listing for Alternate Benefit Program participants. The employer is responsible for reporting the June 30 salary for that fiscal year for all active Alternate Benefit Program participants within the time frame established by the Division.

(Agency Note: N.J.A.C. 17:1-2.9 is proposed for recodification with amendment as N.J.A.C. 17:7-2.3.)

[17:1-2.29]17:7-1.9 (No change in text.)

17:7-1.10 Fiscal year

(a) Fiscal year shall mean the 12-month period of fiscal transactions commencing July 1 and running until June 30 following.

(b) All reports and statements shall consider such a fiscal year except special reports not having direct relationship to the financial transactions of the retirement system.

[17:1-2.37] 17:7-1.11 Contributions; late payment

(a) Participating institutions, which shall include the State for locations on State centralized payroll, shall pay employer and employee contributions (deductions and reductions , except for 403(b) salary reductions (26 U.S.C. 403(b)) to the [carrier] annuity provider underwriting annuity contracts within 30 days after the month in which the employee contributions are withheld, or within 15 days of receipt from the [carrier] annuity provider of the statement of amount owed by the institution, whichever is later, but in no event later than 45 days after the month in which the employee contributions are withheld.

[(b) If the contributions are not received by the carrier within the time limits of (a) above, the participating institution shall pay interest on the contributions, at the rate used by the carrier for crediting interest to participant accounts which receive interest for the month after the month in which the employee contributions are withheld, for each day after the time limit the contributions remain unpaid.]

(b) All 403(b) (26 U.S.C. 403(b)) amounts payable on behalf of an employee for a pay period, shall be transmitted to the employee's annuity provider and credited not later than the fifth business day after the date on which the employee is paid for that pay period.

(c) If a participating institution fails to withhold pension contributions within the first 12 months of the participant's eligibility, the institution shall pay interest on the contributions. The rate of interest is the average rate of return, to the nearest hundredth percent, of the State Cash Management Fund (State accounts) as reported by the Division of Investment for the fiscal year ending June 30 preceding the period for which interest is payable. No interest is payable if the amount of interest is less than $10.00.

[(c)](d) The daily rate for interest on the contributions shall be the annual rate divided by 365, rounded to the nearest one-hundredth percent. The interest payable for each participant shall be indicated on the report to the carrier when the interest is paid.

(e) If participating institutions do not withhold pension contributions within the first 12 months of the participants eligibility, the institution shall be liable for the employers share and shall forfeit reimbursement by the State.

17:7-1.12 Additional investment products and default annuity provider

(a) The Division of Pensions and Benefits may, in its sole discretion, authorize existing Alternate Benefit Program annuity providers to add additional investment options to their existing product line for investment by participants. The availability of such new investment options, if any, shall be effective upon the Director's approval. A new investment option may be made available during a plan year if the Division of Pensions and Benefits must replace an investment option which has been eliminated for any reason.

(b) The Division shall notify the designated annuity providers of their ability to add additional investment options, permitting the designated annuity providers, upon the Director's approval, to prepare a structured proposal of the additional investment options.

(c) The annuity provider has a duty to select and offer those investment funds suitable to the needs and goals of the Alternate Benefit Program.

(d) The Division shall designate a default annuity provider to accept contributions from eligible participants of the Alternate Benefit Program who fail to select an annuity provider.

17:7-1.13 Transfers, direct rollovers

(a) An annuity provider shall permit transferability of an accumulated balance under the Alternate Benefit Program or any portion thereof to another annuity provider within the Alternate Benefit Program, subject to any applicable Federal laws, and this chapter.

(b) Annuity provider shall accept a transfer of a participant's account from other annuity providers within the Alternate Benefit Program, subject to any applicable Federal laws and the terms of the Alternate Benefit Program. Transfers between the annuity providers shall be treated in the same manner as other contribution payments.

(c) Funds transferred from participant's accounts to other annuity providers shall be deposited in accordance with the regulations of the U.S. Securities and Exchange Commission. Transferred funds shall be accompanied by a statement identifying the money type, source of contribution, and tax status for deposit into carrier's 401(a), 403(b) and non-qualified deferred annuity plan.

(d) Amounts distributed to a participant from another qualified plan may not be transferred into the participant's Alternate Benefit Program retirement account.

17:7-1.14 Domestic relations orders

(a) The participant's annuity provider, upon receipt of a certified copy of a domestic relations order as defined in 26 U.S.C. 414(p), shall determine whether such order is a qualified domestic relations order, and shall notify the participant or retiree and each alternate payee of such determination. Payment of benefits to Alternate Payees cannot begin until the participants retire or withdraw their contributions.

SUBCHAPTER 2. ENROLLMENT

[17:1-2.10] 17:7-2.1 Enrollment eligibility; general provisions

(a) Full-time faculty members, visiting professors and professional administrative staffs of the University of Medicine and Dentistry of New Jersey, Rutgers[,] -[the] The State University, the New Jersey Institute of Technology, the State universities and colleges, the county colleges, the Commission of Higher Education and the [Office of Student Assistance] Higher Education Student Assistance Authority are eligible to participate in the Alternate Benefit Program under the provisions of N.J.S.A. 18A:66-167 et seq.

1. For the purposes of this subchapter, "professional administrative staff" means any employee whose minimum qualifications for hiring include a baccalaureate degree or its equivalent, but shall not include career service employees as defined by the Department of Personnel pursuant to the provisions of Title 11A of the New Jersey Revised Statutes.

2. For the purposes of this subchapter, "full-time" shall be defined as working 50 percent or more of the normal work week.

(b) Any eligible person who has been enrolled in the Alternate Benefit Program for at least one year may continue to be enrolled in the program, notwithstanding promotion or transfer to a position within the institution not otherwise eligible for the program.

(c) An Alternate Benefit Program participant shall be immediately vested if they own an annuity contract that contains employee and employer contributions based upon higher education employment or is an active or vested member of a state-administered retirement system in New Jersey or the United States. The retirement contract must be in force and the member entitled to receive benefits at a future date. Employee contributions are remitted to the carrier upon enrollment in the Alternate Benefit Program.

[(c)](d) Employees meeting the following criteria shall not be eligible to participate in the Alternate Benefit Program:

1. Individuals temporarily within the United States under an F or J visa;

2. Temporary employees [, with the exception of visiting professors,] who are appointed for one school year, one semester or a lesser period of time. Any such full-time employee reappointed for a third consecutive semester may enroll within the Alternate Benefit Program;

3. Any employee receiving a retirement benefit from any pension system of the State of New Jersey, including an individual collecting an annuity or cash distribution from the Alternate Benefit Program; or

4. Individuals employed in a clerical or other non-professional position.

[(e][Regarding questions arising concerning the application of this section, the] The Director of the Division of Pensions and Benefits shall have responsibility to determine eligibility for participation in the Alternate Benefit Program [in consultation with the employing institute],in accordance with the law and rules governing the retirement system.

1. If the Division of Pensions and Benefits declares a particular job title to be eligible, all personnel [in the several institutions] currently employed in that [position] title at that institution will then become eligible for participation in the Alternate Benefit Program and must, if otherwise eligible, elect within 90 days to participate in either the Alternate Benefit Program or the Public Employees' Retirement System.

2. If an individual does not file an "Election of Retirement Coverage" form during this 90-day period, [he or she] the individual must remain in, or, if [he or she is] a member of the Teachers' Pension and Annuity Fund, transfer to the Public Employees' Retirement System.

(Agency Note: N.J.A.C. 17:1-2.12 and 2.13 are proposed for recodification with amendment as N.J.A.C. 17:7-5.1 and 4.2, respectively.)

[17:1-2.16] 17:7-2.2 Retention of contributions; compulsory enrollment; incomplete enrollment application

(a) No employee or employer contributions shall be authorized by the Division of Pensions and Benefits for payment to any [carrier underwriting annuity contracts] annuity provider until completed enrollment applications have been filed [by an employee].

(b) Employees of the participating institutions who satisfy the eligibility requirements of N.J.A.C. 17:7-2.1 shall be required to enroll as members of the Alternate Benefit Program as a condition of employment. The compulsory enrollment date shall be fixed as the first of the month for an employee whose regular appointment date falls between the first through the 16th of the month. An employee whose regular appointment date falls between the 17th and the end of the month shall be fixed as of the first of the following month.

(c) If there is a delay in enrolling the participant into the Alternate Benefit Program, the employer shall be responsible for collecting contributions from the participant's eligible enrollment date.

(d) If the employee fails to file an application for enrollment, even though the eligible employee and the employer have been advised of the compulsory nature of enrollment, the certifying officer shall be obligated to complete Part I and Part II of the enrollment application no later than 30 days after the employee's eligibility determination date. The employee's estate shall be the employee's beneficiary for the employee's account until such time as proper designation forms are received by the Division of Pensions and Benefits.

(e) If the employee fails to designate an annuity provider, the certifying officer shall be obligated to complete the appropriate application to enroll the employee with the annuity provider selected as the default annuity provider for the current plan year. In these situations, the employer shall be required to submit both the employee's and employer's contributions to the default annuity provider designated for that plan year no later than 45 days after the commencement of payroll deductions.

[17:1-2.9] 17:7-2.3 Part-time faculty members

[Eligibility of part-time faculty members whose services have been renewed for the succeeding school year shall not include part-time faculty members who are participants in an Alternate Benefit Program or who are members of any other State-administered retirement program in a full-time position with the same employer; employees of the State colleges, Rutgers--The State University, and the College of Medicine and Dentistry of New Jersey are employees of the State.] Alternate Benefit Program participants who concurrently work in a part-time position which is covered by another State administered pension plan shall be ineligible to make Alternate Benefit Program contributions from their concurrent part-time salary.

SUBCHAPTER 3. MEMBERSHIP

[17:1-2.20] 17:7-3.1 Base or contractual salary

(a) [Since the statute] N.J.S.A. 18A:66-169c provides that only base or contractual salary [be] is subject to [salary deductions or reductions or group life coverage] pension contributions. Payments related to [a division of] guaranteed faculty practice moneys shall [not] be included in such base salary up to the extent provided by N.J.S.A. 43:3C-9.1 et seq. The participant's mandatory contributions shall be computed on earned base salary and the employer's contributions shall be computed on the participant's contractual salary.

(b) If the participant elects to have voluntary additional contributions (elective 403(b)) made by entering into a salary reduction agreement with the employer, the contribution percentage is applied against the participant's actual salary after taking into account deductions for mandatory contributions and Section 125 (26 U.S.C. 125) contributions.

17:7-3.2 Delayed vested contribution

(a) Mandatory contributions during a participant's first year of employment, including earnings credited thereto, shall be held in delayed vested status with the designated annuity provider specified by the participant.

(b) A participant who is in delayed vested status shall be ineligible to engage in the following transactions:

1. Loans;

2. Transfers of account accumulations between Alternate Benefit Program annuity providers; and

3. Investments of mandatory contributions with more than one annuity provider.

(c) The delayed-vested portion of a terminated participant's account attributable to employer contributions shall be forfeited at the time of termination. Such forfeitures shall be applied to the current or next succeeding employer contribution to the annuity provider underwriting the terminated participant's annuity contract. Repurchase account forfeitures, plus or minus any gains or losses from investment by the vendor, should be reported to the Division of Pensions and Benefits in the ABP Employer Contribution Report. The reimbursement of a subsequent ABP Employer Contribution Report shall be reduced by the reported forfeiture amount.

(d) The participating institutions shall be required to notify the designated annuity providers when a participant enters delayed vesting and has completed one year of service and is no longer in delayed vested status.

[17:1-2.14] 17:7-3.3 (No change in text.)

(Agency Note: N.J.A.C. 17:1-2.16 is proposed for recodification with amendments as N.J.A.C. 17:7-2.2.)

[17:1-2.17] 17:7-3.4 Termination; withdrawal of delayed vested contributions

(a) A participant may withdraw [his contributions held in escrow only] the participant's delayed vested contributions held by the annuity provider if [he] the participant terminates all employment subject to coverage by the Alternate Benefit Program.

(b) No application for withdrawal of contributions [held in escrow] while in delayed vested status shall be approved if:

1. The participant is on official leave of absence;

2. The participant or [his] employer certifies that [ his] the employment contract has not expired, or that [he] the participant has executed another contract to work in a position subject to coverage by the Alternate Benefit Program; or

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

17:7-3.5 Leave of absence with pay

(a) The mandatory pension contribution for a participant granted a leave of absence with pay shall be calculated on the actual base salary paid, if the participant earns 50 percent or more of full base salary during a pay period. On the monthly Employer Contribution Report, the full contractual base salary should be included in the Total Base Salary section, and the employer contribution shall be paid on this salary. If a participant earns less than 50 percent of full base salary during a pay period, no deductions should be made, and the member's ABP status shall be the same as that of a member on leave of absence without pay.

(b) Voluntary tax-deferred contributions (403(b) contributions) for a participant granted a leave of absence with pay shall be calculated on the actual base salary paid less the mandatory pension contribution, if the participant earns 50 percent or more of full base salary during a pay period. If a participant earns less than 50 percent of full base salary during a pay period, no payroll deductions shall be made for elective 403(b) voluntary additional contributions.

(c) Voluntary after-tax contributions elected by a participant granted a leave of absence with pay shall be calculated on the full base salary if the participant earns 50 percent or more of full base salary during a pay period. If the participant earns less than 50 percent of the full base salary during a pay period, no deductions shall be made for elective after-tax deductions.

(d) In order to give effect to the limitations of Section 415(c)(3) of the Internal Revenue Code (26 U.S.C. 415(c)(3)), an employer may be required to limit a participant's voluntary salary reduction contribution into the participant's 403(b) plan.

(e) When the employer, at the participant's request, approves an extension of the initial leave of absence, and the percentage of base salary to be paid is changed retroactive to the beginning of the initial leave effective date, (a), (b), (c) and (d) above are applicable from the effective date of the initial leave of absence to the end date of the leave of absence, which must be in accordance with N.J.S.A. 18A:66-169h.

[17:1-2.28] 17:7-3.6 Military leave, withdrawal

No participant shall be entitled to withdraw amounts contributed by [his]the employer for the period of a military leave of absence without pay unless [he shall have] the participant has resumed active employment and [contributed] made contributions to an Alternate Benefit Program annuity provider for [a] the period [of at least 90 days after termination] of the military leave per N.J.A.C. 17:1- 4.36.

[17:1-2.33] 17:7-3.7 Minimum adjustment

In order to facilitate the reconciliation of contributions by the Division of Pensions and Benefits, no rebates or additional contributions shall be made where an adjustment involves an amount of [$3.00] $50.00 or less.

17:7-3.8 Hardship withdrawals

(a) Any request for an early withdrawal due to hardship shall be submitted with evidence of the hardship on forms satisfactory to the annuity provider(s) and consistent with applicable Federal income tax law. Hardship withdrawals are limited to a participant's 403(b) voluntary contributions. Hardship withdrawals shall be approved only in the event the participant experiences an immediate and heavy financial need. The amount of such withdrawal shall be limited to the amount needed to satisfy the financial need; to the extent such need may not be satisfied from other resources that are reasonably available to the participant, including commercially available loans and loans available under the annuity contracts purchased under the program.

(b) The annuity provider(s) shall determine whether the participant's request for hardship withdrawal satisfies the requirements of this section and any applicable provisions of the Federal Income Tax Code and Regulations. The annuity provider(s) shall notify the institutions of those employees who received hardship distributions, so that the salary reduction agreements shall be discontinued. All employee voluntary salary contributions (to any contract or annuity provider) shall be suspended for 12 consecutive months. When salary reduction resumes, the affected employee's Section 402(g) limit shall be reduced by the amount of any elective deferral made in the year the hardship withdrawal was taken.

SUBCHAPTER 4. INSURANCE, DEATH BENEFITS AND RETIREMENT

[17:1-2.4] 17:7-4.1 Death or retirement [of participant]; notice

(a) Upon the death or retirement of participant, the employing institution shall notify the Division of Pensions and Benefits.

(b) The [division] Division shall [notify the insurers and] process the necessary forms related to such death or retirement and notify the insurer providing life insurance coverage.

[17:1-2.13] 17:7-4.2 Assignments; group life insurance

(a) Any [person] participant insured under the Alternate Benefit Program group life insurance policy, pursuant to an arrangement among the insured, the group policyholder and the insurer, shall be entitled to make any person other than [his] the employer a gift assignment of the rights and benefits conferred on [him] the participant by any provision of such group life policy or by law, including specifically but not by way of limitation the right to exercise the conversion privilege and the right to name a beneficiary.

(b) Any such assignment, whether made before or after June 28, 1973, the effective date of this rule, shall entitle the insurer to deal with the assignee as the owner of all rights and benefits conferred on the insured under the group life policy in accordance with the terms of the assignment.

17:1-2.19] 17:7-4.3 Death before payment to insurer

If a participant dies before [his] the employee annuity deductions [may be] have been paid to the designated insurer, [his] the deductions shall be paid in a single sum by the employer [to the beneficiary designated for the retirement annuity contract upon receipt of a death certificate and appropriate forms] to the designated annuity provider.

(Agency Note: N.J.A.C. 17:1-2.20 is proposed for recodification with amendment as N.J.A.C. 17:7-3.1.)

[17:1-2.21] 17:7-4.4 Base monthly salary for disability benefits

(a) In determining disability benefits, base monthly salary for 12-month employees shall be 1/12 of the participant's [base annual] last 12 months of salary on which employer contributions were remitted prior to the last day of work as a result of the disability.

(b) In determining disability benefits, base monthly salary for 10-month employees shall be 1/10 of the participant's last 10 months of salary on which employer contributions were remitted prior to the last day of work as a result of the disability.

[17:1-2.22] 17:7-4.5 Life insurance

(a) Any participant, who is reported on [a 10-month basis and who has not resigned or been discharged, shall be covered by applicable insurance benefits for the remaining two summer months of the year provided that the participant has filed a contract of employment for the next school year or where the applicant has gained tenure] other than a 12-month contract year shall continue to be insured for the regular seasonal layoff provided a bona fide employee-employer relationship exists during this period as determined by the Division of Pensions and Benefits.

(b) The salary, in the month or biweekly pay period in which no salary was paid, shall be counted as zero.

[(b)](c) Death benefits shall be based upon the base salary upon which employer contributions were made to the Alternate Benefit Program during 12 months or 26 biweekly pay periods immediately preceding death.

(d) If a member dies within the first year following the date of enrollment, the insurance benefit shall be 3 1/2 times the salary on which Alternate Benefit Program employer contributions were based on the actual months or pay periods of creditable service.

[17:1-2.23] 17:7-4.6 Long term disability insurance

(a) In accordance with the provision of the Federal Age Discrimination in Employment Act and upon [advise] advice of the New Jersey Attorney General's Office and despite the provisions of N.J.S.A. 18A:66-184, a participant enrolling in the Alternate Benefit Program or a participant becoming determined to be totally disabled after age 60 but under 70 will be eligible for long term disability insurance benefits.

[(b) Applications for long term disability insurance benefits are made on forms prescribed by the carrier, the Prudential Insurance Company and supplied by the Alternate Benefit Program.]

[(c) Concerning the long term disability insurance program, in accordance with the New Jersey Attorney General's opinion AA M79-4158 and the Provisions of the Federal Civil Rights Act, participants in the Alternate Benefit Program who are on authorized leave of absence for maternity will not be treated any differently than other participants who are on authorized leaves of absence for personal illness.]

(b) A participant determined to be totally disabled shall be eligible for long-term disability benefits if the participant has completed one year of full-time continuous service in a designated Alternate Benefit Program position pursuant to N.J.S.A. 18A:66-184.

(c) The disability benefits provided shall commence after six months of continuous disability. The disability benefits shall terminate the earlier of either the participant's retirement date or 70th birthday.

(d) A participant who is in receipt of long term disability benefits shall be entitled to full pension rights. The insurance carrier shall make the basic pension contribution that the participant would have been required to make while actively working. Employer contributions shall continue.

(e) Payments from short term disability or salary continuance plans underwritten by private carriers shall not be credited as base salary for the calculation of long term disability benefits nor shall contributions based on these payments be accepted.

(f) The disability benefit shall be offset by the receipt of periodic workers compensation benefits, Social Security benefits or other periodic benefits for loss of time on account of the disability pursuant to N.J.S.A. 18A:66-185.

[17:1-2.26]17:7-4.7 [ Leave] Life insurance coverage during leave for illness

[Coverage] Life insurance coverage during a leave of absence due to illness, as set forth in [section 10 of chapter 242, Public Laws of 1969] N.J.S.A. 18A:66-176, shall apply only to the personal illness of the participant.

(Agency Note: N.J.A.C. 17:1-2.28 and 2.29 are proposed for recodification as N.J.A.C. 17:1-3.6 and 1.9, respectively.)

[17:1-2.32 (Reserved)]

(Agency Note: N.J.A.C. 17:1-2.33 is proposed for recodification with amendment as N.J.A.C. 17:7-3.7.)

SUBCHAPTER 5. TRANSFERS

[17:1-2.12] 17:7-5.1 Interprogram transfers; transfer to the Alternate Benefit Program from another State retirement system by employees of the Commission of Higher Education or [Office of Student Assistance] Higher Education Student Assistance Authority

[(a)] If an Alternate Benefit Program participant terminates employment in a covered institution and becomes employed in an eligible position in another New Jersey public institution, the Division of Pensions and Benefits will, upon the filing of the required forms with the [division] Division, continue all of the participant's rights and obligations in the New Jersey Alternate Benefit Program.

[(b) Any individual employed by the Commission of Higher Education or Office of Student Assistance subsequent to July 1, 1994, but prior to May 1, 1995 shall be entitled to transfer to the Alternate Benefit Program until August 29, 1995.]

[17:1-2.36] 17:7-5.2 Transfers, interest

Pursuant to the provisions of N.J.S.A. 18A:66-173, when payment of the transferred member's reserves in the State-administered retirement system is made more than 30 days after eligibility for the transfer, interest is added to the reserves being transferred from the system to the carriers of the Alternate Benefit Program. The 30-day period after eligibility for transfer shall not begin to run until the Division of Pensions and Benefits has received all the documents or other related information necessary to effectuate the transfer in question. The rate of interest is the average rate of return, to the nearest hundredth percent, of the State Cash Management Fund (State accounts) as reported by the Division of Investment for the fiscal year ending June 30 preceding the period for which interest is payable. No interest is payable if the amount of interest is less than $10.00.

(Agency Note: N.J.A.C. 17:1-2.37 is proposed for recodification with amendment as N.J.A.C. 17:7-1.1.)


WORKERS' COMPENSATION: EMPLOYER'S OBLIGATION
REGARDING EMPLOYEE CONTRIBUTIONS

Adopted Amendment: N.J.A.C. 17:1-4.39

Cite as 33 NJ. Reg. 1605(a)

Adopted May 21, 2001

The agency proposal follows:

Summary

The Division of Pensions and Benefits proposes to amend N.J.A.C. 17:1-4.39, Workers' compensation: employer's obligation regarding employee contributions, which sets forth specific conditions regulating when continued pension contributions are required from employers with employees who are receiving periodic awards of permanent disability benefits without pay.

The amendment of the rule is necessary due to the recent New Jersey Supreme Court decision, James v. Board of Trustees of the Public Employees' Retirement System, 164 N.J. 396, 753 A. 2d 1061 (2000), which determined under which circumstances an employer is obligated to make pension contributions on behalf of an employee who is awarded a permanent disability award of workers' compensation. The Court also addressed the circumstances under which an employer's obligation to make pension contributions terminates.

The proposed amendment of this rule will bring the existing language into conformance with this case. Specifically, the distinction between a temporary and permanent award has been removed. The Court in James eliminates the "in lieu of normal compensation" distinction and requires that an employee who receives workers' compensation benefits must be retained on payroll and pension contributions must be made by the employer. The Court recognized the employer's ability to file an involuntary disability retirement application for a totally and permanently disabled employee. The Court also recognized valid terminations from employment as a means of terminating the employer's requirement to pay pension contributions. The proposed amendment lists the circumstances under which an employer is obligated to make pension contributions for members receiving workers' compensation and when this obligation ceases.

Full text of the proposal follows:

17:1-4.39 Workers' compensation: employer's obligation regarding employee contributions (a) An employer is responsible for the payment of an employee's pension contributions while the employee is receiving periodic [temporary] disability benefits through workers' compensation [in lieu of pay]. [(b) An employer is responsible for the payment of an employee's pension contributions while the employee is receiving a periodic award of permanent disability benefits through workers' compensation without pay if:]

[1. The employee is unable to perform the job functions of the former position;]

[2. The employee is either forced to resign, or is terminated due to the employee's inability to perform the job functions of the former position; and]

[3. The employee does not have sufficient credited service to be eligible to receive an ordinary disability retirement allowance.]

[(c)](b) An employer is not responsible for the payment of an employee's pension contributions while the employee is receiving a periodic award of [permanent] disability benefits through workers' compensation without pay if a valid termination from employment has occurred. If an employer ceases payment of employee pension contributions due to a valid termination, as listed in (b)3 or 4 below, the employer shall notify the Division of Pensions and Benefits in writing of the reasons for the cessation of payments. A valid termination exists when:

1. The employee [has sufficient credited service to be eligible to receive an ordinary disability retirement allowance] voluntarily files for a retirement allowance that is subsequently approved;

2. The employer files an involuntary disability retirement application for the employee that is subsequently approved;

[2.] 3. The employee voluntarily resigns from [the] employment; or

[3.] 4. The employee is terminated by the employer for reasons unrelated to a workers' compensation award.

[(d) If an employer ceases payment of employee pension contributions due to the reasons listed in (c)2 or 3 above, the employer shall notify the Division of Pensions and Benefits in writing of the reasons for the cessation of payments.]


POLICE AND FIREMEN'S RETIREMENT SYSTEM

Readoption with Amendments: N.J.A.C. 17:4

Cite as 33 N.J. Reg. 684(a)

Read adopted amendment and new rule


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.


TEACHERS' PENSION AND ANNUITY FUND
APPLICATIONS

Adopted Amendment: N.J.A.C. 17:3-6.1

Cite as 33 N.J. Reg. 1398(b)

Adopted April 6, 2001

The agency proposal follows:

Summary

The proposed 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 specificity in the Administrative Code as to how a re-retiree was to obtain reinstatement of the initial retirement allowance. The Division has always operationally required a retirement application to reinstate a retirement allowance, but has never codified this requirement. The TPAF Board proposes to add subsection (e) which will clarify what form must be filed to begin receipt of a suspended retirement allowance when a member returns to employment, cancels the retirement allowance and then retires again.

The Board proposes to also amend N.J.A.C. 17:3-6.1 by changing the language to match that in the PERS rule found at N.J.A.C. 17:2-6.1. Specifically, the Board proposes to change the word "prescribed" to "required" and to amend the rule by changing the requirement that the form be filed with the Fund, 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. 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 subsection (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 to change at subsection (d) the requirement that the employer state that a member is incapable of further duty and replace it with a second source from either a doctor or hospital. The Board also proposes to add the word "medical" in front of "reports" in subsection (d) to clarify what type of report is necessary when filing for an application for disability retirement, and to clarify "an application" as "a member's application."

Full text of the proposal follows:

17:3-6.1 Applications

(a) Applications for retirement must be made on forms [prescribed] required by the Fund. Such forms must be completed in all respects and filed with the [Fund] 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. Members enrolled at multiple TPAF locations must retire from employment in all covered positions before a retirement shall become effective.

(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 will] the member shall be required to file a completed application with the [Fund] Division to enable [acceptance for] processing.

(c) Before an application for retirement may be [accepted for processing] processed, [it must be supported by a certificate from the employer setting forth the employment termination date, the salaries reported for contributions in the member's final years of employment and proof of age, if none is already in the member's record.] the Division must receive proof of the member's age, if none is already in the member's record, proof of the beneficiary's age, if the member elected Option 2, 3, or 4, and a 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 of employment.

(d) In addition to the foregoing requirements, [an] a member's application for disability retirement must be supported by [a report] at least two medical reports, 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 either hospital records supporting the disability or a report from a second physician.

(e) Retired members, who return to public employment, shall have their previous retirement allowances cancelled and be reenrolled in the Fund pursuant to N.J.S.A. 18A:66-40 for those who retired on disability retirements or N.J.S.A. 18A:66-53.2 for those who retired on early, service, veteran or deferred retirements. A member who ceases covered employment and retires again must file a new retirement application with the Division in accordance with (a) through (d) above in order to initiate payment of the retirement allowance. The previous retirement allowance shall then be reinstated, and the new retirement allowance, based upon 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. The retirement allowance shall become effective on the first of the month following receipt of the application unless a future date is requested.


PUBLIC EMPLOYEES' RETIREMENT SYSTEM
APPLICATIONS

Adopted Amendment: N.J.A.C. 17:2-6.1

Cite as 33 N.J. Reg. 1398(a)

Adopted March 22, 2001

The agency proposal follows:

Summary

The proposed 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 specificity in the Administrative Code as to how a reretiree was to obtain reinstatement of the initial retirement allowance. The Division has always operationally required a retirement application to reinstate a retirement allowance, but has never codified this requirement. The PERS Board proposes to add subsection (e) which would clarify what form must be filed to begin receipt of a suspended retirement allowance when a member returns to employment, cancels the retirement allowance, and then retires again. In addition, in subsection (a), the Board proposes to delete the unnecessary word "otherwise." The Board also proposes to add the word "medical" in front of "reports" in subsection (d) to clarify what type of report is necessary when filing for an application for disability retirement, and to clarify "an application" as "a member's application."

Full text of the proposal follows:

17:2-6.1 Applications

(a) Applications for retirement must be made on forms required by the System. Such forms must be completed in all respects and filed with the 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 application unless a future date is [otherwise] requested. Members enrolled at multiple PERS locations must retire from employment in all covered positions before a retirement shall become effective.

(b)-(c) (No change.)

(d) In addition to the foregoing requirements, [an] a member's application for disability retirement must be supported by at least two medical reports, one by the member's personal or attending physician and the other may be either hospital records supporting the disability or a report from a second physician.

(e) Retired members, who return to public employment, shall have their previous retirement allowances cancelled and be reenrolled in the System pursuant to N.J.S.A. 43:15A-44 for those who retired on disability retirements or N.J.S.A. 43:15A-57.2 for those who retired on early, service, veteran or deferred retirements. A member who ceases covered employment and retires again must file a new retirement application with the Division in accordance with (a) through (d) above in order to initiate payment of the retirement allowance. 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. The retirement allowance shall become effective on the first of the month following receipt of the application unless a future date is requested.


SUPPLEMENTAL ANNUITY COLLECTIVE TRUST PROGRAM

Adopted Readoption: N.J.A.C. 17:8

Cite as 33 N.J. Reg. 1399(a)

Adopted April 5, 2001

The agency proposal follows:

Summary

The Council of the Supplemental Annuity Collective Trust (SACT) is responsible for promulgating and reviewing the administrative rules within N.J.A.C. 17:8. When SACT becomes aware of a change in the laws or a court decision that possibly could affect SACT, 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 SACT's staff to ascertain if the current rules are necessary and/or cost efficient.

The Trust is a single-employer defined contribution plan established by Chapter 123, P.L. 1963, and is available to active members of several State- administered retirement systems to provide specific benefits to supplement the guaranteed benefits which are provided by their basic retirement systems. The Trust is administered by the New Jersey Division of Pensions and Benefits. Upon retirement, a participant is paid a single cash payment or may elect various forms of monthly annuities or reduced annuity payments with a beneficiary provision based upon the value of the participant's account. Upon the death of a participant the designated beneficiary may elect to receive a lump sum equal to the account value or as an annuity under any of the settlement options which a retiree could elect under the Trust. Upon termination of employment and withdrawal from the basic retirement systems, a participant must also withdraw his or her account under the Trust as a lump sum settlement.

Participants contribute through payroll deductions and may contribute from one percent to 10 percent of their base salary. Contributions are voluntary and may be suspended at the beginning of any quarter. Participants are always fully vested for the accumulated units in their account.

In 1997, SACT amended many of the rules found within N.J.A.C. 17:8. These amendments were necessary to insure the proper administration of SACT in light of legislative changes made by the enactment of PL 1996, c.77 which permitted participants in the section 403(b) plan under SACT and Additional Contributions Tax Sheltered (ACTS) programs to transfer their accumulated deductions between the SACT fund and the alternate vendors participating in the ACTS program. These rules were promulgated to implement many essential provisions of the statutory requirements found at N.J.S.A. 52:18A-107 through 124, the statutory authority that guides the administration of the SACT. The Council has determined that N.J.A.C. 17:8 continues to provide the SACT with appropriate and useful standards concerning the many aspects of the Trust. The Council has also determined that the original purpose of each rule continues to be in full effect, and that the need for these rules still exists. Accordingly, the Council proposes to readopt the current rules within N.J.A.C. 17:8, which will expire on July 15, 2001 and to establish the expiration date of such rules to be five years from their effective date under the provisions of Executive Order No. 66(1978). The current rules deal with the administration of SACT; enrollment, contributions and transfer; retirement, termination and transfer; and Qualified Voluntary Employee Contributions.

Full text of the proposed readoption may be found in the New Jersey Administrative Code at N.J.A.C. 17:8.


STATE POLICE RETIREMENT SYSTEM RULES

Proposed Readoption with Amendments: N.J.A.C. 17:5
Proposed Recodification: N.J.A.C. 17:5-2.5 as 2.3
Proposed Recodification with Amendment: N.J.A.C. 17:5-5.3 as 5.2
Proposed Repeals: N.J.A.C. 17:5-2.3, 3.2, 3.6 and 5.12
Proposed Repeals and New Rules: N.J.A.C. 17:5-5.13 and 5.15

Cite as 33 NJ Reg. 1205(a)

Adopted April 16, 2001

The agency proposal follows:

Summary

The Board of Trustees of the State Police Retirement System is responsible for reviewing the administrative rules within N.J.A.C. 17:5. When the Board becomes aware of a change in the laws or a court decision that possibly could affect the State Police Retirement System, 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 Board of Trustees completed an extensive review of their rules found at N.J.A.C. 17:2. Many of the proposed changes which follow are being made to better correspond with the rules of the PERS. Accordingly, the Board of Trustees of the State Police Retirement System proposes to readopt the current rules within N.J.A.C. 17:5, which expire on June 17, 2001, with the following amendments, repeals and new rules, and to extend the expiration date for such rules under Executive Order No. 66(1978).

The current rules deal with the administration, insurance and death benefits, membership, purchases and eligible service, retirement and transfer aspects associated with the State Police Retirement System (SPRS). 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 rules reflect the requirements for eligibility and amounts of benefits available that are mandated within the statutes governing the State Police Retirement System. The chapter originally became effective prior to September 1, 1969. Following is a discussion of the proposed amendments, repeals and new rules.

Subchapter 1. Administration

The Board proposes that N.J.A.C. 17:5-1.1 would be amended to correspond to the language in the PERS rules found at N.J.A.C. 17:2-1.1. The proposed amendment would delete the references to PL 1975, c.231 (the Open Public Meetings Act) and add that meetings may be called as deemed necessary by the Board. N.J.A.C. 17:5-1.2 would remain unchanged. Proposed amendments at N.J.A.C. 17:5-1.3 will add "vice chairperson" after "chairperson" because a vice-chairperson is also elected at this time. "Each fiscal year" will be changed to "July" to better clarify when election takes place. Language regarding the vice chairperson presiding at meetings when the chairperson is absent will also be added. The Director of the Division of Pensions and Benefits now appoints a Secretary to the Board; therefore, N.J.A.C. 17:5-1.3(b) will be amended to indicate this practice. The "B" in "Board" will be capitalized throughout the rule and any gender specific pronouns will be amended.

N.J.A.C. 17:5-1.4 will remain unchanged. Proposed amendments to N.J.A.C. 17:5-1.5 will capitalize the "B" in "Board" and will add a new subsection (c) to reflect that the names of designated beneficiaries are considered by the Division to be confidential 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 SPRS 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. 17:5- 1.5(c) would provide 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) will be recodified as (d). Proposed amendments at recodified subsection (d) will establish the conditions under which the Division will release medical records to reflect the language in the PERS and PFRS code. Proposed amendments to N.J.A.C. 17:5-1.6 would change the word "his" to "the 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 will replace the existing notice.

Proposed amendments to N.J.A.C. 17:5-1.7 will change the first sentence from "monthly retirement allowances will be suspended" to "the disbursement of pension checks shall be suspended" to correspond with the language in the PERS rules. The word "event" would also be changed to "instance" for the above reason. N.J.A.C. 17:5-1.7(a)1 will be deleted because there is no longer an earnings test in the SPRS. The Board also proposes to recodify paragraphs (a)2 and 3 as (a)1 and 2 and to amend "on an annual basis" to "periodically" to better reflect current Division practice.

Proposed amendments at N.J.A.C. 17:5-1.8 will eliminate subsection (b) because there are no transfers into the SPRS in the last year of service. The Board proposes to eliminate the codification (a) in front of the first subsection since, with but one paragraph in the section, subcodification is unnecessary.

Proposed amendments to N.J.A.C. 17:5-1.9 will amend "may be requested" to "shall be required," because a member's age is required information. The next sentence will 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 will appear next, to establish examples of acceptable proofs. A proposed amendment to N.J.A.C. 17:5-1.9 would make the provision of evidence of birth date mandatory. The Board proposes to eliminate subsection (b) because the Division requires birth date evidence even if such evidence has also been submitted to State Police personnel. The Board proposes to eliminate "his or her" from this rule and to recodify subsection (c) and (d) as (b) and (c).

Subchapter 2. Insurance and Death Benefits

The Board proposes to amend N.J.A.C. 17:5-2.1(a) by changing "he" to "the member" and deleting the reference to contributions for insurance coverage. The life insurance coverage in the SPRS is noncontributory. If an employer reports pensionable income after a member's death, than we 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 "month's" to "biweekly" because all members of the SPRS are paid on a biweekly basis. The Board also proposes to amend N.J.A.C. 17:5-2.1(b) by adding "insurance benefits" after "death benefits" to apply this subsection to both types of benefits as their base salary calculation is the same and changing "shall be counted as zero" to "shall not be used in the calculation" to clarify what salary is used in the calculation of benefits. The Board proposes to amend N.J.A.C. 17:5-2.1(c) by changing the masculine pronouns to "the member" and replacing "average" with "base" salary. Benefits are no longer based on the final three years average of salary. The proposed amendments to N.J.A.C. 17:5-2.1(d) would 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. At N.J.A.C. 17:5-2.1(e) the Board proposes to add the line "If a deceased member does not have an eligible surviving spouse, child or parent" before "refunds" to reflect that a deceased member's contributions are used to fund the survivor's benefit, 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. 17:5-2.1(f) because only members who are over 60 need to prove insurability now. The maximum enrollment age is 35 in SPRS; therefore, no members would have to prove insurability. The Board proposes to recodify N.J.A.C. 17:5-2.1(g) as (f) and to add "which are attributable to those 26 pay periods" instead of "the prescribed period." Retroactive adjustments may apply to previous years as well and shouldn't be includable in this calculation. The Board proposes to delete N.J.A.C. 17:5-2.1(h) because there are no 10-month employees in the SPRS and this subsection only applies to the calculation of benefits for 10-month employees.

The proposed amendment to N.J.A.C. 17:5-2.2 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. PL 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. 17:5-2.2(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 paid to eligible survivors 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. The Board proposes to repeal N.J.A.C. 17:5-2.3 because it deals with proof of insurability. At one time members had to prove insurability if they were late enrollees into the system. Now, the only time a member must provide insurability is when the member is age 60 at enrollment. Because the maximum enrollment age is 35, and the mandatory retirement age 55 in the SPRS, this situation cannot exist, and so the rule as written is no longer necessary.

The Board proposes to recodify N.J.A.C. 17:5-2.5 as N.J.A.C. 17:5-2.3 and the text will remain unchanged. N.J.A.C. 17:5-2.4 will remain unchanged.

Subchapter 3. Membership

Proposed amendments to N.J.A.C. 17:5-3.1 include the replacement of the word "earnable" with "creditable" before "compensation" in N.J.A.C. 17:5- 3.1(a) to reflect current Division usage. The Board proposes to delete N.J.A.C. 17:5-3.1(d) and replace it with the language concerning the same subject matter in the PFRS code found at N.J.A.C. 17:4-4.1(d). The Board investigates any suspected violations of N.J.S.A. 53:5A-3u regarding salary adjustments in anticipation of retirement, and not just those salary adjustments equal to 15 percent over the previous year.

The Board proposes to repeal N.J.A.C. 17:5-3.2. Interest is charged from the first pay period of missed contributions. There has not been an eight-month grace period for as long as anyone working in the Division's loan section can remember. Proposed amendments at N.J.A.C. 17:5-3.3 would make the wording closely match that found in the PFRS at N.J.A.C. 17:4-4.5. Proposed amendments would also place a period after full normal deduction and add that if wages are sufficient, arrears and loan deductions should be taken, which is existing Division practice. The Division will accept just pension contributions and will not reject the contribution if loan and arrears payments are not also made. The proposed change reflects this practice. In subsection (c), month would be deleted and pay period added because State Police service is credited by pay period.

Proposed amendments at N.J.A.C. 17:5-3.4 would change the minimum adjustment amount to $2.00 per quarter to reflect the PERS rule at N.J.A.C. 17:2-4.6, the proposed amendments to the Police and Firemen's Retirement System Code at N.J.A.C. 17:4-3.7 which were recently proposed for readoption at 32 N.J.R. 4060(a) and the general rules at N.J.A.C. 17:1-1.10. Proposed amendments at N.J.A.C. 17:5-3.5 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 change as well. The Board also proposes 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. 17:5-3.6 because it has not been in effect since August 1, 1974, when the Vietnam War ended. The Board proposes to amend N.J.A.C. 17:5-3.7 to better correspond with the language in the PERS Code at 17:2-4.9 and the proposed amendments to the Police and Firemen's Retirement System Code at N.J.A.C. 17:4-3.7 which were recently proposed for readoption in the November 20, 2000 New Jersey Register (Cite as 32 N.J.R. 4060(a)). The proposed amendment would clarify that the member's total outstanding loan balance may not exceed 50 percent of the accumulated deductions posted to the member's account.

The Board proposes to amend N.J.A.C. 17:5-3.8 by replacing the gender specific pronouns with "the member" or deleting them altogether and by capitalizing the "S" in System.

Subchapter 4. Purchases and Eligible Service

N.J.A.C. 17:5-4.1, 4.2 and 4.3 remain unchanged.

Subchapter 5. Retirement

The Board proposes to amend N.J.A.C. 17:5-5.1 by changing the wording to match that in the PERS rule found at N.J.A.C. 17:2-6.1 and the PFRS rule found at N.J.A.C. 17:4-6.1. 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 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 subsection (c) to add the requirements that a member submit proof of age before retirement. The Board proposes to add a new subsection (d) to include the requirement that a disability retirement application must be supported by two medical reports, the first by the member's personal physician and the other by either a doctor or hospital.

The Board proposes to recodify N.J.A.C. 17:5-5.2 as 5.3 to match the PERS and PFRS Code, 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. 17:5-5.2 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 at subsection (d) to add that a member may retire on the first of a month that the member turns 55 if the member's birthday is the first of the month. The Board proposes to delete subsection (e) because any amendments other than dates which are covered in subsection (b) may now be made in writing without submitting a new application. Existing ubsection (f) would be recodified as (e).

The Board proposes to recodify N.J.A.C. 17:5-5.3 as 5.2 as stated above. The Board also proposes to amend the rule to state "one month" instead of "30 days" and to capitalize the "B" in Board. The Board proposes to amend N.J.A.C. 17:5-5.5 by deleting paragraph (a)2 PL 1999, c.132, the law that permitted loans to be carried into retirement, did not make provision for the withholding of the member's entire retirement benefit until the loan was satisfied, therefore, the Board proposes to delete it from this rule. Paragraph (a)3 will then be recodified as (a)2. Proposed amendments at N.J.A.C. 17:5-5.6 will eliminate the gender specific pronouns and capitalize the "S" in System.

Proposed amendments at N.J.A.C. 17:5-5.7 will eliminate the gender specific pronouns and delete paragraph (a)1 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. The Board proposes to amend N.J.A.C. 17:5-5.9 to clarify that retroactive salary adjustments must be attributable to the last 26 pay periods of compensation to be includable in final compensation. The Board also proposes to delete references to 10-month employees because there are no 10-month employees in the SPRS, to replace "be counted as zero" with "shall not be used in the calculation" to clarify what is used for final compensation and to add this last section to the first paragraph thereby eliminating the need for the (a) and (b) subsection codifications.

Proposed amendments to N.J.A.C. 17:5-5.10 will amend the language to better match the PERS Code at N.J.A.C. 17:2-6.10 and PFRS at N.J.A.C. 17:4-6.10. The proposed amendments include adding the words "initiated disability" in the section heading to better reflect the subject matter of the rule. The proposed amendment will make this rule gender neutral, change employer to "the Division of State Police" and remove the requirement that the employer make a medical opinion as to the totality and permanency of an employee's disability.

N.J.A.C. 17:5-5.11 will remain unchanged.

The Board proposes to repeal N.J.A.C. 17:5-5.12, Disability retirant; annual report. This earnings test for the SPRS was repealed in 1984. It was formerly found at N.J.S.A. 53:5A-11(b).

The proposed repeal and new rule at N.J.A.C. 17:5-5.13 will better clarify that all members of the SPRS must retire at age 55. In 1985, the option of a member to work past age 55 was deleted from N.J.S.A. 53:5A-8; therefore, the Board proposes to delete it from this rule as well. Proposed amendments at N.J.A.C. 17:5-5.14 will change any gender specific pronouns, capitalize the "B" in Board and change "system" to "Division." Proposed amendments will also delete the last sentence, stating that information on file will be considered in future claims, to conform to Division practice. Any medical information must be updated in order to file again.

Proposed amendments to N.J.A.C. 17:5-5.15, Medical examination; physicians, will repeal the existing language and replace it with that developed for the PERS at N.J.A.C. 17:2-6.26. Proposed amendments will 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.

The Board proposes to add a new rule at N.J.A.C. 17:5-5.16 which will correspond to the rules found in PERS at N.J.A.C. 17:2-6.27 and PFRS at N.J.A.C. 17:4-6.17 detailing when travel would be considered work related in determining accidental disability and death benefits. Proposed new rule at N.J.A.C. 17:5-5.17 will mirror 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 will include a new subsection (a), stating: "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 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. Subsection (a) will be recodified as (b) and will be broken down to better illustrate what type of service is not eligible for transfer. Subsections (b) and (c) will become (c) and (d), respectively. Subsection (d) will be amended to clarify that service credits and contributions transfer, and that the form names have been changed. The Division now does wire transfers and not checks. Back deductions are scheduled in the new account. Subparagraph (d)5 will be replaced because a check is no longer issued in transfers; the new paragraph relates that a data sheet will be created reflecting an interfund transfer. Former subsection (e) will be recodified as (f). Former subsection (f) will be deleted regarding the mention of the same rate of contribution because we now have standardized and not age based rates. Proposed subsection (g) would clarify that someone who transfers into the SPRS is subject to the age and physical requirements of enrollment.

Full text of the proposed readoption may be found in the New Jersey Administrative Code at N.J.A.C. 17:5.

Full text of the proposed repeals may be found in the New Jersey Administrative Code at N.J.A.C. 17:5-2.3, 3.2, 3.6, 5.12 and 5.15.

Full text of the proposed amendments follows:

SUBCHAPTER 1. ADMINISTRATION

17:5-1.1 Board meetings
The Board of Trustees shall meet at the call of the chairperson and secretary [, subject to the prescribed requirements and procedures of c.231, PL 1975] at such time as may be deemed necessary by the Board.

17:5-1.3 Officers and committees

(a) The chairperson and vice chairperson of the [board] 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 three members to be present at such a meeting. The chairperson of the [board] Board shall preside at all meetings [he attends and] or in the absence of the 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.

(b) [The secretary of the board will be the Chief of the Bureau of Police and Fire Funds, Division of Pensions. 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.] The Director of the Division of Pensions and Benefits shall appoint a qualified employee of the Division to be Secretary of the Board.

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

17:5-1.5 Records

(a) The minutes of the [board] Board are a matter of public record and may be inspected during regular business hours in the office of the [board] Board secretary.

(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.

17:5-1.6 Appeal from board decisions

The following statement shall be incorporated in every written notice setting forth the [board's] Board's determination in a matter where such determination is contrary to the claim made by the claimant or [ his] 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 disagreement and all of the reasons therefor. 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 in 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."

17:5-1.7 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] shall continue during the period [of] in default:

[1. If a disability retirant fails to timely file a report with the system of his annual earned income pursuant to the provisions of N.J.S.A. 53:5A-1 et seq.;]

[2.] 1. 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.]2. 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.

17:5-1.8 State 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.

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

17:5-1.9 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) No further proof of age will be required by the Division of Pensions if proof of age of a State Policeman is fully documented in the personnel records of the Division of State Police.]

[(c)](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.

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

SUBCHAPTER 2. INSURANCE AND DEATH BENEFITS

17:5-2.1 Computation of insurance benefits

(a) Full salary credit will be given for the biweekly pay period in which a member dies, if [he] the member was paid salary to the date of death and the salary paid was sufficient to permit a full normal [month's] 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 26 biweekly pay periods immediately preceding the member's death, plus maintenance received by the member concurrent with such salary. [The salary, in the biweekly] Biweekly pay [period] 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 [average compensation],member's base salary on which [he] the member contributed or would have contributed immediately prior to [his] death, plus the maintenance received by the member concurrent with such salary.

(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 the 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.

(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].

[(f) Members who prove their insurability for the group life insurance benefits shall have their insurance benefit calculated on the basis of the salary upon which pension contributions were based or received during their last 26 biweekly pay periods of service prior to death, regardless of their effective date of insurance coverage.]

[(g)] (f) In computing the salary upon which pension contributions were based during the member's last year of service, a total of 26 biweekly pays will be used including any retroactive salary payments made [within the prescribed period] which are attributable to those 26 pay periods. The total salary will be adjusted by multiplying the total by the factors supplied by the actuary; such adjustment will compensate for State biweekly payroll schedules.

[(h) 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.]

17:5-2.2 Survivor benefits

[(a) Payment of pension 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 survivors of members who die in service, 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.]

17:5 [2.5] 2.3 (No change in text.)

17:5-2.4 (No change.)

(Agency Note: N.J.A.C. 17:5-2.5 is proposed for recodification as N.J.A.C. 17:5-2.3.)

SUBCHAPTER 3. MEMBERSHIP

17:5-3.1 Creditable salary

(a) "[Earnable] Creditable compensation" or the phrase "compensation upon which contributions by the member to the Annuity Savings Fund were based" shall not include retroactive salary adjustments if the increases are not of a normal, overall, published program of increases.

(b)-(c) (No change.)

(d) [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 suspected shall be referred to the board.] 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.

17:5-3.2 (Reserved)

17:5-3.3 Deductions

(a) [A member shall receive credit toward retirement] A full deduction shall be taken for the State Police Retirement System for any payroll period in which the member is paid a sufficient amount to make a full normal pension deduction. [has been received by the retirement system] If wages are sufficient, deductions shall also be made for any arrears or loan deductions then in effect.

(b) [A full deduction is required in all instances where the salary exceeds the amount of normal deduction.] No deductions shall be taken in any pay period in which the employee's salary is not sufficient to cover the required deductions for the State Police Retirement system.

(c) Credit, as established in the retirement system, will be reduced by breaks in service, and leaves or absences without pay, the total of such credit adjusted to the nearest [month] pay period.

17:5-3.4 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.

17:5-3.5 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.

17:5-3.6 (Reserved)

17:5-3.7 Eligibility for loan

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

17:5-3.8 Termination; withdrawal

(a) Under the terms of the statutes, a member may withdraw from the [system] System only if [he] the member terminates all employment. No application shall be approved if:

1. (No change.)

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. (No change.)

SUBCHAPTER 5. RETIREMENT

17:5-5.1 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) before the requested date of retirement.

(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 will] the member 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] a completed Certification of Service and Final Salary form from the Division of State Police setting forth the employment termination date and the salaries reported for contributions in the member's final year of employment.

(d) In addition to the requirements in (a) through (c) above an application for disability retirement must be supported by at least two medical reports, one by the member's personal or attending physician and the other may be either hospital records supporting the disability or a report from a second physician.

17:5-[5.3]5.2 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) (No change.)

17:5-[5.2] 5.3 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] Board.

(b) Except in the event of deferred retirement, if a member requests a change [in his] of retirement [application] date before [his] the retirement allowance becomes due and payable, said change will require approval of the [board] 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] 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] 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) 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. 53:5A-28 and requests that retirement date.

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

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

(Agency Note: N.J.A.C. 17:5-5.3 is proposed for recodification with amendments as N.J.A.C. 17:5-5.2.)

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. (No change.)

[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 retirement benefits]or

[3.]2. (No change in text.)

(b) (No change.)

17:5-5.6 Retirement credit

(a) A member shall receive credit toward retirement for any biweekly payroll 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.)

17:5-5.7 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; and

2. The member is physically or mentally incapacitated for the performance of duty and such incapacity is likely to be permanent; [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 regular or assigned duties]; and

4. (No change.)

17:5-5.9 Determination of final compensation

[(a)] In computing the salary upon which pension contributions were based during the member's last year of service, a total of 26 biweekly pays will be used including any retroactive salary payments [made within the prescribed period] which are attributable to those 26 biweekly pay periods. The total salary will be adjusted by factors supplied by the actuary to compensate for State biweekly payroll schedules.

[(b) 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]not be used in the calculation.

17:5-5.10 Employer [initiated disability] application; employee notice

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

1. [His employer] The Division of State Police has properly initiated a disability application[,] on the member's behalf;

2. [His employer] The Division of State Police has [certified that the member is permanently and totally disabled for the continued performance of duty and, if appropriate] 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;

3. [His employer]If appropriate, the Division of State Police 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;

6. In the event the [board] Board finds that [he] the member is totally and permanently incapacitated for the performance of duty, [and] the member shall be granted the [disability] retirement allowance approved [prescribed by the statute]; and

7. In the event the [board] Board finds that [he] the member is not totally and permanently disabled for the performance of duty, the [employer] Division of State Police shall be so advised that the application has been rejected and that the member should be returned to duty.

17:5-5.11 (No change.)

17:5-5.12 (Reserved.)

17:5-5.13 Compulsory retirement

[Compulsory retirements will be effective on the first day of the month following the month in which the member attains the condition of compulsory retirement. The mandatory retirement age of 55 years can, at the option of the member, be extended to the date he accumulates 25 years of creditable service from all sources. In such an instance, the compulsory retirement date will be the first day of the month following the completion of such service.]

(a) Compulsory retirement at age 55 is applicable to all members.

(b) Compulsory retirement will be effective on the first day of the month following the member's 55th birth date

17:5-5.14 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].

17:5-5.15 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. 53:5A-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.

17:5-5.16 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 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) If a member's duties require or authorize the member to travel between a regularly assigned office or workplace and other locations, or among other locations, the member is in performance of duty during travel between a regularly assigned office or workplace and other locations, or among other locations.

(c) If a member's duties require or authorize the member to travel between 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 the member completely leaves the property of the member's residence and begins to travel to the other location, or until 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 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. The member's regular or assigned duties are usually performed at an office or workplace of the employer to which the member is regularly assigned but occasionally require or authorize travel to other locations.

3. The member is authorized or required by 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. The member is attending a meeting, seminar, convention or a similar type of work-related activity as authorized or required by the employer at a location other than a regularly assigned office or workplace, regardless of whether the expenses of the travel are paid for by the employer or the member. Where there are social or recreational activities associated with the work- related activity or attendance requires living accommodations, only travel to and from the general activity and participation in and travel to and from the work-related functions of the activity are considered part of the duties of the member. Activities related to social or recreational functions or living accommodations are not considered part of the duties of the member.

i. In all cases, a certification from the employer is required and must include a copy of the member's job description, a statement of the member's work schedule on the day of the travel in question, and proof of or a statement by the employer that the travel was authorized or required by the employer and indicating who paid the travel expense.

17:5-5.17 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) Such 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 6. TRANSFERS

17:5-6.1 Interfund transfers; other State systems

(a) The receipt of a public pension or retirement benefit is expressly condition upon the rendering of honorable service by a public official 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) Interfund transfers between State-administered pension funds are permitted by reciprocal transfer arrangements. Such transfers would not apply where the member has credit in the present system for service after the date of enrollment in the new system or where a person has ceased to be a member of the present system before establishing sufficient service credit to be eligible for deferred retirement.]

(b) The member is not eligible to transfer service credit if any of the following conditions apply:

1. The member has withdrawn the previous membership;

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

3. The account has expired; that is, it has been more than two years from the date of the last contribution and there was not sufficient service credit to be eligible for deferred retirement.

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

[(c)](d) The system will transfer membership to any State- administered system as follows:

1. A member, desiring to transfer [his or her] 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 [shall commence] 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] member's service credits established in the present system[, subject to the provisions of] shall be transferred to the new system, subject to the provisions of the SPRS.

[5. 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.

[(d)](e)[The present system will cause to be valued the reserves accrued to such employee as compared to the reserves required in the new 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.)

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

[(f) 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.]

(g) A member shall meet all age and physical requirements for enrollment into the State Police Retirement System before an interfund transfer into the SPRS shall take effect.


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

N.J.A.C. 17:9-3.1 Adopted Amendment and Adopted New Rule: N.J.A.C. 17:9-3.8

Cite as 33 NJ Reg. 291(b)

Read adopted amendment and new rule


 
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