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Pensions and Benefits
RULE CHANGES
2004
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 Cite as 36 N.J. Reg. 1245(a) PROPOSAL TO INCLUDE THE NON-CIVIL SERVICE POSITION OF DETECTIVE, WATERFRONT COMMISSION OF NEW YORK HARBOR IN THE POLICE AND FIREMEN'S RETIREMENT SYSTEM. Treausry-General-Division of Pensions and Benefits


Proposed Rules

There are no Proposed Rules for 2004.


Adoptions

Adopted Amendments: N.J.A.C. 17:9-9.1, 9.6 and 9.7

Adopted New Rules: N.J.A.C. 17:9-9.6 and 12

Adopted Repeals: N.J.A.C. 17:9-9.4 and 9.5 EMPLOYEE DENTAL PLANS; RETIREE DENTAL EXPENSE PLAN Cite as 37 NJR 628(a) (SHBP) - January 13, 2005

Adopted Amendment: N.J.A.C. 17:9-6.10 RETIREE PRESCRIPTION DRUG CARD PLAN Cite as 37 NJR 627(a) (SHBP) -January 12, 2005

Adopted Amendment: N.J.A.C. 17:2-2.9 ELIGIBILITY AND ENROLLMENT OF EMPLOYEES OF BI-STATE AND MULTI-STATE AGENCIES PURSUANT TO P.L. 2003, C.263 (N.J.S.A. 43:15A-73) Cite as 37 NJR 619(a) (PERS)- January 20, 2005

Adopted Readoption with Amendments: N.J.A.C. 17:2 and Proposed New Rules: N.J.A.C. 17:2-2.10 and 3.15 PUBLIC EMPLOYEES RETIREMENT SYSTEM Cite as 37 NJR 619(b)- January 20, 2005

Adopted New Rule: N.J.A.C. 17:2-6.14 DISABILITY RETIRANT; ANNUAL REPORT (EMPLOYMENT, EARNINGS, TEST AND ADJUSTMENT) Cite as 36 N.J.R. 4023(a) (PERS)

Adopted New Rule: N.J.A.C. 17:3-6.14 DISABILITY RETIRANT; ANNUAL REPORT (EMPLOYMENT, EARNINGS, TEST AND ADJUSTMENT) Cite as 36 N.J.R. 4220(a) (TPAF) - December 2, 2004

Adopted New Rule: N.J.A.C. 17:1-5.5 DOMESTIC PARTNERS Cite as 36 N.J.R. 3472(a) (General Administration) - November 1, 2004

Adopted Recodification with Amendment: N.J.A.C. 17:4-6.6 as 17:4-4.8 SERVICE AND SALARY CREDIT: AWARDS OF BACK PAY Cite as 36 N.J. Reg. 622(a) (PFRS) - November 1, 2004

Adopted Recodification with Amendment: N.J.A.C. 17:5-5.6 as 17:5-3.6 SERVICE AND SALARY CREDIT: AWARDS OF BACK PAY Cite as 36 N.J.R. 4835(b) (SPRS) - October 18, 2004

Adopted New Rules: N.J.A.C. 17:1-14 NEW JERSEY STATE EMPLOYEES COMMUTER TAX SAVINGS PROGRAM (COMMUTER TAX$AVE PROGRAM) Cite as 36 N.J.R. 1735(a) (General Administration) - July 19, 2004

Adopted New Rule: N.J.A.C. 17:1-12.5 CENTRAL PENSION FUND LAST CHECK BENEFIT Cite as 36 N.J.R. 1734(a) (General Administration) - July 19, 2004

Adopted New Rule: N.J.A.C. 17:1-5.4 PAYMENT OF PENSION CONTRIBUTIONS; DEATH OF MEMBER Cite as 36 N.J.R. 1733(a) (General Administration) - July 19, 2004

Adopted New Rules: N.J.A.C. 17:9-11 PART-TIME EMPLOYEES GROUP Cite as 36 N.J.R. 2423(a) (SHBP) - May 17, 2004

Adopted Recodification with Amendment: N.J.A.C. 17:3-6.6 as 17:3-4.7 SERVICE AND SALARY CREDIT: AWARDS OF BACK PAY Cite as 36 N.J.R. 3267(c) (TPAF) - July 6, 2004

Adopted New Rules: N.J.A.C. 17:2-8 Prosecutors Part Cite as 36 N.J.R.3068(a) (PERS)- May 19, 2004

Adopted Amendment: N.J.A.C. 17:2-2.3 INELIGIBLE PERSONS Cite as 36 N.J.R. 3066(a) (PERS) - May 19, 2004

Adopted Recodification with Amendment: N.J.A.C. 17:2-6.6 as 17:2-4.5 SERVICE AND SALARY CREDIT: AWARDS OF BACK PAY Cite as 36 N.J.R. 3066(b) (PERS) - May 19, 2004

Adopted Amendment N.J.A.C. 17:1-4.2 PURCHASE TERMS; GRACE PERIOD Cite as 36 N.J. Reg. 661(a) GENERAL ADMINISTRATION - February 2, 2004

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DIVISION OF PENSIONS AND BENEFITS
PUBLIC EMPLOYEES' RETIREMENT SYSTEM
ELIGIBILITY AND ENROLLMENT OF EMPLOYEES OF BI-STATE AND
MULTI-STATE AGENCIES PURSUANT TO P.L. 2003, C.263 (N.J.S.A. 43:15A-73)

Adopted New Rule: N.J.A.C. 17:2-2.9

Cite as 37 NJR 619(a)

Adopted January 20, 2005

The agency proposal follows:

Summary

P.L. 2003, c.263 (N.J.S.A. 43:15A-73) provides for enrollment in the Public Employees' Retirement System of New Jersey (PERS) of eligible employees of any bi-state or multi-state agency in which New Jersey is a participant.

The PERS statutes currently provide for enrollment in the system of employees of various specified independent agencies and instrumentalities, including several interstate agencies (for example, the Palisades Interstate Park and Delaware River Basin Commissions). This law establishes an enrollment provision covering employees of all interstate agencies and prescribes the terms and conditions applicable to coverage of new enrollees under that provision. Under this law, the PERS is directed to enroll an eligible officer or employee (other than a police officer or firefighter) of a bi-state or multi-state agency established by an interstate compact to which New Jersey is a party if:

a. The person is a New Jersey resident at the time of appointment with the agency, and

b. The governing body of the agency has certified to the retirement system its approval for enrollment in the system of its employees.

The certification must be in the manner of a resolution filed with the PERS Board of Trustees in a form prescribed by the Division of Pensions and Benefits and could apply retroactively to individuals commencing service with the agency on or after January 1, 2002. Any individual eligible for membership under such a certification would have the option whether or not to be enrolled. They would have 90 days to enroll after either the effective date of the modification of the State of New Jersey's agreement with the Social Security Administration or date of appointment or hire, whichever is later.

Once enrolled, the employee would receive credit for service with the agency rendered prior to enrollment if either the agency or the employee pays the full purchase cost to the retirement system at the time of enrollment and the employee is not eligible for a retirement benefit based on that service in a different retirement system. In no case would the employee receive credit for service with the agency prior to January 1, 2002 as stated in the new law.

The interstate agency would, for purposes of the PERS, be deemed an employer, and its eligible employees would be subject to the same membership, contribution and benefit provisions of the retirement system, and to certain general provisions of law covering members of all State-established pension funds, as are applicable to State employees.

A 60-day comment period is provided and, therefore, pursuant to N.J.A.C.

1:30-3.3(a)5, this proposal is not subject to the provisions of N.J.A.C.

1:30-3.1 and 3.2 governing rulemaking calendars.

17:2-2.9 Eligibility and enrollment of employees of bi-state and multi-state agencies pursuant to P.L. 2003, c.263
(N.J.S.A. 43:15A-73)

(a) For the purposes of the resolution to adopt the provisions of the PERS for a bi-state or multi-state agency, the "category of officers or employees who may enroll in the retirement system" shall be defined as those employees:

  1. Initially appointed or employed by the bi-state or multi-state agency on or after January 1, 2002;

  2. Who are residents of the State of New Jersey at the time of appointment or employment with the agency; and

  3. Who meet the PERS eligibility requirements found at N.J.S.A. 43:15A-6 et seq.

(b) Enrollment in the PERS is at the option of the employee. The employee must elect within 90 days of either the date of the modification of the State of New Jersey's agreement with the Social Security Administration, or the date of appointment for hire, whichever is later, to enroll in the PERS. If the PERS does not receive an enrollment form for the employee within that 90-day period, the employee shall be ineligible for enrollment in the PERS during their continued employment with the agency.

(c) The enrollment date of the employee shall be the first of the month after a completed enrollment application is submitted to the PERS.

(d) The employee may then purchase, at full cost as defined by N.J.A.C. 17:2-5.5(b), any service with the agency between the date that the employer designates as the effective date of the resolution and the employee's enrollment date, as long as the employee is not eligible for a present or future pension benefit with another retirement system for that same service. In no case would the employee receive credit for service with the agency prior to January 1, 2002. The agency may elect to pay for any portion of this purchase of service for the member, but any such employer payments shall be deposited in the PERS general fund and not the employee's account.

(e) Once an employee is enrolled in the PERS, that employee must remain a member of the retirement system during the entire period of continuous service with the agency. The employee cannot be enrolled or receive credit in the employer's retirement plan or the Pennsylvania, New York, Connecticut, Delaware or any other state or local retirement system during the same period of time as the PERS service with the agency. Should the employee terminate employment with the agency and then be reemployed by that agency or any other bi-state or multi-state agency that has adopted the provisions of PERS, that employee shall be required to continue enrollment in the PERS from that new position, as long as the employee is a New Jersey resident on the date of appointment or employment and has an active PERS account.

(f) An employee who opts not to enroll in the PERS when eligible at a bi-state or multi-state agency and then leaves the agency, has the option of enrolling in the PERS within 90 days of reemployment with a bi-state or multi-state agency if the employee meets the enrollment requirements found at (a) above.

(g) If an employee opts not to enroll in the PERS when eligible at a bi-state or multi-state agency and that employee becomes a PERS member in the future by virtue of employment with another public employer, or with the same agency after a break in service, the cost of the purchase of service credit for the earlier employment with the bi-state or multi-state agency which occurred between January 1, 2002 or the effective date established by the employer, whichever is later, and the employee's latest possible enrollment date from the previous employment, shall be calculated as a full cost purchase.


STATE HEALTH BENEFITS PROGRAM
RETIREE PRESCRIPTION DRUG CARD PLAN

Adopted Amendment: N.J.A.C. 17:9-6.10

Cite as 37 NJR 627(a)

Adopted January 12, 2005

The agency proposal follows:

Summary

In January 2000, the State Health Benefits Commission (Commission) initiated a five-year pilot program establishing a retiree prescription drug card plan for Traditional Plan and NJ PLUS retirees. The pilot program was codified through the adoption of N.J.A.C. 17:9-6.10 effective March 20, 2000. The pilot program is scheduled to expire on March 20, 2005.

The Commission proposes to extend the pilot program for an additional year. This extension would enable the Commission the time necessary to review what effect the proposed prescription coverage under the Federal Medicare program, which takes effect in two years, may have on prescription drug benefits under the State Health Benefits Program.

A 60-day comment period is provided for this notice of proposal; therefore, pursuant to N.J.A.C. 1:30-3.3(a)5, this notice of proposal is not subject to the provisions of N.J.A.C. 1:30-3.1 and 3.2 governing rulemaking calendars.

Full text of the proposal follows:

17:9-6.10 Retiree prescription drug card plan

(a) (No change.)

(b) As a pilot program for [five] six years (from March 20, 2000 to March 20, [2005] 2006), payment for eligible prescription drug expenses of retired members of the State Health Benefits Program and their eligible dependents who participate in the Traditional Plan or NJ PLUS shall be provided under the prescription drug card plan. Payment for prescription drug expenses or the co-payments required under the card plan shall not be made under the major medical portion of the Traditional Plan or NJ PLUS. There shall be no annual deductible amount that retired members or their eligible dependents shall satisfy before eligibility for payment of prescription drug expenses under the card plan.

(c)-(k) (No change.)


STATE HEALTH BENEFITS PROGRAM
EMPLOYEE DENTAL PLANS
RETIREE DENTAL EXPENSE PLAN

Adopted Amendments: N.J.A.C. 17:9-9.1, 9.6 and 9.7
Adopted New Rules: N.J.A.C. 17:9-9.6 and 12
Adopted Repeals: N.J.A.C. 17:9-9.4 and 9.5

Cite as 37 NJR 628(a)

Adopted January 13, 2005

The agency proposal follows:

Summary

The State Employee Group Dental Program was established for State employees on February 1, 1978 by the State Health Benefits Commission under the provisions of N.J.S.A. 52:14-17.29(F) and was extended to active local participating employers as of January 1, 2005, under the new name, The Employee Dental Plans (Employee Plans). The Employee Plans are available to full-time employees and their eligible dependents. Newly eligible employees may enroll by completing an application during the first 60 days of employment or within 60 days of becoming eligible. The Employee Plans offer a choice between two types of dental plans: a Dental Expense Plan and a Dental Plan Organization (DPO). The Dental Expense Plan is a traditional indemnity-type plan which allows the employee to select any licensed dentist for dental care. The Dental Plan Organizations (DPOs) are companies that contract with a network of providers for dental services. The employee must use providers participating with the DPO selected.

The Commission also established for the first time, a retiree dental plan which becomes effective as of January 1, 2005 for retired members who participate in the State Health Benefits Program (SHBP). The Retiree Dental Expense Plan is primarily available on a retiree pay-all basis, although local public employers that participate in the State Health Benefits Program may contribute to the cost of retiree coverage as permitted by P.L. 1999, c.48.

The State does not pay any part of the coverage costs of the Retiree Dental Expense Plan. The Retiree Dental Expense Plan is a self-insured traditional indemnity plan and at this time is administered for the SHBP by Aetna Dental. It is available to retirees who are eligible for medical coverage in the retired group of the State Health Benefits Program (SHBP) regardless of whether or not the employer participates in the Employee Dental Plans. Generally, retirees would be offered a one-time only opportunity to enroll. The Retiree Dental Expense Plan differs from the active plans because it consists of a single traditional indemnity plan and does not offer any DPOs. The Retiree Dental Expense Plan is separate from the dental plans offered to active employees and the benefits do not mirror the active group. The Retiree Dental Expense Plan has a $50.00 per person deductible, maximum of $150.00 per family, which must be met before reimbursements are made. The deductible is waived for preventive services. The maximum possible benefit in any calendar year is $1,500 per person. The Retiree Dental Expense Plan has a passive network of dentists who have agreed to accept a discounted fee for services.

The Retiree Dental Expense Plan reimburses covered services provided by any licensed dental provider at a percentage of reasonable and customary fees at three differing levels of reimbursement, depending on the length of time the retiree has had dental coverage. If the retiree was covered by a group dental plan for a minimum of 12 months within 60 days of his or her enrollment in the Retiree Dental Expense Plan, the retiree is enrolled in Tier 3, the highest paying benefit tier. If the retiree was not covered by a group dental plan or was covered by a group dental plan for less than 12 months within 60 days of joining the Retiree Dental Expense Plan, he or she would be placed in Tier 1, the lowest paying level. After a year in the Plan, the participant is moved to a Tier 2 reimbursement schedule, and after another year, to Tier 3. To keep costs low, orthodontics are not part of the Plan. The Commission proposes a new subchapter, Subchapter 12, to establish rules of the new Retiree Dental Expense Plan.

The extension of dental benefits to employees other than the State as well as to retired members necessitates a number of changes and additions to N.J.A.C. 17:9-9. Because the active plans are being extended to local employers for the first time, the Commission proposes to remove references to the State and to State employees from the existing rules regarding the active plans in Subchapter 9 to make them applicable to all covered employees. The Commission also proposes to remove the word "Group" and change "Program" to "Plans" in the title of the active plans.

The Commission also proposes to amend N.J.A.C. 17:9-9.1 to better define the Employee Plans. A definition of two types of plans under the Employee Plans, the Dental Plan Organizations and the Dental Expense Plan, would be added. The rules of the Employee Plans follow all the rules of the SHBP unless the exception is stated. This includes the rules for eligibility and effective dates, but also includes many more aspects of the Employee Plans; therefore, the Commission proposes to eliminate this restriction at N.J.A.C. 17:9- 9.1(c). The proposed amendment to N.J.A.C. 17:9-9.1(c)3 (recodified as (c)2) would clarify that children may only be covered once and would also add that someone cannot be covered as an employee and retiree. The proposed amendment to N.J.A.C. 17:9-9.1(c)4 would capitalize the "p" in "plan" to indicate that enrollment must be with one plan for a year as opposed to one year in the Employee Plans. Because existing N.J.A.C. 17:9-9.1(c)1, 6 and 7, and (d) and (e) do not provide exceptions to the SHBP but merely refer to the existing rules, the Commission proposes to delete these paragraphs and subsections because they are redundant. The Commission proposes to add new N.J.A.C. 17:9-9.1(c)5, 6, 7 and 8 which deal with the new requirements necessitated by the addition of local employers to the Employee Plans. The proposed amendments add the requirements that a local employer cannot request a premium delay for dental premiums, must pay at least 50 percent of the rates charged for active employees and their enrolled dependents, must participate in the SHBP in order to participate in dental and must remain enrolled for a minimum of 12 months. Because the Employee Plans as extended to local employers are very new, there are no existing reserves to allow for employer delay of premium payments at this time. The State pays for 50 percent of dental coverage for active State employees. The requirement that the employer pay for a minimum of 50 percent of the cost of dental coverage is intended to minimize the level of anti-selection that would typically occur if employees were responsible for all or most of the cost of the Employee Plans. The rates approved for local employer participation are identical to the State employer rates and are based upon the State's claims experience. The State pays for 50 percent of the cost of active employee coverage. If local employers were permitted to contribute at a lower percentage of the total cost of the Employee Plans for their employees, fewer employees would be expected to elect enrollment in the Employee Plans and the rates collected could be insufficient to pay the claims of the smaller number of enrolled employees. If employees perceive the cost of enrollment in the Employee Plans to be high, only those who expect to have significant dental costs would be likely to elect to enroll. The Employee Plans supplement SHBP coverage and, like prescription drugs, cannot be adopted without participation in the SHBP. Enrolling and terminating employers and employees is a labor intensive process. Also the Employee Plans rely on the extended participation of an employer when it enrolls, and could face problems if employers could come in and out of coverage for periods of less than a year. Unless participation is guaranteed for at least one year, the costs of enrollment would be inflated.

N.J.A.C. 17:9-9.2 and 9.3 remain unchanged.

N.J.A.C. 17:9-9.4 and 9.5 would be repealed. Only procedures that are different from the State Health Benefits Program are included in this subchapter. The enrollment process and annual enrollment period is the same regarding dental, as well as core health benefits.

The proposed amendment to N.J.A.C. 17:9-9.6 (recodified as 9.4) would clarify that the orthodontics waiting period applies only to the Dental Expense Plan and not to the DPOs. Because employment is no longer exclusively with the State, the clarification that employment must be with the same employer would also be added.

The proposed new rule, N.J.A.C. 17:9-9.8, Deductible, would allow eligible charges under a local employer's group dental coverage to apply toward satisfying the annual Employee Dental Plans deductible instead of requiring the employee to satisfy the deductible in each plan.

The Commission proposes to change "plan" to "Plans" throughout the subchapter to indicate that the entire Employee Plans Handbook supplements the master contracts.

Proposed new Subchapter 12 establishes the Retiree Dental Expense Plan. Proposed N.J.A.C. 17:9-12.1, the Retiree Dental Expense Plan, would establish and describe the Retiree Dental Expense Plan and provide that the rules are the same as those for SHBP unless stated otherwise. Proposed N.J.A.C. 17:9-12.1(a) establishes the authority for the Plan, what type of a plan it is (traditional indemnity) and who is eligible for the Plan. N.J.A.C. 17:9-12.1(b) establishes that the Plan is voluntary while N.J.A.C. 17:9-12.1(c) provides that the rules are the same as those for the State Health Benefits Program except as follows. The offering of COBRA coverage is not required for retirees and the Commission has decided not to offer COBRA for the Retiree Dental Expense Plan at this time. There has never been a right to convert dental to non-group coverage for active employees and this restriction would be applied to retirees as well. Duplicate coverage is not permitted for active dental coverage, and this restriction would be restated in the retiree plan. Retirees have the ability to enroll when they retire or when first eligible for retiree group enrollment. The few exceptions to this one-time opportunity for enrollment would be the same as for enrollment for SHBP medical plan coverage. All of these proposed new rules and amendments are aimed at keeping the costs of the retiree plan to a minimum in order to make the premium rates affordable.

Proposed N.J.A.C. 17:9-12.2 would establish that the State is not contributing for the cost of the coverage, but that local employers may negotiate the payment of premium costs for their retirees under the provisions of P.L. 1999, c.48.

Proposed N.J.A.C. 17:9-12.3 describes the three tiers of coinsurance coverage, who is eligible for each tier, when movement between tiers occurs and establishes the maximum annual benefit amount of the Retiree Dental Expense Plan.

Proposed N.J.A.C. 17:9-12.4 would establish that the handbook and master contracts contain the specific provisions of services to be covered and excluded. Orthodontics are specifically excluded to help keep the costs of the plan low.

Because the Retiree Dental Expense Plan is an independent plan, proposed N.J.A.C. 17:9-12.5 would be added to indicate that any charges incurred prior to enrollment would not be considered toward satisfying the plan deductible. The deductible is only $50.00 at this time.

Finally, proposed N.J.A.C. 17:9-12.6 would provide for a special open enrollment period if a group dental plan for which the Division of Pensions and Benefits deducts premiums from retirement allowances pursuant to N.J.S.A.43:15A-72 drops below 1,000 retirees, or the plan is terminated.

A 60-day comment period is provided for this notice of proposal; therefore, pursuant to N.J.A.C. 1:30-3.3(a)5, this notice of proposal is not subject to the provisions of N.J.A.C. 1:30-3.1 and 3.2 governing rulemaking calendars.

Full text of the proposal follows :

SUBCHAPTER 9. [STATE] EMPLOYEE [GROUP] DENTAL [PROGRAM] PLANS

17:9-9.1 [State] Employee [Group] Dental [Program] Plans

(a) The [State] Employee [Group] Dental [Program] Plans were established under the provisions of N.J.S.A. 52:14-17.29(F) and were extended to local participating employers as of January 1, 2005. The Employee Dental Plans are available to full-time employees and their eligible dependents. Newly eligible employees may enroll by completing an application during the first 60 days of employment. The Employee Dental Plans offer a choice between two types of dental plans; a Dental Expense Plan and a Dental Plan Organization (DPO). The Dental Expense Plan is a traditional indemnity-type plan which allows the employee to select any licensed dentist for dental care. The Dental Plan Organizations (DPOs) are companies that contract with a network of providers for dental services. The employee must use providers participating with the DPO selected.

(b) The [program is] Plans are voluntary. A separate election will be required for enrollment and for a change in, or a voluntary termination of, coverage in the [State] Employee [Group] Dental [Program] Plans.

(c) The rules [for eligibility and for determining the effective dates of coverage] are the same as those of the State Health Benefits Program as administered by the State Health Benefits Commission in accordance with the provisions of N.J.S.A. 52:14-17.25 et seq. with the following exceptions:

[1. Except under the provisions of the Federal Consolidated Omnibus Budget Reconciliation Act of 1985, 29 U.S.C. § § 1161-1168 (COBRA) law, coverage is not continued in the event of death, retirement, or other termination of the group coverage;]

[2.] 1. There is no right of conversion from a Plan participating in the [State] Employee [Group] Dental [Program] Plans to non-group coverage;

[3]2. Duplicate coverage is not permitted; an individual may be covered as an employee or as a dependent [or retiree,] but not as both an employee and a dependent [or retiree]. Dependent children may only be covered by one parent;

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

[5.]4. All employees enrolled for coverage are required to participate in the [plan] Plan for a minimum 12-month period while eligibility for coverage exists unless the minimum enrollment requirement is waived by the State Health Benefits Commission;

[6. Dependent coverage may be increased or decreased if a qualifying event occurs as defined by N.J.A.C. 17:9-2.4; and]

[7. If the member ceases to be eligible for coverage as defined in N.J.A.C. 17:9-7.2, coverage will terminate.]

5. An employer who participates in the Employee Dental Plans is not eligible to request a premium delay of 30 or 60 days for payment of the premium charges pursuant to N.J.A.C. 17:9-5.2(a);

6. If an employer elects to participate in the Employee Dental Plans, the employee's share of the cost for the Plans may be determined by a formula different from that used to determine the employee's share of the cost of health coverage, provided that the employer's portion of the total premium cost for the Plans shall not be less than 50 percent. The employee may pay a share of the cost of dental coverage for the employee and for the employee's covered dependents as required by a collective negotiations agreement. The employer may establish by ordinance or resolution, rules for the employee's share of the cost for those employees not covered under a collective negotiations agreement;

7. An employer who does not participate in the State Health Benefits Program is ineligible for participation in the Employee Dental Plans; and

8. An employer who elects to participate in the Employee Dental Plans must remain in the Plans for a minimum of 12 months before terminating coverage unless the employer terminates participation in the State Health Benefits Program.

[(d) Where the otherwise eligible employee elects a voluntary furlough, as authorized by N.J.S.A. 11A:6-1.1, coverage shall continue with the employer paying the costs as if the member were an active employee, provided that the employee remits in advance to the employer the amount required for the employee's contribution for coverage.]

[(e) Where the otherwise eligible employee elects a voluntary furlough extension, coverage may continue as if the member were an active employee provided that the employee pays the entire premium in advance (employer and employee shares for employee and dependents) unless the requirement is waived by the Merit System Board of the Department of Personnel]

[17:9-9.4 Enrollment forms]

[At the time each employee first becomes eligible for coverage, the employee may complete an enrollment form indicating the employee's election to enroll for coverage on the employee's own behalf and on behalf of the employee's qualified dependents under one of the options to be provided in the contract. When new dependents are acquired subsequent to enrollment, the employee must complete a new enrollment application within 60 days of the event to add such dependent(s) to the coverage. In the absence of any authorization for payroll deductions, coverage cannot be extended.]

[17:9-9.5 Annual initial enrollment period]

[An employee who does not select coverage for the employee, or for the employee's eligible dependents when first eligible, may complete and submit an enrollment application to start such coverage during any subsequent open enrollment period]

17:9-[9.6] 9.4 Waiting period--Orthodontics under the [dental expense plan] Dental Expense Plan

Credit for qualified [State] service with the same employer immediately preceding the employee's election to participate in the [plan] Plan or during any annual enrollment period shall count towards establishing the 10 months or more of continuous service required for orthodontics. Otherwise, all other benefits will be available and such participants will become eligible for orthodontics as soon as 10 months of continuous qualified [State] service has been accumulated.

17:9-[9.7] 9.5 Covered expenses

The [Plan] Plans handbook supplements the master contracts and contains the specific provisions for services to be covered and those which are excluded.

17:9-9.6 Deductible

Eligible charges incurred under a local employer's group dental coverage by an employee prior to the employer's enrollment in the Employee Dental Plans shall be considered toward satisfying the annual Employee Dental Plans deductible.

SUBCHAPTER 12. RETIREE DENTAL EXPENSE PLAN

17:9-12.1 The Retiree Dental Expense Plan

(a) The Retiree Dental Expense Plan (Plan) was established under the provisions of N.J.S.A. 52:14-17.29(F) and became effective as of January 1, 2005. The Plan is available to retirees eligible for participation in the State Health Benefits Program and their eligible dependents. New retirees may enroll by completing an application at the time of retirement. The Plan is a Dental Expense Plan which is a traditional indemnity-type plan which allows the employee to select any licensed dentist for dental care.

(b) Participation in the Plan is voluntary. A separate election will be required for enrollment and for a change in, or a voluntary termination of, coverage in the Plan.

(c) The rules are the same as those of the State Health Benefits Program as administered by the State Health Benefits Commission in accordance with the provisions of N.J.S.A. 52:14-17.25 et seq. with the following exceptions:

1. Coverage is not continued in the event of termination from the State Health Benefits Program. There is no eligibility to continue retired dental coverage under the Federal Consolidated Omnibus Budget Reconciliation Act of 1985, 29 U.S.C. § § 1161 through 1168 (COBRA) law;

2. There is no right of conversion from the Plan to non-group coverage;

3. Duplicate coverage is not permitted; an individual may be covered as a retiree or as an employee or dependent but not as both a retiree and a dependent or retiree or employee. Dependent children may only be covered by one parent; and

4. Retirees are offered one opportunity to elect enrollment in the Plan. If a retiree declines coverage when first eligible or elects to terminate Plan coverage, the retiree and the retiree's dependents are ineligible to enroll in the Plan at a later date except as permitted under the provisions of N.J.A.C. 17:9-6.

17:9-12.2 Plan premiums

(a) The State will not make any contributions for the cost of dental coverage.

(b) Local participating employers through collective negotiation agreements may pay nothing, all or a portion of the premium cost of the Plan for eligible retirees pursuant to the provisions of N.J.A.C. 17:9- 5.4(e).

(c) Premium payments are deducted directly from a retiree's monthly retirement allowance. If the retirement allowance is not sufficient to cover the full premium, the retiree will be billed monthly for the coverage.

17:9-12.3 Plan progressive coinsurance design

(a) The Plan has three progressive coinsurance tiers. The highest tier provides a greater percentage of reimbursement for reasonable and customary charges than the lower two tiers. Each year a retiree remains a member of the Plan, the coinsurance tier rises until the retiree reaches the highest tier.

1. A retiree who was enrolled in the group dental plan immediately proceeding eligibility for coverage in the Plan, and who was covered under that group dental plan for at least one year within 60 days of joining this Plan, is eligible for enrollment at the highest tier of reimbursement.

2. A retiree who was not enrolled in a group dental plan for at least one year immediately proceeding eligibility for coverage in the Plan shall be enrolled in the lowest tier of reimbursement.

3. A dependent is enrolled at the same tier of reimbursement as the retiree.

(b) The maximum annual benefit amount is the same for each tier.

17:9-12.4 Covered expenses

The Plan handbook supplements the master contracts and contains the specific provisions for services to be covered and those which are excluded. Orthodontic services are not covered under the Plan.

17:9-12.5 Deductible

Charges incurred by a retiree prior to enrollment in the Plan shall not be considered toward satisfying the Plan deductible.

17:9-12.6 Special open enrollment period

If the Division of Pensions and Benefits is deducting premiums for a group dental insurance plan pursuant to N.J.S.A. 43:15A-72, and the number of retirees enrolled in that plan requesting the deduction drops below 1,000, or the plan is terminated by its sponsor, the Retiree Dental Expense Plan shall offer a special open enrollment period for the eligible retirees of that plan.


DIVISION OF PENSIONS AND BENEFITS
PUBLIC EMPLOYEES' RETIREMENT SYSTEM

Adopted Readoption with Amendments: N.J.A.C. 17:2
Adopted New Rules: N.J.A.C. 17:2-2.10 and 3.15

Cite as 37 NJR 619(b)

Adopted January 20, 2005

The agency proposal follows:

Summary

The Board of Trustees of the Public Employees' Retirement System is responsible for reviewing the administrative rules within N.J.A.C. 17:2. When they become aware of a change in the laws or a court decision that couldaffect the Public Employees' 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 reflect the current procedures of the Division and are necessary and/or cost efficient.

Accordingly, the Board of Trustees of the Public Employees' Retirement System proposes to readopt the current rules within N.J.A.C. 17:2, which expire on June 15, 2005, to N.J.S.A. 52:14B-5.1c, with the following amendments 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, enrollment, insurance and death benefits, membership, purchases and eligible service, retirement, transfer and the Prosecutors Part associated with the Public Employees' Retirement System.

Subchapter 1. Administration

N.J.A.C. 17:2-1.1, Board meetings, and 1.2, Fiscal year, would remain unchanged.

The Board proposes to amend N.J.A.C. 17:2-1.3, Officers and Committees, at subsection (a) by deleting the requirement that a member be elected to the Pension System Actuary Committee each July. This committee meets only when the System is seeking bids for an actuary. The Board proposes to add that a representative to this committee would be elected whenever it is formed. N.J.A.C. 17:2-1.3(b) would be amended to add that if the chairperson and vice chairperson are not available, then another member would be elected to act as chairperson for that single meeting. N.J.A.C. 17:2-1.3(c) would remain unchanged. N.J.A.C. 17:2-1.3(d) would be amended to indicate that there is only one standing committee. The retirement committee and the executive committee were not created by statute and have not been active in many years. The Division of Pensions and Benefits staff now performs these functions. N.J.A.C. 17:2-1.3(e) would be merged with subsection (d) and N.J.A.C. 17:2-1.3(f) and (g) would be deleted because they describe the retirement and executive committee.

N.J.A.C. 17:2-1.4, Election of member trustee, would remain unchanged.

N.J.A.C. 17:2-1.5, Certifying officer (employer), would be amended to clarify that the duties of the certifying officer include providing requested documentation in a timely manner. This amendment is necessary due to recent questions regarding the responsibilities of participating employers.

Proposed amendments to N.J.A.C. 17:2-1.6, Records, include clarification that the provisions in the general administration section (N.J.A.C. 17:1-1.2) also apply. The Board also wishes to clarify that doctors' reports and the reports of the actuary cannot be released until a decision has been made by the Board. Finally, the Board wishes to clarify that original documents cannot be removed from the Division and may only be viewed by appointment. The Division scans most documents and needs time to request the originals from the warehouseif necessary.

N.J.A.C. 17:2-1.7, Appeal from Board decisions, would remain unchanged. The Board proposes to amend N.J.A.C. 17:2-1.8, Suspension of pension checks, by adding to the end of N.J.A.C. 17:2-1.8(a)2 the clarification, "if requested." The Division now matches earnings records with the Department of Labor and Workforce Development data base and in most cases does not need to request annual earnings from the member. When a retired member has deductions taken from his or her retirement check due to an overpayment or other liability to the System or when a retired member makes personal payments directly to the Division, the Board routinely requests that the retired member complete a policy assignment of group life insurance to protect the System should the retired member die before the debt is paid. New N.J.A.C. 17:2-1.8(a)5 is necessary to inform a retirant what would happen should a retirant not complete a policy assignment of group life insurance as requested by the Board of

Trustees. In the case of a retired member who does not follow this Board requirement, the retired member's check is suspended until the assignment has been completed. The insurance is reassigned to the member once the liability has been satisfied.

N.J.A.C. 17:2-1.9, Verified discrepancy in member's age, would remain unchanged. Proposed amendments to N.J.A.C. 17:2-1.11, Proof of age, at subsection (b) would remove the requirement of satisfactory birth date evidence in the case of a member's death. If there is a question, the Division may still ask for the evidence, but if all the information received and in the member's file records reflects the same birth date, evidence would not be requested.

N.J.A.C. 17:2-1.12, State employees; biweekly salaries, would remain unchanged. The Board proposes to add a new subsection capturing the history of the pension contribution rate since 1999 at N.J.A.C. 17:2-1.13, Nearest attained age; enrollment; retirement.

Subchapter 2. Enrollment

N.J.A.C. 17:2-2.1, Social Security coverage, would remain unchanged.

The Board proposes to amend N.J.A.C. 17:2-2.2, Multiple employments, by correcting a grammatical error. It should be "employee" and not "employee's" before "meets."

The proposed amendment to N.J.A.C. 17:2-2.3, Ineligible persons, at paragraph (a)7 would clarify that if a retired member accepts a regularly budgeted position for public employment that is over the reenrollment compensation limit, then the retired member must be reenrolled immediately. If the retired member is an hourly employee, they do not have to enroll until they reach the compensation limit. This question has been asked a number of times and has appeared in the Division of Pensions and Benefits publications.

The Board proposes to amend N.J.A.C. 17:2-2.4, Enrollment date, by replacing "one-year" with "12-month." There has been some confusion regarding this issue and we hope to clarify it by specifying the 12-month period prior to enrollment. A new N.J.A.C. 17:2-2.4(e) would be added to indicate that an employee cannot receive credit in the PERS for the initial pay period or month if employment commenced after the seventh day of the pay period, or 16th day of the month. This has been Division of Pensions and Benefits practice for the past 50 years, but was not set forth specifically in a rule.

N.J.A.C. 17:2-2.5, Optional enrollment, would remain unchanged.

The proposed amendment to N.J.A.C. 17:2-2.6, Enrollment eligibility of professors and instructors employed on a temporary, provisional or adjunct basis by public institutions of higher education, would eliminate the reference to salary and service credit. This rule only deals with enrollment eligibility and not salary or service credit. "And" would be changed to "or" after paragraph (b)1. An adjunct professor cannot enroll if the class the professor teaches is not for the full term or if it is not an academic course. The word "semester" would be replaced with "term" to reflect common usage. Many colleges now have trimesters or quarters and do not always use the word "semester."

N.J.A.C. 17:2-2.7, Enrollment following deferred retirement, and 2.8, Enrollment eligibility of provisional or temporary employees occupying full-time police and fire titles, would remain unchanged. N.J.A.C. 17:2-2.9 is reserved.

Proposed new rule, N.J.A.C. 17:2-2.10, Enrollment eligibility of on-call employees who have not established membership; including, but not limited to, substitute teachers, replacement teachers, and bedside or home instructors, is necessary to remove some confusion on this subject. Although there is a rule limiting eligibility of on-call employees as well as a rule requiring a minimum salary to be earned, there is no rule regarding enrollment eligibility of this small group of employees. Long standing policy that appears in the Division of Pensions and Benefits manuals and fact sheets require enrollment after one year of continuous service if the employee worked at least 10 days each month. This policy may be viewed in the Employer Pension and Benefits Administration Manual (EPBAM) which is accessed through the Division web page (www.state.nj.us/treasury/pensions). Also, recently there have been a number of questions regarding whether a bedside instructor is eligible for enrollment in PERS or TPAF. Because bedside instruction is temporary in nature, on an as needed basis and is not a regularly budgeted position, enrollment would be the same as for on-call substitutes and employees.

Subchapter 3. Insurance and Death Benefits

Proposed amendments to N.J.A.C. 17:2-3.1, Compulsory and optional enrollment, at subsections (a) and (b), would restate that the Division will determine a member's age at the time the enrollment application is filed. This clarification appears earlier in the rules. N.J.A.C. 17:2-3.1(b) would also be amended to make it gender neutral by replacing "he" with "the optional enrollee."

N.J.A.C. 17:2-3.2, Computation of insurance benefits, 3.3, Contributory insurance rates, 3.4, New enrollment and transfers; contributory insurance premiums, 3.5, Leave for illness, life insurance coverage, 3.6, Survivor benefits, 3.7, Withdrawal application; contributory insurance, 3.8, Withdrawal and return, contributory insurance, and 3.9, Retired life insurance coverage, would remain unchanged.

The Board proposes to amend N.J.A.C. 17:2-3.10, Contributory insurance premiums; leave of absence, by clarifying in subsection (a) that only leaves of absence without pay are affected by this rule. A member on a leave of absence with pay has the same deductions as an active employee. The Board also proposes to add the requirement that the employer provide proof of the leave of absence. This would enable the Division of Pensions and Benefits to process a claim more quickly should the member die and would also prevent the account from expiring immediately if it is inactive for two years. N.J.S.A. 43:15A-25.1 permits a member to pay for contributory insurance while receiving workers' compensation but does not state that the payments need to be made in advance by the member to the Division. Therefore, the Board proposes to add a new N.J.A.C. 17:2-3.10(c) in order to clarify what is necessary for a member to continue contributory insurance while receiving periodic workers' compensation. The section heading is amended to include workers' compensation.

N.J.A.C. 17:2-3.11, Ten month members, would remain unchanged.

N.J.A.C. 17:2-3.12, Beneficiary designation; pension contribution, would be amended at subsection (b) to remove the definition of children. Beneficiaries must be specifically named. The Division does not accept the designation "children" which contradicts the requirement that beneficiaries be specifically named.

N.J.A.C. 17:2-3.13, Benefits payable under P.L. 1984, c.96 as amended by P.L. 1995, c.221, would remain unchanged. The proposed amendment to N.J.A.C. 17:2-3.14, Acceptable designation of beneficiaries, would remove the word "active" before "group life insurance" in subsection (b). The beneficiaries are the beneficiaries of either the active or retired group insurance, not just the active insurance.

The Board proposes a new N.J.A.C. 17:2-3.15, Suspension, which would be similar to that found in the Police and Firemen's Retirement System rules at N.J.A.C. 17:4-4.7. The question was recently raised by a member whether life insurance continues during a suspension. Unlike leaves of absences, there is no statutory authority to allow for payments of the contributory insurance during a suspension. Therefore, the Board proposes to clarify that while noncontributory life insurance remains in effect for 93 days after the date of a suspension, contributory insurance does not and must be converted to an individual policy in order to retain the coverage.

Subchapter 4. Membership

The Board proposes to amend N.J.A.C. 17:2-4.1, Creditable compensation, at subparagraph (a)2vi by providing an example of what a trade-in is to make it clearer to employers regarding what is creditable salary. N.J.A.C. 17:2-4.1(g)3 would be amended to clarify that "pension" contributions are what is returned to the member.

N.J.A.C. 17:2-4.2, Leave with pay, would remain unchanged. The Board proposes to clarify at N.J.A.C. 17:2-4.3, School year members; 10 and 12months, in subsection (a), that the full normal school year is considered to be September through June and that the two months of additional service credit granted would be for July and August. The Board also proposes to state the requirement that a member work in a month to receive service credit for that month and not just receive pay for that month. A number of instructors only teach three or four months in a semester but receive a year's credit. Colleges and universities may also be 10-month employers; therefore, the limitation to employment with boards of education would be removed.

The Board proposes to increase the loan tolerance at N.J.A.C. 17:2-4.4,

Loan tolerance, from $10.00 to $50.00. The Board believes that this amount is de minimus in light of the fact that the cost of auditing balances of less than $50.00 far outweighs the write-off amounts.

N.J.A.C. 17:2-4.5, Service and salary credit: awards of back pay, would be amended at subsection (d) to clarify that the section is speaking about awards of back pay or settlements of back pay. This amendment is in response to comments received by the State Police Retirement System during the promulgation of their rule on awards of back pay. Language in the second sentence would be revised to provide for the Board to first determine the compensation to be used before refunding contributions on the compensation. This would eliminate the possibility of refunding and then having to ask for the contributions back.

N.J.A.C. 17:2-4.6, Minimum adjustment, would remain unchanged. The Board proposes clarification at N.J.A.C. 17:2-4.7, Part-time hourly, on-call or per diem salary, to add adjunct instructors who must receive actual salary in a month to receive credit for that month of service if they do not have a contract.

N.J.A.C. 17:2-4.8, Military leave prior to August 1, 1974; employer contributions, would remain unchanged. N.J.A.C. 17:2-4.9, Eligibility for loan, would be amended to clarify the requirement that loans from the Public Employees' Retirement System are subject to Federal regulation.

N.J.A.C. 17:2-4.10, Waiver of retirement benefits upon withdrawal, would remain unchanged. A proposed amendment to N.J.A.C. 17:2-4.11, Termination; withdrawal, would clarify in paragraph (b)2 that the employer or the member may certify that employment has not ended instead of just the member. A proposed amendment to N.J.A.C. 17:2-4.11(b)3 would replace "or" and "and" in the second sentence. A member should not have any claims pending if they are withdrawing. A member who withdraws with a claim pending that is settled in the member's favor must repay any contributions and interest withdrawn before the account may be reinstated. The proposed amendment to N.J.A.C. 17:2-4.11(b) 3 is necessary to explain what would happen to a member's account and what amounts would have to be repaid to the system should the member withdraw with a claim pending against his or her employer. Also, N.J.A.C. 17:2-4.11(b)5 is amended to state that a member who has a pending claim for workers' compensation may now withdraw from the System if they sign a waiver indicating that the member still wishes to withdraw.

N.J.A.C. 17:2-4.12, Deductions, 4.13, Active employment; membership requirement and 4.14, Continuance of membership; transfer, remain unchanged. The Board proposes to amend N.J.A.C. 17:2-4.15, Ineligible service, by clarifying that employees of non-public employers who contract or provide services to public employers cannot be considered eligible for membership credit in the Public Employees' Retirement System for that employment with the non-public employer. The Board also proposes to clarify that this service cannot be purchased because it was never eligible service in the retirement system.

N.J.A.C. 17:2-4.16, Creditable service; law enforcement officers, would

remain unchanged.

Subchapter 5. Purchases and Eligible Service

N.J.A.C. 17:2-5.1, Eligibility for purchase, 5.2, New enrollment purchase or rate adjustment, 5.3, Reestablishing military leave credit and 5.4, Compulsory contributions (back deductions), remain unchanged.

Proposed amendments to N.J.A.C. 17:2-5.5, Optional purchases of eligible service, at subparagraph (a)4ii, would clarify that proof of the approved leave of absence must come from the employer. This would be the most accurate and easily obtained method of confirmation of a leave. The Board of Trustees proposes to amend N.J.A.C. 17:2-5.5(b)1 by adding a definition of active duty military service that is eligible to be purchased. The Board has always interpreted active duty to mean the same as the Federal definition found at 10 U.S.C. § 101 but has not included the definition in the Code. The Board would expand the definition to include types of military service that cannot be purchased. A recent unpublished appellate decision, Ewanus v. State of New Jersey, Division of Pensions and Benefits, Board of Trustees, Public Employees' Retirement System, Dkt. No. A-6348-00T2, decided December 24, 2002, determined that attendance at West Point or other military academies could not be

purchased.

N.J.A.C. 17:2-5.6, Methods of payment, would be amended to include direct rollovers and transfers of funds, by the addition of paragraph (a)5. Federal law was changed a number of years ago to permit this method of payment and the Division has been accepting rollovers and transfers in accordance with the Federal law. The proposed amendment would clarify the procedures for using rollovers and transfers to make a purchase of service credit.

Proposed amendment to N.J.A.C. 17:2-5.8, Per diem credit, would add adjunct professors to the categories of employment, hourly, per diem, on-call and as-needed, that require a member to work at least 10 days in a month to receive service credit for that month. Adjunct professors often have abbreviated work schedules and sometimes only work a few days, or no days, in a month and receive service credit.

N.J.A.C. 17:2-5.11, Service ineligible for purchase, would remain unchanged. The proposed amendment to N.J.A.C. 17:2-5.12, Correction of errors, would clarify in the heading that the correction of errors procedure is used for prior service credit. The statutory citation would be added after the Chapter Law citation.

The proposed amendment to N.J.A.C. 17:2-5.13, Lump sum purchases, would remove the hyphen from the word "lump sum" to be consistent.

Subchapter 6. Retirement

The proposed amendment to N.J.A.C. 17:2-6, Application, would add a new subsection (g) which would clarify that the beneficiary or estate of a member or beneficiary who dies before receiving in benefits the value of the total member contributions plus interest would receive the remaining balance of contributions and interest. This is required by N.J.S.A. 43:15A-50.

N.J.A.C. 17:2-6.2, Effective date, remains unchanged. The Board proposes to amend N.J.A.C. 17:2-6.3, Effective dates; change, at subsection (e) by removing the phrase "after approval of the retirement by the Board of Trustees" because a member should not have any earnings after retirement. If Board approval is delayed that does not mean that the retiring member may work until it is received.

The Board proposes at N.J.A.C. 17:2-6.4, Outstanding loan, to clarify in subsection (a) that "accrued" interest is what is assessed. The Board also proposes to amend the rule reference to N.J.A.C. 17:2-6.3(a)1 to the correct reference, N.J.A.C. 17:2-6.2. The Board proposes to add the statutory citation for P.L. 1999, c.132 in paragraph (a)2. Finally, in subsection (b), the Board proposes that "Option I" be changed to "Option 1." There is no Option I.

N.J.A.C. 17:2-6.5, Willful negligence, 6.6 (Reserved) and 6.7, Disability determination, remain unchanged. A proposed amendment to N.J.A.C. 17:2-6.8, Option selection, would specify in the heading that this rule only applies if an accidental disability is denied. N.J.A.C. 17:2-6.9, Employer and employee notices; 6.10, Involuntary disability application; 6.11, Early retirement; reduction; 6.12, Service retirement; eligibility; 6.13, Disability retirant; annual medical examinations; 6.14, Disability retirant; annual report (employment, earnings, test and adjustment); and 6.15, Disability retirements; filing after more than two years' discontinuance of service, remain unchanged. A proposed amendment to N.J.A.C. 17:2-6.16, Compulsory retirement, Law Enforcement Officers (LEO), would change the phrase "an LEO" to "a LEO" to be grammatically correct.

The Board proposes to clarify at N.J.A.C. 17:2-6.17, Approved allowance, the definition of when a retirement allowance becomes effective by adding the citation to N.J.A.C. 17:2-6.2.

The Board proposes to amend N.J.A.C. 17:2-6.18, Option 1 benefit, by removing the quotation marks around "1."

N.J.A.C. 17:2-6.19 is reserved.

Proposed amendments to N.J.A.C. 17:2-6.20, Final compensation; 10 and 12-month members reported monthly, at subsections (a) and (b), include changing "on" to "of" before "a member" to be more grammatically correct. The word "use" would be removed and replaced with "shall be used" at the end of the sentences to make the sentences declarative instead of imperative.

Proposed amendments to N.J.A.C. 17:2-6.21, Determination of last year's salary; veterans paid on a monthly basis, would also remove "use" and replace it with "shall be used" at the end of the sentences to make the sentences declarative instead of imperative.

N.J.A.C. 17:2-6.22, Waiver, 6.23 (Reserved) and 6.24, Final compensation; biweekly salary computation for employees reported on a biweekly basis, remain unchanged. The proposed amendments to N.J.A.C. 17:2-6.25, Determination of last week's salary; veterans reported on a biweekly basis, would also make the sentences declarative instead of imperative. Salary is only used if it is attributed to a time period within the 26 biweekly pay periods. If it is retroactive payment for some prior time period, it cannot be used. Therefore, the Board wishes to amend "made within" to "that are attributable to" to clarify this. The references to paragraph (a)1 would be amended to reference subsection (a), because there is no longer a paragraph (a)1.

N.J.A.C. 17:2-6.26, Medical examination; physician, and 6.27, Work related travel; accidental disability retirement and accidental death benefit coverage, remain unchanged.

Subchapter 7. Transfers

N.J.A.C. 17:2-7.1, Interfund transfers; State-administered retirement systems, would be amended to clarify that the "present" system is really the new State-administered retirement system in subsection (a). The "present" or "previous" system would be changed to "former" system throughout the rule. Hopefully, this would eliminate confusion. A new subsection (b) would be added to clarify what happens should a member take covered employment in a new system and also accept employment in the former system which would have the same effective date in each system. The transfer would not take place if the effective dates were the same because there would not be any break in service from the former membership. Existing subsection (b) would become (c), subsection (c) would become (d), and subsection (d) would become (e).

The proposed amendment to N.J.A.C. 17:2-7.2, Intrafund transfers; State-administered Retirement Systems, at paragraph (a)2, would expand the definition of when an account remains unexpired.

Subchapter 8. Prosecutors Part

There are no proposed amendments to the Prosecutors Part of the PERS.

A 60-day comment period is provided and, therefore, pursuant to N.J.A.C.

1:30-3.3(a)5, this proposal is not subject to the provisions of N.J.A.C.

1:30-3.1 and 3.2 governing rulemaking calendars.

Full text of the proposed amendments follows:

SUBCHAPTER 1. ADMINISTRATION

17:2-1.3 Officers and committees

(a) The members of the Board shall elect a chairperson and vice chairperson, and a representative to the State Investment Council[, and the Pension System Actuary Committee] from its membership for the forthcoming year at its regular meeting held in July. A representative to the Pension System Actuary Selection Committee, as provided for by N.J.S.A. 43:4b-1, shall be elected by the Board whenever the selection of a new actuary is needed.

(b) The chairperson of the Board shall preside at all of its meetings, or in the absence of the chairperson, the vice chairperson shall assume the chairperson's responsibilities. In the absence of the chairperson and vice chairperson, another member selected by the majority of the members in attendance will preside for that single meeting.

(c) (No change.)

(d) There shall be [three]one standing committee[s,] which [are] is the finance committee [ the retirement committee, and the executive committee] pursuant to N.J.S.A. 43:15A-32. The committee[s] shall be appointed by the chairperson at the July meeting for the forthcoming fiscal year. [(e)] The finance committee shall review all investment transactions and financial reports referred to it by the Secretary for presentation to the Board at its regular monthly meetings. The committee shall consist of five members three of whom shall be elected members of the Board.

[(f) The retirement committee shall consider all cases referred to it by the Secretary and submit its recommendations to the Board at its next meeting. The committee shall consist of three members.]

[(g) The executive committee shall consider all cases referred to it by the Secretary and submit its recommendations to the Board at its next meeting. The committee shall consist of three members.]

17:2-1.5 Certifying Officer (employer)

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

(c) The Certifying Officer shall also be responsible for all other duties relating to matters concerning the System including providing requested documentation in a timely manner.

(d) (No change.)

17:2-1.6 Records

(a) [The] In addition to the provisions of N.J.A.C. 17:1-1.2, the minutes of the Board are a matter of public record and may be inspected during regular business hours in the Office of the Board Secretary.

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

(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. A copy of the Board appointed physician's medical report cannot be released until after the Board's initial determination. In no event shall the report be released to any individual not authorized in writing to receive the report.

(e) The annual report of the system's actuary shall not be released until it has been approved by the Board of Trustees.

(f) Original documents, if available, shall only be viewed by appointment at the Division of Pensions and Benefits.

17:2-1.8 Suspension of pension checks

(a) The disbursement of pension checks shall be suspended under the following circumstances and such suspensions shall continue during the period in default:

1. (No change.)

2. If a disability retirant fails to timely file a report with the System of annual earned income if requested;

3. (No change.)

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

5. If a retirant does not complete a policy assignment of group life insurance as requested by the Board of Trustees.

17:2-1.11 Proof of age

(a) (No change.)

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

(c) (No change.)

17:2-1.13 Nearest attained age; enrollment; retirement

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

(c) The contribution rate was reduced to 4.5 percent effective January 1, 1998 under the provisions of P.L. 1997, c.115. P.L. 1999, c.415 further reduced the contribution rate to three percent of pensionable salary. The rate change was effective January 1, 2000, and remained in effect until July 1, 2004 for State employees and January 1, 2005 for local employees when the rates returned to five percent. Future reductions are possible if the System is fully funded.

SUBCHAPTER 2. ENROLLMENT

17:2-2.2 Multiple employments

(a) Any employee who has enrolled in a covered position must also enroll in any other position regardless of the employee's employment status in such other position if the employee['s] meets the salary and Social Security qualifications for enrollment. However, if an employee who is ineligible for membership later accepts an additional position which makes the employee eligible for membership in that second position, the employee's ineligibility for membership in the earlier position is not altered by the employee's enrollment in the Public Employees' Retirement System.

(b) (No change.)

17:2-2.3 Ineligible persons

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

1.-6. (No change.)

7. Any retired member who returns to a PERS covered position or positions for which the aggregate compensation is less than the aggregate calendar year compensation limit for exclusion from membership pursuant to N.J.S.A. 43:15A-57.2b. Retired members shall notify their employer or employers when the aggregate calendar year compensation limit will be reached, so that the retired members may be reenrolled in the PERS. If the contractual or regularly budgeted compensation for the position or positions exceeds the calendar year compensation limit, the retired member shall be reenrolled in the PERS as of the beginning of their employment. A retired member who is employed on an hourly basis shall be reenrolled in the PERS as soon as the compensation received exceeds the calendar year compensation limit. For the purposes of this paragraph, a "retired member" is a former member who has terminated all employment covered by the retirement system, who has not received compensation from employment covered by the retirement system for at least 30 consecutive calendar days, who is not receiving a disability retirement allowance and whose retirement benefit has become due and payable as provided in N.J.A.C. 17:2-6.2;

8.-11. (No change.)

17:2-2.4 Enrollment date

(a)-(c) (No change.)

(d) An employee of a Civil Service employer who is not in a classified or unclassified position or an employee of a non-Civil Service employer who is not in a regular budgeted position may be considered a temporary employee by the employer for the[one-year] 12-month period following the employee's date of hire, but if the employment continues into a second year, the employee will be required to enroll immediately, as follows:

1. For employees whose employers report on a monthly basis, the compulsory enrollment date will be the first of the month following the end of the [one-year (]12-month[)] period.

2. For employees whose employers report on a biweekly basis, the compulsory enrollment date will be the first day of the pay period following the end of the [one year (]12-month[)] period.

(e) An employee cannot receive credit in the retirement system for the initial pay period or month of employment if that employment began after the seventh day of the pay period or after the 16th day of the month.

17:2-2.6 Enrollment eligibility of professors and instructors employed on a temporary, provisional or adjunct basis by public institutions of higher education

(a) (No change.)

(b) Professors and instructors employed on a temporary, provisional or adjunct basis by public institutions of higher education who are not in regularly appointed teaching or administrative staff positions, in classified or unclassified positions with a Civil Service employer, or in regularly budgeted positions with a non-Civil Service employer, shall not be eligible for enrollment [or salary or service credit] on the basis of any course they teach which:

1. Provides no academic credit; [and] or

2. Varies in length from the normal academic [semester] term.

17:2-2.9 (Reserved)

17:2-2.10 Enrollment eligibility of on-call employees who have not established membership; including, but not limited to, substitute teachers, replacement teachers, and bedside or home instructors

(a) An individual who assumes a position as an on-call employee, such as a substitute teacher, or bedside or home instructor is eligible to enroll in the PERS at the beginning of the 13th month of continuous employment. On-call employees have unpredictable work schedules and their employment is usually temporary in nature. In determining eligibility for enrollment in the case of these employees, the following apply:

1. At employing locations where the regular work year is 12 months long, the employee must work at least 120 days within a 12-month period (10 days per month x 12 months) before becoming eligible for enrollment.

2. At employing locations where the regular work year is 10 months, the employee must work at least 100 days (10 days per month x 10 months) before becoming eligible for enrollment.

3. The date of eligibility for enrollment for on-call employees is the first day of the 13th month after the commencement of the 100 or 120 day period. For example, if the employment began on January 1st, then the enrollment date would be January 1st of the following year. If the employee worked 10 days a month for the requisite number of months (10 or 12), the employee would be eligible for enrollment, regardless of when in the year the 10 or 12 month period began. Enrollment is mandatory.

(b) A replacement teacher is an employee who assumes the duties of a teacher in a regularly budgeted position for the length of time that teacher is on an approved leave of absence. Replacement teachers are eligible for enrollment on the first day of the 13th month after the commencement of continuous service.

(c) A permanent, long-term substitute in a regularly budgeted position is eligible for PERS enrollment on the date of hire.

(d) An employee who has an active PERS membership based upon other employment shall be eligible to participate in the PERS in an on-call position on his or her date of hire provided the minimum salary provisions of N.J.A.C. 17:2-4.7 are met.

SUBCHAPTER 3. INSURANCE AND DEATH BENEFITS

17:2-3.1 Compulsory and optional enrollment

(a) For the purpose of contributory insurance, all compulsory enrollees, including veterans, under age 60 at the time their enrollment application is filed, shall be required to participate in the contributory insurance program for one year (12 calendar months) from the date of enrollment, or the effective date of insurance premium deduction, whichever is later. Proof of insurability shall be required for all compulsory and optional enrollees, age 60 and older at the time their enrollment application is filed with the Division of Pensions and Benefits, in order to qualify for noncontributory and contributory insurance coverage.

(b) Optional enrollees under age 60 at the time their enrollment application is filed with the Division of Pensions and Benefits may qualify for noncontributory and contributory insurance coverage only if they were actively at work performing all of the duties that the position requires at the time they made application for enrollment, and such application was filed within one year from the date they first became eligible for enrollment in the system. If an application for an optional enrollee is not received within one year after [he] the optional enrollee became eligible for enrollment, evidence of insurability will be required for the noncontributory and contributory coverage.

(c) (No change.)

17:2-3.10 Contributory insurance premiums; leave of absence and workers' compensation

(a) Contributory insurance coverage will be in effect for up to two years while a member is on an official leave of absence without pay for the personal illness of the member without premiums paid by the member. The employer shall provide to the Division of Pensions and Benefits proof of the official leave of absence.

(b) (No change.)

(c) Contributory insurance coverage will be in effect for members who are receiving periodic benefits through workers' compensation provided that insurance premiums are paid in advance by the member. It is the member's responsibility to make arrangements directly with the Division to continue these premium payments.

17:2-3.12 Beneficiary designation; pension contributions

(a) (No change.)

(b) All beneficiaries must be specifically named. [The designation "children," unless otherwise qualified by the member shall mean all individuals, including natural or adopted children, entitled to take from the member by the New Jersey laws of intestate succession, N.J.S.A. 3B:1-1 et seq., and excludes all persons who are only stepchildren, foster children, grandchildren or any more remote descendants.]

17:2-3.14 Acceptable designation of beneficiaries

(a) (No change.)

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

1. (No change.)

17:2-3.15 Suspension

A member suspended without pay will have noncontributory life insurance coverage continued for a period of 93 days following the effective date of such suspension. A member will not be covered by contributory life insurance during a suspension without pay, but may convert the contributory insurance prior to 31 days after the effective date of the suspension.

SUBCHAPTER 4. MEMBERSHIP

17:2-4.1 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 system shall be limited to base salary, and shall not include extra compensation. For purposes of this section:

1. (No change.)

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

i.-v. (No change.)

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. An example of a trade-in is compensation added to a new contract that correlates with compensation on an excluded item in an old contract (that is, clothing allowance);

vii.-xiii. (No change.)

(b)-(f) (No change.)

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

1.-2. (No change.)

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

4.-5. (No change.)

(h) (No change.)

17:2-4.3 School year members; 10 and 12 months

(a) Ten month members who are employed [and are compensated for employment] for the full normal school year [by the board of education], September through June,] are entitled to receive [12 months of] service credit for July and August. Members will not receive service credit for months during the normal school year, September through June, when they [are not actively employed and did not receive salary] do not work and are not on a paid leave of absence.

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

17:2-4.4 Loan tolerance

Interest will be calculated on a periodic basis on the unpaid loan balance. If scheduled payments are not paid timely, interest will be accrued and added to the remaining outstanding loan balance. If, at the end of the loan schedule, there is a balance of less than [$10.00] $50.00, it will be written off. If the balance is equal to or greater than [$10.00] $50.00, the member will be assessed.

17:2-4.5 Service and salary credit: awards of back pay

(a)-(c) (No change.)

(d) If the award or settlement is structured in such a way as to provide the member with a substantial increase of creditable salary at or near the end of the member's service, or a substantial increase in retirement benefits, the award or settlement shall be reviewed by the Board of Trustees. If the Board determines that the pension benefit was part of the negotiations for the award or settlement, or if the award or settlement includes extra compensation as defined by N.J.A.C. [17:5- 3.1]17:2-4.1 [the member shall have the contributions for the salaries based on the award refunded without interest, and] the Board shall determine the compensation to be used to calculate the retirement allowance, and the member shall have the pension contributions for the salaries found not to be creditable refunded without interest.

17:2-4.7 Part-time hourly, on-call, adjunct or per diem salary

(a) Deductions from the salary of a member who is paid on a part-time hourly, on-call, adjunct or per diem basis and who does not have an annual contractual base salary shall be calculated using actual creditable salary earned. If a member's actual creditable salary should drop below one-twelfth of the minimum threshold salary required for enrollment into the PERS for 12-month employees or one-tenth of the minimum threshold salary required for enrollment into the PERS for 10-month employees, pension contributions shall not be deducted from that member's creditable salary, and pension credit shall not be earned, for that month.

(b) (No change.)

17:2-4.9 Eligibility for loan

Only active contributing members of the System may exercise the privilege of obtaining a loan. The member's total outstanding loan balance shall not exceed the lesser of 50 percent of the accumulated deductions posted to the member's account or $50,000. The loan is subject to Federal regulation.

17:2-4.11 Termination; withdrawal

(a) (No change.)

(b) No application shall be approved, if:

1. (No change.)

2. The member, or employer, certifies that employment has not ended or that 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 the member has formally resigned from the position [or] and there is no legal action contemplated or pending and the dismissal has been adjudged final. If the member or employer does not advise the Division that there is an appeal and the withdrawal application is processed, the member must repay the retirement system the full amount of contributions with interest before the account may be reinstated.

4. (No change.)

5. The member has a claim pending for Workers' Compensation benefits unless the member signs a waiver indicating that the member still wishes to withdraw.

17:2-4.15 Ineligible service

(a) Members will not be granted, nor may they purchase, prior service or membership credit for the following employment:

1-2. (No change.)

3. Licensing agent of the Division of Fish, Game and Shellfisheries or as non-State employee of the agent[-]; or

4. As an employee of an employer that is ineligible to participate in the PERS, but who provides services to an employer who participates in the PERS.

SUBCHAPTER 5. PURCHASES AND ELIGIBLE SERVICE

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.-3. (No change.)

4. Leaves of absence without pay:

i. (No change.)

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

5.-9. (No change.)

(b) The types of purchases indicated in (b)1 through 3 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. 43:15A-73.1 provides that the employer shall not be liable for any costs of purchasing this service; therefore, the member must pay both the employee and employer share.

1. Active duty military service prior to enrollment. Active military service that is eligible for purchase means full-time duty in the active military service of the United States. Such term includes full-time training duty, and attendance, while in the active military service, at a school designated as a service school by law or by the Secretary of the military department concerned. It cannot include periods of service of less than 30 days. It does not include weekend drills or annual summer training of a national guard or reserve unit nor does it include periods when the member was on-call. It also does not include time spent in the Reserved Officers Training Corps or as a cadet or midshipman at one of the service academies. Military service before enrollment cannot be used to qualify for an ordinary disability retirement;

2.-3. (No change.)

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

17:2-5.6 Methods of payment

(a) Methods of payment include the following:

1.-4. (No change.)

5. Direct rollover/trustee-to-trustee transfer of funds: Lump sum payments and partial lump sum payments can include the direct rollover or transfer of tax-deferred contributions from financial plans that qualify under terms specified by the Internal Revenue Service. All payments remitted to the Division must be accompanied by properly completed forms as specified by the Division. Checks remitted to the Division without the required forms shall be returned to the member. A lump sum rollover payment for a purchase cannot exceed the lump sum cost of that purchase. Checks in an amount greater than the lump sum cost of the purchase shall be returned to the member.

17:2-5.8 Per diem credit

For the purchase of granting prior service credit for service performed on a per diem, hourly, on-call, adjunct or as-needed basis, credit shall be prorated and granted on the basis of 10 days equal one month of credit.

17:2-5.12 Correction of errors for prior service credit

Credit for all previous service established under the provisions of P.L. 1974, c.104 (N.J.S.A. 43:15A-54), and payment therefore, shall be calculated on the basis of salaries received during the period of such service with applicable regular interest. The pension rate of contribution will be determined as of the member's compulsory date of enrollment.

17:2-5.13 Lump [-] sum purchases

If a purchase is paid in a lump sum, the member shall receive full credit for the amount of service covered by the purchase upon receipt of the lump[-]sum payment. The service may be used for any purchase for which it is authorized under the Public Employees' Retirement System Act (N.J.S.A. 43:15A-1 et seq.) and the rules of the Retirement System.

SUBCHAPTER 6. RETIREMENT

17:2-6.1 Applications

(a)-(f) (No change.)

(g) If the total amount of retirement allowances received by a member or beneficiary under the option selected is less than the value of the member's contributions and interest on those contributions, the balance of contributions and interest shall be paid in a lump sum to the member's designated beneficiary or estate.

17:2-6.3 Effective dates; change

(a)-(d) (No change.)

(e) Should the member continue to receive a salary beyond the effective date of retirement [after approval of the retirement by the Board of Trustees], no retirement benefits shall be paid for the period where the member received salary and no salary or service credit shall be provided for the service rendered after the approved effective date of retirement.

17:2-6.4 Outstanding loan

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

1. In full before the retirement allowance becomes due and payable as provided in N.J.A.C. 17:2-[6.3]6.2; or

2. By deductions from retirement benefit payments of the same monthly amount deducted from the member's compensation immediately preceding retirement until the loan balance, with accrued interest, is repaid as authorized by P.L. 1999, c.132 (N.J.S.A. 43:15A-34.1). If the member does not request repayment in full, repayment is by deductions in the same monthly amount deducted from the member's compensation immediately preceding retirement.

(b) If a retirant dies before the loan balance, with accrued interest, is repaid, the remaining balance is paid first from the group life insurance proceeds, and then from the proceeds of any other benefits payable on account of the retirant in the form of monthly payments or the balance of the Option [I ]1 reserves or the balance of the retirant's accumulated deductions and regular interest that are due to the beneficiary or estate. If the retirant designated multiple beneficiaries to receive these benefits, each beneficiary shares in repaying the remaining balance in the same proportion in which they are entitled to the benefits.

17:2-6.8 Option selection; accidental disability denied

If an applicant for an accidental disability retirement benefit is rejected for an accidental disability benefit but is approved by the Board for retirement, in accordance with N.J.A.C. 17:2-6.7, the applicant will be permitted within 30 days following Board approval of the retirement, to amend the option selection which the applicant made on the original accidental disability retirement application.

17:2-6.16 Compulsory retirement; Law Enforcement Officers (LEO)

(a)-(e) (No change.)

(f)[An] A LEO member who is also enrolled as a non-LEO member cannot continue the LEO membership or employment in the LEO capacity beyond age 65 should the member continue membership on the basis of the non-LEO position per N.J.S.A. 43:15A-99.

17:2-6.17 Approved allowance

When a retirement allowance becomes effective pursuant to N.J.A.C. 17:2-6.2, the type of retirement benefit and option elected shall stand as approved.

17:2-6.18 Option ["1"] 1 benefit

The reserve established under the provisions of Option [ '1"] 1 shall be a form of reducing term insurance, as the reserve shall reduce in value by the amount of the retirant's regular monthly allowance, whether received or not, for each month that the retirant survives after the effective date of retirement.

17:2-6.20 Final compensation; 10 and 12-month members reported monthly

(a) In order to determine the final compensation (three-year average) for benefits [on] of a member reported on a monthly basis under a 10-month contract, [use] the creditable salaries upon which contributions were made to the System for the member's final 30 months, or the highest three fiscal years of pensionable service, including any retroactive salary payments that are attributable to the covered period and paid as part of a salary agreement with a group of employees shall be used.

(b) In order to determine the final compensation (three-year average) for benefits [on] of a member reported on a monthly basis under a 12-month contract, [use] the creditable salaries upon which contributions were made to the system for the member's last 36 months or the highest three fiscal years of pensionable service, including any retroactive salary payments that are attributable to the covered period and paid as part of a salary agreement with a group of employees shall be used.

(c) (No change.)

17:2-6.21 Determination of last year's salary; veterans paid on a monthly basis

(a) In order to determine the last year's salary for a veteran with 35 or more years of creditable service, age 55 or older, reported on a monthly basis under a 10-month contract, [use] the creditable salaries upon which contributions were made in the member's final 10 months of pensionable service preceding retirement, including any retroactive salary payments that are attributable to the covered period and paid as part of a salary agreement with a group of employees shall be used.

(b) In order to determine the last year's salary with a veteran with 35 or more years of creditable service, age 55 or older, reported on a monthly basis under a 12-month contract, [use] the creditable salaries upon which contributions were made in the member's final 12 months of pensionable service preceding retirement, including any retroactive salary payments that are attributable to the covered period and paid as part of a salary agreement with a group of employees shall be used.

(c) In order to determine the last year's salary for a veteran with 20 or more years of creditable service, age 60 or older, or a veteran with 25 or more years of creditable service, age 55 or older, reported on a monthly basis under a 10-month contract, [use] the creditable salaries upon which contributions were made in the member's final 10 months of pensionable service preceding retirement or in the consecutive 10-month period in which the member achieved the greatest earnings, including any retroactive salary payments that are attributable to the covered period and paid as part of a salary agreement with a group of employees shall be used.

(d) In order to determine the last year's salary for a veteran with 20 or more years of creditable service, age 60 or older, or a veteran with 25 or more years of creditable service, age 55 or older, reported on a monthly basis under a 12-month contract, [use] the member's creditable salaries upon which contributions were made in the member's final 12 months of pensionable service preceding retirement or in the consecutive 12-month period in which the member achieved the greatest earnings, including any retroactive salary payments that are attributable to the covered period and paid as part of a salary agreement with a group of employees shall be used.

(e) (No change.)

17:2-6.25 Determination of last year's salary; veterans reported on a biweekly basis

(a) In order to determine the last year's salary for a veteran with 35 or more years of creditable service, age 55 or older reported on a biweekly basis under a 12-month contract, use a total of 26 biweekly pay periods including any across the board retroactive salary payments [made within] that are attributable to the covered period shall be used. The total salary will be adjusted by factors supplied by the actuary to compensate for biweekly payroll schedules.

(b) In order to determine the last year's salary for a veteran with 35 or more years of creditable service, age 55 or older reported on a biweekly basis under a 10-month contract, [include in the total of 26 biweekly pay periods] the total 26 biweekly pay periods will include those pay periods in the third quarter of each year in which the member does not receive salary, including any retroactive salary payments that are attributable to the covered period and paid as part of a salary agreement with a group of employees. The adjustment as specified in [(a)1] (a) above shall not be made.

(c) In order to determine the last year's salary for a veteran with 20 or more years of creditable service, age 60 or older, or a veteran with 25 or more years of creditable service, age 55 or older, reported on a biweekly basis under a 12-month contract, [use] the member's creditable salaries upon which contributions were made in the member's final 26 biweekly pay periods of pensionable service preceding retirement, or in the 26 consecutive pay periods in which the member achieved the greatest earnings, including any retroactive salary payments that are attributable to the covered period and paid as part of a salary agreement with a group of employees shall be used. The total salary will be adjusted by factors supplied by the actuary to compensate for biweekly payroll schedules.

(d) In order to determine the last year's salary for a veteran with 20 or more years of creditable service, age 60 or older, or a veteran with 25 or more years of creditable service, age 55 or older, reported on a biweekly basis under a 10-month contract, the total 26 biweekly pay periods will include those pay periods in the third quarter of each year in which the member does not receive salary, including any retroactive salary payments that are attributable to the covered period and paid as part of a salary agreement with a group of employees. The adjustment as specified in [(a)1](a) above shall not be made.

(e) (No change.)

SUBCHAPTER 7. TRANSFERS

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

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

(b) A member is eligible to transfer the former membership in a State-administered retirement system into the retirement system that covers the new eligible employment, if the member has first ended employment with the former employer, and has not taken another position subject to coverage in the State-administered retirement system of the former account which would have the same effective date as the membership in the new State-administered retirement system.

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

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

2. (No change.)

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

4. The member's service credits established in the [present] former system shall be transferred into the new system.

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

i. The member has withdrawn the [previous] former membership;

ii. The member has credit in the [present] former 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.341 (N.J.S.A. 43:15A-14). P.L. 2001, c.341 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 three 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 to 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;

iii. (No change.)

6. A data sheet shall be created for the member's new account that will indicate an interfund transfer from the member's [previous] former retirement system and the service credit transferred into the new membership account.

(c) (d) The reserves accrued in the [present] former] system will be valued and compared to the reserves required in the new system.

1. If the reserves accumulated or provided for in the [present] former system are less than those required in the new system, the full reserve will be transferred.

2. If the reserves accumulated or provided for in the [present] former system are more than those required in the new system, only the amount required to establish the credit will be transferred.

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

17:2-7.2 Intrafund transfers; State-administered retirement systems

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

1. (No change.)

2. The account has not expired; that is, it has not been more than two years between the date of the last contribution [received from the old employer and the starting date of contributions with the new employer or there was enough service credit to be eligible for a deferred retirement], the member is vested, or the member's account has remained active due to the provisions of N.J.S.A. 43:15A-8; and

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

36 N.J.R. 4682(a)


DIVISION OF PENSIONS AND BENEFITS
TEACHERS' PENSION AND ANNUITY FUND
DISABILITY RETIRANT; ANNUAL REPORT
(EMPLOYMENT, EARNINGS, TEST AND ADJUSTMENT)

Adopted Amendment: N.J.A.C. 17:3-6.14

Cite as 36 N.J.R. 4220(a)

Adopted December 2, 2004

The agency proposal follows:

Summary

The Division of Pensions and Benefits has recently been authorized to obtain salary information from the Department of Labor and Workforce Development, Division of Wage and Hour. This technical ability has made it much easier and more cost effective for the Division to apply the earnings test for employment after disability retirement for members of the Public Employees' Retirement System and the Teachers' Pension and Annuity Fund. N.J.A.C. 17:3-6.14 required amendment to reflect this change. The rule was also reviewed to see what other clarifications or changes needed to be made based on current practices of the Division.

New subsection (a) was added to identify the enabling statutory authority for the test and to explain what the earnings test is. Until recently, the Division had to request salary information for the retirant's current position from the former employer. The Division propose to use the salary assumptions used by the Teachers' Pension and Annuity Fund's actuary to estimate the current salary for the position. Currently that assumption is a 5.95 percent increase each year. The retirant would retain the ability to prove what the current salary for the positions by requesting that the Division obtain salary information from the retirant's former employer if he or she doesn't agree with the salary projected by the Division. The Division would then use that salary to determine any over payment.

Existing subsection (a) would become (b) and the clarification that earnings information would be obtained from the Department of Labor and Workforce Development for New Jersey earnings would be added. The Teachers' Pension and Annuity Fund may in the future accept different forms of proof of earnings so the "shall" in the first sentence is proposed for amendment to "may." Paragraphs (a)1 and 2 would be deleted. Earnings information can be obtained much earlier than April 30. In most cases the retirant would not have to file reports. The penalties for not filing would be moved to subsection (c) (recodified (b)).

New subsection (c) (recodified (b)) would add that the Department of Labor would be reporting earnings in some cases. N.J.S.A. 18A:66-40b requires reenrollment as stated in current paragraph (b)1 and does not need to be restated in this rule; therefore, paragraph (b)1 is deleted. The proposed amendment to paragraph (c)1 would clarify that the retirant would be billed for any overpayment and that a dollar for dollar reduction would be made in anticipation of employment at the same level of earnings for the present year.

The proposed amendments provide for the retirant to inform the Division if they stop employment so that the benefit may be recalculated. The proposed amendments to paragraph (c)2 would also clarify what reductions would be made if the overpayment is not refunded in lump sum. Proposed paragraph (c)3 would clarify that system interest would be assessed on repayment schedules in the same manner as is done for arrears and back deductions.

Until November 1992, a member had to be under age 60 to qualify for an ordinary disability retirement. Members who retire on November 1, 1992 or later could retire at any age based on the interpretation of Federal law regarding age discrimination. For those under the restrictions of the age 60 requirement, the earnings test does not apply after the member turns 60. For those who received the benefit after the age restrictions were lifted, the earnings test continues for the lifetime of the retirant. New subsection (d) would clarify this practice.

A 60-day comment period is provided and, therefore, pursuant to N.J.A.C. 1:30-3.3(a)5, this proposal is not subject to the provisions of N.J.A.C. 1:30-3.1 and 3.2 governing rulemaking calendars.

17:3-6.14 Disability retirant; annual report (employment, earnings, test and adjustment)

(a) Pursuant to N.J.S.A. 18A:66-40, if a disability retirant is engaged in gainful employment that does not require reenrollment in the Teachers' Pension and Annuity Fund, then the amount of the retirant's pension benefit and cost-of-living increases based on the pension benefit, but not the annuity benefit, shall be reduced to an amount, when added to the amount then earned, shall not exceed the amount of salary now attributable to the position from which the member retired.

1. For the purposes of determining the amount of salary attributable to the position from which the member retired, the Division of Pensions and Benefits (Division) shall apply the salary assumption used by the Fund's actuaries in each calendar year of retirement to the retirant's final year's salary.

2. If the retirant can prove through written verification from the former employer that the salary for the position from which the member retired is higher than that assumed under the provisions of (a)1 above, the Division shall use that salary to determine what reduction in benefits should be made.

[(a) Upon written request from the Division, all] (b) Earnings from employment in New Jersey shall be obtained through the New Jersey Department of Labor and Workforce Development. For all other earnings the disability retirants shall be required to file a report with the Fund which [shall] may include copies of the retirant's IRS 1040 forms and W-2 forms as well as any other proofs of employment requested of a specific retirant indicating the type of employment they are engaged in, if any, and the gross earned income realized therefrom as of December 31 of the prior year.

[1. Such report shall be filed with the Fund before the following April 30.]

[2. Failure on the part of the retirant to file a completed report with the Fund before April 30 shall result in the presentation of the retirant's case to the TPAF Board of Trustees who may impose penalties or suspend the retirant's entire retirement allowance for the period the report is in default.]

[(b)](c) If the Department of Labor and Workforce Development or a retirant reports employment and earnings, then the following tests shall be made by the [Fund to ascertain] Division:

[1. If the retirant is engaged in a position subject to coverage by the Fund, the retirement allowance shall be canceled and the retirant shall be reenrolled in the Fund pursuant to N.J.S.A. 18A:66-40c, effective as of the date of the retirant's appointment to such position. Any disability retirement benefits received after this date of appointment shall be refunded to the Fund.]

[2.] 1. If the retirant is engaged in employment, and the gross earned income for the preceding calendar year exceeds the difference between the pension portion of the retirement benefit and the salary the retirant would have been receiving had the retirant continued to work for the former employer [(normal increments steps and salary guide revisions will be considered but no promotional assumptions will be made), an appropriate adjustment to the pension for the period will be made by such difference], the retirant shall be billed for the amount of the overpayment. Further, the Division shall assume that the retirant continues to be employed at the same level of salary for the current year. Therefore, a dollar for dollar reduction may be made in anticipation of excess earnings in the current year. If, in the subsequent year, it is determined that the salary earned in the previous year was higher, appropriate repayment to the Fund shall be requested by the Division. If the salary earned was less, then a refund shall be made minus any outstanding amounts owed. If the gainful employment ends, the retirant must notify the Division in order to have the amount of reduction recalculated.

[3.]2. If it is found[, on or after April 30,] by the Division that gross earned income for the prior calendar year exceeded the difference between the pension portion of the retirement benefit and the salary of the retirant's former position and if the retirant does not refund the excess pension to the Fund within 30 days of notification of the difference, the pension portion of the retirement allowance shall be further reduced [, dollar for dollar, by the excess earnings] in order to recover the overpayment. [The Board of Trustees shall determine the length of time that the retirant's pension allowance will be reduced.] If the remaining pension portion of the retirement benefit is not large enough to recover the amounts owed after a dollar for dollar reduction has been taken, then the annuity portion of the benefit as well as any death benefits or survivor's benefits shall be reduced by the amounts owed.

3. System interest shall be assessed on any repayment schedules.

(d) Retirants who retired on or before October 1, 1992, and who are age 60 or older, shall be exempt from the above earnings test beginning with the calendar year in which they attain the age of 60. Retirants who retired on or after November 1, 1992 are subject to the earnings test for their lifetime.


PUBLIC EMPLOYEES' RETIREMENT SYSTEM
DISABILITY RETIRANT; ANNUAL REPORT
(EMPLOYMENT, EARNINGS, TEST AND ADJUSTMENT)

Adopted Amendment: N.J.A.C. 17:2-6.14

Cite as 37 N.J. Reg. 293(a)

Adopted on January 18, 2005

The agency proposal follows:

Summary

The Division of Pensions and Benefits has recently been authorized to obtain salary information from the Department of Labor and Workforce Development, Division of Wage and Hour. This technical ability has made it much easier and more cost effective for the Division to apply the earnings test for employment after disability retirement for members of the Public Employees' Retirement System and the Teachers' Pension and Annuity Fund. N.J.A.C. 17:2-6.14 required amendment to reflect this change. The rule was also reviewed to see what other clarifications or changes needed to be made based on current practices of the Division.

New subsection (a) was added to identify the enabling statutory authority for the test and to explain what the earnings test is. Until recently, the Division had to request salary information for the retirant's current position from the former employer. The Division proposes to use the salary assumptions used by the Public Employees' Retirement System's actuary to estimate the current salary for the position. Currently that assumption is a 5.95 percent increase each year. The retirant would retain the ability to prove what the current salary for the position is by requesting that the Division obtain salary information from the retirant's former employer if he or she doesn't agree with the salary projected by the Division. The Division would then use that salary to determine any over payment.

Existing subsection (a) would become (b), and the clarifications that earnings information would be obtained from the Department of Labor and Workforce Development for New Jersey earnings would be added. The Public Employees' Retirement System may in the future accept different forms of proof of earnings so the "shall" in the first sentence is proposed for amendment to "may." Paragraphs (a)1 and 2 would be deleted. Earnings information can be obtained much earlier than April 30. In most cases the retirant would not have to file reports. The penalties for not filing would be moved to subsection (c) (recodified (b)).

Subsection (c) (recodified (b)) would be amended to add that the Department of Labor and Workforce Development would be reporting earnings in some cases. N.J.S.A. 43:15A-44b requires reenrollment and does not need to be restated in this rule; therefore, paragraph (b)1 is deleted. The proposed amendment to paragraph (c)1 would clarify that the retirant would be billed for any overpayment and that a dollar for dollar reduction would be made in anticipation of employment at the same level of earnings for the present year. The proposed amendments provide for the retirant to inform the Division if they stop employment so that the benefit may be recalculated. The proposedamendments to paragraph (c)2 would also clarify what reductions would be made if the overpayment is not refunded in lump sum. Proposed paragraph (c)3 wouldclarify that system interest would be assessed on repayment schedules in thesame manner as is done for arrears and back deductions.

Until November 1992, a member had to be under age 60 to qualify for an ordinary disability retirement. Members who retire on November 1, 1992 or later could retire at any age based on interpretation of Federal law regarding age discrimination. For those under the restrictions of the age 60 requirement, the earnings test does not apply after the member turns 60. For those who received the benefit after the age restrictions were lifted, the earnings test continues for the lifetime of the retirant. New subsection (d) would clarify this practice.

A 60-day comment period is provided and, therefore, pursuant to N.J.A.C. 1:30-3.3(a)5, this proposal is not subject to the provisions of N.J.A.C. 1:30-3.1 and 3.2 governing rulemaking calendars.

17:2-6.14 Disability retirant; annual report (employment, earnings, test and adjustment)

(a) Pursuant to N.J.S.A. 43:15A-44, if a disability retirant is engaged in gainful employment that does not require reenrollment in the Public Employees' Retirement System, then the amount of the retirant's pension benefit and cost-of-living increases based on the pension benefit, but not the annuity benefit, shall be reduced to an amount, which when added to the amount then earned, shall not exceed the amount of salary now attributable to the position from which the member retired.

1. For the purposes of determining the amount of salary attributable to the position from which the member retired, the Division of Pensions and Benefits (Division) shall apply the salary assumption used by the System's actuaries in each calendar year of retirement to the retirant's final year's salary.

2. If the retirant can prove through written verification from the former employer that the salary for the position from which the member retired is higher than that assumed under the provisions of (a)1 above, the Division shall use that salary to determine what reduction in benefits should be made.

[(a) All](b) Earnings from employment in New Jersey shall be obtained through the New Jersey Department of Labor and Workforce Development. For all other earnings, the disability retirants shall be required to file a report with the System which [shall] may include copies of the retirant's IRS 1040 forms and W-2 forms and any other proofs of employment requested of a specific retirant indicating the type of employment they are engaged in, if any, and the gross earned income realized therefrom as of December 31 of [each] the prior year.

[1. Such report shall be filed with the System before the following April 30.]

[2. Failure on the part of the retirant to file a completed report with the System before April 30 shall result in the presentation of the retirant's case to the PERS Board of Trustees who may impose penalties or suspend the retirant's entire retirement allowance for the period the report is in default.]

[(b)](c) If the Department of Labor and Workforce Development or a retirant reports employment and earnings, then the following tests shall be made by the [System] Division [to ascertain]:

[1. If the retirant is engaged in a position subject to coverage by the System, the retirement allowance shall be cancelled and the retirant shall be reenrolled in the Fund pursuant to N.J.S.A. 43:15A-44, effective as of the date of the retirant's appointment to such position. Any disability retirement benefits received after this date of appointment shall be refunded to the System.]

[2.] 1. If the retirant is engaged in employment, and the gross earned income for the preceding calendar year exceeds the difference between the pension portion of the retirement benefit and the salary the retirant would have been receiving had the retirant continued to work for the former employer [(normal increment steps and salary range revisions will be considered but no promotional assumptions will be made), an appropriate adjustment to the pension for the period will be made by such difference], the retirant shall be billed for the amount of the overpayment. Further, the Division shall assume that the retirant continues to be employed at the same level of salary for the current year. Therefore, a dollar for dollar reduction may be made in anticipation of excess earnings in the current year. If, in the subsequent year, it is determined that the salary earned in the previous year was higher, appropriate repayment to the System shall be requested by the Division. If the salary earned was less, then a refund shall be made minus any outstanding amounts owed. If the gainful employment ends, the retirant must notify the Division in order to have the amount of reduction recalculated.

[3.] 2. If it is found[, on or after April 30,] by the Division that gross earned income for the prior calendar year exceeded the difference between the pension portion of the retirement benefit and the salary of the retirant's former position and if the retirant does not refund the excess pension to the System within 30 days of notification of the difference, the pension portion of the retirement allowance shall be further reduced [, dollar for dollar, by the excess earnings] in order to recover the overpayment. [The Board of Trustees shall determine the length of time that the retirant's pension allowance will be reduced.] If the remaining pension portion of the retirement benefit is not large enough to recover the amounts owed after a dollar for dollar reduction has been taken, then the annuity portion of the benefit as well as any death benefits or survivor's benefits shall be reduced by the amounts owed.

3. System interest shall be assessed on any repayment schedules.

(d) Retirants who retired on or before October 1, 1992, and who are age 60 or older, shall be exempt from the above earnings test beginning with the calendar year in which they attain the age of 60. Retirants who retired on or after November 1, 1992 are subject to the earnings test for their lifetime.


GENERAL ADMINISTRATION
DOMESTIC PARTNERS

Adopted New Rule: N.J.A.C. 17:1-5.5

Cite as 36 N.J.R. 3472(a)

Adopted November 1, 2004

The agency proposal follows:

Summary

P.L. 2003, chapter 246, which was enacted on January 12, 2004 and becomes effective on July 10, 2004, has been designated the "Domestic Partnership Act."

P.L. 2003, chapter 246 (N.J.S.A. 26:8A-1 et seq.), creates a mechanism, through the establishment of domestic partnerships, for New Jersey to recognize and support the adult individuals in this State who share a personal, emotional and committed relationship with another adult. The law provides that two persons who desire to become domestic partners may execute and file an Affidavit of Domestic Partnership if they meet the requirements set forth in the law. This law accords domestic partners rights and responsibilities that reflect the mutually interdependent and supportive nature of domestic partnership relationships and makes certain health and pension benefits available to dependent domestic partners in the case of domestic partnerships in which both persons are of the same sex and therefore unable to enter into a marriage with each other that is recognized by New Jersey law.

In the case of State employees, domestic partners are eligible for dependent coverage under the State Health Benefits Program and survivor benefits under State-administered retirement systems (Public Employees' Retirement System, Police and Firemen's Retirement System, Judicial Retirement System, Teachers' Pension and Annuity Fund, and State Police Retirement System). In the case of other public employees, including employees of counties, municipalities and boards of education, eligibility for survivor benefits under the State-administered retirement systems is available if the employer adopts a resolution providing for such coverage. Likewise, local employers (counties, municipalities, and boards of education) participating in the State Health Benefits Program may adopt a resolution providing for dependent coverage for domestic partners.

P.L. 2003, chapter 246 at N.J.S.A. 26:8A-11 specifically limits the availability of health benefit and pension benefit provisions of the Domestic Partnership Act to same sex couples, and does not extend such benefits to those heterosexual couples who are age 62 or older. Because this portion of the law is not found in the pension system or State Health Benefits Program statutes, the Division proposes to clarify this limitation through this rulemaking.

Finally, because the Federal government does not recognize domestic partners as dependents for Federal income tax purposes, the Division of Pensions and Benefits proposes to clarify in rule how to calculate the benefit, what form to report it on and that the money used to pay for the benefit cannot be tax-deferred under the State's Section 125 Tax$ave Program or an employer's section 125 plan unless the domestic partner meets all the criteria of Section 152 of the Internal Revenue Code (26 U.S.C. § 152) and qualifies as a dependent for Federal tax purposes.

A 60-day comment period is provided and, therefore, pursuant to N.J.A.C. 1:30-3.3(a)5, this proposal is not subject to the provisions of N.J.A.C. 1:30-3.1and 3.2 governing rulemaking calendars.

Full text of the proposed new rule follows:

17:1-5.5 Domestic partners

(a) Resolutions by the employer to adopt the provisions of P.L. 2003, c.246, the Domestic Partnership Act, cannot take effect prior to the date of the resolution. If the employer decides to adopt the provisions of P.L. 2003, c.246, the employer must adopt the provisions for all its employees and retirees in all of the retirement systems in which it participates and not just members of a specific retirement system.

  1. An employer may adopt the provision of P.L. 2003, c.246 for the State Health Benefits Program (SHBP) separately from the resolution for the retirement systems. Once a resolution is adopted, it may only be rescinded on a prospective basis. Anyone receiving a survivor's benefit or SHBP coverage based on the old resolution shall continue to do so until such time as they no longer meet the definition of widow, widower, surviving spouse or dependent.

  2. A retired employee of a public employer that has not elected to provide coverage for domestic partners or does not participate in the State Health Benefits Program cannot add a domestic partner to State Health Benefits Program coverage.

(b) Pursuant to P.L. 2003, c.246, the Domestic Partnership Act (N.J.S.A. 26:8A-1 et seq.), the State Health Benefits Program and State-administered retirement system provisions found in sections 41 through 56 of the Act only apply in the case of two persons who are of the same sex and have established a domestic partnership. Therefore:

  1. The domestic partner of a member or retiree who is of the opposite sex of the member cannot meet the definition of widow, widower or surviving spouse found in N.J.S.A. 18A:66-2, 43:6A-3, 43:15A-6, 43:16A-1, 53:5A-3 and cannot receive any statutory survivor benefits through the retirement systems;

  2. The domestic partner of a participant in the State Health Benefits Program who is the opposite sex of the participant cannot enroll for State Health Benefits Program coverage; and

  3. If the widow, widower or surviving spouse of a member or retiree is receiving retirement benefits and then enters into a domestic partnership with a member of the opposite sex, that widow, widower or surviving spouse may continue to receive the retirement benefits.

(c) Since the Federal tax code does not view a domestic partner in the same manner as a spouse, any benefit an employer provides its employees or retirees for a domestic partner will be taxable to the employee or retiree. The employer who adopts the domestic partner benefit for its active and retired employees should report the value of the benefit provided for the domestic partner on Form W-2 as income to the employee or retiree, and the value of the benefit will be subject to Federal income, Social Security, and Medicare taxes. The adopting employer shall also be responsible for the employer share of Social Security and Medicare taxes due on the domestic partner benefit, including the taxes due on any State paid benefits.

  1. The income reported by the employer shall be the full cost of single coverage in the plan in which the domestic partner is enrolled.

  2. Anything that the employee or retiree pays for the domestic partner coverage through premium sharing arrangements will reduce the amount of the income reported to the Federal government for the domestic partner benefit. These premiums cannot be made on a pre-tax basis unless the domestic partner meets the Federal definition of dependent. If the domestic partner qualifies as a dependent of the covered member for Federal income tax purposes, the value of the domestic partner benefit will not be taxable to the employee or retiree, and any premium paid by the employee toward the domestic partner benefit can be deducted on a pre-tax basis through the State's Section 125 Tax $ave Program. To be eligible for the tax exemption, the employee or retiree must file a certification of tax dependency with the Division of Pensions and Benefits.

(d) The Division will implement equitable distribution for a domestic partner if an acceptable order as described in N.J.A.C. 17:1-1.12 is received by the Division.


GENERAL ADMINISTRATION
NEW JERSEY STATE EMPLOYEES COMMUTER TAX SAVINGS PROGRAM
(COMMUTER TAX$AVE PROGRAM)

Adopted New Rules: N.J.A.C. 17:1-14

Cite as 36 N.J.R. 1735(a)

Adopted on July 19, 2004

The agency proposal follows:

Summary

The New Jersey State Employees Commuter Tax Savings Program, the Commuter Tax$ave Program (the Program), was established through the provisions of P.L. 2001, c.162 (N.J.S.A. 52:14-15.1b and 54A:6-23) to provide a qualifiedtransportation fringe benefit, as defined in, and otherwise consistent with,the provisions and limits of Section 132 of the Federal Internal RevenueCode of 1986, 26 U.S.C. § 132.

The Treasurer has charged the Division of Pensions and Benefits with theadministration, including the development of administrative rules under the Treasurer's rulemaking authority found at N.J.S.A. 52:18A-30(d), of the Program. Therefore, the Division of Pensions and Benefits proposes thefollowing new rules which would establish the Commuter Tax$ave Program. Theproposed rules would also provide for enrollment into and deductions for theProgram, as well as salary reduction elections, purchase of transit products tocover mass transit commuting and parking expenses, claims processing andreimbursement services for parking expenses, rollover of unused elections tofuture benefit periods, and the forfeiture of unused amounts before theprescribed expiration dates. Finally, the proposed rules would establish thatthe Program is intended to comply in all respects with the provisions of theInternal Revenue Code.

The Division of Pensions and Benefits proposes at N.J.A.C. 17:1-14.1 toestablish the Program and to define who is eligible to participate. Theeligibility requirements are the same as those for Tax$ave, the New JerseyState Employees Cafeteria Plan (N.J.A.C. 17:1-13) which limits participationto State employees who are eligible for employer-paid State Health BenefitsProgram (SHBP) coverage and excludes employees participating under theprovisions of P.L. 2003, c.172 (N.J.S.A. 52:14-17.33a). Since P.L.2003, c.172, does not create any additional benefits for these part-timeemployees other than limited SHBP eligibility, participation in the Commuter Tax$ave Program would be a benefit not anticipated in the legislation.

The Division of Pensions and Benefits proposes at N.J.A.C. 17:1-14.2 toestablish the enrollment procedures and the minimum amounts that can bededucted. It would also provide that deductions would be taken in the first payperiod of the month prior to the benefit month and that the amount of reductionwould still be treated as regular compensation for all purposes other thanFederal, Social Security and Medicare taxes.

Proposed N.J.A.C. 17:1-14.3 provides that the Program operates on a month-to-month basis, that the employee may make monthly changes to the deductionamount and that the deductions would remain in effect until the employee makesa change or leaves payroll. It also requires a formal election of the benefit.

Proposed N.J.A.C. 17:1-14.4 outlines how transportation fringe benefits aredistributed to employees, how reimbursements of qualified parking benefitswould be made and that refunds of unused amounts are not permitted, but may berolled over to a future benefit date.

Proposed N.J.A.C. 17:1-14.5 provides how claims for payment of parkingbenefits from plan accounts would be made and that the total payments cannotexceed the total salary reduction amount.

Proposed N.J.A.C. 17:1-14.6 provides that account balances would beforfeited if they are not rolled over to a future benefit within the opportunities provided to do so. Finally, proposed N.J.A.C. 17:1-14.7provides that the Program is intended to comply with the provisions of Section 132 of the Federal Internal Revenue Code.

A 60-day comment period is provided and, therefore, pursuant to N.J.A.C.

1:30-3.3(a)5, this proposal is not subject to the provisions of N.J.A.C.

1:30-3.1 and 3.2 governing rulemaking calendars.

Full text of the proposed new rules follows:

SUBCHAPTER 14. THE NEW JERSEY STATE EMPLOYEES COMMUTER TAX SAVINGS PROGRAM (COMMUTER TAX$AVE PROGRAM)

17:1-14.1 Establishment of plan

State employees eligible to participate in the State Health Benefits Program, except those part-time employees participating due to the provisions of P.L. 2003, c.172 (N.J.S.A. 52:14-17.33a), are eligible to participate in the New Jersey State Employees Commuter Tax Savings Program, which shall be referred to as the Commuter Tax$ave Program, set forth in this subchapter. The Division of Pensions and Benefits has been charged by the Treasurer with responsibility for administering the Commuter Tax$ave Program. In each month, an employee, but not the employee's spouse or domestic partner, may participate in one or both of the plan options available; mass transit expenses and commuter parking expenses.

17:1-14.2 Enrollment in and deductions for the Commuter Tax$ave Program

(a) Each employee may elect to reduce his or her salary, through monthly payroll deductions, by a specified dollar amount which shall not be less than $15.00 per month in one plan option, to create a Commuter Tax$ave Program account in exchange for the payment by the State, or its plan administrator, of a qualified transportation fringe benefit, as defined in, and otherwise consistent with the provisions and limits of Section 132 of the Federal Internal Revenue Code of 1986, 26 U.S.C. § 132.

(b) Monthly deductions shall be taken by Centralized Payroll in the first pay period of the month prior to the benefit month. State Colleges and Universities may establish when, during the month prior to the benefit month, deductions will be taken.

(c) The amount of any reduction in an employee's salary for the purpose of contributing to the payment of the qualified transportation fringe benefit shall continue to be treated as regular compensation for all other purposes, including the calculation of pension contributions and the amount of any retirement allowance, but up to the limit permitted by the Federal Internal Revenue Code, shall not be included in the computation of Federal, Social Security or Medicare taxes withheld from the employee's salary.

17:1-14.3 Salary reduction elections

(a) The Commuter Tax$ave Program shall operate on a month-to-month basis.

(b) An employee may make monthly changes in the amount elected as a deduction for the Commuter Tax$ave Program. Deductions shall remain in effect at the same amount until the employee makes a change or leaves payroll.

(c) An employee may elect to have deductions for mass transit expenses, commuter parking expenses, or both.

(d) A formal election is required. The election must include the date of election, amount of reduction, and applicable benefit period (month).

17:1-14.4 Reimbursement of qualified transportation fringe benefit

(a) Pre-tax salary reduction amounts will be used to purchase benefit products (transit passes, transit vouchers, etc.) that can be used to pay for mass transit and parking expenses.

(b) Pre-tax salary reduction amounts for qualified parking expenses will be reimbursed to employees upon the submission of a claim form and documentation to substantiate incurred expenses.

(c) Reimbursement claims for parking expenses must be submitted within 180 days of the date the expense is incurred.

(d) Refunds of unused parking election amounts are not permitted; however, unclaimed amounts can be rolled over to a subsequent benefit month as described in N.J.A.C. 17:1-14.6.

17:1-14.5 Claims for payment from plan accounts

(a) Claims for payment of expenses eligible for payment from the Commuter Tax $ave Program account shall be submitted to the plan administrator with parking or park-and-ride receipts. Information about the plan administrator and claim forms shall at all times be available from the Division of Pensions and Benefits.

(b) In each month, the total payments from a Commuter Tax$ave Program account shall not exceed the total salary reduction amount elected by the employee for that account for that month.

(c) Commuter Tax$ave Program accounts may not be used to pay expenses incurred prior to the employee's participation in the account or for periods that an employee is not contributing to the Program, except as permitted by Section 132 of the Federal Internal Revenue Code of 1986, 26 U.S.C. § 132.

(d) Commuter Tax$ave Program accounts may only be used to pay for eligible commuter expenses incurred by the employee.

17:1-14.6 Forfeiture of account balances

In the event that the amount elected by an employee to fund a Commuter Tax$ave Program-Commuter Parking Reimbursement account in a given month exceeds the employee's total claims for Commuter Parking Reimbursement expenses incurred in that month and eligible for payment from the Commuter Tax$ave Program-Commuter Parking Reimbursement account, or if the employee fails to file a request for Commuter Parking Reimbursement within 180 days of the date the expense is incurred, the balance in the Commuter Tax$ave Program account for that month shall be forfeited to the State unless the employee requests a rollover of the unused amount to a future benefit month. The program's administrator shall send the employee two separate notices of the rollover option. Rollover notices will be sent in July and January of each calendar year. An employee will receive an initial notice when available funds are older than 180 days. For employees who fail to respond to the initial notice, second notice will be sent six months later. If the employee fails to exercise the rollover option within 30 days of the date of the second notice, the unused balance shall be forfeited to the State.

17:1-14.7 Compliance with Internal Revenue Code

The Commuter Tax$ave Program is intended to comply in all respects with the provisions of Section 132 of the Federal Internal Revenue Code of 1986, 26 U.S.C. § 132.


STATE POLICE RETIREMENT SYSTEM
SERVICE AND SALARY CREDIT: AWARDS OF BACK PAY

Adopted Recodification with Amendment: N.J.A.C. 17:5-5.6 as 17:5-3.6

Cite as 36 N.J.R. 4835(b)

Adopted October 18, 2004

The agency proposal follows:

Summary

The Division of Pensions and Benefits has recently received a number of awardsof back pay for members of the Public Employees' Retirement System, theTeachers' Pension and Annuity Fund (N.J.A.C. 17:3-6.6), the Police andFiremen's Retirement System (N.J.A.C. 17:4-6.6) and the State PoliceRetirement System (SPRS).

The awards were often missing information, or attempted to award time that wasnot pensionable or to use salary that was not creditable. Therefore, the Boardbelieves that an amendment to the existing rule is necessary to detail whatinformation must be included in an award of back pay in order for that award tobe implemented by the Division so as to grant service credit to the member. Theproposed amendment would also state what salaries to use in calculating pensioncontributions and would require, at a minimum, that the award be equal topension contributions. This amendment is necessary because the adequacy of the award was never questioned before, leading to many awards of $1.00 to cover theentire period of service, thus undermining the public policies that the Boardis pledged to uphold.

The proposed amendment at new subsection (d) would also caution members thatamounts given in anticipation of retirement or amounts negotiated merely toaffect retirement benefits cannot be included as creditable salary. N.J.S.A. 53:5A-3 specifically excludes amounts given in anticipation of retirement fromthe definition of compensation. Also, the courts have been very clear on theissue of negotiating pension benefits. In Fair Lawn Education Association v.Teachers' Pension and Annuity Fund 79 N.J. 574, 401 A.2d 681, 684 (1979), theCourt states that, "The right to negotiate does not apply to the area ofretirement benefits. Specifically, the Legislature has determined that theentire subject matter of public employee pensions is to be insulated fromnegotiated agreement which would contravene or supplement its comprehensiveregulation of that area. Public employees and employee representatives mayneither negotiate nor agree upon any proposal which would affect the sacrosanctsubject of employee pensions."

Because the proposed rule as proposed for amendment deals with service creditand the salaries to be used to determine the cost of service credit and notretirement benefits, the Board proposes to recodify the rule to the membershipsubchapter at N.J.A.C. 17:5-3.6.

The Board proposes to add "service" before "credit" in N.J.A.C. 17:5-5.6(a)to clarify what type of credit is being discussed, and to change the word "in"to "for" to indicate that service credit may be granted even though thededuction based on salary was not received in the pay period or month it wasearned. The Board proposes in N.J.A.C. 17:5-5.6(b) to replace the referenceto "retirement" credit with "service" credit because the Division uses servicecredit to calculate a retirement benefit. The phrase, "regardless of the amountof the back pay awarded" would be deleted because the Board is proposing torequire that the award of back pay be at least as much as pension contributionsfor the period of the award. The final sentence in N.J.A.C. 17:5-5.6(b), "Inthe 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 themember," has been incorporated into N.J.A.C. 17:5-5.6(c).

A 60-day comment period is provided and, therefore, pursuant to N.J.A.C.

1:30-3.3(a)5, this proposal is not subject to the provisions of N.J.A.C.

1:30-3.1 and 3.2 governing rulemaking calendars.

Full text of the proposal follows :

17:5-[5.6] 3.6 [Retirement credit] Service and salary credit: awards of back pay

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

(b) A member who appeals the suspension or termination of the member's employment and is awarded back pay for all or a portion of the member's employment for the period of such suspension or termination shall receive [retirement] service 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) In no case shall the award of back payment be less than the value of the normal pension contributions due. If the amount of the award of back pay is mitigated so that the member does not receive an amount equal to or greater than the value of the normal pension contributions due, then the member is required to remit the normal pension contribution directly to the Division of Pensions and Benefits. If a member waives an award of back pay, then the member cannot receive service or salary credit for the period of the award.

(d) If the award is structured in such a way as to provide the member with a substantial increase of creditable salary at or near the end of the member's service, or a substantial increase in retirement benefits, the award shall be reviewed by the Board of Trustees. If the Board determines that the pension benefit was part of the negotiations for the award, or if the award includes extra compensation as defined by N.J.A.C. 17:5-3.1, the member shall have the contributions for the salaries based on the award refunded without interest, and the Board shall determine the compensation to be used to calculate the retirement allowance.

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


GENERAL ADMINISTRATION
CENTRAL PENSION FUND
LAST CHECK BENEFIT

Adoted New Rule: N.J.A.C. 17:1-12.5

Cite as 36 N.J.R. 1734(a)

Adopted on July 19, 2004

The agency proposal follows:

Summary

The Central Pension Fund consists of the administration of a series ofnoncontributory pension acts. The benefits are administered by the Division ofPensions and Benefits in accordance with governing statutes and administrativerules. As of June 30, 2002, there were 359 pensioners receiving annual pensionstotaling $410,656. Most of these pensioners are receiving benefits under theprovisions of N.J.S.A. 43:4-1 et seq., Retirement of Certain Veterans AfterTwenty Years' Public Service, N.J.S.A. 43:5-1 et seq., State Officers andEmployees Generally, and N.J.S.A. 43:5A-1 et seq., State Employees--Noncontributory Pensions. Another group of pensioners in the Central PensionFund receive benefits under a catastrophic entitlement fund through theDepartment of Veteran and Military Affairs. These pensioners receive a monthlybenefit of $62.50 without any additional cost-of-living increases. P.L. 1993, c.335 permitted beneficiaries of retirees of the PublicEmployees' Retirement System, Teachers' Pension and Annuity Fund, Police andFiremen's Retirement System, State Police Retirement System and JudicialRetirement System to receive a retirement benefit for the month in which theretiree died. Previously, a retiree had to live the entire month in order forthe beneficiary to be eligible to receive any portion of the retirement benefitfor that month. P.L. 1993, c.335 also amended the cost-of-living adjustmentprovisions found at N.J.S.A. 43:3B-2A so that a full month of the cost-of-living adjustment could be paid as well.

The Division of Pensions and Benefits was recently asked whether a benefitsimilar to that provided for by P.L. 1993, c.335 could be provided topensioners of the Central Pension Fund. The Division received advice indicatingthat the Division could pay the cost-of-living adjustment, if applicable, forthe entire month in which the pensioner died, as well as a prorated portion ofthe retirement benefit, but the Division could not pay the entire benefitwithout legislative authority. Therefore, the Division proposes a new rule, N.J.A.C. 17:1-12.5, Last check benefit, which would codify this new policyfor deaths that occur after the effective date of the proposed rule.

A 60-day comment period is provided and, therefore, pursuant to N.J.A.C.

1:30-3.3(a)5, this proposal is not subject to the provisions of N.J.A.C.

1:30-3.1 and 3.2 governing rulemaking calendars.

Full text of the proposed new rule follows:

17:1-12.5 Last check benefit

After the effective date of this rule and pursuant to N.J.S.A. 43:3B-2A, a cost-of-living adjustment shall be payable to the estate of a pensioner who is receiving a benefit under the provisions of N.J.S.A. 43:4-1 et seq., 43:5-1 et seq., or 43:5A-1 et seq. for the entire month in which the pensioner dies. The estate shall also receive a prorated portion of the retirement benefit equal to the number of days the pensioner lived during that month.


GENERAL ADMINISTRATION
PAYMENT OF PENSION CONTRIBUTIONS; DEATH OF MEMBER

Adopted New Rule: N.J.A.C. 17:1-5.4

Cite as 36 N.J.R. 1733(a)

Adopted on July 19, 2004

The agency proposal follows:

Summary

The Division of Pensions and Benefits was recently asked whether a member could stipulate that the return of the member's pension contributions not be made until the member's beneficiary turned 21 instead of 18.It has been the Division's practice to return the member's pensioncontributions upon the attainment of age 18 by a named beneficiary. No interestaccrues on a member's pension contributions after the member's death, so therewould not be a financial reason to leave the contributions with the Division.

Furthermore, the Division does not have a tracking system in place which wouldprompt the payment of the benefit, nor does it keep changes of beneficiaryaddresses after a member dies.Therefore, the Division proposes the following new rule which would clarifythat the return of a member's pension contribution would be made as soon afterthe beneficiary's 18th birthday as possible. The proposed rule would alsorequire a beneficiary to notify the Division when the benefit is payable.

Finally, because there are no provisions in statute in the systems in whichinterest is payable on an active member's pension contributions for the paymentof interest on a member's contributions after the death of the member, theproposed rule would state that no interest accrues on the member's pensioncontributions from the date of the member's death until the payment is made tothe named beneficiary.

A 60-day comment period is provided for this notice of proposal; therefore,pursuant to N.J.A.C. 1:30-3.3(a)5, this notice is not subject to theprovisions of N.J.A.C. 1:30-3.1 and 3.2 governing rulemaking calendars.

Full text of the proposed new rule follows:

17:1-5.4 Return of pension contributions; death of member

(a) A deceased member's pension contributions shall be payable to a named beneficiary who is at least 18 years old.

(b) If a member designates a beneficiary who is not yet 18 years old to receive the return of pension contributions, and no trustee or guardian is appointed, the Division of Pensions and Benefits will pay the benefit as soon after the beneficiary's 18th birthday as possible. The beneficiary must notify the Division at the time of his or her 18th birthday for the benefit to be paid.

(c) No interest accrues on the member's contributions between the date of the member's death and the date of distribution.


PUBLIC NOTICE
TREASURY-GENERAL

DIVISION OF PENSIONS AND BENEFITS

PROPOSAL TO INCLUDE THE NON-CIVIL SERVICE POSITION OF
DETECTIVE, WATERFRONT COMMISSION OF NEW YORK HARBOR
IN THE POLICE AND FIREMEN'S RETIREMENT SYSTEM

Cite as 36 N.J. Reg. 1245(a)

Take notice that in compliance with N.J.A.C. 17:4-2.1(h), and the recommendation of the Director of the Division of Pensions and Benefits, and as determined by the Board of Trustees of the Police and Firemen's Retirement System, the above title meets the definition of "policeman" or "fireman" as defined by N.J.S.A. 43:16A-1(2). The Board of Trustees of the Police and Firemen's Retirement System hereby proposes to include the positions listed above as eligible titles in the Police and Firemen's Retirement System. Interested parties should comment by March 31, 2004 to JoAnn Martin, Board and Trustee Administration, Division of Pensions and Benefits, PO Box 295, Trenton, NJ 08625-0295.


TEACHERS' PENSION AND ANNUITY FUND
SERVICE AND SALARY CREDIT: AWARDS OF BACK PAY

Adopted Recodification with Amendment: N.J.A.C. 17:3-6.6 as 17:3-4.7

Cite as 36 N.J.R. 3267(c)

Adopted July 6, 2004

The agency proposal follows:

Summary

The Division of Pensions and Benefits has recently received a number of awards of back pay for members of the Public Employees' Retirement System, the Teachers' Pension and Annuity Fund (N.J.A.C. 17:3-6.6) and the Police and Firemen's Retirement System (N.J.A.C. 17:4-6.6).

The awards were often missing information, or attempted to award time that was not pensionable or to use salary that was not creditable. Therefore, the Board believes that an amendment at new subsection (c) to the existing rule at N.J.A.C. 17:3-6.6 is necessary to detail what information must be included in an award of back pay in order for that award to be implemented by the Division so as to grant service credit to the member. The proposed amendment would also state what salaries to use in calculating pension contributions and would require, at a minimum, that the award be equal to pension contributions. This amendment is necessary because the adequacy of the award was never questioned before, leading to many awards of $1.00 to cover the entire period of service, thus undermining the public policies that the Board is pledged to uphold.

The proposed amendment at new subsection (d) would also caution members that amounts given in anticipation of retirement or amounts negotiated merely to affect retirement benefits cannot be included as creditable salary. N.J.S.A. 18A:66-2 specifically excludes amounts given in anticipation of retirement from the definition of compensation. Also, the courts have been very clear on the issue of negotiating pension benefits. In Fair Lawn Education Association v. Teachers' Pension and Annuity Fund, 79 N.J. 574, 401 A.2d 681, 684 (1979), the Court states that, "The right to negotiate does not apply to the area of retirement benefits. Specifically, the Legislature has determined that the entire subject matter of public employee pensions is to be insulated from negotiated agreement which would contravene or supplement its comprehensive regulation of that area. Public employees and employee representatives may neither negotiate nor agree upon any proposal which would affect the sacrosanct subject of employee pensions."

The Board proposes to add "service" before "credit" in N.J.A.C. 17:3-6.6(a) to clarify what type of credit is being discussed, and to change the word "in" to "for" to indicate that service credit may be granted even though the deduction based on salary was not received in the pay period or month it was earned. The Board proposes in N.J.A.C. 17:3-6.6(b) to replace the reference to "retirement" credit with "service" credit because the Division uses service credit to calculate a retirement benefit. The phrase, "regardless of the amount of the back pay awarded" would be deleted because the Board is proposing to require that the award of back pay be at least as much as pension contributions for the period of the award. The Board also proposes to clarify, at N.J.A.C. 17:3-6.6(b), that contributory group life insurance contributions, if applicable, are also required when an award of back pay has been made. This has been Board practice for many years. The final sentence in N.J.A.C. 17:3- 6.6(b), "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," has been incorporated into N.J.A.C. 17:3-6.6(c).

Because the proposed rule deals with service credit and the salaries to be used to determine the cost of service credit and not retirement benefits, the Board proposes to move the rule to the membership subchapter at N.J.A.C. 17:3-4.7.

A 60-day comment period is provided and, therefore, pursuant to N.J.A.C.

1:30-3.3(a)5, this proposal is not subject to the provisions of N.J.A.C.

1:30-3.1 and 3.2 governing rulemaking calendars.

Full text of the proposal follows :

17:3-[6.6]4.7 [Retirement credit] Service and salary credit: awards of back pay

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

(b) A member who appeals the suspension or termination of the member's employment and is awarded back pay for all or a portion of that employment for the period of such suspension or termination shall receive [retirement] service credit for the period covered by the award [, regardless of the amount of the back pay awarded,] provided a full normal pension and contributory group life insurance contribution (if applicable) 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) In no case shall the award of back payment be less than the value of the normal pension contributions due. If the amount of the award of back pay is mitigated so that the member does not receive an amount equal to or greater than the value of the normal pension contributions and contributory life insurance due, then the member is required to remit the normal pension contribution and contributory insurance directly to the Division of Pensions and Benefits. If a member waives an award of back pay, then the member cannot receive service or salary credit for the period of the award.

(d) If the award is structured in such a way as to provide the member with a substantial increase of creditable salary at or near the end of the member's service, or a substantial increase in retirement benefits, the award shall be reviewed by the Board of Trustees. If the Board determines that the pension benefit was part of the negotiations for the award, or if the award includes extra compensation as defined by N.J.A.C. 17:3-4.1, the member shall have the contributions for the salaries based on the award refunded without interest, and the Board shall determine the compensation to be used to calculate the retirement allowance.

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


GENERAL ADMINISTRATION
PURCHASE TERMS; GRACE PERIOD

Adopted Amendment: N.J.A.C. 17:1-4.2

Cite as 36 N.J. Reg. 661(a)

Adopted February 2, 2004

Summary

The Division of Pensions and Benefits has begun publicizing the availability of applying tax-deferred contributions to the cost of a purchase of service credit. For the past year, the Division has been accepting rollovers from various financial plans and has realized the 60-day grace period for making purchases of service does not provide enough time for rollovers. A number of plans only issue rollovers on a monthly basis.

The Division proposes to amend N.J.A.C. 17:1-4.2 by changing the 60-day grace period for purchases to a 90-day period. This should provide enough time for the member to contact the financial plan and for the plan to issue the rollover to the Division. If the purchase is not authorized within the 90-day period, then the cost quotation would be recalculated.

A 60-day comment period is provided for this notice of proposal; therefore, pursuant to N.J.A.C. 1:30-3.3(a)5, this notice of proposal is not subject to the provisions of N.J.A.C. 1:30-3.1 and 3.2 governing rulemaking calendars.

Full text of the proposal follows:

17:1-4.2 Purchase terms; grace period

A member who receives a written optional purchase cost quotation is given a [60-day] 90-day grace period to confirm that he or she wishes to make the purchase of credit. If the confirmation of the purchase is not received from the member within [60] 90 days, the cost of purchase must be recalculated to determine if any change in the cost is warranted as a result of change in age or salary.


PUBLIC EMPLOYEES' RETIREMENT SYSTEM
SERVICE AND SALARY CREDIT: AWARDS OF BACK PAY

Adopted Recodification with Amendment: N.J.A.C. 17:2-6.6 as 17:2-4.5

Cite as 36 N.J.R. 3066(b)

Adopted May 19, 2004

Summary

The Division of Pensions and Benefits has recently received a number of awards of back pay for members of the Public Employees' Retirement System, the Teachers' Pension and Annuity Fund (N.J.A.C. 17:3-6.6) and the Police and Firemen's Retirement System (N.J.A.C. 17:4-6.6).

The awards were often missing information, or attempted to award time that was not pensionable or to use salary that was not creditable. Therefore, the Board believes that an amendment at new subsection (c) to the existing rule at N.J.A.C. 17:2-6.6 is necessary to detail what information must be included in an award of back pay in order for that award to be implemented by the Division so as to grant service credit to the member. The proposed amendment would also state what salaries to use in calculating pension contributions and would require, at a minimum, that the award be equal to pension contributions. This amendment is necessary because the adequacy of the award was never questioned before, leading to many awards of $1.00 to cover the entire period of service, thus undermining the public policies that the Board is pledged to uphold.

The proposed amendment at new subsection (d) would also caution members that amounts given in anticipation of retirement or amounts negotiated merely to affect retirement benefits cannot be included as creditable salary. N.J.S.A. 43:15A-6r specifically excludes amounts given in anticipation of retirement from the definition of compensation. Also, the courts have been very clear on the issue of negotiating pension benefits. In Fair Lawn Education Association v. Teachers' Pension and Annuity Fund, 79 N.J. 574, 401 A.2d 681, 684 (1979), the Court states that, "The right to negotiate does not apply to the area of retirement benefits. Specifically, the Legislature has determined that the entire subject matter of public employee pensions is to be insulated from negotiated agreement which would contravene or supplement its comprehensive regulation of that area. Public employees and employee representatives may neither negotiate nor agree upon any proposal which would affect the sacrosanct subject of employee pensions."

The Board proposes to add "service" before "credit" in N.J.A.C. 17:2-6.6(a) to clarify what type of credit is being discussed, and to change the word "in" to "for" to indicate that service credit may be granted even though the deduction based on salary was not received in the pay period or month it was earned.

The Board proposes in N.J.A.C. 17:2-6.6(b) to replace the reference to "retirement" credit with "service" credit because the Division uses service credit to calculate a retirement benefit. The phrase, "regardless of the amount of the back pay awarded" would be deleted because the Board is proposing to require that the award of back pay be at least as much as pension contributions for the period of the award.

The Board also proposes to clarify at N.J.A.C. 17:2-6.6(b) that contributory group life insurance contributions are also required when an award of back pay has been made. This has been Board practice for many years. The requirements of final sentence in N.J.A.C. 17:2-6.6(b), "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," has been incorporated into N.J.A.C. 17:2-6.6(c).

Because the rule as proposed for amendment deals with service credit and the salaries to be used to determine the cost of service credit and not retirement benefits, the Board proposes to recodify the rule to the membership subchapter at N.J.A.C. 17:2-4.5.

A 60-day comment period is provided and, therefore, pursuant to N.J.A.C. 1:30-3.3(a)5, this proposal is not subject to the provisions of N.J.A.C. 1:30-3.1 and 3.2 governing rulemaking calendars.

Full text of the proposal follows :

17:2-[6.6]4.5 [Retirement credit]Service and salary credit: awards of back pay

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

(b) A member who appeals the suspension or termination of the member's employment and is awarded back pay for all or a portion of that employment for the period of such suspension or termination shall receive [retirement] service credit for the period covered by the award [, regardless of the amount of the back pay awarded,] provided a full normal pension and contributory group life insurance contribution (if applicable) 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) In no case shall the award of back payment be less than the value of the normal pension contributions due. If the amount of the award of back pay is mitigated so that the member does not receive an amount equal to or greater than the value of the normal pension contributions and contributory life insurance due, then the member is required to remit the normal pension contribution and contributory insurance directly to the Division of Pensions and Benefits. If a member waives an award of back pay, then the member cannot receive service or salary credit for the period of the award.

(d) If the award is structured in such a way as to provide the member with a substantial increase of creditable salary at or near the end of the member's service, or a substantial increase in retirement benefits, the award shall be reviewed by the Board of Trustees. If the Board determines that the pension benefit was part of the negotiations for the award, or if the award includes extra compensation as defined by N.J.A.C. 17:2-4.1, the member shall have the contributions for the salaries based on the award refunded without interest, and the Board shall determine the compensation to be used to calculate the retirement allowance.

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


POLICE AND FIREMEN'S RETIREMENT SYSTEM
SERVICE AND SALARY CREDIT: AWARDS OF BACK PAY

Adopted Recodification with Amendment: N.J.A.C. 17:4-6.6 as 17:4-4.8

Cite as 36 N.J. Reg. 622(a)

Adopted November 1, 2004

The agency proposal follows:

Summary

The Division of Pensions and Benefits has recently received a number of awards of back pay for members of the Public Employees' Retirement System, the Teachers' Pension and Annuity Fund (N.J.A.C. 17:3-6.6) and the Police and Firemen's Retirement System (N.J.A.C. 17:4-6.6).

The awards were often missing information, or attempted to award time that was not pensionable or to use salary that was not creditable. Therefore, the Board believes that an amendment at new subsection (c) to the existing rule at N.J.A.C. 17:4-6.6 is necessary to detail what information must be included in an award of back pay in order for that award to be implemented by the Division so as to grant service credit to the member. The proposed amendment would also state what salaries to use in calculating pension contributions and would require, at a minimum, that the award be equal to pension contributions. This amendment is necessary because the adequacy of the award was never questioned before, leading to many awards of $1.00 to cover the entire period of service, thus undermining the public policies that the Board is pledged to uphold.

The proposed amendment at new subsection (d) would also caution members that amounts given in anticipation of retirement or amounts negotiated merely to affect retirement benefits cannot be included as creditable salary. N.J.S.A. 43:16A-1 specifically excludes amounts given in anticipation of retirement from the definition of compensation. Also, the courts have been very clear on the issue of negotiating pension benefits. In Fair Lawn Education Association v.

Teachers' Pension and Annuity Fund, 79 N.J. 574, 401 A.2d 681, 684 (1979), the Court states that "The right to negotiate does not apply to the area of retirement benefits. Specifically, the Legislature has determined that the entire subject matter of public employee pensions is to be insulated from negotiated agreement which would contravene or supplement its comprehensive regulation of that area. Public employees and employee representatives may neither negotiate nor agree upon any proposal which would affect the sacrosanct subject of employee pensions."

Because the rule as proposed for amendment deals with service credit and the salaries to be used to determine the cost of service credit and not retirement benefits, the Board proposes to recodify the rule to the membership subchapter at N.J.A.C. 17:4-4.8.

The Board proposes to add "service" before "credit" in N.J.A.C. 17:4-6.6(a) to clarify what type of credit is being discussed, and to change the word "in" to "for" to indicate that service credit may be granted even though the deduction based on salary was not received in the pay period or month it was earned.

The Board proposes in N.J.A.C. 17:4-6.6(b) to replace the reference to "retirement" credit with "service" credit because the Division uses service credit to calculate a retirement benefit. The phrase, "regardless of the amount of the back pay awarded" would be deleted because the Board is proposing to require that the award of back pay be at least as much as pension contributions for the period of the award. The final sentence in N.J.A.C. 17:4-6.6(b), "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," has been incorporated into N.J.A.C. 17:4-6.6(c).

A 60-day comment period is provided and, therefore, pursuant to N.J.A.C. 1:30-3.3(a)5, this proposal is not subject to the provisions of N.J.A.C. 1:30-3.1 and 3.2 governing rulemaking calendars.

Full text of the proposal follows :

17:4-[6.6] 4.8 [Retirement credit] Service and salary credit: awards of back pay

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

(b) A member who appeals the suspension or termination of the member's employment and is awarded back pay for all or a portion of that employment for the period of such suspension or termination shall receive [retirement] service 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) In no case shall the award of back payment be less than the value of the normal pension contributions due. If the amount of the award of back pay is mitigated so that the member does not receive an amount equal to or greater than the value of the normal pension contributions due, then the member is required to remit the normal pension contribution directly to the Division of Pensions and Benefits. If a member waives an award of back pay, then the member cannot receive service or salary credit for the period of the award.

(d) If the award is structured in such a way as to provide the member with a substantial increase of creditable salary at or near the end of the member's service, or a substantial increase in retirement benefits, the award shall be reviewed by the Board of Trustees. If the Board determines that the pension benefit was part of the negotiations for the award, or if the award includes extra compensation as defined by N.J.A.C. 17:4-4.1, the member shall have the contributions for the salaries based on the award refunded without interest, and the Board shall determine the compensation to be used to calculate the retirement allowance.


PUBLIC EMPLOYEES' RETIREMENT SYSTEM
INELIGIBLE PERSONS

Adopted Amendment: N.J.A.C. 17:2-2.3

Cite as 36 N.J.R. 3066(a)

Adopted May 19, 2004

The agency proposal follows:

Summary

In the April 1, 2002 New Jersey Register (at 34 N.J.R. 1364(a)), the Public Employees' Retirement System (PERS) Board of Trustees proposed amendments to N.J.A.C. 17:2-2.3, Ineligible persons, to comply with the provisions of P.L. 2001, c.278 (N.J.S.A. 43:15A-57.2) which became law on December 31, 2001. P.L. 2001, c.278 requires the cancellation of retirement and reenrollment in PERS of a PERS retiree who earns more than $15,000 in the

aggregate from all PERS employers. When Assembly Bill 1694 was introduced to amend the provisions of P.L. 2001, c.278 to allow for a member to earn $15,000 from each employer instead of from an aggregate of post-retirement employment, the Board decided not to adopt the proposed amendments because of the expected statutory change. On October 3, 2003, Governor McGreevey vetoed Assembly Bill 1694. Therefore, the Board is once again proposing changes to N.J.A.C. 17:2-2.3, Ineligible persons, to comply with the provisions of P.L. 2001, c.278.

The proposed amendments to N.J.A.C. 17:2-2.3(a)4 and 7 are necessary due to the enactment of P.L. 2001, c.278. This act changes the earnings limit for a retiree of the PERS who is working in a PERS covered position for one or more public employers. As noted, P.L. 2001, c.278 requires cancellation of retirement and reenrollment in the PERS if the PERS retiree earns more than $15,000 in a calendar year from all PERS covered employment.

Previously, the calendar year limit was $10,000 and it was not an aggregate limit; rather, it was a limit for each PERS employer. Prior to the enactment of P.L. 2001, c.278, a PERS retiree who returned to work with more than one PERS employer could consider the salaries earned at each employer separately for the $10,000 annual limit. For example, if a PERS retiree's annual salary at one PERS employer was $9,000 and the annual salary at another PERS employer was $7,500, the PERS retiree would not be required to reenroll in the PERS.

P.L. 2001, c.278 now provides that a PERS retiree may return to PERS covered employment and earn an aggregate amount of $15,000 or less in a calendar year. All PERS employment is considered in determining whether the $15,000 threshold has been reached. For example, a PERS retiree who earns $7,000 per year from two PERS employers ($14,000 annually) would not be eligible to reenroll, but a PERS retiree who earns $7,501 per year from two PERS positions ($15,002) would be required to reenroll.

The proposed amendment to N.J.A.C. 17:2-2.3(a)4 would add that the enrollment eligibility provisions do not apply to PERS retirees as well as to current members of PERS. The proposed amendment to N.J.A.C. 17:2-2.3(a)7 would include the addition of the word "aggregate" before "calendar year" and the requirement that the PERS retiree notify the PERS employer or employers when the compensation exceeds the calendar year compensation for exclusion from membership. This addition is necessary because the Division does not have access to salaries if the employee is not contributing to the retirement system; therefore, it cannot determine when the threshold has been reached. Many retirees have more than one post-retirement employer; therefore, one employer may not know that the threshold has been reached through other employment without information from the retiree. The language regarding PERS retiree employment at more than one PERS employer would be deleted because the new law provides for an aggregate of salary and does not consider each employment separately.

The proposed addition of N.J.A.C. 17:2-2.3(a)10 and 11 is necessary due to the enactment of legislation which created two additional categories of ineligible people. P.L. 2001, c.253 permits PERS retirees to take employment in teaching positions at institutions of higher education without having to reenroll in the PERS regardless of income. P.L. 2001, c.355 provides a one- year exemption from employment after retirement for PERS retirees who obtain employment with a Board of Education or with the Department of Education in positions of critical need. A PERS retiree covered by this exception may have this exemption extended for an additional year.

A 60-day comment period is provided for this notice of proposal; therefore, pursuant to N.J.A.C. 1:30-3.3(a)5, this notice of proposal is not subject to the provisions of N.J.A.C. 1:30-3.1 and 3.2 governing rulemaking calendars.

Full text of the proposal follows :

17:2-2.3 Ineligible persons

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

1.-3. (No change.)

4. Any employee who is provisionally appointed to a Civil Service position is considered as an employee with temporary employment status and is ineligible to establish membership until the employee receives a regular Civil Service appointment, or has one year of continuous service. This does not apply to anyone who is already enrolled as a member or is a retiree from the System. Breaks in service of less than 30 days do not negate the continuity of service;

5.-6. (No change.)

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

8. Any person who is employed in an intermittent title. The designation "intermittent" shall be used for those titles in the career service in which work responsibilities are characterized by unpredictable work schedules and which do not meet the normal criteria for regular year-round, full-time or part-time assignments; [and]

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

10. Any retired member, as defined in (a)7 above, who returns to employment with an institution of higher education in a teaching position covered by the PERS pursuant to N.J.S.A. 43:15A-57.2; and

11. Any retired member, as defined in (a)7 above, who becomes employed by the State Department of Education in a position of critical need as determined by the State Commissioner of Education, or becomes employed by a board of education in a position of critical need as determined by the superintendent of the district on a contractual basis for a term of not more than one year pursuant to N.J.S.A. 43:15A-57.2. The retired member so reemployed may renew a contract for one additional year, pursuant to N.J.S.A. 43:15A-57.2, provided that the total period of employment with any individual board of education does not exceed a two-year period. The cancellation, reenrollment, and additional retirement allowance provisions and the compensation limitations shall apply if the retired member becomes employed within 120 days of retirement in a position with the employer from which the member retired.


STATE HEALTH BENEFITS PROGRAM
PART-TIME EMPLOYEES GROUP

Adopted New Rules: N.J.A.C. 17:9-11

Cite as 36 N.J.R. 2423(a)

Adopted on May 17, 2004

The agency proposal follows:

Summary

P.L. 2003, c.172 (N.J.S.A. 52:14-17.33a) was signed into law on September 4, 2003. This new law provides that a part-time State employee or a part-time faculty member, including part-time lecturers and adjunct faculty members, at a public institution of higher education that participates in the State Health Benefits Program (SHBP), will be eligible to participate in the SHBP managed care plan, NJ PLUS, for themselves and eligible dependents. Chapter 172 requires the employee or faculty member to pay the full cost of coverage, plus any associated administrative costs, unless the employer is obligated to pay all or a portion of such costs in accordance with the provisions of a binding collective negotiations agreement. It also provides that employees who pay for this coverage are not entitled to employer-paid post-retirement medical coverage on the basis of this coverage. It provides that the State Health Benefits Commission may establish rules and regulations concerning the enrollment and termination of coverage of employees and faculty members in the State Health Benefits Program, and the procedures for the remittance to the program of the cost of coverage. Finally, it provides that the laws and regulations governing the State Health Benefits Program, except as modified in the proposed new subchapter, are applicable to enrollments in NJ PLUS and shall be construed to apply to part-time employees or faculty members and their dependents in the same manner as to full-time employees or faculty members and their dependents to the extent possible.

Proposed N.J.A.C. 17:9-11.1 establishes the Part-time Employees Group and provides that enrollment in the group is voluntary; that the rules governing the State Health Benefits Program, except as modified by this subchapter, apply to this group; that coverage terminates at death or termination of employment and that Chapter 172 does not provide for conversion to an individual policy; that duplicate coverage is not permitted; how long coverage may be maintained during a leave of absence; when eligible dependents may be added; and that coverage may be continued during a furlough.

Proposed N.J.A.C. 17:9-11.2 states who is eligible to enroll in the Part- time Employees Group pursuant to Chapter 172. Proposed N.J.A.C. 17:9-11.3 defines the State-managed care plan and allows a member to waive the prescription drug portion of the offered coverage. It also clarifies that there were no rights to dental or vision benefits created by this law.

Proposed N.J.A.C. 17:9-11.4 establishes how premiums will be paid. Because many of the employees who are eligible for this coverage do not receive enough salary to have the costs deducted, direct billing is the most practical method.

Proposed N.J.A.C. 17:9-11.5 provides that separate rates reflecting the actual cost of the benefit plus administrative costs may be established for this group as provided for in the new law.

Proposed N.J.A.C. 17:9-11.6 establishes that all coverage in the Part-Time Employees Group shall be on a monthly basis instead of either a monthly or biweekly basis to make the billing process more effective. It also establishes the date when coverage under the Part-time Employees Group begins pursuant to N.J.S.A. 52:14-17.26, which requires a 60-day waiting period. Finally, it provides that eligible employees hired under a 10-month contract may be enrolled as of September 1 to be consistent with the enrollment practice for other 10-month employees found at N.J.A.C. 17:9-5.11.

Proposed N.J.A.C. 17:9-11.7 establishes when the coverage of an employee who moves from the Part-Time Employees Group to full-time coverage becomes effective. N.J.A.C. 17:9-7.2(c)3 provides that coverage cannot be effective for a part-time employee moving to full-time until the 60-day waiting period has been met. A member of the Part-time Employees Group could continue coverage under COBRA until the full-time coverage begins.

Proposed N.J.A.C. 17:9-11.8 provides when coverage is terminated due to nonpayment of premiums and is similar to N.J.A.C. 17:9-7.1. It adds the clarification that this type of termination is not a COBRA event, and the employee could not re-enroll until the next open-enrollment period.

Proposed N.J.A.C. 17:9-11.9 states when termination of coverage occurs when employment ends. It also clarifies that a COBRA notice would be given in this instance.

Finally, proposed N.J.A.C. 17:9-11.10 provides for members of the Part-Time Employees Group to continue coverage into retirement in NJ PLUS, and also permits a surviving spouse to continue the benefit.

A 60-day comment period is provided and, therefore, pursuant to N.J.A.C. 1:30-3.3(a)5, this proposal is not subject to the provisions of N.J.A.C. 1:30-3.1 and 3.2 governing rulemaking calendars.

SUBCHAPTER 11. PART-TIME EMPLOYEES GROUP17:9-11.1

Establishment of Part-time Employees Group

(a) The State Health Benefits Program Part-Time Employees Group was established under the provisions of P.L. 2003, c.172 (N.J.S.A. 52:14- 17.33a).

(b) Enrollment for coverage is voluntary. A separate election will be required for enrollment, change in or a voluntary termination of coverage in the Part- time Employees Group. If an employee does not elect coverage within 60 days of eligibility for participation in the Part-time Employees Group, the employee may only enroll during an open-enrollment period.

(c) The laws and regulations governing the State Health Benefits Program, except as modified in this subchapter, are construed to apply to part-time employees or faculty members and their dependents to the extent possible.

(d) Except under the provisions of the Federal Consolidated Omnibus Budget Reconciliation Act of 1985, 29 U.S.C. § § 1161-1168 (COBRA) law, coverage is not continued in the event of death, or other termination of the group coverage. There is no right of conversion from the Part-Time Employees Group to nongroup coverage.

(e) Duplicate coverage is not permitted; an individual may be covered only once. An individual eligible as both a subscriber and as the dependent of someone else can be enrolled as an employee or as a dependent but not as both an employee and a dependent.

(f) Coverage may be continued during an approved leave of absence without pay of not more than nine months provided the employee pays the monthly premium.

(g) Eligible dependents may be added during the open enrollment or if a qualifying event occurs as defined by N.J.A.C. 17:9-2.4.

(h) Where the otherwise eligible employee elects a volunteer furlough or a voluntary furlough extension, as authorized by N.J.S.A. 11A:6-1.1, coverage shall continue with the employee paying the costs as if the member were an active employee, provided that the employee remits, in advance, the monthly amount required for the employee's coverage.

17:9-11.2 Eligible part-time employees

Part-time employees of the State, including employees of the State colleges and universities, New Jersey Building Authority, New Jersey State Library, Palisades Interstate Parkway Commission, and the Commerce and Economic Growth Commission, as well as part-time faculty at county colleges participating in the SHBP, are eligible to enroll if they are members of the State-administered retirement system.

17:9-11.3 Coverage available

(a) The State Managed Care Plan is NJ PLUS.

(b) Pursuant to P.L. 2003, c.172 (N.J.S.A. 52:14-17.33a), members of the Part-time Employees Group shall be eligible for coverage in NJ PLUS. Members shall also be eligible for coverage under the State Employee Prescription Drug Plan. There shall be no prescription drug coverage under NJ PLUS.

(c) Eligible employees may waive enrollment in the State Employee Prescription Drug Plan, but in no case shall they be allowed to enroll in the State Employee Prescription Drug Plan without also being enrolled in NJ PLUS.

(d) There is no eligibility for dental or vision or any other benefit created by P.L. 2003, c.172.

17:9-11.4 Payment of coverage

The employee will be billed directly for the cost of premiums plus administrative fees.

17:9-11.5 Cost of coverage

The State Health Benefits Commission may adopt separate rates for the Part- time Employees Group reflecting the actual cost of the benefit plus administrative costs.

17:9-11.6 Effective date of coverage

(a) Coverage for all members of the Part-time Employees Group shall be on a monthly basis.

(b) The coverage for members eligible to enroll in the Part-time Employees Group shall be effective on the first of the month following the completion of two months of continuous service after enrollment in a State-administered retirement system, or two months after the effective date of P.L. 2003, c.172 (January 1, 2004). This is the normal waiting period prescribed for new enrollees pursuant to N.J.S.A. 52:14-26. Billing for coverage shall begin approximately one month prior to the effective date.

(c) An employee hired under a 10-month contract whose enrollment in a State- administered retirement system becomes effective on September 1 may establish coverage in the Part-time Employees Group as of that date.

17:9-11.7 Effect of full-time employment on participation in the Part-time Employees Group

A member of the Part-time Employees Group who changes from part-time to full- time status cannot be enrolled for employer-paid coverage until the employee has established eligibility for coverage by serving the normal waiting period prescribed for new enrollees. In no event will the waiting period for full-time coverage include any part-time service rendered by the employee.

17:9-11.8 Termination of coverage due to nonpayment of premiums

(a) Cessation of coverage in the Part-time Employees Group shall be deemed to occur on the last day of eligibility for the coverage period for which charges have been paid.

(b) If a member of the Part-time Employees Group does not remit payment by the end of the month in which payment is due and owing, the SHBP shall notify the member by regular mail that the right to continue coverage will be suspended if payment in full is not remitted within 30 days. If no payment is made, the SHBP shall generate a notice of termination to the member indicating the termination date and restating the amounts due to reinstate coverage. Termination shall be effective on the last day of the month for which premiums were paid.

(c) Termination for nonpayment of premiums is not a COBRA event. An active employee terminated for nonpayment of premiums would not be able to re-enroll in the Part-time Employees Group until the next regular open enrollment.17:9-11.9 Termination of coverage due to termination of employment with an eligible employerThe eligibility for coverage for members of the Part-time Employees Group ends at the end of the month in which termination from an eligible employer occurs. The employer must notify the Division of Pensions and Benefits of the termination and issue the employee a COBRA notice.

17:9-11.10 Coverage in retirement

(a) Participation in the Part-time Employees Group pursuant to this section shall not qualify the employee or faculty member for employer-paid or State- paid health care benefits in retirement. Upon retirement, such employees or faculty members who were enrolled in NJ PLUS immediately prior to retirement shall be eligible to continue NJ PLUS coverage as a retiree at their own expense. Prescription drug benefits under NJ PLUS shall be provided through the Retiree Prescription Drug Card Plan (N.J.A.C. 17:9-6.10).

(b) Whenever possible, the cost of retiree coverage will be deducted directly from the retirement allowance or pension checks. Where the available retirement allowance or pension check is less than the charge for coverage, no amount will be deducted to pay for the cost of the coverage; instead, the retiree will be permitted to continue coverage if the retiree pays for the full cost of coverage in advance on a monthly basis.

(c) An eligible surviving spouse will be offered the opportunity to continue participation in NJ PLUS subsequent to the death of the retiree. Coverage will be limited to only those dependents covered at the time of the retiree's death. The surviving spouse must pay the full costs.


PUBLIC EMPLOYEES' RETIREMENT SYSTEM
PROSECUTORS PART

Adopted New Rules: N.J.A.C. 17:2-8

Cite as 36 N.J.R.3068(a)

Adopted May 19, 2004

The agency proposal follows:

Summary of Public Comments and Agency Responses:

Comments were received from the following organizations and individuals:

  • Charles Ouslander, Deputy Attorney General in the Division of Criminal Justice
  • John Krayniak, Deputy Attorney General in the Division of Criminal Justice, and Chief of the Medicaid Fraud Section
  • Thomas Bracken, Assistant Sussex County Prosecutor
  • John Redden, Assistant Morris County Prosecutor
  • Robert M. Holmsen, Chief Assistant Passaic County Prosecutor
  • Robert D. Bernardi, Burlington County Prosecutor and President of the County Prosecutors Association of New Jersey
  • Steven J. Zweig, Deputy Attorney General in the Division of Criminal Justice
  • Ralph E. Amirata, Assistant Morris County Prosecutor
  • Kelly Anne Shelton, Assistant Warren County Prosecutor and President of the Assistant Prosecutors' Association of New Jersey
  • John K. McNamara, Jr., Assistant Morris County Prosecutor, Chief of Major Crimes Unit

The comments have been arranged according to the rule to which they refer.

Economic Impact

COMMENT: Mr. Redden commented that there is an inconsistency in the EconomicImpact statement. He states, "The problem is that the language of proposedN.J.A.C. 17:2-8.9 is not in accord with the comment. Rather that section dealswith the issue of withdrawal of contributions."

RESPONSE: The commenter is correct that the statement regarding N.J.A.C. 17:2-8.9 was meant to be used to describe N.J.A.C. 17:2-8.11. The Board apologizesfor this error.

General Comment

COMMENT: Mr. Amirata commented on the proposal in general that, "It seemsapparent that when the pension part for prosecutors was established in 2002,the legislature intended the pension to mirror the PFRS and benefit careerprosecutors. However, this proposal alters that benefit into an extremely highcontributory pension that offers less incentive to continue governmentemployment. Please do everything in your power to see that the legislativeintent is carried out and the pension system becomes the benefit that it wasintended to be."

RESPONSE: The Board cannot grant benefits that have not been provided for instatute. P.L. 2001, c.366, the legislation which established the ProsecutorsPart, was hastily written and unclear in many respects. The Board asserts thatmany of the points made by the commenters must be addressed through correctivelegislation and are not within the rulemaking powers of the Board of Trustees.

N.J.A.C. 17:2-8.1 Definitions

"Annual salary"

COMMENT: Mr. Bracken commented regarding the issue of the definition of annualsalary. He asks, "What is ambiguous regarding the definition of annual salary?"It would "diminish through averaging what my current annual salary is at thetime of my retirement." He adds that, "The special retirement under theProsecutors Part tracks the retirement provisions of the Judicial RetirementSystem and Workers Compensation Judges part of the Public Employees' RetirementSystem and not police and firemen. Annual compensation should equal currentannual salary like Judicial and not salary for the last 12 months which is whatPFRS does."

RESPONSE: The specific intent of the legislation according to the SenateBudget and Appropriations Committee stated that "this bill establishesretirement benefits for members of the Prosecutors Part that are the same asthose applicable under the Police and Firemen's Retirement System." There is nolegislative intent equating the benefit to judges. Therefore, the Boardbelieves that defining annual compensation in the same manner as the Police andFiremen's Retirement System is reasonable and in keeping with the legislativeintent. There would not be any averaging of salary for members of theProsecutors Part who retire on a special retirement benefit.

"Average annual compensation"

COMMENT: Mr. Bernardi commented that the proposed definition of "averageannual compensation" "undermines the legislature's intent to provide a pensionfor members of the Prosecutors Part based solely on the members salary duringthe last 12 months before retirement." Ms. Shelton added, "Enactment of theproposed definition of 'average annual compensation' would create confusion andperhaps, incongruities in pension compensation to retirees."

RESPONSE: Final compensation is the basis for the Prosecutors Part specialretirement benefit. Even the service retirement benefit with 20 or more yearsof service is based upon final compensation. The regular service retirementbenefit (two percent a year based upon final average compensation) is the onlyplace in this legislation which does not use final compensation. It appearsthat this may have been an oversight on the part of the bill drafters. A membercould still obtain, in effect, a regular service retirement benefit based uponfinal compensation by filing for a deferred retirement with a one-monthdeferral. The benefit formula is the same, but the salary basis for deferredretirement is final compensation. With the new 20-year service retirementbenefit and the special retirement benefit, the regular service retirementbenefit will be applicable only to members with less than 20 years of service.Therefore, based on the comments, and a review of the legislation, the Board onadoption, is amending the definition of "average annual compensation" to meanthe same as "annual salary." Any service benefits would be calculated using thelast 12 months of salary instead of the average of the final three years.

"Service"

COMMENT: Ms. Shelton commented that, "The proposed regulation regarding thedefinition of service is contrary to the clear legislative purpose which is tocredit without cost prior PERS service." She states that members of theProsecutors Part should receive credit without cost for all prior PERS serviceor at least prior service as a prosecutor. Commenters believed that theregulations proposed would have the contrary effect of making the position ofassistant prosecutors less, not more, attractive, something which theLegislature never contemplated.

RESPONSE: P.L. 2003, chapter 140 was recently enacted by the Legislature topermit an individual nominated and appointed pursuant to Article VII, SectionII, paragraph 1 of the New Jersey Constitution, to the position of a countyprosecutor after January 7, 2002 to receive full credit in the Prosecutors Partof the Public Employees' Retirement (PERS) for non-Prosecutor Part PERS servicerendered prior to the date of appointment. Legislation has also been proposedto do the same for assistant prosecutors. If the legislative intent was as Ms.Shelton suggested, there would not be any need for this legislation. The Boardbelieves that legislation is the correct way to proceed if all prior service isto be credited as Prosecutors Part service.

COMMENT: Ms. Shelton of the Assistant Prosecutors' Association (APA) suggeststhe need for two additional definitions. "First, there should be a definitionof special retirement. Second, because many members of the Prosecutors Part atthe time of retirement may also have service in regular PERS, the APA suggestsa definition of combined service to be added." She suggests the followinglanguage:

" 'Special retirement' means a retirement election by a prosecutor who hasestablished at least 25 years of creditable service in the Prosecutors Partregardless of age, for which the pension, when added to the prosecutor'sannuity, will provide a total retirement allowance of 65% of finalcompensation, plus 1% of final compensation multiplied by the number of yearsof creditable service over 25 but not over 30."

" 'Combined service' means service of a prosecutor who has time both in PERSand in the Prosecutors Part."

RESPONSE: The Board agrees that the suggested inclusion of the above twoadditional definitions is reasonable and necessary and, therefore, adds thedefinitions at adoption.

COMMENT: The definition of investigator should not limit enrollment into theProsecutors Part of investigators denied membership in the Police and Firemen'sRetirement System solely because of age.

RESPONSE: When this rule was first drafted, it was anticipated that only thoseinvestigators denied membership in the PFRS solely because of age would go intothe Prosecutors Part. The personnel office in the Division of Criminal Justicepointed out that many of these investigators were in special investigatortitles as well as other titles that had not been approved for inclusion in thePFRS. Through discussions between the Division of Criminal Justice and theDivision of Pensions and Benefits, it was decided that the definition ofinvestigator as originally proposed was too limited. Therefore, in response tothese discussions, the Board is removing the limitation in the definition ofinvestigator that the ineligibility for PFRS was based solely on age and isamending the definition to include all criminal investigators not eligible forPFRS membership.

N.J.A.C. 17:2-8.2 Criteria for determining eligibility for enrollment for employees of the Department of Law and Public Safety

COMMENT: Mr. Ouslander states, "I believe there is an actual, non-waivableconflict of interest regarding the legality of having the Office of theAttorney General or Division of Law act as legal counsel for the Division ofPensions and Benefits, under these circumstances."

RESPONSE: The Division of Pensions and Benefits requested the Office of theGovernor's Counsel to independently review Mr. Ouslander's comment regardingwhether a conflict of interest exists by permitting the Office of the AttorneyGeneral or Division of Law to provide advice regarding the Prosecutors Part tothe Division. That Office responded that in their opinion there is no conflictpresented by this situation which would warrant the wholesale disqualificationof every Deputy Attorney General in the Office of the Attorney General, and theDivision of Law, from providing legal advice to, and representation of, theDivision of Pensions and Benefits. This issue was also referred for ethicalreview in the Department of Law and Public Safety leading to a similarconclusion.

N.J.A.C. 17:2-8.4 Ineligibility for credit in the Prosecutors Part

COMMENT: Ms. Shelton commented that, "The proposed regulation is contrary tothe clear legislative purpose which is to credit without cost prior PERSservice as a prosecutor. The plain language of the statute, principles ofstatutory construction, other PERS provisions and sound policy lead to theconclusion that such time must be credited, without cost, in the ProsecutorsPart of PERS." She added that "a prosecutor, without limitation orqualification as to date of hire, is entitled to prior PERS service creditwithout cost as long as that credit was earned before the act came intoeffect." Mr. Bernardi commented that, "These proposed regulations would have thedetrimental effect of making the position of assistant prosecutor less, notmore, attractive to persons who were assistant prosecutors before the effectivedate of the legislation who are contemplating a return to public service." Mr. Holmsen added, "The denial of credit for established PERS time forprosecutors employed after the effective date of the act as well as denyingsuch individuals the right to aggregate traditional PERS time and ProsecutorsPart time for purposes of determining retirement eligibility createssubstantial equal protection issues. Similarly, the refusal to permit aprosecutor to receive credit in the Prosecutors Part for the purchase of priorservice raises equal protection issues. These issues are generated by thevarious classification and the disparate treatment which results." A number of comments added that when there is some doubt or ambiguity as towhether the act intended to allow assistant prosecutors employed after itseffective date to receive credit without cost for time previously establishedin PERS, this doubt must be resolved in favor of the employee, and the timeshould be credited in the Prosecutors Part without further cost. The commentsadd that the principle of liberal construction of pension legislation must begiven particularly heavy weight here. They point out that the Legislature'sspecifically stated purpose for the Prosecutors Part legislation was to provideenhanced benefits for prosecutors.

RESPONSE: The Board notes that the language used by the Legislature creates adistinction between those employed as prosecutors on January 7, 2002, theeffective date of the statute, and those not employed as prosecutors as of thatdate. Only persons who were prosecutors as of January 7, 2002 are entitled totransfer the entire PERS account into the Prosecutors Part. The Board believesthat this interpretation is reasonable and rationally based upon thelegislation. Therefore, without further legislative action, the Board cannotcomply with the commenters' request to credit all prior PERS service in theProsecutors Part if the member was not in a Prosecutors Part position as of theeffective date of the legislation.

N.J.A.C. 17:2-8.5 Interfund transfers

COMMENT: Mr. Redden commented that, "The transfer statutes mandate that anassistant prosecutor who is employed after January 7, 2002 receive credit forother service in the PERS positions." He states, "Aside from the fact that theclear language of this statute (N.J.S.A. 43:2-1) requires that credit be givenfor prior PERS service, the public policy reflected in the statute alsorequires this. This policy behind the statute is obviously to avoid the evilswhich would be created by fragmenting a public employee's pension between oramong multiple pension systems."

RESPONSE: The transfer statute cited speaks to transfer between differentretirement systems. The Prosecutors Part is a part of the Public Employees'Retirement System and not a different system. All service could be used asregular PERS service if it provides a greater benefit to the member. The cost free transfer of prior PERS service is available only to those who wereprosecutors on January 7, 2002.

N.J.A.C. 17:2-8.6 Purchase of service

COMMENT: Mr. Bernardi commented that, "This proposed regulation interprets thestatute in a manner that is unfair and contradicts the anguage of the enablingstatute. Moreover, this interpretation runs contrary to similar statutes andcase law pertaining to pensions and retirement benefits."

Mr. Redden adds thatmembers of the Prosecutors Part should be entitled to purchase prior serviceand have it credited in the Prosecutors Part of PERS. He states, "Since anypurchased credit time will in effect be placed in a different pension system,the benefit afforded to all PERS employees of obtaining credit for otherservice will be significantly diminished if not negated entirely. This is sobecause the purchased time and Prosecutors Part time will be in two differentpension systems, and for all of the reasons stated above this will result indiminished pension benefits."

Mr. Ouslander adds, "Purchase of service creditshould be considered to be Prosecutors Part service and not regular PERSservice. Purchase of prior employment in another State or with the USgovernment, including military service is available as a matter of law formembers of the Prosecutors Part as a preexisting benefit of PERS. Purchase ofcredit for all previous membership in PERS that has been withdrawn is availableas a matter of law for members of the Prosecutors Part as a preexisting benefitof PERS." Mr. Ouslander further adds that "Creditable service includes allprior public employment eligible for purchase credit under N.J.S.A. 43:15A-73.1and N.J.S.A. 43:15A-8(b)."

Ms. Shelton comments, "The only interpretation of the Prosecutors Part thatcan be maintained by the Board must allow prosecutors the same right topurchase prior service credit as all other members of PERS are entitled to do."She adds, "Under this regulatory scheme, these prosecutors have paid theirpurchase money to the Division of Pensions and Benefits with no foreseeablebenefit from it at the time of retirement, and no foreseeable likelihood of itbeing refunded before then."

Mr. McNamara comments, "The proposed regulations are in contradiction to thestated position of the Board that prior service credit, including out-of-Statetime, would be credited as in the Prosecutors Part if it had been purchasedprior to January 7, 2002." He adds, "The proposed regulations will adverselyimpact the administration of justice in the State of New Jersey. Theregulations proposed gut that goal of having the best available people serve asprosecutors. The legislative goal to ensure that the best available candidatesserve that special role is furthered by providing people who have prior publicemployment in this State or other states the option of becoming prosecutorsbecause of the appeal of enhanced pension benefits."

RESPONSE: P.L. 2001, chapter 366 made no provisions for PERS service prior toJanuary 7, 2002, to be credited to the Prosecutors Part unless the member wasemployed as a prosecutor on that date. The legislation did not create apurchase right for Prosecutors Part service. This absence contrasts with thelegislative treatment of similar situations. For example, N.J.S.A. 43:15A-152expressly authorizes such purchases for judges of compensation and makesdetailed provisions for the purchase. N.J.S.A. 43:15A-137 specificallyauthorizes the purchase of legislative service for legislators. Therefore,without specific legislative authority, the Board cannot comply with thecomments to allow the purchase of service to be credited in the ProsecutorsPart.

N.J.A.C. 17:2-8.11 Election of largest possible retirement allowance

COMMENT: Mr. Krayniak disagrees with the proposed rule change at N.J.A.C.17:2-8.11(c) which indicates there will be no refund of the difference betweenthe Prosecutors Part and regular PERS contributions if a regular PERS benefitis elected. He states, "Enactment of this rule would trigger the application ofthe law of unattended [sic] consequences. The enactment would work as ahardship on Prosecutors Part veterans who choose to retire at age 60 with 20years of pension credit."

Mr. Holmsen adds, "Fundamental fairness dictates thatif a veteran member of the Prosecutors Part elects to retire under a non-Prosecutors Part formula, the excess contributions should be refunded to thatemployee." Mr. Holmsen concludes, "It effectively makes prosecutors pay morethan they would if the legislation had never been enacted and requiresprosecutors to pay more than all other PERS employees for the same benefit. Itis preposterous to suppose that the Legislature intended such a result. This isa perfect example of the proposed rules' disregard of the legislative mandateand why the rules in many instances are flawed because they have lost touchwith the legislative intent." Mr. Redden adds, "I believe that the Boardintends to allow a member to elect regular PERS benefits where those benefitswould be greater than what would be available under the Prosecutors Part. Inlight of this, I request that the Board adopt a regulation which makes it clearthat a member who has combined service in the Prosecutors Part and regular PERSmay elect early retirement pursuant to N.J.S.A. 43:15A-41b."

RESPONSE: The Board will add a specific reference to early retirement underN.J.A.C. 17:2-8.11, Election of largest possible retirement allowance.Currently, there are no provisions in P.L. 2001, chapter 366 or in the enablingstatutes of PERS (N.J.S.A. 43:15A-1 et seq.) which would permit the refund ofthe difference between regular PERS and Prosecutors Part contributions shouldthe member elect to receive a regular PERS benefit. Legislators do not receivea refund of the difference between the legislative contribution rate and PERSif they elect a PERS benefit. Therefore, although the commenters make apersuasive argument, to the extent possible, the Board must treat these partsof PERS similarly and cannot refund the requested contributions.

N.J.A.C. 17:2-8.12 Service retirement

COMMENT: Ms. Shelton states, regarding proposed N.J.A.C. 17:2-8.12 whichlimits retirement after 20 years of service regardless of age only toprosecutors who were employed on the effective date of the statute, that, "Thefundamental flaw with this proposed regulation is that it grafts onto theprovision an age requirement for prosecutors employed after January 7, 2002that does not exist. The proposed regulation misinterprets 'as of the effectivedate.' The phrase as employed does not limit the provision to prosecutorsemployed on the effective date, but merely precludes retroactive application tothose prosecutors who previously retired with 20 or more years of creditableservice."

RESPONSE: Only those members of the Police and Firemen's Retirement System whowere enrolled in the PFRS at the time that P.L. 1999, c.428 became effectiveare eligible to retire from the PFRS at any age with 20 or more years ofservice. All other members must wait until they are 55 to retire under aservice retirement benefit at 50 percent of salary. The legislation whichestablished the Prosecutors Part mirrors in many ways the provisions of P.L.1999, chapter 428. The Board does not believe that the legislative intent ofthe Prosecutors Part was to provide a greater benefit to prosecutors than topolice officers and firefighters. Further, there were no retirees in theProsecutors Part prior to January 7, 2002, so Ms. Shelton's argument regardingretroactive application does not have any basis. Finally, the Board believesthat the statute is clear to the effect that only those who were prosecutorswhen P.L. 2001, chapter 366 was enacted are eligible to take service retirementafter 20 years regardless of age. All others must satisfy the age and servicerequirements.

COMMENT: Mr. Zweig suggests, "One reasonable solution which effectuates theLegislature's intent to provide enhanced benefits to prosecutors, without alsodividing a public employee's benefits between pension systems, would be todetermine the amount of the pension benefit using a pro rata formula based onthe respective percentages of traditional PERS service and Prosecutors PartPERS service." He adds, "Such an approach avoids the twin evils of diminishingpension benefits for prosecutors and extending the service time required toretire, both of which the Legislature clearly did not intend. At the same timeit is in accord, at least in part, with the expressed legislative intent ofproviding enhanced pension benefits for prosecutors. And it also is consistentwith the clearly expressed legislative policy of avoiding fragmentation of apublic employee's benefits between or among multiple State pension systems."

RESPONSE: While the Board finds Mr. Zweig's suggestion interesting, it cannotfind any basis in the legislation, advice or statutory authority which wouldpermit this calculation of benefits. The Board notes that a legislative memberof the PERS who has service in both legislative and regular PERS faces similarissues. The Board suggests the need for legislation if additional clarificationis needed for those with combined service.

N.J.A.C. 17:2-8.14 Retirement date for prosecutors having both regular and Prosecutors Part Public Employees' Retirement System service

COMMENT: Mr. Redden states, "Assuming arguendo that prior PERS service of aprosecutor employed after the effective date of stablishment of theProsecutors Part is not to be fully credited in the Prosecutors Part,Prosecutors Part time should still be considered in determining retirementeligibility and final salary for purposes of calculation benefits; accordingly,proposed rules N.J.A.C. 17:2-8.4, 17:2-8.14 and 17:2-8.11 should not be adoptedbut should be modified to further the legislature's intent." He adds, "Bysegregating service time into what is, in effect, two different pensionsystems (regular PERS and the Prosecutors Part of PERS) the proposed rulesdiminish benefits from what they would be if the Prosecutors Part legislationhad never been enacted."

RESPONSE: The member has the option of electing the benefit which provides thegreatest benefit allowable. If an early PERS benefit is better than theProsecutors Part service benefit, the member would be able to elect thatbenefit. If a Prosecutors Part benefit and regular PERS benefit are elected,then the salaries cannot be combined. If only a regular PERS benefit iselected, all PERS salaries would be used to calculate the retirement benefit.

N.J.A.C. 17:2-8.15 Options at retirement

COMMENT: Mr. Bernardi argues that the Legislature's intent was to create asurvivor's benefit similar to that available to Police and Firemen's RetirementSystem members. He adds that the regulation must permit members of theProsecutors Part to receive the same survivor-benefit coverage that isavailable to members of the Police and Firemen's Retirement System.

RESPONSE: Without statutory authority, the Board cannot provide an automaticsurvivors benefit similar to that provided for in the law governing the Policeand Firemen's Retirement System. A member of the Prosecutors Part may provide abenefit to a survivor by selecting the applicable option at retirement.

Summary of Changes Upon Adoption:

The Public Employees' Retirement System Board of Trustees amends N.J.A.C.17:2-8.1 in response to the comments received. The Board proposes to amend thedefinition of "average annual compensation" to mean the same as "annualsalary." Any Prosecutors Part service benefits would be calculated using thelast 12 months of salary instead of the average of the final three years. Thisamendment would benefit the member by not averaging the final three years ofsalary. The Board also proposes to add a definition for "combined service" assuggested by the commenters which would mean having service credit in both theregular PERS and in the Prosecutors Part. The Board proposes to eliminate therequirement from the definition of "investigator" that the member be in aPolice and Firemen's Retirement System position and was denied enrollment inthe Police and Firemen's Retirement System solely because of age in response tocomments. This would also benefit the member. Again, in response to thecomments, a definition of "special retirement" would also be added.

N.J.A.C. 17:2-8.11, Election of largest possible retirement allowance, wouldbe amended to clarify that a member with combined service may elect any PERSbenefit including early retirement, service and veterans retirement. Thisamendment is in response to the comments received. Because the proposed amendments do not have a negative impact, and merelybetter define an aspect of the Prosecutors Part, the Board asserts that theseamendments are appropriate at adoption.

Federal Standards Statement

A Federal standards analysis is not required because N.J.S.A. 43:15A-17governs the subject of the adopted new rules, and there is no Federal

requirement or standard that affects the subject of this rulemaking.

Full text of the adoption follows :

SUBCHAPTER 8. PROSECUTORS PART

17:2-8.1 Definitions

The following words and terms, when used in this subchapter, shall have the following meanings unless the context clearly indicates otherwise:

"Annual salary" means the compensation received by a member of the Prosecutors Part in the last 12 months of creditable service preceding retirement or death.

"Average annual compensation" means the [average] annual salary [ upon which contributions are made to the Prosecutors Part for the three years of creditable service immediately preceding retirement or death, or it shall mean the average annual salary for which contributions are made during any three fiscal years of membership providing the largest possible benefit to the member],as defined above.

"Combined service" means service credit in both the regular PERS and in the Prosecutors Part."

"PERS" means the Public Employees Retirement System.

"Regular Public Employees' Retirement System service" means all service credited as a public employee not meeting the definition of "service" as defined below.

"Service" as a prosecutor as defined by N.J.S.A. 43:15A-155 shall include service as the following. For members employed as prosecutors on January 7, 2002, service shall also include any Public Employees' Retirement System service credited to a member's account on January 7, 2002. Pursuant to P.L. 2003, c.140, for an individual nominated and appointed pursuant to Article VII, Section II, paragraph 1 of the New Jersey Constitution to the position of a county prosecutor after January 7, 2002, service shall also include regular Public Employees' Retirement System service credited as of the date of appointment.

  1. A county prosecutor, first assistant prosecutor, or assistant prosecutor as defined in N.J.S.A. 2A:158-1 et seq.;

  2. The Director of the Division of Criminal Justice in the Department of Law and Public Safety; any assistant director, deputy director, assistant attorney general or deputy attorney general employed by that department and assigned to that division on or after January 7, 2002;

  3. A criminal investigator (as defined by N.J.S.A. 52:17B-100.1) [in an approved Police and Firemen's Retirement System title] in the Division of Criminal Justice who was ineligible for enrollment in the Police and Firemen's Retirement System [solely because of age] on or after January 7, 2002; and

  4. A Department of Law and Public Safety employee meeting the criteria set forth in N.J.A.C. 17:2-8.2.

"Special retirement" as defined in N.J.S.A. 43:15A-159 means a retirement election by a prosecutor who has established at least 25 years of creditable service in the Prosecutors Part regardless of age, for which the pension, when added to the prosecutor's annuity, will provide a total retirement allowance of 65 percent of final compensation, plus one percent of final compensation multiplied by the number of years of creditable service over 25 but not over 30."

17:2-8.2 Criteria for determining eligibility for enrollment for employees of the Department of Law and Public Safety

(a) Employees of the Department of Law and Public Safety who are not assigned to the Division of Criminal Justice shall be eligible for enrollment in the Prosecutors Part provided they satisfy one of the following criteria:

1. The employee is assigned to a unit that has a specific delegation of authority under the Criminal Justice Act of 1970, N.J.S.A. 52:17B-97 et seq., and the employee performs law enforcement functions on behalf of the Attorney General as an assistant attorney general, deputy attorney general or investigator. For the purposes of this section an investigator is defined as someone who assists an assistant attorney general or deputy attorney general in the investigation of potential violations of the law. Specifically, an investigator performs functions related to the detection, apprehension, arrest or conviction of persons and entities who violate the law; or

2. The employee is detached from his or her assignment in the Division of Criminal Justice to another division or office within the Department of Law and Public Safety and performs law enforcement functions on behalf of the Attorney General under the Criminal Justice Act of 1970, N.J.S.A. 52:17B-97 et seq. Additionally, the employee, prior to being detached from the Division of Criminal Justice, must have been eligible for enrollment in the Prosecutors Part according to P.L. 2001, c.366.

17:2-8.3 Contribution rate

(a) The rate of contribution to the Prosecutors Part of the Public Employees' Retirement System shall be 7.5 percent as established by the Board of Trustees.

(b) The rate of contribution shall be reviewed by the System's actuaries periodically and adjusted by the Board as necessary.

17:2-8.4 Ineligibility for credit in the Prosecutors Part

A person who was not employed as a prosecutor on January 7, 2002 is not eligible to have any portion of his or her Public Employees' Retirement System account credited to the Prosecutors Part except as provided under the definition of "service" in N.J.A.C. 17:2-8.1.

17:2-8.5 Interfund transfers

(a) A person who contributes to another State-administered retirement system and was not employed as a prosecutor on January 7, 2002 is not eligible to have any portion of his or her State-administered defined benefit retirement system credit transferred into the Prosecutors Part. The State-administered defined benefit retirement system credit shall become regular PERS credit.

(b) The service credit of a member of the Prosecutors Part who transfers into another State-administered retirement system pursuant to N.J.S.A. 43:2-1 shall be converted into service credit in the new retirement system. If the member later transfers back into the Public Employees' Retirement System, service that was previously credited in the Prosecutors Part shall be credited as Prosecutors Part service, while all other service shall be credited as regular PERS service.

17:2-8.6 Purchase of service

(a) Any active member of the Prosecutors Part may make an optional purchase of service as authorized by N.J.A.C. 17:2-5.5

(b) Any purchase requested after January 7, 2002 shall be credited as regular PERS service in the calculation of benefits except for the following three types of service which shall be credited as Prosecutors Part service. The cost of this Prosecutors Part service shall be determined using Prosecutors Part actuarial purchase factors:

1. Temporary service after January 7, 2002 as a prosecutor leading directly to permanent employment as a prosecutor;

2. Service properly credited in the Prosecutors Part on or after January 7, 2002 as to which contributions had been withdrawn in accordance with N.J.S.A. 43:15A-8b; and

3. Leaves of absence without pay after January 7, 2002 from service as prosecutor. A prosecutor may purchase the period of a leave of absence pursuant to N.J.A.C. 17:2-5.5(a)4.

(c) An active member who wishes to purchase service credit shall file an application with the Division of Pensions and Benefits. The cost shall be calculated in accordance with N.J.A.C. 17:2-5.5 The member must pay into the annuity savings fund the amount required by applying the factor, supplied by the actuary, to the member's age at the time of purchase and to the member's salary at that time or to the highest annual compensation for service in this State during any fiscal year, including a fiscal year for which credit is purchased, whichever is the highest. Such purchase may be made in regular installments, equal to at least one-half the full normal contribution to the retirement system over a maximum period of 10 years.

17:2-8.7 Eligibility for a loan

Active, contributing members of the Prosecutors Part with at least three years of service credit may exercise the privilege of obtaining a loan pursuant to the provisions of N.J.S.A. 43:15A-34 and IRS regulations. The monthly or biweekly payment amount shall be at least equal to the member's rate of contribution to the Prosecutors Part and cannot exceed 25 percent of the member's compensation. Not more than two loans may be granted to any member in any calendar year. The member's total outstanding loan balance shall not exceed the lesser of 50 percent of the accumulated deductions posted to the member's account or $50,000. Should a prosecutor retire or die with an outstanding loan balance, repayment shall be made according to the provisions of N.J.S.A. 43:15A-34.1 and N.J.A.C. 17:2-6.4.

17:2-8.8 Vesting

(a) A prosecutor with service in both the Prosecutors Part and the regular Public Employees' Retirement System may use the combined noncurrent service in order to meet the 10-year vesting requirement found at N.J.S.A. 43:15A-38 for a member of the PERS.

(b) If the prosecutor begins receipt of a Prosecutors Part retirement benefit prior to the date of eligibility to receive a PERS retirement benefit, the Prosecutors Part service credit shall be subtracted from the member's active account and any credited regular PERS service would remain. A retired member of the Prosecutors Part who does not have 10 or more years of credited regular PERS service remaining in the active account after the Prosecutors Part service is subtracted, and whose regular PERS account will not be active pursuant to N.J.S.A. 43:15A-7e when the member attains the age of 60, cannot collect a benefit based on that service. An application for return of contributions made on the basis of such other public service, if no part of the service was used in the calculation of a retirement allowance or to qualify for payment of health benefits, may be approved.

17:2-8.9 Withdrawal from Prosecutors Part or regular PERS service

(a) A prosecutor, upon termination of service as a prosecutor, may elect to receive the return of the accumulated contributions in accordance with the provisions of N.J.S.A. 43:15A-41 and N.J.A.C. 17:2-4.10 and 4.11.

(b) If a prosecutor is a member of the Public Employees' Retirement System on the basis of other public service, no application for a return of contributions shall be approved until the prosecutor has terminated all service covered by the System and makes application for a return of all contributions made to the System. An application for return of contributions made on the basis of such other public service, if no part of the service was used in the calculation of a retirement allowance or to qualify for payment of health benefits, may be approved.

(c) A prosecutor cannot withdraw from the regular PERS unless retired or withdrawn from the Prosecutors Part.

17:2-8.10 Retirement effective date

A member's retirement allowance shall not become due and payable until 30 days after the date the Board approved the application for retirement or 30 days after the date of retirement, whichever is later.

17:2-8.11 Election of largest possible retirement allowance

(a) At the time of retirement, a member enrolled on the basis of service as a prosecutor, or on a combination of service as a prosecutor and regular PERS service, shall be permitted to elect the largest possible retirement allowance, if the member qualifies for benefits under both the provisions of P.L. 2001, c.366 and N.J.S.A. 43:15A-1 et seq. and the combined service provides a higher benefit. The member may elect any PERS retirement benefit for which the member qualifies, including early retirement pursuant to N.J.S.A. 43:15A-41, veterans retirement pursuant to N.J.S.A. 43:15A-61 and service retirement pursuant to N.J.S.A. 43:15A-48. A prosecutor who elects to receive a regular PERS retirement benefit instead of a prosecutor's benefit, and has 10 or more years of service credit, will have a death benefit equal to [FN3]/16 of the last 12 months of salary upon retirement.

(b) A prosecutor electing to receive a retirement allowance under the Prosecutors Part shall be ineligible to receive a retirement allowance or pension for the same service under any other law of the State.

(c) There will be no refund of Prosecutors Part employee contributions if a regular PERS benefit is elected; nor, will there be a refund of the difference in employee contribution rates between the Prosecutors Part and regular PERS.

17:2-8.12 Service retirement

(a) If a prosecutor is a member of the PERS on the basis of other public service, no application for retirement shall be approved until the prosecutor has terminated all service covered by the System.

(b) A member who was employed as a prosecutor on January 7, 2002 may retire with 20 or more years of creditable Prosecutors Part service at any age by filing a written application, duly attested, stating at what time subsequent to the execution and filing thereof the member desires to be retired.

(c) A member who was not employed as a prosecutor on January 7, 2002 may retire at age 55 by filing a written application, duly attested, stating at what time subsequent to the execution and filing thereof the member desires to be retired.

(d) The service retirement allowance shall consist of:

1. An annuity which shall be the actuarial equivalent of the prosecutor's aggregate contributions; and

2. A pension in the amount, when added to the annuity, would provide a total retirement allowance of [FN1]/60th of average final compensation multiplied by the number of years of creditable prosecutor's service, or two percent of average final compensation multiplied by the number of years of creditable prosecutor's service up to 30 plus one percent of average final compensation multiplied by the number of years of creditable prosecutor's service over 30, or 50 percent of final compensation if the prosecutor has established 20 or more years of creditable prosecutor's service, whichever is greatest.

17:2-8.13 Eligibility for disability and accidental death retirement benefit

(a) A prosecutor who has a total of 10 years of nonconcurrent New Jersey service in the Prosecutors Part, regular Public Employees' Retirement System, or a combination thereof may be eligible for an ordinary disability retirement allowance as provided by N.J.S.A. 43:15A-42. The benefit shall be the same as that provided by N.J.S.A. 43:15A-45.

(b) A prosecutor who is permanently and totally disabled as a direct result of a traumatic event occurring during and as a result of the performance of the prosecutor's regular or assigned duties may be eligible for an accidental disability retirement allowance as provided by N.J.S.A. 43:15A-43. The benefit shall be the same as that provided by N.J.S.A. 43:15A-46.

(c) Should a prosecutor die in active service as a result of an accident met in the actual performance of duty and not as the result of willful negligence, an accidental death benefit may be payable subject to the provisions of N.J.S.A. 43:15A-49.

(d) A prosecutor who is awarded a disability benefit as stated in (a) and (b) above, cannot receive an additional Prosecutors Part retirement benefit or death benefit as defined in N.J.S.A. 43:15A-158, 159 and 160 or any additional PERS benefit. There will be no refund of Prosecutors Part employee contributions if a PERS disability benefit is elected; nor will there be a refund of the difference in employee contribution rates between the Prosecutors Part and regular PERS service.

17:2-8.14 Retirement date for prosecutors having both regular and Prosecutors Part Public Employees' Retirement System service

(a) If a prosecutor is a member of the PERS on the basis of other public service, no application for retirement shall be approved until the prosecutor has terminated all service covered by the System.

(b) A prosecutor who has both regular and Prosecutors Part PERS service may, after filing the necessary application, begin receipt of the Prosecutors Part benefit at age 55, or at any age with 20 or more years of service if the member was employed as a prosecutor as of January 7, 2002. The member may begin receipt of the remaining regular PERS benefit at age 60 based on the member's final average salary in the regular PERS covered position in accordance with the PERS retirement rules so long as the member is vested in the regular PERS account, or the regular PERS account is still active pursuant to N.J.S.A. 43:15A-7e. The maximum amount of the PERS benefit shall be determined as of the effective date of retirement from the Prosecutors Part. Should a retired member of the Prosecutors Part return to employment prior to receipt of the regular PERS retirement benefit, that PERS benefit shall not increase and the provisions of N.J.A.C. 17:2-8.16 shall apply. If the member has 25 years or more of regular PERS service, the member may begin receipt of the regular PERS benefit at any age after filing the necessary application.

(c) A member must be enrolled in group life insurance as an active employee to be eligible to receive a death benefit in retirement from either the Prosecutors Part or the regular PERS. A member in receipt of a benefit provided under N.J.S.A. 43:15A-158 or 159 with 10 or more years of Prosecutors Part service at retirement, will receive a death benefit equal to either 50 percent of the last 12 months of salary on which Prosecutors Part contributions were based or [FN3]/16 of the last 12 months of regular PERS salary, whichever is greater. A member who is in receipt of a benefit based on 10 or more years of regular PERS service as well as another benefit based on 10 or more years of Prosecutors Part service, will receive a combined death benefit equal to 50 percent of the last 12 months of salary on which Prosecutors Part contributions were based as well as a benefit equal to [FN3]/16 of the last 12 months of regular PERS salary.

17:2-8.15 Options at retirement

(a) A member of the Prosecutors Part shall, on the retirement application, select one of the nine options to receive retirement benefits as provided at N.J.S.A. 43:15A-50 and N.J.A.C. 17:2-6.1.

(b) P.L. 2001, c.366 does not provide for a separate surviving spouse benefit. Members may elect survivor benefits under the provisions of N.J.S.A. 43:15A-50 and N.J.A.C. 17:2-6.1.

(c) A member of the Prosecutors Part who files for a retirement allowance from both the Prosecutors Part as well as the regular PERS, may select a different option and/or beneficiary under each retirement allowance.

(d) The cost-of-living adjustment as provided for in N.J.S.A. 43:3B-1 et seq. shall be calculated separately using the retirement date for each retirement allowance.

17:2-8.16 Return to employment

(a) Retired members of the Prosecutors Part, who return to Public Employees' Retirement System or Prosecutors Part covered employment, shall have their previous retirement allowances suspended and shall be reenrolled in the System in the same manner as provided by 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, special or deferred retirements. A member who ceases covered employment and retires again must file a new retirement application with the Division in accordance with N.J.A.C. 17:2-6.1 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 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.

(b) Pursuant to N.J.S.A. 43:15A-57.2, in no event shall the total retirement allowance upon subsequent retirement be a greater proportion of final compensation than the proportion to which the member would have been entitled had the member remained in service during the period of prior retirement.


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