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Pensions and Benefits
RULE CHANGES
2005
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 - Division of Pensions and Benefits - Proposal to Include the Non Civil Service Positions Firefighter/Fire Inspector and Firefighter/Fire Apparatus Mechanic in the Police and Firemen's Retirement System - Cite as 37 N.J. Reg. 2262(a)


Proposed Rules

Proposed Readoption N.J.A.C. 17:4 Eligibility Requirements and Benefit Amounts; Cite as 37 N.J.R. 4525

Pre-Proposal Number: PPR 2005-2 N.J.A.C. 17:4-4.1 CREDITABLE COMPENSATION; Cite as 37 NJ Reg. 2350(a) (PFRS)

Re-Proposed Amendment: N.J.A.C. 17:9-6.10 STATE HEALTH BENEFITS PROGRAM; RETIREE PRESCRIPTION DRUG PLAN; Cite as 37 N.J.R. 2147(a)

Proposed Amendments: N.J.A.C. 17:5-5.3 and 5.7 EFFECTIVE DATES; CHANGES DISABILITY DETERMINATION; Cite as 37 N.J.R. 396(a) (SPRS)


Adoptions

Adopted Amendments: N.J.A.C. 17:3-6.3 and 6.7 EFFECTIVE DATES; CHANGES DISABILITY DETERMINATION; Cite as 37 N.J.R. 1928(a) (TPAF) - Adopted with technical changes - October 6, 2005

Adopted Amendments: N.J.A.C. 17:2-6.3 and 6.7 EFFECTIVE DATES; CHANGES DISABILITY DETERMINATION; Cite as 37 N.J.R. 1927(a) (PERS)- Adopted with technical changes - October 6, 2005

Adopted New Rule: N.J.A.C. 17:4-6.8 EMPLOYMENT AFTER RETIREMENT Cite as 37 N.J.R. 40(a) (PFRS) - April 18, 2005

Adopted Amendment: N.J.A.C. 17:4-5.3 and 5.4 and Proposed New Rule: N.J.A.C. 17:4-5.2 SERVICE CREDITED FROM MULTIPLE POSITIONS OPTIONAL PURCHASES OF ELIGIBLE SERVICE METHODS OF PAYMENT; Cite as 37 N.J.R. 39(a) (PFRS) - April 18, 2005

Adopted Amendments: N.J.A.C. 17:5-5.3 and 5.7 EFFECTIVE DATES; CHANGES DISABILITY DETERMINATION; Cite as 37 N.J.R. 396(a) (SPRS) - April 18, 2005

Adopted Amendments: N.J.A.C. 17:4-6.3 and 6.7 EFFECTIVE DATES; CHANGES DISABILITY DETERMINATION; Cite as 37 NJ Reg. 2687(a) (PFRS) - July 18, 2005

Adopted Amendments: N.J.A.C. 17:4-1.4 and 1.13 ELECTION OF ACTIVE MEMBER-TRUSTEE ELECTION OF RETIRED MEMBER-TRUSTEE; Cite as 37 N.J.R. 570(a) (PFRS) - July 18, 2005

Adopted Amendment:N.J.A.C. 17:9-1.8, 2.4, 2.10, 3.1, 3.2, 3.3, 3.5, 5.5, 5.6, 6.1, 6.2, 6.6 through 6.9, 7.1 and 11.10
DOMESTIC PARTNERS; MEDICARE PART B REIMBURSEMENT; Cite as 37 N.J.R. 397(a) (SHBP) - June 20, 2005

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

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NOTICE OF PRE-PROPOSAL
DIVISION OF PENSIONS AND BENEFITS
POLICE AND FIREMEN'S RETIREMENT SYSTEM
CREDITABLE COMPENSATION

N.J.A.C. 17:4-4.1

Cite as 37 NJ Reg. 2350(a)

Pre-Proposal Number: PPR 2005-2

Take notice that the Board of Trustees of the Police and Firemen's Retirement System is considering possible modifications to N.J.A.C. 17:4-4.1, Creditable compensation, which deals with compensation creditable for pension purposes. Concerns raised by Division staff, along with those affected employers, employees and collective negotiations representatives have prompted a review of the rule. The Board has not established a timetable for action but seeks input from those who are or might be affected by the operation of the rule.


PUBLIC NOTICE
DIVISION OF PENSIONS AND BENEFITS
PROPOSAL TO INCLUDE THE NON CIVIL SERVICE POSITIONS
FIREFIGHTER/FIRE INSPECTOR AND FIREFIGHTER/FIRE APPARATUS MECHANIC
IN THE POLICE AND FIREMEN'S RETIREMENT SYSTEM

Cite as 37 NJ Reg. 2262(a)

Take notice that in compliance with N.J.A.C. 17:4-2.1(h), and after the recommendation of the Director of the Division of Pensions and Benefits, and the determination of Board of Trustees of the Police and Firemen's Retirement System that the title meets the definition of "policeman" or "fireman" as defined by N.J.S.A. 43:16A-1(2)(a) and (b), the Board of Trustees of the Police and Firemen's Retirement System hereby proposes to include the positions of Firefighter/Fire Inspector and Firefighter/Fire Apparatus Mechanic as eligible titles in the Police and Firemen's Retirement System.

Interested parties should comment by July 20, 2005 to MaryEllen Rathbun, Board and Trustee Administration, Division of Pensions and Benefits, PO Box 295, Trenton, NJ 08625-0295.


PROPOSED READOPTION
DIVISION OF PENSIONS AND BENEFITS
POLICE AND FIREMEN'S RETIREMENT SYSTEM

Proposed Readoption with Admendments

N.J.A.C. 17:4

Cite as 37 N.J.R. 4525

Summary

The Board of Trustees of the Police and Firemen's Retirement System (Board) is responsible for reviewing the administrative rules within N.J.A.C. 17:4. When the Board becomes aware of a change in the laws or a court decision that possible could affect the Police and Firemen's Retirement System ("Retirement System" or "PFRS"), the administrative rules are reviewed and, if changes therein are mandated, steps are taken to propose changes to those rules to conform to the new statute or court decision. Additionally, the rules are periodically reviewed by the Division of Pensions and Benefits, and the Board's staff to ascertain if the current rules are necessary and/or cost efficient.

Accordingly, the Board proposes to readopt the current rules within N.J.A.C. 17:4, which expire on January 25, 2006 with the following amendments, and to extend the expiration date for such rules to July 2, 2006, pursuant to N.J.S.A. 52:14B-5.1c. The current rules deal with the administration enrollment insurance and death benefits, membership,. purchases and eligible service, retirement and transfer aspects associated with the Retirement System.

Members, participating, employers, retirees and survivors of members and retirees rely on the efficient operation of the Retirement System to administer member and retirement benefits and to provide the information they need regarding individual accounts. They rely upon the presence and predictability of the rules that guide the administration of benefits and the stability of the Retirement System. The protections and guarantees that these rules afford its members mandate their continued existence.

The rules proposed for readoption with amendments reflect the requirements for eligibility and amounts of benefits available that are mandated within the statutes governing the Retirement System. The chapter originally became effective prior to September 1. 1969. Pursuant to Executive Order No. 66(1978). the chapter was readopted as new rules in 1990. Chapter 4 expired on June 8, 1995 pursuant to Executive Order No. 66(1978), and Chapter 4, Police and Firemen's Retirement System, was adopted as new rules, effective April I. 1996. Pursuant to Executive Order No. 66(1978), the chapter was readopted effective January 25, 200 I. Following is a discussion of the amendments proposed.

Subchapter 1. Administration

N.J.A.C. 17:4-1.5(b), is proposed to 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 certifying officers.

At N.J.A.C. 17:4-1.6, Records. subsection (a) is proposed to be amended to capitalize the "0" in "office." Subsection (b) is proposed to be amended [0 clarify that it pertains to active members as well as retired members. Subsection (c) is proposed to be amended to require a signed release from the active member or retired member before the release of a confidential file. Subsection (d) is proposed to be amended to clarify that the Board-appointed physician's report will not be released until after the Board's initial determination. New subsection (e) is proposed to be added to advise that the annual report of the Retirement System's actuary will not be released until it has been approved by the Board. New subsection (f) is proposed to be added to clarify that original documents can only be viewed by appointment at the Division of Pensions and Benefits. by calling Client Services at (609) 292-7524. The Division scans most documents and needs time to request the originals from the warehouse if necessary .

At N.J.A.C. 17:4-1.8. Suspension of pension checks, new paragraph (a)4 is proposed to be added. When a retiree has deductions taken from his or her retirement check due to an overpayment or other liability to the System or when a retiree makes personal payments directly to the Division, the Board routinely requests that the retiree complete a policy assignment of group life insurance to protect the System should the retiree die before the debt is paid. In the case of a retiree who does not follow this Board requirement, the retiree's check is suspended until the assignment has been completed. The insurance is reassigned to the member once the liability has been satisfied. The Board proposes to add the requirement that the check be suspended as N.J.A.C. 17:4-1.8(a)4 to reflect current Board practice and to also make the requirement mirror that found in the Public Employees' Retirement System at N.J.A.C. 17:2­1.8(a)5.

Subchapter 2. Enrollment

At N.J.A.C. 17:4-2.1, Eligible positions, amendments are proposed to subsection (a), specifically, adding the word, "statutory" before the word "definition" and adding the statutory cite for the definitions of "police officer" and "firefighter." These amendments are proposed to make it easier for the members and the public to find these definitions. The Board proposes amending the definition of "Director" in paragraph (b)4 to clarify that "Division" refers to the Division of Pensions and Benefits. The Board proposes amending subsection (c) to add "Trustees" after "Director and the Board of' in the first line. The Board also proposes amending the final clause of subsection (c) to read as "the Director and the Board of Trustees shall consider the following factors:" to clarify that the Director and Board will consider the same factors in determining whether an employee of a law enforcement unit or firefighting unit is an administrative employee. The Board proposes amending subsection (d) to add "Trustees" after "Director and the Board of in the first line. The Board also proposes amending the final sentence to read "In determining whether an employee is a supervisory employee, the Director and the of Trustees shall consider the following factors:" to clarify that the Director and Board of Trustees will consider the same factors in determining whether an employee of a law enforcement unit or firefighting unit is a supervisory employee.

The Board proposed replacing N.J .A.C. 17:4-2.1(f) to clarify the statutory requirements for determining whether a position qualifies for inclusion in the PFRS and to advise that the Board requires appropriate documentation to accompany the request. The Board proposes amending subsection (g) to clarify that the Director's review is not of the employee's application to determine whether the employee meets the definition of "police officer" or "firefighter," but rather the Director's review is of the position and documentation to determine whether the duties and responsibilities of the position meet the definition of "police officer" or "Fire"Firefighter" The Board proposes amending subsection (I) to add to the items that are required to be submitted in order for the Director and the Board to determine the eligibility of fire positions for employers with an established firefighting unit that have not adopted the provisions of Title IIA of the New Jersey Statutes (non-civil service). Items required are: a description of the physical and mental requirements for the position; a description of the training requirements; a table of organization for the firefighting unit; a list of employees currently in the position, with present pension status and job title;' proof of compliance with N.J.A.C. 40A:14-81.1; statutory reference authorizing the firefighting unit; and an official job description for the position. This information is required before a determination can be made by the Director and the Board. This is proposed to better educate the employees and employers who wish to begin this process.

The Board proposes adding new N.J.A.C. 17:4-2.l(m) to list the items that are required to be submitted in order for the Director and Board to determine the eligibility of fire positions for employers with an established firefighting unit that have adopted the provisions of Title IIA of the New Jersey Statutes (civil service). Subsection (m) requires the submission of the following items: a description of the physical and mental requirements for the position; a description of the training requirements; a table of organization for the firefighting unit; a list of employees currently in the position. with present pension status and job title; statutory reference authorizing the firefighting unit; and an official job description for the position. This information is required before a determination can be made by the Director and the Board and is proposed to better educate the employees and employers who wish to begin this process. The Board proposes adding new subsection (n) to list the items that are required to be submitted in order for the Director and Board to determine the eligibility of police positions for employers with a police force that has not adopted the provisions of Title II A of the New Jersey Statutes (non-civil service). Subsection (n) requires the submission of the following items: statutory reference authorizing the law enforcement unit; statutory authority authorizing carrying a firearm in the performance of duty; statutory reference to police training or Police Commission Training; and statutory reference that that the holder of the position has police powers. This information is required before a determination can be made by the Director and the Board and is proposed to better educate employees and employers who wish to begin this process.

At N.J.A.C. 17:4-2.3. Medical requirements, the Board proposes making the employer responsible for the submission of health information. Presently the applicant is responsible for the submission of health information. The Board further proposes amending this section to permit the Division of Pensions and Benefits or the Board to request that the applicant be examined by an independent physician to verify his or her good health. Because the Board is accepting the verification from the employer, paragraphs (a) I, 2, and 3 are no longer necessary and are proposed for deletion.

At N.J.A.C. 17:4-2.5, Age requirements, the Board proposes adding new subsections (f), (g) and (h). Subsection (f) is proposed to clarify that an applicant over the, maximum age of 35 years for the position of municipal police officer can use comparable experience with a federal law enforcement agency, law enforcement agency of another state, the Delaware River Port Authority or the South Eastern Pennsylvania Transportation Authority (SEPTA) to secure a permissible "reduction in age" in order to meet the 35 year age maximum. Subsection (g) is proposed to clarify that an applicant seeking employment in an eligible Retirement System title who exceeds the 35 year age maximum on the closing date of the examination with a Civil Service employer or who exceeds the 35 year age maximum on the date of hire with a Non-Civil Service employer cannot establish membership in any State administered retirement system. Since enrollment in the Retirement System is a condition of employment, such applicant cannot be hired. Subsection (h) is proposed to clarify that in instances where a municipality properly appoints a volunteer or exempt firefighter over the 35 year age maximum but not over 40 years of age to a full-time fire fighter position. such fire fighter is ineligible for enrollment in the Retirement System because he or she exceeds the 35 year age maximum. Such fire fighter is required to be enrolled in the Public Employees' Retirement System.

At N.J.A.C. 17:4-2.6, Enrollment date, the Board proposes adding new subsection (e). This addition is necessary to advise that an employee cannot purchase or receive credit in the Retirement System 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 previously stated in a rule.

Subchapter 3. Insurance and Death Benefits

At N.J.A.C. 17:4-3.4, Survivor benefits, the Board proposes adding new subsection (b) to clarify when survivor benefits start and end for those receiving an accidental death benefit.

At N.J.A.C. 17:4-3.5, Beneficiary designation; pension contributions, the Board proposes recodifying this section as subsection (a) and adding the word "active" before "member's accumulated pension's contributions" to clarify that subsection (a) only pertains to the accumulated pension contributions of active members. The Board proposes adding new subsection (b) to clarify that a retiree's accumulated contributions are not refunded upon the retiree's death but are instead used to fund survivor benefits."

Subchapter 4. Membership

At N.J.A.C. 17:4-4.4, Loan tolerance, the Board proposes increasing the amount of the outstanding loan balance to be written off 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. This proposed amendment also makes the loan tolerance the same as it is for PERS which was amended in 2004.

At N.J.A.C. 17:4-4.8, Service and salary credit; awards of back pay, the Board proposes amending subsection (d) to reference an award or settlement throughout. This proposed amendment is in response to comments received during the promulgation of the rule on awards of back pay by the State Police Retirement System, N.J.A.C. 17:5-3.6. The last line in subsection (d) is amended to provide that the Board first determine the compensation to be used before refunding contributions on the compensation. This eliminates the possibility of refunding and then having to ask for the contributions back.

At N.J.A.C. 17:4-4.9, Eligibility for loan. the Board proposes amending this section to clarify that the member's total outstanding loan balance cannot exceed the lesser of either 50 percent of the member's accumulated deductions or $50,000 and to advise that the loan is subject to 26 U.S.C. §72(p).

At N.J.A.C. 17:4-4.10. Termination; withdrawal. the Board proposes amending paragraph (b)2 to clarify that either the employer or the member may certify that employment has not ended instead of just the member. The Board proposes amending paragraph (b)3 to change the "or" to "and" in the second sentence. This change clarifies that a dismissed or suspended member can withdraw from the Retirement System if the member has formally resigned and there is no legal action contemplated or pending. A third sentence has been added to (b)3 to clarify that a member who withdraws and does not inform the Division that there is a claim pending and then receives a settlement in the member's favor must repay any contributions and interest withdrawn before the account can be reinstated. The Board proposes amending paragraph (b)4 to clarify that a member who has a pending claim for workers' compensation may withdraw from the Retirement System if he or she signs a waiver indicating that he or she still wishes to withdraw.

Subchapter 5. Purchases and Eligible Service

At N.J.A.C. 17:4-5.2, Service credited from multiple positions, the Board proposes to amend this section to clarify that a member may only receive one month credit in the retirement system for one month worked and not two months if the member had more than one employer in a month. While this scenario is unlikely because the additional position must also be full-time, the Board has been asked questions regarding this type of service credit and hopes that this proposed clarification would eliminate an y confusion on this subject.

At N.J.A.C. 17:4-5.3, Optional purchases of eligible service. the Board proposes amending paragraph (a)3 to clarify that a member cannot purchase service for time attending the police academy or firefighter training.

Subchapter 6. Retirement

At N.J.A.C. 17:4-6.2, Effective date; death prior thereto, the Board proposes amending this section heading to delete "death prior thereto" from the title because this rule deals with the effective date of retirement and has nothing to do with death.

At N.J.A.C. 17:4-6.3, Effective dates; changes, the Board proposes amending subsection (e) to clarify that money received for sick or vacation time after retirement that is paid on regular payroll would negate the receipt of retirement benefits until the payments cease.

At N.J.A.C. 17:4-6.4. Outstanding loan, the Board proposes amending this section throughout to clarify that "accrued" interest is what is assessed. The Board proposes to update the cross-reference of N.J.A.C. 17:4-6.3 at paragraph (a) I to the correct reference, N.J.A.C. 17:4-6.2. The Board proposes deleting paragraph (a)2 in its entirety. Chapter 132, PL 1999 did not provide for the option set forth in paragraph (a)2, but because it was the method used before the passage of Chapter 132, it remained in the rule. Further review of the law indicates that withholding the entire retirement check until the loan is satisfied is no longer an option and the Board proposes to delete paragraph (a)2 and recodify paragraph (a)3 as paragraph (a)2. The Board also proposes adding the statutory citation for Chapter 132, that is, N.I.S.A. 43:16A-16.2.

At N.J.A.C. 17:4-6.11, Service or special retirement; eligibility, the Board proposes amending paragraph (a)2 to clarify that a member must have 20 years of service credit before being able to file for a service retirement, and the effective date would be the first of the month following the attainment of 20 years of service credit.

Subchapter 7. Transfers

At N.J.A.C. 17:4-7.1, Interfund transfers/State-administered retirement systems. The Board proposes amending the section to clarify that the "present" system is really the new State-administered retirement system. The "present." "previous" or "old" system would be changed to "former State-administered retirement system." Hopefully, this would eliminate confusion. The Board proposes a new subsection (b) 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.

At N.J.A.C. 17:4-7.2, Intrafund standards; State-administered retirement systems. The Board proposes amending paragraph (a)1 to clarify that the member cannot have their contributions withdrawn from the retirement system that he or she is transferring from. The contributions must be available to transfer, or the member will have to purchase the service.

Throughout the rules, the Board proposes amending "Retirement System" or "System" to no longer be capitalized unless it is referring specifically to the Retirement System, and to replace all references to the "System" with the "Retirement System."

As the Division has provided a 6O-day comment period on this notice of proposal. this notice is excepted from the rulemaking calendar requirement pursuant to N.J.A.C. 1:30-3.3(a)5.

Social Impact

The rules involving the Police and Firemen's Retirement System affect and work to the benefit of the members, retirees, beneficiaries and participating employers of the Retirement System. The members, participating employers, retirees and survivors of retirees rely on the efficient operation of the Retirement System to provide them with monthly retirement benefits and with the information they need regarding their individual accounts. They rely upon the presence and predictability of the rules which guide the administration of their benefits and the stability of the Retirement System. The protections and guarantees that these rules afford its members mandate their continued existence.

The taxpaying public is affected by these rules in the sense that public monies are used to fund the benefits and they, too, benefit from the proper and efficient administration of the Retirement System.

Many of the proposed amendments are of a purely technical nature such as capitalizing letters. Other proposed changes will have a social impact only on members, retirees, beneficiaries and former members of the Retirement System.

Requiring certifying officers to respond to the Board's and/or Division's requests for information would benefit employees who are waiting to retire, purchase service credit or enroll for benefits by reducing waiting times (N.J.A.C. 17:4-1.5). Clarifying that copies of physician's reports or annual reports cannot be released until after approval by the Board and that appointments must be made to view original documents would allow interested parties to schedule their visits and not waste time requesting items or waiting for items prior to their availability (N.J.A.C. 17:4-1.6). Clarifying the process for making positions eligible for inclusion in the Retirement System would make those employees who should be enrolled aware of what information is needed before the position could be determined to be in the Retirement System (N.J.A.C. 17:4-2.1). Providing the Division or the Board with the option of requesting the applicant to submit to an independent medical examination would help ensure that only fit applicants become police officers and firefighters (N.J.A.C. 17:4-2.3). Clarifying the 35 maximum age requirement for the position of municipal police officer would help ensure that only fit applicants become municipal police officers(N.J .A.C. 17:4-2.5).

Economic Impact

The rules proposed for readoption with amendments will not impose any adverse economic effects on the public; they will continue existing, long-standing, regulatory requirements. The rules proposed for readoption with amendments do not impose any additional record keeping or other requirements, and will serve to preserve the efficient administration and operation of the Retirement System. Further,, the rules proposed for readoption with amendments will enable the Division of Pensions and Benefits to continue to provide for benefits in a manner that meets statutory and contractual requirements.

Most of the current rules set forth in N.J.A.C. 17:4 have proven effective over time in the proper administration of the Retirement System. Without such rules, the efficient operation of the Retirement System could not be ensured.

Most of the proposed amendments are technical in nature and do not have an economic impact. Some will have a positive economic impact.

Clarifying when survivor benefits will be available to the survivor of an active member who dies in the performance of duty reassures all members that their families will be financially supported in the event of accidental death (N.J.A.C. 17:4-3.4). Amending the amount of the loan balance that will be written off at the end of the loan schedule from $10.00 to $50.00 will provide a monetary benefit to members and save the Retirement System administrative costs (N.J.A.C. 17:4-4.4). Limiting a member's outstanding loan balance to the lesser of 50 percent of the member's accumulated deductions or $50.000 will, in addition to complying with Federal regulations, safeguard the viability of the member's pension account and future pension (N.J.A.C. 17:4-4.9).

Requiring that a dismissed or suspended member who withdraws contributions to the Retirement System without advising the Division that an appeal has been filed and is thereafter reinstated must repay the Retirement System the amount of contributions withdrawn with interest protects the financial integrity of the Retirement System (N.J.A.C 17:4-4.10). Clarifying that a member shall only be credited with one month of service for one month worked, regardless of how many different employers he or she had in that month protects the financial integrity of the Retirement System (N.J.A.C. 17:4-5.2).

Clarifying that time attending the Police Academy or Firefighter training cannot be purchased educates members that such time cannot be included in the calculation of pensions (N.J.A.C. 17:4-5.3). Clarifying that periodic payments to a. member on the employer's regular payroll schedule for accrued sick or vacation time precludes the payment of retirement benefits educates members that no retirement benefits will be paid in such instance (N.J AC 17 :4-6.3).

Federal Standards Statement

A Federal standards analysis is not required because N.J.S.A. 43:16A­13(7) governs the subject of this rule making, and there is no Federal requirement or standard that affects the subject of this rule making

Jobs Impact

The operation of the rules proposed for readoption with amendments will not result in the generation or loss of jobs.

The Division of Pensions and Benefits invites any interested parties to submit any data or studies concerning the jobs impact of these rules proposed for readoption with their written comments.

Agriculture Industry Impact

This rules proposed for readoption with amendments will not have any impact on the agriculture industry.

Regulatory flexibility Statement

The rules of the Police and Firemen's Retirement System only affect public employers, public employees and their beneficiaries. Thus, the rules proposed for readoption with amendments do not impose any reporting, record keeping or other compliance requirements upon small businesses, as defined under the Regulatory Flexibility Act, N.J .S.A. 52:14B-l et seq. Therefore, a regulatory flexibility analysis is not required.

Smart Growth Impact

The rules proposed for readoption with amendments will not have any impact on the achievement of smart growth and implementation of the State Development and Redevelopment Plan.

Full text of the rules proposed for readoption may be found in the New Jersey Administrative Code at N.J.A.C. 17:4.

Full text of the proposed amendments follows (additions indicated in boldface thus; deletions indicated in brackets [thus)):

17:4-1.5 Certifying officer (employer)

(a) (No change.)

(b) The certifying officer shall be responsible for the duties described by N.J.S.A. 43:16A-32, including providing documentation requested by the Board or the Division of Pensions and Benefits in a timely manner.

(c) (No change.)

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

17:4-1.6 Records

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

(b) The mailing addresses of all active members and retired members are considered to be a part of the member's confidential files and shall not be released for any purpose.

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

(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 indi vidual not authorized in writing to receive the report.

(e) The annual report of the Retirement 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 by contacting the Client Services section at (609) 292-7524.

17:4-1.8 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.-2. (No change.)

3. 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

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

SUBCHAPTER 2. ENROLLMENT

17:4-2.1 Eligible positions

(a) AIl public employees actively employed in positions meeting the statutory definition "police officer" or "firefighter" found at N.J.S.A. 43:16A-I(2)(a) and (b) shall be members of the Police and Firemen's Retirement System of New Jersey.

(b) The following words and terms, as used in this [section] subchapter and in NJ.S.A. 43:16A-I et seq., shaIl have the foIlowing meanings:

1.-3. (No change.)

4. "Director" means the Director of the Division of Pensions and Benefits (Division) in the Department of the Treasury.

5.-14. (No change.) .

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

1.-3. (No change.)

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

1.-4. (No change.) (e) (No change.)

(f) [In the event an employee not currently included as a member of the system, believes that the employee performs duties that meet the definition of "police officer" or "firefighter," the employee may file an application for membership in the System with the Director. stating in detail the basis for the employee's belief that the employee is a police officer or firefighter. A copy of the application shall be served on counsel for the employee's employer.] If an employee of a "law enforcement" or firefighting unit" holds a position which has not been deemed eligible for inclusion in the Police and Firemen's Retirement System pursuant to P,L.1989, c. 204 (NJ.s.A. 43:16A-I.2), and the employee or employer contends the duties of the position meet the definitions of police officer or firefighter as found in N.J.S.A. 43:16A.I et seq., the employee or employer may submit a written request Indicating why the position meets the above definitions, The appropriate documentation must accompany the request.

(g) The Director shall review the [application and] position and documentation to determine whether the [employee] duties and responsibilities of the position meet[s] the definition of "police officer" or ''firefighter.'' The Director shaIl then make a recommendation to the Board as to whether the [employee should be included] position qualifies for inclusion in the Retirement System.

(h)-(k) (No change.)

(I) To determine the eligibility [of a non-civil service position] for fare positions for employers with an established firefighting unit that have not adopted the provisions of Title llA of the New Jersey Statutes (non-civil service) for membership in the PFRS, the Board requires the foIlowing items:

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

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

3. A table of organization for the [employing entity] firefighting unit, which includes names and positions;

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

5. Proof of compliance with the provisions of N.J.S.A. 40A:14-81.1[.] and a copy of the resolution or ordinance which established the position;

6. Statutory reference, which provides the firefighting unit with the authority for the control and extinguishment of fires; and

7. An official Job description which outlines the duties and responsibilities of the position.

(m) To determine the eligibility for fire positions for employers with an established firefighting unit that have adopted the provisions of Title llA of the New Jersey Statutes (civil service), the Board requires the following Items:

I. A description of the physical and mental requirements for the position;

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

3. A table of organization for the firefighting unit, which includes names and positions;

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

5. Statutory reference, which provides the firefighting unit with the authority for the control and extinguishment of fires; and

6. An official Job description which outlines the duties and responsibilities of the position.

(n) To determine the eligibility for police positions for employers with an established law enforcement unit that have not adopted the provisions of Tide llA of the New Jersey Statutes (non-civil service), the Board requires the following items:

I. Statutory reference which provides the law enforcement unit with the authority of detecting crime and enforcing the general criminal laws;

2. Statutory reference authorizing carrying a firearm In the performance of duty;

3. Statutory reference to the police training requirement or Police Commission Training (PCT); and

4. Statutory reference that the holder of the position has police powers.

17:4-2.3 Medical requirements

[(a) Applicants] The employer must furnish evidence of good health sufficient to satisfy the Board of Trustees[:]. If the Division or the Board has a question regarding the evidence of good health provided, the Division or Board may request that the applicant be examined by an independent physician designated to conduct such an examination for the Retirement System.

[1.ln this connection. The Board may accept the medical determination of the physician examining for the appointing authority. If this medical source indicates further examination is in order, the System will select and arrange an appointment with an independent physician.

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

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

17 :4-2.5 Age requirements

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

(f) An applicant is permitted to reduce their actual age in order to meet the maximum age requirement of 35 years for the position of municipal police officer if, In accordance with N..J.S.A. 4OA:14-127,1, they have previous service as a former State trooper, sheriff's officer or deputy, or county or municipal police officer. Prior experience In Federal law enforcement agencies or in law enforcement agencies of other states that would meet the requirements of police officer in New Jersey would also qualify for the purpose of reducing the candidate's age for the position of a municipal police officer, "Age reductions" may also be granted for persons seeking employment as municipal police officers who have prior service with the Delaware River Port Authority Police, Amtrak or South Eastern Pennsylvania Transportation Authority (SEPTA) police departments. No person may be appointed over the age of 45 except for those who were previously involuntarily terminated from their former law enforcement officer employment.

(g) Individuals seeking employment with a municipality in an eligible PFRS title who are over age 35 on the closing date of the examination with a Civil Service employer or over age 35 on the date of hire with a non-Civil Service employer, even after "reductions in age" have been taken into account, cannot establish membership in any State-administered retirement system. Since enrollment in the PFRS is a condition of employment (N..J.s.A. 43:16A-3(1», these individuals cannot be hired.

(h) Municipal statutes provide that in some situations volunteer and exempt fire fighters In municipalities may be appointed to full. time fire fighter positions if they are not over 40 years of age at the time of their appointments; This proper appointment of someone who is past their 35th birthday to a municipal fire department does not negate the eligibility requirement that someone not be past their 35th birthday to be enrolled in the PFRS. Therefore, any appointees under this provision are required to enroll in the Public Employees' Retirement System.

17:4-2.6 Enrollment date

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

(e) An employee cannot receive or purchase 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.

17:4-3.4 Survivor benefits

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

(b) In the Instance of an active member who dies In the performance of duty. (Accidental death), eligible ~survivors shall be entitled to benefits on the first day of the month following the member's death. The pension payment shall begin on the start of the month following the survivor's eligibility for benefits date. Survivor benefits shall terminate as of the last day of the month In which the survivor no longer qualifies for such benefits.

17:4-3.5 Beneficiary designation; pension contributions

(a) Only a primary and a contingent designation of beneficiary may be made by the member for the payment of the active member's accumulated pension contributions.

(b) A retiree cannot designate a primary or a contingent beneficiary for the receipt of the retiree's accumulated pension contributions In the event of the retiree's death.

17:4-4.3 Continuance of membership; transfer

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

17:4-4.4 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.

17:4-4.8 Service and salary credit: awards of back pay

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

(b)-(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. 17:4-4.1, [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 and the member shall have the pension contributions for the salaries found not to be creditable refunded without interest.

(e) (No change.)

17:4-4.9 Eligibility for loan

Only active contributing members of the Retirement System may exercise the privilege of obtaining a loan. The member's total outstanding loan balance shall not exceed the lesser of either 50 percent of the accumulated deductions posted to the member's account or $50,000. The loan is subject to 26 U.S,C. §72(p).

17:4-4.10 Termination; withdrawal

(a) (No change.)

(b) No application shall be approved if:

I. (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; or

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

17:4-5.2 Service credited from multiple positions

Not more than one year of service shall be credited for all service in a calendar year. A member Is credited with one month of service for one month worked, regardless of how many different employers he or she had In that month.

17:4-5.3 Optional purchases of eligible service

(a) A shared-cost purchase is one in which the member pays only the employee's share and not the employer's share of the purchase. A member may purchase all or a portion of such eligible service. A shared­cost 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.-2. (No change.)

3. Continuous temporary service as a police officer or firefighter immediately preceding enrollment. "Special Police" service and time attending the Police Academy or Firefighter training cannot be purchased;

4.-5. (No change.)

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

SUBCHAPTER 6. RETIREMENT

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

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 one month after the date of the retirement, whichever is later.

17:4-6.3 Effective dates; changes

(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. This restriction also applies to payments of accrued sick or vacation time that Is paid In periodic payments on the employer's regular payroll schedule.

17:4-6.4 Outstanding loan

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

I. In full before the retirement allowance becomes due and payable as provided in N.J.A.C. 17:4-[6.3;] 6.2; or

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

i. Authorized deductions include Federal tax liens, health benefit premiums, and Federal and State income tax withholding; or)

[3.] 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 PL 1999, c.132 (N,N.J.S.A. 43:16A-16.2). 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 that are due to the beneficiary or estate. If multiple beneficiaries are to receive these benefits, each beneficiary shares in repaying the remaining balance in the same proportion in which they are entitled to the benefits.

17:4-6.11 Service or special retirement; eligibility

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

I. (No change.)

2. [When the member has a minimum of 20 years of service credit] On the first of the month' following the attainment of 20 years of service credit in to be Retirement System, if the member was enrolled in the [PFRS) Retirement System as of January 18, 2000.

(b) (No change.)

17:4-7.1 Interfund transfers/State-administered retirement systems (a) The receipt of a public pension or retirement benefit is expressly conditioned upon the rendering of honorable service by a public officer or employee. Therefore. The Board of Trustees of the [present System) new State.adminlstered retirement system shall disallow the transfer of all or a portion of prior service of any member of the [System) former State.adminlstered 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 elligible to transfer the former membership in a State-administered retirement system Into the retirement system that covers the new eligible employment, If the member bas first ended employment with the 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 State­administered [Retirement System) retirement system as follows:

1. A member, desiring to transfer service credit and contributions from one State-administered retirement system to another, shall file an "Application of 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 cop forwarded to the [old) former account.

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

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

i. (No change.)

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

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.)

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

17 :4-7.2 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 retirement system are immediately eligible to transfer their membership to their new employers, as long as the following conditions are met:

1. The member has not withdrawn [from the System] his or her contributions;

2.-3. (No change.)

(b) (No change.)


STATE HEALTH BENEFITS PROGRAM
RETIREE PRESCRIPTION DRUG PLAN

Re-Proposed Amendment: N.J.A.C. 17:9-6.10

Cite as 37 NJR 2147(a)

The agency proposal follows:

Summary

On June 20, 2005 the State Health Benefits Commission (Commission) published in the New Jersey Register (cite as 37 NJR 2147) a proposed amendment to the Retiree Prescription Drug Plan (Plan) which would eliminate the annual out-of-pocket expense maximum from the Plan and delete the reference to the Plan as a "pilot program" scheduled to expire March 20, 2006. Following a public hearing on the matter on July 20, 2005, and receiving more than 1,000 comments in opposition to the proposed removal of the out-of-pocket maximum, the Commission proposes to retain an annual out-of-pocket maximum to protect individuals with catastrophic costs, but to increase it to $1,000.00 for calendar year 2006. The out-of-pocket maximum would then increase thereafter according to the formula specified at N.J.A.C. 17:9-6.10 (h). The Commission also proposes to extend the Plan as a "pilot program" until December 31, 2007, to provide its staff and consultants with time to study the impact of the modification to the out-of-pocket expense maximum on purchasing behavior.

The Plan was originally initiated as pilot prescription drug program for retired members enrolled in the Traditional Plan and NJ PLUS. The Plan was codified through the adoption of N.J.A.C. 17: 9-6.10 effective March 20, 2000 as a pilot program scheduled to expire on March 20, 2006. The Plan utilizes a 3-tiered co-payment schedule to encourage the use of generic and preferred brand drugs and includes a mail-order option. Although the original plan design did not contain provisions for an out-of-pocket maximum limit, employee representatives and retiree associations succeeded in having this plan design feature added to the pilot program. Unlike the State Health Benefits Program (SHBP) Employee Prescription Drug Plan and the prescription drug coverage provided to retirees enrolled in the SHBP's HMOs, retired members covered by the pilot plan would cease to pay co-payments if an annual dollar amount of out-of-pocket expenses was reached. All prescriptions filled by the retired member after the maximum expense limit was reached would be free of charge for the remainder of the calendar year.

When the pilot plan was implemented in 2000, the initial annual cap on out-of-pocket CO-payment expenses was $300. Commencing in the third year of the plan, in an effort to maintain the retiree cost-sharing provisions of the plan over time, the out-of-pocket maximum and the CO-payments had built-in annual inflation/index adjustments. The maximum out-of-pocket cap for retired members' cost-sharing has proven to be a major design flaw. Statistics provided by the plan administrators have consistently indicated that Plan participants who reach the cap on annual out-of-pocket expenses, as a group, are less likely to use less expensive generic and mail-order options than Plan participants who pay CO-payments throughout the year.

For example, in calendar year 2003, the majority of retired members with the prescription drug card plan (70%) never reached the annual out-of-pocket maximum and therefore, continued to pay the applicable CO-payment throughout the year for any prescription drug received. In this population, those using the card plan elected to receive 23% of their prescriptions through mail order and had a generic drug utilization rate of 41%. Their cost-share as a group was 17% of the overall cost of their prescriptions with the plan paying the remaining 83% of the costs. They accounted for only 27% of the total claims expenditure in 2003.

In contrast, the remaining 30% of retired members who utilized the card plan and reached the annual out-of-pocket maximum in 2003, accounted for 73% of the total claims dollars. Their use of mail order was markedly less (11% before reaching the maximum and 6% thereafter) and their rate of generic substitution was also considerably lower at 34%. Prescription drug purchasing by these members also accelerated once they reached the point where no further CO-payments were required for the year. Because of the impact of $0 CO-payments when the out-of-pocket maximum was reached, as a group, their cost-share for their prescription drug expenditure was only 9% (compared to 17% for all other participants).

This pattern of behavior continued in 2004. Again, the majority of retired members enrolled in the pilot plan (69%) never reached the annual out-of-pocket maximum. Voluntary mail-order participation for those members who used the card plan rose from 23% to 26%, and their generic drug utilization rate improved slightly to 42%. Their cost-share as a group was maintained at 17% of the overall cost of their prescriptions with the plan paying the remaining 83% of costs. They accounted for only 28% of the total claims expenditure for the plan (the experience of the prior year was 27%). That year 33% of members who utilized the card plan exceeded the annual out-of-pocket cap of $474. Their claims accounted for 72% of total claims dollars for the year and 69% of the prescriptions filled. Their use of mail-order remained unchanged (11% before reaching the cap and 6% thereafter) and their rate of generic substitution was only 35%. As a group, their cost-share for their prescription drug expenditure was 9% (compared to 17% for all other participants).

While it was hoped that the use of mail-order and generic drug options would improve over time, this has not materialized among participants with high prescription drug utilization who can anticipate reaching the annual out-of-pocket maximum. Unless participants who account for the vast majority of the prescription drug claims expenditure can be induced to purchase their prescription drugs in a more cost-effective manner, the Commission will continue to be severely hampered in its efforts to slow the increase in prescription drug plan costs, thus jeopardizing the future of this valuable benefit for retired members. The evidence suggests that unless retired members have a continued financial stake in the cost of their prescription drugs, they are far less likely to engage in cost-effective purchasing behavior. The Commission therefore proposes to modify the current Plan by increasing the annual out-of-pocket maximum effective January 1, 2006 from $626.00 to $1,000.00 instead of eliminating the out-of-pocket maximum as originally proposed. This increase should provide a financial incentive to encourage more participants to engage in cost-effective purchasing behavior while still protecting those with the highest prescription drug expenditures.

In calendar year 2003, total claims expenditure for the plan was approximately $282 million. Spending rose by 18% to $333 million in 2004. The cost of the plan will reach $399 million in 2005 (a 20% increase), and is projected to rise to $430 million by 2006 if the plan design remains unchanged. Approximately 208,000 participants (retirees and their dependents, all medical plans) receive prescription drug coverage under the SHBP. Of this number, approximately 51,100, or 27% of the total population enrolled in the SHBP Retired Group, are expected to exceed the out-of-pocket maximum of $552.00 for calendar year 2005. The remaining 73% of retired SHBP participants include NJ PLUS and Traditional Plan members whose prescription drug purchases did not exceed the annual maximum, as well as those that have elected coverage in the SHBP's five HMOs, which do not have a limit on out-of-pocket prescription drug expenditures. If the annual out-of-pocket expense limit is not modified or eliminated, in calendar year 2006 it would increase to $626.00 pursuant to the provisions of N.J.A.C. 17:9-6.10 (h).

The Commission anticipates savings of approximately 16 million in the first year with the proposed increase to the out-of-pocket maximum. These savings represent about 4% of the projected total expenditure if the plan remains unchanged. The savings would accrue to the State and local employers that pay for the cost of post-retirement medical coverage as well as to participants who must pay for the cost of coverage in order to participate in the SHBP. This is a conservative figure that does not take into account changes in purchasing behavior that should occur in the population that consumes the majority of prescription drugs and plan dollars.

The Commission also proposes to extend the pilot program so that it will not expire until the end of plan year 2007, which is the calendar year. The Plan has been in existence for almost 6 years and has been beneficial for both Plan sponsors and retired members. The Commission does not want the Plan to expire in March of 2006, but does want additional time to consider the impact of the proposed modification in the annual out-of-pocket maximum on the Plan before deciding to eliminate the reference to the Plan as a "pilot program."

Summary of Public Comments and Agency Responses received regarding the original proposal to eliminate the out-of-pocket maximum.

Public Comments were made at the public hearing on the proposal which was held at 10:00 A.M. on Wednesday, July 20, 2005 at The War Memorial, Patriots Theatre, Memorial Drive, Trenton, NJ. Approximately 1,500 people attended. The following 81 individuals and 15 organizations were heard at the public hearing before the State Health Benefits Commission. The proceedings were recorded, and in many cases, those commenting also submitted written comments with their oral testimony. More than 900 individuals and organizations also submitted written comments regarding the proposed amendments. The issues discussed at both the public meeting and in the comments echoed the same sentiments. Therefore, they will be discussed together.

Following is a list of the individuals and organizations who submitted written comments:

The following were the general concerns expressed in both the oral and written comments received:

1. Elimination of the designation of the Retiree Prescription Drug Plan as a Pilot Program.

Comment: Written and oral comments received supported the amendment of the regulation to delete the reference therein to the Retiree Prescription Drug Plan (Plan) being a "pilot program."

Response: The Commission thanks the commenters for their favorable remarks regarding the deletion of the reference in the regulation to the Plan being a "pilot program". The Plan has been in existence for almost 6 years and overall has been beneficial for retired members and their dependents. However, since the Commission now proposes to retain an annual out-of-pocket maximum of $1,000.00 for calendar year 2006 to protect participants from catastrophic costs, the Commission also proposes to continue to extend the Plan on a "pilot program" basis until December 31, 2007, to provide its staff and consultants with time to study the impact of the modification to the out-of-pocket expense maximum on purchasing behavior.

2. Elimination of the out-of-pocket maximum expense limit.

Comment: William G. Dressel, Jr., commented orally and in writing on behalf of the New Jersey State League of Municipalities. Mr Dressel advised that the League supports the elimination of the out-of-pocket maximum expense limit from the Plan. Mr. Dressel advised that the finding that Plan participants reaching the out-of-pocket maximum expense limit switch from generic drugs to more expensive brand name drugs evidences that the out-of-pocket maximum expense limit results in increased costs for participating local employers without any true benefit to Plan participants. Mr Dressel noted that there is no out-of-pocket maximum expense limit for active members of the SHBP or for retirees participating in SHBP HMO prescription drug plans.

Response: The Commission thanks Mr. Dressel for his comments. There is no doubt that the existing out-of-pocket maximum expense limit results in increased costs for the Plan. Mr. Dressel's comment that the out-of-pocket maximum expense limit is unique to the Plan, i.e. unique to retirees participating in the Traditional Plan and NJ PLUS, is correct. A review of other states' public retiree plans also confirms that the availability of an out-of-pocket expense limit is rare.

Comment: With the exception of the comments received from Mr. Dressel on behalf of the New Jersey State League of Municipalities, oral and written comments received expressed concern with the negative financial impact on retirees if the out-of-pocket maximum expense limit was eliminated from the Plan. Form letters received stated: "If this rule is implemented, thousands of retirees enrolled in this program would see dramatic prescription drug cost increases with no protections against catastrophic drug costs. Currently, out-of-pocket costs for this program are approximately $552. This rule could double or even triple the amount of costs program enrollees would have to pay." Other commenters asserted that the budget should not be balanced on the backs of the most vulnerable Plan participants.

Response: The Plan has a three tiered CO-payment design to encourage the use of less expensive generic drugs. The Plan's low out-of-pocket maximum expense limit has proven to be a major design flaw. Statistics provided by the plan administrators have consistently indicated that Plan participants who reach the cap on annual out-of-pocket expenses, as a group, are less likely to use less expensive generic and mail-order options than Plan participants who pay CO-payments throughout the year. Unless Plan participants, particularly those that create the largest portion of plan expenditures, can be induced to purchase prescription drugs in a more cost-effective manner, the Commission will continue to be severely hampered in its efforts to slow the increase in Plan costs. The out-of-pocket maximum expense limit, instituted as part of the Plan's pilot program, is unique to the Plan. Retirees enrolled in the SHBP's HMOs do not have an out-of-pocket maximum expense limit. As advised by the Plan administrator, an unintended consequence of the out-of-pocket maximum expense limit has been the elimination of the incentive for Plan participants who reach the out-of-pocket maximum expense limit to use the less expensive generic and mail order options available to them.

The Commission accepts the comments received regarding the need to have an element of protection in the Plan with respect to catastrophic drug costs. The Commission has determined that, instead of eliminating the out-of-pocket maximum expense limit as originally proposed, an out-of-pocket maximum expense limit will continue as part of the Plan. The Commission proposes to increase the out-of-pocket maximum expense limit to $1,000.00 for calendar year 2006, with future annual indexing in accordance with the provisions of N.J.A.C. 17:9-9.10. This change addresses the concerns voiced by most commenters that the Plan must continue to provide catastrophic coverage while helping to ensure the ongoing financial viability of the Plan by raising the out-of-pocket maximum expense limit. Further, the availability of the new Medicare Part D plans commencing in 2006 may be of benefit to a few SHBP retired participants with very low incomes. While the majority of SHBP retirees should not enroll in Medicare Part D plans because their out-of-pocket expenses will be lower if they retain their SHBP prescription drug coverage, individuals who qualify for Medicare Part D Low Income Subsidy (individuals at or below 150% of the federal poverty level) may find Medicare Part D plan enrollment to have far lower out-of-pocket costs.

Comment: Several commenters stated that, notwithstanding the availability of generic and preferred brand name drugs, their physicians often prescribe the more expensive, or non-preferred brand name drugs. These commenters stated that they have no choice but to follow the directives of their physicians. These commenters advised that the elimination of the $552 out-of-pocket maximum expense limit and the resulting obligation to continue to pay the higher CO-payment associated with brand name drugs would be financially devastating.

Response: By proposing to retain an out-of-pocket maximum expense limit, although at the higher level of $1,000.00 for calendar year 2006, the Plan provides protection for those individuals with catastrophic expenses. The Commission recognizes that there are instances when a physician will prescribe a non-preferred drug, notwithstanding the availability of alternatives at lower CO-payments levels. While there may be a number of reasons for such prescribing behavior, the Commission recognizes that in a few instances the member is truly unable to take alternatives. In these rare instances, Plan participants should not be financially disadvantaged. The Plan administrator has a process in place to allow a participant to receive a non-preferred drug at the lower preferred generic or preferred brand name CO-payment level under limited conditions. To apply for this special consideration, the prescribing provider must submit documentation to Horizon that will verify that all preferred drugs have been ineffective in the treatment of the member's disease or condition, or will cause a harmful reaction.

Comment: Several commenters stated that the Commission should use means other than the elimination of the out-of-pocket maximum expense limit to effectuate Plan savings. Ms. Rae Roeder, Communications Workers of America, Local 1033, stated: "What is most striking, is the failure of the State Health Benefits Program Commission to explore other alternatives to curb rising costs first, e.g., educating members on mail order prescription, reexamining the formulary governing non-generic medications, and negotiation with the pharmaceutical companies, many of which are resident in New Jersey, for rebates and discounts."

Response: Plan participants, as well as SHBP retirees in HMO prescription drug plans, are routinely advised of the three tier structure of the various retiree prescription drug plans and of the financial advantage to them, and to the SHBP, of utilizing generic drugs and mail order. This message is a routinely included within the "Health Reporter," a newsletter for retired members of the SHBP, and in periodic advisories sent by the Plan administrator to Plan participants. Review of the formulary governing non-generic medications is conducted periodically by the Plan administrator. The Plan administrator negotiates with pharmaceutical companies for rebates and discounts which are passed through to the SHBP.

Comment: The out-of-pocket maximum expense limit was a guaranteed part of the Plan.

Response: As noted, the out-of-pocket maximum expense limit is unique to the Plan, i.e. SHBP active members and SHBP retirees participating in HMO prescription drug plans do not have an out-of-pocket maximum expense limit. The Plan's out-of-pocket maximum expense limit was instituted as part of the Plan's pilot program. Because the Plan was initially a pilot program, with no guarantees that it would be continued, and because the Plan is limited to retirees in the Traditional Plan and NJ PLUS, the assertion that the out-of-pocket maximum expense limit was a promised retiree benefit is without basis. In any event, as noted, the re-proposal continues an out-of-pocket expense limit in the Plan, although at a somewhat higher level.

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 rule making calendars.

Social Impact

The proposed amendment to N.J.A.C. 17:9-6.10 regarding the increase of the annual out-of-pocket maximum expense cap is expected to change the behavior of some retired members who require prescription drugs. Without this change, the 2005 out-of-pocket maximum of $552.00 would have been expected to increase to $626.00 in 2006, under the annual indexing required by the Plan. Those who would have met the out-of-pocket maximum of $626.00 in 2006 would have to continue to pay the usual CO-payments for generic, preferred brand, and non-preferred brand drugs for the entire year or until the $1,000.00 out-of-pocket maximum is reached, which ever occurs first.

About 23% of all SHBP retired participants (approximately 208,000 retirees and dependents are enrolled in all SHBP medical plans) would have been projected to reach the out-of-pocket expenditure maximum of $626.00 in 2006 (for Traditional Plan and NJ PLUS enrollees only, this represents about 33% of those who have utilized their prescription drug card). These individuals may incur additional CO-payment costs if the annual out-of-pocket expenditure limit is increased. This additional cost could be at least partially offset for many participants, and fully offset for some, by their decision to use mail-order or generic substitution whenever possible to save on costs. They may also elect to enroll in one of the SHBP's five HMOs, which have lower CO-payments for prescription drugs. By increasing the out-of-pocket expenditure maximum to $1,000.00, 11% of the total SHBP retiree population enrolled in all SHBP medical plans, or approximately 22,800 retirees or dependents, will still be protected from additional CO-payments after the $1,000.00 limit is reached (or 16% of the individuals with activity through this Plan). The change would not impact retirees enrolled in HMOs, or those enrolled in the Traditional Plan or NJ PLUS who would not have exceeded $626.00 in out-of-pocket CO-payments in 2006, including those who do not utilize the Plan.

An increase in the use of mail-order could affect local pharmacies. Statistics, though, indicate that retired members' utilization of local pharmacies would remain high, due in part to a reluctance to change purchasing behavior and an overall increase in prescription drug usage as the SHBP population ages.

The proposed amendment to extend the expiration date of the pilot program would have a beneficial social impact on retirees in the Traditional and NJ PLUS plans. These retired members would not want to have the plan end, as it is highly utilized and makes prescription drugs affordable and accessible.

The taxpaying public is affected by the proposed amendments in the sense that public monies are used to fund the benefits and they, too, benefit from the proper and efficient administration of the SHBP which the rules require.

Economic Impact

When the Commission introduced the concept for the pilot plan in 1999, its objectives were two-fold: (1) to improve retiree access to prescription drugs; and (2) to provide more cost-effective management of future costs. Increased costs associated with improved access were intended to be offset by the introduction of a mail order component, access to greater discounts through the 3-tiered arrangement, and improved use of generics and preferred brand alternatives, resulting in overall cost-neutral changes in the early years, with savings anticipated in the later years. With the introduction of an annual out-of-pocket maximum expense cap intended to protect those retired members with the highest prescription drug utilization, the pilot plan ceased to be cost neutral in the early years. Nonetheless, the Commission hoped that the pilot plan would save costs in the long run by encouraging participants to make more cost-effective choices. In retrospect, the initial $300 annual out-of-pocket maximum was clearly too low. Rather than affecting a very small number of participants with the very highest utilization, in the first year of operation over one-third of retired members utilizing the plan reached the out-of-pocket maximum, resulting in a cost overrun of $10 million. Since the $300 annual maximum remained in force for the first two years of the pilot plan's operation, the percentage of patients reaching the out-of-pocket maximum grew to an even greater number, 39%, in 2001. In calendar year 2003, 30% of retirees obtained $0 CO-payment status. In calendar year 2004, 33% met the $474.00 out-of-pocket maximum. Since these participants accounted for the majority of the claims expenditures, efforts to control costs through mail-order, better discounts, and use of generics and preferred brand alternatives were significantly undermined.

It is unusual for employer-sponsored prescription drug plans to incorporate out-of-pocket maximums in their plan designs. If caps exist, they are usually caps on the maximum amount of prescription drug cost that will be permitted under the plan, rather than out-of-pocket expense caps. In comparison, active participants in the Employee Prescription Drug Plan do not have an out-of-pocket expense maximum. They continue to make their CO-payments no matter how much they spend on prescription drugs. Similarly, SHBP retired members who have selected to enroll in medical plans other than the Traditional Plan or NJ PLUS do not have an out-of-pocket maximum for CO-payment amounts, but continue to pay CO-payments for their 3-tiered prescription drug plans ($5-$10-$20) throughout the year.

The Commission anticipates total savings to the SHBP of approximately $16 million in calendar year 2006 as a result of this increase in the out-of-pocket maximum. Of this amount, approximately $1 million in savings would accrue to retired members who pay for the cost of their coverage. Local employers that pay for the cost of coverage would accrue savings of about $5.5 million and the balance (about $9.5 million) would accrue to the State of New Jersey as the primary payer of retiree health care coverage. These savings represent about 4% of the projected total expenditure if the plan were to remain unchanged. This is a conservative figure that does not take into account changes in purchasing behavior that should occur in the population that consumes the majority of prescription drugs and plan dollars. By raising the out-of-pocket maximum limit the Commission does not wish to punish participants who utilize the prescription drug card plan, but rather to encourage participants to engage in more cost-effective purchasing.

The large majority of retirees would not be impacted by the proposed amendment. They never reach the out-of-pocket maximum and would continue to pay as before. If they are in the Traditional Plan or NJ PLUS, their overall cost-share for prescription drug purchases would continue to be approximately 17% of the total costs. The remaining retired members in the Traditional Plan or NJ PLUS who would have reached the out-of-pocket maximum would incur the additional expense of paying CO-payments up until the $1,000.00 is reached. Since 23% of all SHBP retired participants (approximately 48,000 out of a total of 208,000 retirees and dependents) were projected to reach an out-of-pocket maximum of $626.00 in 2006, these individuals could pay as much as the difference between $626.00 and $1,000.00, or $374.00, in additional CO-payments Projections by the administrator indicate that only 22,800 of the 48,000 will pay that full amount. The remaining 25,200 will not have sufficient out-of-pocket CO-payments expenses to reach the $1,000.00 limit.

Retirees may choose to reduce their expenses by electing the mail order option or utilizing more generic brand drugs where such alternatives exist. Some participants may also elect to switch to HMO coverage, which may offer slightly lower CO-payments

The Commission recognizes that there are instances when a physician will prescribe a non-preferred drug, notwithstanding the availability of alternatives at lower CO-payments levels. While there may be a number of reasons for such prescribing behavior, the Commission recognizes that in a few instances the member is truly unable to take alternatives. In these rare instances, Plan participants should not be financially disadvantaged. The Plan administrator has a process in place to allow a participant to receive a non-preferred drug at the lower preferred generic or preferred brand name CO-payment level under limited conditions. To apply for this special consideration, the prescribing provider must submit documentation to Horizon that will verify that all preferred drugs have been ineffective in the treatment of the member's disease or condition, or will cause a harmful reaction.

The availability of the new Medicare Part D plans commencing in 2006 may be of benefit to a few SHBP retired participants with very low incomes. While the majority of SHBP retirees should not enroll in Medicare Part D plans because their out-of-pocket expenses will be lower if they retain their SHBP prescription drug coverage, individuals who qualify for Medicare Part D Low Income Subsidy (individuals at or below 150% of the federal poverty level) may find Medicare Part D plan enrollment to have far lower out-of-pocket costs. The SHBP will be providing more information on the impact of Medicare Part D on the SHBP to participants in the fall of 2005.

The proposed extension of the Plan as a "pilot program" until December 31, 2007, would be an economic benefit to participants who would continue to have a prescription drug card plan and access to a mail order program. Traditional Plan and NJ PLUS retired participants would not have to return to paying for the full cost of prescription drugs up-front and being reimbursed a percentage of the cost through the health plan. Plan administration would not change and the SHBP would retain access to better prescription drug rebates through the use of a preferred drug formulary.

Federal Standards Statement

A Federal standards analysis is not required because the rule making requirements for the State Health Benefits Program are governed by state law, specifically N.J.S.A. 52:14-17.27, and are not subject to any federal requirements or standards.

Jobs Impact Statement

The proposed amendments will not result in the creation of new jobs or loss of existing jobs.

The Division of Pensions and Benefits invites any interested parties to submit any data or studies concerning the jobs impact of the proposed amendments with their written comments.

Agriculture Industry Impact

The proposed amendment will not have any impact on the agriculture industry.

Regulatory Flexibility Statement

If a large number of retired members switch to the mail order prescription drug option, local pharmacies, which may be small businesses, could be affected. However, many retired members will continue to use their local pharmacies and would not switch to mail order. Further, prescription drug usage continues to increase as the SHBP population increases and ages, which may offset the potential impact on increased mail order usage on local pharmacies. A regulatory flexibility analysis is not required for the remainder of the proposed amendment because it does not impose reporting, record keeping or other compliance requirements upon small businesses as defined under the Regulatory Flexibility Act, N.J.S.A. 52:14B-16 et seq. The rules of the State Health Benefits Commission only affect public employers, employees and retirees.

Smart Growth Impact Statement

The proposed amendment will not have any impact on the achievement of smart growth and implementation of the State Development and Redevelopment Plan.

Full text of the proposed amendment follows:

Dated: September 14, 2005

State Health Benefits Commission

17:9-6.10 Retiree prescription drug card plan

(a) No change.

(b) As a pilot program [for six years (]from March 20, 2000 to [March 20, 2006] December 31, 2007 [)], 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 plan. Payment for prescription drug expenses or the CO-payments required under the prescription drug 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 prescription drug plan.

(c) through (k) No change.

(l) For calendar year 2006 (January 1, 2006 through December 31, 2006) the out-of-pocket maximum expense limit shall be equivalent to $1,000.00. For each calendar year thereafter the out-of-pocket maximum expense limit shall be recalculated pursuant to the provisions of Section (h) above.


TEACHERS' PENSION AND ANNUITY FUND
EFFECTIVE DATES; CHANGES
DISABILITY DETERMINATION

Adopted Amendments: N.J.A.C. 17:3-6.3 and 6.7

Cite as 37 NJR 1928(a)

Adopted with technical changes October 6, 2005

The agency proposal follows:

Summary

Comment: Louis P. Bucceri, from the firm of Bucceri and Pincus, Counselors at Law, commented on July 25, 2005 in opposition of the proposed amendment which would prohibit a disability retiree from amending the effective date of their retirement once the Board has approved the benefit. Mr. Bucceri adds that the amendments appear to be proposed solely because of a similar change in the Police and Firemen's Retirement System. He adds that the proposed change fails to consider the differences between school employees and police and fire employees as to sick leave availability. He states, "School employees can only accumulate from 10 to 15 days of sick leave per year….. It is only in situations in which they miscalculate their remaining sick time or when sick days are returned to them due to a Worker's Compensation court ruling that a correction of their retirement date is needed." He adds, "On rare occasions a teacher who is mortally ill may select an earlier retirement date to preserve benefits for his or her spouse if death seems imminent and then amend the date to complete the use of such dates when they enter an unexpected period of remission." He concludes that uniformity of benefits and a desire for consistency is not enough of a reason to extend amendments apparently designated to curtail abuse by non-TPAF members.

Response: The Teachers' Pension and Annuity Fund Board of Trustees thanks Mr. Bucceri for his comments. Although the amendments were prompted by similar changes in the Police and Firemen's Retirement System and State Police Retirement System, they conform to the statutory requirement (N.J.S.A. 18A:66-40) which dictates what the procedure for return to employment after having been determined by the Board to be disabled. Amendments to the retirement date may be made at any time prior to the Board's determination. It is noted that school employees accumulate sick leave differently than Police and Firemen's Retirement System. The Board agrees with Mr. Bucceri that a member should be able to amend the application for an earlier retirement date to preserve benefits should conditions change and has proposed to make this correction at adoption as described in the summary of agency initiated change below. The member would have to amend the retirement date in writing prior to the effective date of retirement. The Division of Pensions and Benefits is required to administer the State-administered retirement systems in a manner that is uniform, as much as possible, across the retirement systems, and the amendment would accomplish this. Comment: Barbara Sachau, a private citizen, commented on July 11, 2005, in favor of the proposed amendments. She is opposed to any benefit being received prior to the age of 65. She adds that the taxpayers of the State of NJ are getting hammered and once an application for disability is submitted, it should stand.

Response: The Teachers' Pension and Annuity Fund Board of Trustees thanks Ms Sachau for her comments. Retirement benefits are provided by statute and cannot be changed without legislation.

Comment: Brian Volz, Associate Director, Research and Economic Services, New Jersey Education Association, commented on August 1, 2005, in opposition of the proposal prohibiting the amendment of disability retirements for retirement dates. Mr. Volz states , "The impact of the proposed rule change would be to prevent a member of the TPAF or PERS who files an application for disability retirement in order to financially protect their family, in the event they prematurely die, from amending the effective date of their retirement once the board of trustees has approved their retirement." He adds, "The proposed rule will lead to considerable confusion; in addition the proposed rule might result in some individuals not submitting their retirement application in time to leave a spousal annuity benefit which would result in significant financial hardship in addition to the emotional hardship of losing a family member." He argues that uniformity of administration is an inadequate reason for the change and the amendment "fails to recognize the significant differences between the State Police Retirement System and Police and Firemen's Retirement System and the non-uniform State administered retirement systems, such as TPAF and PERS." He points out some of the differences between the TPAF/ PERS and SPRS/PFRS in regard to survivor benefits and adds that the proposed rule may also interfere with contractual rights by not permitting an employee to use accumulated unused sick leave. He adds that TPAF/PERS members may not understand that there is no statutorily provided survivors' benefit as is required under ERISA. Finally, he believes the proposed amendment may actually result in additional work for the Division because the members may wait until the last minute to file or rescind their application before each monthly meeting of the trustees only to re-submit it the following month resulting in increased retroactive retirement checks and enrollments in the State Health Benefits Program. He concludes, "The significant differences between the systems, the additional actuarial cost of providing benefits for a longer period of time, and the catastrophic consequences of not having a retirement application on file with the Division of Pensions and Benefits for the members of PERS and TPAF necessitate different rules than what might be adopted for SPRS and PFRS."

Response: The Teachers' Pension and Annuity Fund Board of Trustees thanks Mr. Volz for his comments. As stated in the response to Mr. Bucceri, the Board agrees that a member should be able to amend the application for an earlier retirement date if necessary. The Division of Pensions and Benefits administers the State-administered retirement systems in a manner that is uniform, as much as possible, across the retirement systems. Although the amendment was prompted by similar changes in the Police and Firemen's Retirement System and State Police Retirement System, they conform to the statutory requirements for returning to employment after being approved for disability retirement. The Division of Pensions and Benefits attempts to educate members of the TPAF/PERS regarding their benefits through publications, seminars and in-person/ phone counseling. Fact sheets on retirement and survivor benefits are readily available through internet, fax, mail, etc. to help to eliminate any misunderstanding regarding survivor benefits. An employee would be able to use accumulated sick leave up to the date where determined disabled from working. Prior to Board approval, the application may be amended without limitation. The Division does not see many members who are applying for disability waiting until the last minute to file or rescind their application. If there is increased activity, procedures already in place should be able to make any amendments without affecting work loads.

The Division of Pensions and Benefits is required to administer the State-administered retirement systems in a manner that is uniform, as much as possible, across the retirement systems, and the amendment would accomplish this.

Although the amendments were prompted by similar changes in the Police and Firemen's Retirement System and State Police Retirement System, they conform to the statutory requirement (N.J.S.A. 18A:66-40) which dictates what the procedure for return to employment is after having been determined by the Board to be disabled. Amendments to the retirement date may be made at any time prior to the Board's determination.

Summary of Agency-Initiated Change

The Teachers' Pension and Annuity Fund Board of Trustees proposes to amend N.J.A.C. 17:3-6.7 at adoption by permitting a member to amend a retirement application to an earlier effective date so long as all normal filing procedures have been followed. For example, if a member filed a retirement application for a January 1 effective date, but then whose disability became worse and could no longer work, could amend the retirement application to an earlier effective date as long as the amendment was requested in writing prior to that new date. The member could not extend the retirement date past the date when the Board has determined the member to be totally and permanently disabled because N.J.S.A. 18A:66-40 requires that after a member is determined to be permanently disabled by the Board, reemployment in a covered position may only be accomplished through an additional medical report showing that the member is not disabled.

Because the amendment constitutes a minor change from the proposal, effected to provide clarification, and does not have a negative impact, is responsive to the comments received and is beneficial to the members of the TPAF, the Board asserts that the amendment is appropriate at adoption.

Federal Standards Statement

A Federal standards analysis is not required because N.J.S.A. 18A:66-56 governs the subject of the proposed rulemaking, and there is no Federal requirement or standard that affects the subject of this rulemaking.

Full text of the adoption follows (additions to proposal indicated in boldface with asterisks, *thus*, deletions to the proposal indicated in brackets with asterisks, *[thus] *:

17:3-6.3 Effective dates; change

No change from original proposed amendment.

17:3-6.7 Disability determination

(a) No change from original proposed amendment.

(b) Once the Board approves a member for a disability retirement allowance, the member's retirement application shall not be withdrawn or canceled, or amended *[as to the retirement date] to a later retirement date than the date specified in the approved retirement application.*


PUBLIC EMPLOYEES' RETIREMENT SYSTEM
EFFECTIVE DATES; CHANGES
DISABILITY DETERMINATION

Adopted Amendments: N.J.A.C. 17:2-6.3 and 6.7

Cite as 37 N.J.R. 1927(a)

Adopted with technical changes - October 6, 2005

The agency proposal follows:

Summary

Comment: Barbara Sachau, a private citizen, commented on July 11, 2005, in favor of the proposed amendments. She is opposed to any benefit being received prior to the age of 65. She adds that the taxpayers of the State of NJ are getting "hammered" and once an application for disability is submitted, it should stand.

Response: The Public Employees' Retirement System Board of Trustees thanks Ms Sachau for her comments. Retirement benefits are provided by statute and cannot be changed without legislation.

Comment: Brian Volz, Associate Director, Research and Economic Services, New Jersey Education Association, commented on August 1, 2005, in opposition of the proposal prohibiting the amendment of disability retirements for retirement dates. Mr. Volz states, "The impact of the proposed rule change would be to prevent a member of the TPAF or PERS who files an application for disability retirement in order to financially protect their family, in the event they prematurely die, from amending the effective date of their retirement once the board of trustees has approved their retirement." He adds, "The proposed rule will lead to considerable confusion; in addition the proposed rule might result in some individuals not submitting their retirement application in time to leave a spousal annuity benefit which would result in significant financial hardship in addition to the emotional hardship of losing a family member." He argues that uniformity of administration is an inadequate reason for the change and the amendment "fails to recognize the significant differences between the State Police Retirement System and Police and Firemen's Retirement System and the non-uniform State administered retirement systems, such as TPAF and PERS." He points out some of the differences between the TPAF/ PERS and SPRS/PFRS in regard to survivor benefits and adds that the proposed rule may also interfere with contractual rights by not permitting an employee to use accumulated unused sick leave. He adds that TPAF/PERS members may not understand that there is no statutorily provided survivors' benefit as is required under ERISA. Finally, he believes the proposed amendment may actually result in additional work for the Division because the members may wait until the last minute to file or rescind their application before each monthly meeting of the trustees only to re-submit it the following month resulting in increased retroactive retirement checks and enrollments in the State Health Benefits Program. He concludes, "The significant differences between the systems, the additional actuarial cost of providing benefits for a longer period of time, and the catastrophic consequences of not having a retirement application on file with the Division of Pensions and Benefits for the members of PERS and TPAF necessitate different rules than what might be adopted for SPRS and PFRS."

Response: The Public Employees' Retirement System Board of Trustees thanks Mr. Volz for his comments. The Board agrees with Mr. Volz that a member should be able to amend the application for an earlier retirement date to preserve benefits should conditions change and has proposed to make this correction at adoption as described in the summary of agency initiated change below. The member would have to amend the retirement date in writing prior to the effective date of retirement. The Division of Pensions and Benefits administers the State-administered retirement systems in a manner that is uniform, as much as possible, across the retirement systems. Although the amendment was prompted by similar changes in the Police and Firemen's Retirement System and State Police Retirement System, they conform to the statutory requirements for returning to employment after being approved for disability retirement. The Division of Pensions and Benefits attempts to educate members of the TPAF/PERS regarding their benefits through publications, seminars and in-person/ phone counseling. Fact sheets on retirement and survivor benefits are readily available through internet, fax, mail, etc. to help to eliminate any misunderstanding regarding survivor benefits. An employee would be able to use accumulated sick leave up to the date where determined disabled from working. Prior to Board approval, the application may be amended without limitation. The Division does not see many members who are applying for disability waiting until the last minute to file or rescind their application. If there is increased activity, procedures already in place should be able to make any amendments without affecting work loads.

Summary of Agency-Initiated Change

The Public Employees' Retirement System Board of Trustees proposes to amend N.J.A.C. 17:2-6.7 at adoption by permitting a member to amend a retirement application to an earlier effective date so long as all normal filing procedures have been followed. For example, if a member filed a retirement application for a January 1 effective date, but then whose disability became worse and could no longer work, could amend the retirement application to an earlier effective date, pursuant to N.J.A.C. 17:2-6.3, as long as the amendment was requested in writing prior to that new date. The member could not extend the retirement date past the date when the Board has determined the member to be totally and permanently disabled because N.J.S.A. 43:15A-44 requires that after a member is determined to be permanently disabled by the Board, reemployment in a covered position may only be accomplished through an additional medical report showing that the member is not disabled.

Because the amendment constitutes a minor change from the proposal, effected to provide clarification, and does not have a negative impact, is responsive to the comments received and is beneficial to the members of the PERS, the Board asserts that the amendment is appropriate at adoption.

Federal Standards Statement

A Federal standards analysis is not required because N.J.S.A. 43:15A-17 governs the subject of the proposed rulemaking, and there is no Federal requirement or standard that affects the subject of this rulemaking.

Full text of the adoption follows (additions to proposal indicated in boldface with asterisks, *thus*, deletions to the proposal indicated in brackets with asterisks, *[thus] *:

17:2-6.3 Effective dates; change

No change from original proposed amendment.

17:2-6.7 Disability determination

(a) No change from original proposed amendment.

(b) Once the Board approves a member for a disability retirement allowance, the member's retirement application shall not be withdrawn or canceled, or amended *[as to the retirement date] to a later retirement date than the date specified in the approved retirement application.*


POLICE AND FIREMEN'S RETIREMENT SYSTEM
EFFECTIVE DATES; CHANGES
DISABILITY DETERMINATION

Adopted Amendments: N.J.A.C. 17:4-6.3 and 6.7

Cite as 37 N.J. Reg. 2687(a)

Adopted July 18, 2005

The agency proposal follows:

Summary

17:4-6.3 Effective dates; changes

(a) Except as provided by N.J.A.C. 17:4-6.7, a member shall have the right to withdraw, cancel or change an application for retirement at any time before the member's retirement allowance becomes due and payable by sending a written request signed by the member. Thereafter, the retirement shall stand as approved by the Board.

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

(e) Should the member continue to receive a salary beyond the effective date of retirement, 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 effective date of retirement.

17:4-6.7 Disability determination

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

1. The applicant was considered a member in service at the time of filing the application for a disability retirement allowance. A "member in service" means that the member or the employer was making pension contributions to the retirement system at the time of filing the application for a disability retirement allowance. It may also mean that the member was on an approved leave of absence, paid or unpaid, or suspension, paid or unpaid, at the time of filing the application for a disability retirement allowance, and it has not been more than the time frames permitted by N.J.S.A. 43:16A-9(5) a for active membership since the member's last contribution to the retirement system. If the member had pending litigation for wrongful termination filed against the employer, the member has 30 days from the date the litigation is resolved to file for disability retirement in order to be considered a "member in service";

2.-4. (No change.)

(b) Once the Board approves a member for a disability retirement allowance, the member's retirement application shall not be withdrawn, canceled or amended.


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

Adopted Amendments: N.J.A.C. 17:4-1.4 and 1.13

Cite as 37 N.J.R. 570(a)

Adopted July 18, 2005

The agency proposal follows:

Summary

The Police and Firemen's Retirement System (PFRS) proposes to amend N.J.A.C. 17:4-1.4 and 1.13 regarding the election of member-trustees for the Police and Firemen's Retirement System Board of Trustees (Board) by adding the clarification that endorsements cannot be part of the candidate's biography.

It is currently Division of Pensions and Benefits practice to eliminate endorsements from the biographical sketches submitted by the candidates for the Board. The Division does not wish to print anything that is not substantiated and the process for verifying each endorsement could be very time consuming. Endorsements for candidates appear on all of the union web pages and in the union newsletters and are not a necessary addition to the biographical sketches.

The Police and Firemen's Retirement System Board of Trustees, at the November 8, 2004 Board meeting, reviewed this issue and determined that endorsements would not be part of the biographies. The Board proposed to amend the Administrative Code to reflect this determination.

The Board also reviewed N.J.A.C. 17:4-1.4 and 1.13 to determine whether any changes were necessary to reflect current election procedures or to make the two rules more uniform. Therefore, the following amendments are also being proposed:

The Board proposes to amend N.J.A.C. 17:4-1.4(a) by inserting the word "election" before "procedures" to clarify what type of procedures are being discussed. The statutory authority for election to the PFRS Board, N.J.S.A. 43:16A-13, would also be inserted. N.J.A.C. 17:4-1.4(c)5 would be amended to eliminate the references to the master list of members and challenges regarding who is eligible to vote prior to the actual voting. The list of members is compiled by the Division of Pensions and Benefits and stored in a computer database and is no longer printed as a list. The procedure to challenge the results of an election is stated in N.J.A.C. 17:4-1.4(i). The Board proposes to amend N.J.A.C. 17:4-1.4(d)1 by capitalizing the "o" in "office" to be more consistent and to amend N.J.A.C. 17:4-1.4(d)6 to change references to "ballots" to "election packets." N.J.A.C. 17:4-1.4(e) 1iii would be deleted to eliminate the use of telefacsimile service. This method of voting has been the least used of the voting methods and three other methods of voting would still be available. Clarification that the certifying officer is responsible to make sure that election packets are properly distributed would also be added to N.J.A.C. 17:4-1.4(e)4; in addition, the word "receipt" would be changed to "notice" to more accurately reflect the nature of the notice.

The clarification regarding endorsements would be added as N.J.A.C. 17:4- 1.4(g)4. N.J.A.C. 17:4-1.4(h)4 would be amended to reflect that ballots are no longer counted by hand. Candidates are invited to be present when the final results are presented by the vendor.

The Board proposes to amend N.J.A.C. 17:4-1.13(c) and (d) by adding the word "Board" before "Secretary." N.J.A.C. 17:4-1.13(c)4 would be deleted because the distribution of election notices is described in N.J.A.C. 17:4- 1.13(c)1. The voting information is now kept on a computer file and not as a list. Challenges to the voting process are now made at the conclusion of the election process and not the beginning as provided at N.J.A.C. 17:4-1.13(h).

Therefore, N.J.A.C. 17:4-1.13(c)4 would be deleted to reflect these changes. The clarification that the Board Secretary would verify the retiree's eligibility would also be added to N.J.A.C. 17:4-1.13(d)2. References to "ballots" would be changed to "election packets" in N.J.A.C. 17:4-1.13(d)6, (e), (e)2 and (f)3. The ballot is contained in the packet with all the biographical information and voting information. N.J.A.C. 17:4-1.13(e) would be amended to clarify that the Board may hire a vendor to collect votes. It would also be amended to include the methods that are in use to cast a ballot. The requirements of N.J.A.C. 17:4-1.13(e)3 have been removed and relocated in new N.J.A.C. 17:4-1.13(e)1 with the other methods of voting, with only minor changes not affecting the standard. These methods make voting more convenient to the member and hopefully encourage more retired members to vote.

N.J.A.C. 17:4-1.13(f)1 is being amended because biographical information is prepared by the candidate and not by the Division of Pensions and Benefits. The Board Secretary receives the information. The biographical information is not submitted to the Board for approval. In N.J.A.C. 17:4-1.13(f)2, the word "Board" would be inserted before "Secretary." The clarification that the biographical information is included in the election packet would be added. The Board proposes to delete the language regarding the Secretary informing the candidate about the option to include biographical information. This information is required and is included with the election packet. Finally, the Board proposes at N.J.A.C. 17:4-1.13(f)3 to eliminate the phrase "if not included upon the ballot" because the biographical information is only distributed in the election packets. Only retired members receive packets and so the Board proposes to add the word "retired" before "member." The Board also proposes to add the restriction that "Endorsements are not permitted in the biographical information" pursuant to the discussion found in the first paragraph of the Summary.

The Board proposes to add a new N.J.A.C. 17:4-1.13(g) which would explain vote tabulation procedures. These procedures were added to the active-member trustee elections in 2000, but unfortunately were not added to the retired- member elections. The procedures are currently used by the Board and are necessary to determine which vote counts and who oversees the election process as well as who is invited to the presentation of the final results of the election. N.J.A.C. 17:4-1.13(g) would become N.J.A.C. 17:4-1.13(h) and the word "ballots" would be changed to "beliefs" in paragraph (g)1. The candidate is defending their belief regarding who won and not the individual ballots cast. The Board has not used an Election Board in more than 15 years. The Board Secretary oversees all aspects of the election process, and the vendor is contracted to be an independent body to oversee the election process. The active-member election rule, N.J.A.C. 17:4-1.4, was amended in 2000, to reflect this change and the Board proposes to amend the retired rule to be more uniform with the active rule. Finally, the Board proposes to add a new N.J.A.C. 17:4-1.13(i) which would state the process should a candidate die or be unable to serve. This procedure is taken from the active-member election rule and is the Board's policy.

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 :

17:4-1.4 Election of active member-trustee

(a) The election procedures as required by N.J.S.A. 43:16A-13 for the election of a police or fire trustee representative to thePolice and Firemen's Retirement System (PFRS) Board of Trustees are set forth in this section.

(b) (No change.)

(c) The following apply to election notices:

1.-4. (No change.)

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

(d) The following apply to nominating petitions:

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

2.-5. (No change.)

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

7.-8. (No change.)

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

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

i. (No change.)

ii. Internet access (electronic vote); or

[iii. Telefacsimile server (electronic vote); or]

[iv.]iii. (No change in text.)

2.-3. (No change.)

4. A [receipt]notice shall be signed by each certifying officer acknowledging the receipt and distribution of the election packets. It is the responsibility of the certifying officer to ensure that such election packets are properly distributed to all eligible employees.

(f) (No change.)

(g) The following apply to biographical information:

1.-3. (No change.)

4. Endorsements are not permitted in the biographical information.

(h) The following apply to vote tabulation:

1.-3. (No change.)

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

(i)-(j) (No change.)

17:4-1.13 Election of retired member-trustee

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

(c) The following apply to election notices:

1. At least six months prior to the expiration of a term of office of a retired member-trustee or immediately upon a vacancy on the Board, a notice shall be prepared and distributed by the Secretary of the Board to each retired member eligible to vote. This notice will be sent to the member's last known mailing address and shall inform the members that the nominating petition forms are available at the Office of the Board Secretary, Police and Firemen's Retirement System.

2.-3. (No change.)

[4. Election notices shall be distributed to each retired member who is eligible to vote as shown on a master list of retired members compiled by the Division of Pensions and Benefits. This list may be reviewed by a candidate or other interested parties. Retired members' home addresses shall be excluded from this master list. Any challenge or questions concerning eligible voters shall be made prior to the close of the voting deadline. Failure to challenge the list or any part of its prior to this deadline shall disallow any challenge or questions raised after the close of voting.]

(d) The following shall apply to nominating petitions:

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

2. Nominating petitions shall be provided to each retired member requesting them after the Office of the Board Secretary verifies the retiree's eligibility to run for such election.

3.-4. (No change.)

5. The form shall explain that a member shall sign only one nominating petition for a candidate seeking the retired-member trustee position.

6. The dates for filing and returning the nominating petitions shall be identified as well as the approximate date [that ballots] the election packets shall be sent to the retired members.

7.-8. (No change.)

(e) The following shall apply to the distribution of [ballots] the election packets:

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

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

ii. Internet access (electronic vote); or

iii. Paper ballot (postage-paid, self seal return mailer).

Recodify existing 1.-2. as 2.-3. (No change in text.)

[3. The ballots, together with postage-page return envelopes, shall be distributed by the vendor selected to conduct the election.]

4.-7. (No change.)

8. The candidates for election whose names are printed upon the ballots shall be [informed as to the method and the date of the counting of the ballots and shall be] invited to [be present or to be represented at the counting of the ballots] attend the presentation of the final results of the election.

(f) The following shall apply to biographical information:

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

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

3. [If not included upon the ballot, the] The biographical information shall be distributed to the eligible voters at the time of distribution of the [ballots] election packets or otherwise distributed as approved by the Board of Trustees so that the retired members of the retirement system shall have reasonable opportunity to read and consider the biographical information regarding the candidates.

4. Endorsements are not permitted in the biographical information.

(g) The following apply to vote tabulation:

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

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

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

4. The eligible candidates for the election shall be invited to the presentation of the final results of the election.

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

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

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

3. (No change.)

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


STATE POLICE RETIREMENT SYSTEM
EFFECTIVE DATES; CHANGES
DISABILITY DETERMINATION

Proposed Amendments: N.J.A.C. 17:5-5.3 and 5.7

Cite as 37 N.J.R. 396(a)

The agency proposal follows:

Summary

The State Police Retirement System Board of Trustees recently denied an accidental disability retirement application for a member who the Board determined to be totally and permanently disabled pursuant to N.J.S.A. 53:5A-9. Once the Board determines that a member is mentally or physically incapable of performing their assigned duties and grants a disability retirement allowance, there are no statutory provisions which would allow that member to cancel the retirement allowance and be reenrolled in the State Police Retirement System. The Board proposes to clarify this issue by amending N.J.A.C. 17:5-5.3 to indicate that there is an exception to when a member may amend or cancel an application for retirement. The Board also proposes to eliminate the references to Board approval in subsection (d) because a member may now be placed on retired payroll prior to being Board approved in order to have the member paid as promptly as possible.

The Board also proposes to amend N.J.A.C. 17:5-5.7, Disability determination, to both define what the term "a member in service" means and to clarify that once the Board approves a member for an ordinary disability retirement allowance, the member's retirement application shall not be withdrawn, canceled or amended as discussed in the previous paragraph. The Board had thought that the definition of the term "a member in service" was clear but a Police and Firemen's Retirement System decision Ensslin v. Board of Trustees, Police and Firemen's Retirement System, 311 N.J. Super. 333, 709 A.2d 1344 (App. Div., 1998) advised the PFRS Board to define the term because a member is required by statute there as well as here (N.J.S.A. 53:5A-9 and 10) to be "a member in service" in order to file for any type of disability retirement. The Ensslin decision carved out an exception to the "in service" rule. In Ensslin, the issue surrounded filing a Law Against Discrimination (LAD) suit against his employer. The Court determined in cases such as this, as well as in wrongful termination suits, the member should not be barred from filing for disability retirement upon settlement of the litigation. The SPRS Board proposes to define the term to mean that either pension contributions are being made at the time of filing the application for a disability retirement allowance or that the member was on an approved leave of absence at the time of filing the application for a disability retirement allowance, and it has not been more than the time frames permitted by

N.J.S.A. 53:5A-15.1 for active membership since the member's last contribution to the retirement system. If the member had pending litigation for wrongful termination or a Law Against Discrimination suit filed against the employer, the member has 30 days from the date the litigation is resolved to file for disability retirement in order to be considered a "member in service."

A 60-day comment period is provided for this notice of proposal 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 :

17:5-5.3 Effective dates; changes

(a) [A] Except as provided by N.J.A.C. 17:5-5.7, a member shall have the right to withdraw, cancel or change an application for retirement at any time before the member's retirement allowance becomes due and payable by sending a written request signed by the member. Thereafter, the retirement shall stand as approved by the Board.

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

(e) Should the member continue to receive a salary for services rendered 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.

17:5-5.7 Disability determination

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

1. The applicant was considered a member in service at the time of filing the application for a disability retirement allowance [; and]. A member in service means that the member or the employer was making pension contributions to the retirement system at the time of filing the application for a disability retirement allowance. It may also mean that the member was on an approved leave of absence at the time of filing the application for a disability retirement allowance, and it has not been more than the time frames permitted by N.J.S.A. 53:5A-15.1 for active membership since the member's last contribution to the retirement system. If the member had pending litigation for wrongful termination or a Law Against Discrimination suit filed against the employer, the member has 30 days from the date the litigation is resolved to file for disability retirement in order to be considered a "member in service";

2.-4. (No change.)

(b) Once the Board approves a member for a disability retirement allowance, the member's retirement application shall not be withdrawn, canceled or amended.


STATE HEALTH BENEFITS PROGRAM
DOMESTIC PARTNERS; MEDICARE PART B REIMBURSEMENT

Adopted Amendments: N.J.A.C. 17:9-1.8, 2.4, 2.10, 3.1, 3.2, 3.3, 3.5, 5.5, 5.6, 6.1, 6.2, 6.6 through 6.9, 7.1 and 11.10

Cite as 37 N.J.R. 397(a)

Adopted June 20, 2005

The agency proposal follows:

Summary

P.L. 2003, c.246, which was enacted on January 12, 2004 and became effective on July 10, 2004, has been designated the "Domestic Partnership Act." P.L. 2003, c.246 creates a mechanism, through the establishment of domestic partnerships, for New Jersey to recognize and support the many adult individuals in this State who share an important 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 (SHBP) and dependent 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 dependent coverage under the SHBP and State-administered retirement systems is available if the employer adopts a resolution providing for such coverage.

The proposed amendment to N.J.A.C. 17:9-1.8 would add the definition of domestic partner as defined by N.J.S.A. 26:8A-3. The definition would include same sex couples in committed relationships. P.L. 2003, c.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 covered by the above programs and systems, and does not extend such benefits to those heterosexual couples who are age 62 or older. Therefore, the definition would specifically exclude these couples.

The proposed amendment to N.J.A.C. 17:9-2.4 would add the phrase "eligible domestic partner" whenever the words "spouse" or "marriage" appear. For State employees and employees of SHBP participating employers who adopt the definition of dependent that includes domestic partners, a domestic partner is treated like a spouse and entering into a domestic partnership provides the same ability to add a domestic partner and domestic partner's dependents as does a marriage. Similarly, in the case of the termination of a domestic partnership or death of a domestic partner, an employee may change coverage. This clarification would appear throughout this rule. The addition of the requirement of a copy of the marriage or certificate of domestic partnership would provide proof of when the marriage or domestic partnership occurred. The proposed amendment to N.J.A.C. 17:9-2.4(a)6 would delete the reference to declining SHBP coverage. If an employee or dependent has any other group coverage, and that coverage ends, the employee may enroll in any SHBP plan or coverage.

The proposed amendment to N.J.A.C. 17:9-2.10(b) would add the phrase "or surviving eligible domestic partners" after the words "surviving spouses" to indicate that an employer could elect to pay for SHBP coverage for surviving domestic partners.

The Commission proposes to amend the definitions in N.J.A.C. 17:9-3.1 by clarifying that children of an eligible domestic partner may be added to coverage as long as they satisfy the other requirements of dependency. The requirement that the children of the domestic partner must live with the employee to be covered, which is the same requirement for stepchildren, would also be added.

The proposed amendment to N.J.A.C. 17:9-3.2 would add the phrase "eligible domestic partner" after the word "spouse" concerning those not eligible for coverage during military service.

The proposed amendment to N.J.A.C. 17:9-3.3 would add certificates of domestic partnership as acceptable documentation. The phrase "such dependent is wholly dependent" would also be changed to "such dependent is substantially dependent" to comply with the definition of dependent found at N.J.A.C. 17:9-3.1. The phrase "contract level of the employee" would be eliminated in subsection (b) and "level of coverage of the employee" would be inserted to reflect common usage.

The proposed amendment to N.J.A.C. 17:9-3.5 would add the phrase "or eligible domestic partner" after the word "spouse." "Husband and wife" would be amended to "spouses."

The Commission proposes to amend N.J.A.C. 17:9-5.5 by clarifying in a new subsection (a) that Medicare Part B reimbursement would be made directly in the pension benefit if possible or through a separate check if not. The clarification that the amount of the reimbursement may be determined by the law or through collective negotiations would be added. Reimbursement is limited to the standard monthly cost of Medicare Part B. The clarification that premiums may only be paid retroactively for a year would be moved to new paragraph (a)2 instead of subsection (d) which would be deleted. Existing subsection (a) would become subsection (b) and the phrase "or eligible domestic partner" would be added after the word "spouse." Existing subsection (b) would become subsection (c) and the clarification that local employers, like the State, can only refund retroactively up to one year would be added. Existing subsection (c) would become subsection (d) and the clarification that an employee cannot receive duplicate reimbursement for Medicare B and that the member's spouse or eligible domestic partner would have to show proof that they have waived their entitlement to other reimbursement for Medicare B so that they may receive reimbursement through the State would be added. Also the clarification that they cannot receive the difference between the reimbursements would be added. This would clarify existing Division practice. The word "subscriber" would be eliminated from the rule in new (b), (c) and (d). The Division no longer uses this term and refers to the retired member as a retiree, and not "retiree subscriber." Finally, the clarification that overpayment of Medicare Part B premiums are deducted from the retiree's or survivor's benefits would be added as subsection (e). Again, this is the Division's practice, but has not been stated in the Administrative Code.

The proposed amendments to N.J.A.C. 17:9-5.6, 6.1, 6.2 and 6.3 would add the phrase "or domestic partner" or "or eligible domestic partner," as appropriate, after the word "spouse." N.J.A.C. 17:9-6.1(b)4iii would also be amended to provide that a retiree with 25 or more years of service from a school board who elects the school's coverage instead of SHBP coverage is permitted to join the SHBP when they enroll in the full Federal Medicare program and be eligible for State or system-paid coverage. This is a practice, but a number of questions have recently arisen regarding this issue and the SHBP was asked to put this policy into the Administrative Code. This requirement that the member file for coverage within 60 days of enrolling in Medicare is consistent with the time frame for enrollments throughout the SHBP.

The definition of "retired employee" found at N.J.A.C. 17:9-6.1(i) includes those who terminate coverage due to other active employee or dependent coverage under the SHBP, but who later wish to reenroll for coverage after the active coverage has terminated. Because this provision was limited only to coverage as an eligible employee, retired employees could not return to the SHBP if they were covered under a private insurance or health benefit plan. Retired employees often would continue coverage in the SHBP even though their primary coverage was as a dependent under the active coverage just so they would not lose the right to participate in the SHBP should that dependent coverage end. The cost of retired SHBP coverage continues to increase, but the SHBP coverage to these retired employees has very little value as long as they have active coverage. Therefore, the State Health Benefits Commission proposes to amend N.J.A.C. 17:9-6.1(i) by allowing a retired employee to terminate SHBP coverage if they have employer-provided health benefits coverage as an employee or dependent regardless of the nature of the employer that is providing the coverage. The retired employee would be able to reenroll in the SHBP within 60 days after the active coverage ends by submitting an application and a certificate of continued coverage or employer letter certifying when coverage terminated to the SHBP.

N.J.A.C. 17:9-6.3(a) would be amended to include the requirement of a copy of the marriage certificate, certificate of domestic partnership or other documentation in order to better prove the dependent's relationship to the member.

N.J.A.C. 17:9-6.3(e) would be amended from "and/or spouse" to "or dependent" to cover everyone and make the phrase less awkward.

The proposed amendments to N.J.A.C. 17:9-6.6, 6.7 and 6.8 would also add the phrase "or domestic partner" or "or eligible domestic partner," as appropriate, after the word "spouse." In addition, N.J.A.C. 17:9-6.8(g) would be added. Local employers may set employee premium payments in retirement through collective negotiation (N.J.S.A. 52:14-17.38) as can State employers (N.J.S.A. 52:14-17.28b) but independent State authorities, which is a very small group of employers, appear to have been overlooked. Because these employers may premium share for active employees in the same manner as the State under the provision of N.J.S.A. 52:14-17.28b, the Commission believes that the intent of the law was also to allow them to have their retired employees also premium share in the same manner as the State and, therefore, adds this proposed clarification.

The proposed amendments to N.J.A.C. 17:9-6.9 would also add the phrase "or eligible domestic partner" after the word "spouse." The Commission also proposes to amend N.J.A.C. 17:9-6.9 to allow the retiree to waive coverage due to active group coverage as a dependent and then reenroll within 60 days of the effective date of termination by adding N.J.A.C. 17:9-6.9(f). The SHBP would require proof of the continued coverage and the date when the coverage ended in order to allow retirees to enroll in the SHBP at N.J.A.C. 17:9- 6.9(d). This proposed amendment would be consistent with the proposed amendment to the definition of "retired employee." Finally, the Commission proposes to add the words "or dependent" after "employee" in N.J.A.C. 17:9-6.9(e), so that the surviving spouse may enroll for coverage under this section if the retired employee had waived coverage due to active coverage as a dependent.

The proposed amendment to N.J.A.C. 17:9-7.1(c) would remove the requirement that the member agree in writing to the deductions for health benefits. The enrollment application has always required the member to authorize deductions if necessary and does not need a separate authorization. The provision that the benefit would not stop until the retirement is either approved or denied would also be added. Finally, the provision that any premiums owed could be deducted from the surviving spouse or domestic partner benefit would be added.

The proposed amendments to N.J.A.C. 17:9-11.10(c) would add the phrase "or eligible domestic partner" after the word "spouse."

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 :

17:9-1.8 Definitions

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

"Domestic partner" (as defined by N.J.S.A. 26:8A-3) or "eligible domestic partner" means a person, who is of the same sex as the employee, who is in a committed relationship with an employee of the State of New Jersey or with an employee of a SHBP participating location that has adopted by resolution, pursuant to N.J.S.A. 52:14-17.26, the definition of dependent that includes domestic partners. The relationship must also satisfy the definition of a domestic partnership as set forth in N.J.S.A. 26:8A-4, and the domestic partners must execute and file an Affidavit of Domestic Partnership with the local registrar. The resulting Certificate of Domestic Partnership must be provided to the SHBP. Marriage certificates issued to same-sex couples do not fall under the New Jersey Domestic Partnership statutes. Pursuant to N.J.S.A. 26:8A-11 this definition does not include the domestic partner of a participant in the SHBP who is the opposite sex of the participant. A public employer that does not participate in the SHBP cannot adopt this definition of domestic partner for any of their retirees enrolled in the retired SHBP pursuant to N.J.A.C. 17:1-5.5.

17:9-2.4 Coverage changes; exceptions

(a) An employee may change the employee's enrollment and the enrollment of the employee's dependents to any type of coverage if such changes result from a change in the family, dependency or employment status of the employee or the employee's dependents. Such changes will be permitted under the following conditions:

1. Marriage and eligible domestic partnerships. Any employee who marries or enters into a domestic partnership may enroll the employee, or the employee and the employee's spouse or eligible domestic partner, as defined by N.J.A.C. 17:9-1.8 and eligible dependents, if any, for any appropriate type of coverage by completing and forwarding a new enrollment form within the period beginning 60 days prior to the marriage or domestic partnership and ending 60 days after such marriage or domestic partnership. In the event that the spouse or domestic partner of such employee is already enrolled as an employee, the provisions of N.J.A.C. 17:9-3.5 shall apply to such spouse's or domestic partner's enrollment. A copy of the marriage certificate or certificate of domestic partnership must be submitted with the completed application to add the spouse or domestic partner.

2. Divorce; separation; termination of domestic partnership. Any employee who has been enrolled or has been covered as a dependent of an enrolled employee and is subsequently divorced or terminates a domestic partnership pursuant to N.J.S.A. 26:8A-10 may enroll and delete from coverage or cover any eligible dependents by completing and forwarding a new enrollment form within 60 calendar days after the divorce or termination of the domestic partnership of such employee or dependent of an employee who was covered previously under the spouse's or domestic partner's contract. A change of enrollment of this nature may also be made in the case of separation.

3. Death of spouse, eligible domestic partner or dependent child. Any employee who is enrolled as the dependent of another employee who dies may thereupon enroll as an employee, and may enroll any eligible dependents, for any appropriate coverage by completing and forwarding a new enrollment form within 60 days following the death. Any employee may, upon the death of a spouse, eligible domestic partner or dependent child who is enrolled as a dependent, enroll the employee and any other eligible dependents for any appropriate coverage by completing and forwarding a new enrollment form within 60 days following the death.

4. (No change.)

5. When last dependent child reaches age 23 or marries prior to that time. Any employee who shall have enrolled one or more dependent children as dependents may enroll for any coverage at the time the last such dependent child reaches age 23, marries prior to that time, enters into a domestic partnership or becomes otherwise ineligible, by completing and forwarding a new enrollment form.

6. An employee, spouse, eligible domestic partner or dependent ceases to be covered. If the employee, spouse, domestic partner or other dependent [declined State Health Benefits Program coverage due to] has other group health coverage, and then becomes ineligible for that other coverage due to qualifying events such as termination of employment, divorce, termination of domestic partnership, death, or reduction in hours worked, the [individual] employee may enroll in any plan or for any coverage in the State Health Benefits Program provided that the employee submits a new enrollment application accompanied by proof of the prior coverage within 60 days of the qualifying event.

7. (No change.)

8. Upon the divorce or termination of domestic partnership of a dependent child. An employee may enroll, for any coverage, a child under age 23 who, following a divorce or termination of domestic partnership, resides with the parent and is financially dependent upon the parent. The employee and child must enroll in the same plan. An application for coverage shall be submitted within 60 days of the entry of a judgment of divorce or termination of the domestic partnership in order to obtain coverage retroactively to the date of the divorce or termination+>>. Otherwise, enrollment shall be permitted only during an open enrollment.

9.-10. (No change.)

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

17:9-2.10 Coverage for survivors--death of active employee

(a) (No change.)

(b) Unless the employer or the State pays for surviving spouses or surviving eligible domestic partners, the eligible survivor of the deceased employee must submit personal payments to the health benefits program in order to continue coverage. Once the survivor's annuity begins, the cost of benefits shall be deducted directly from the retirement benefit.

(c) (No change.)

17:9-3.1 Dependents and children defined

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

"Children" includes stepchildren, legally adopted children, children placed in the employee's custody pending adoption, [and] foster children and children of an eligible domestic partner who are substantially dependent upon the employee for support and maintenance. This includes children in a guardian-ward, legal relationship who are living with the employee.

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

1.-3. (No change.)

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

17:9-3.2 Military service

A spouse, eligible domestic partner or child enlisting or inducted into military service shall not be considered eligible for coverage during such military service.

17:9-3.3 Certification of dependency

(a) An employee who elects to enroll an eligible dependent for any coverage shall report such dependent's relationship or status on the enrollment form and such listing of the dependent shall constitute the required certification that at the time of enrollment such dependent is [wholly] substantially dependent upon the employee for support and maintenance.

(b) A person who, although listed as an eligible dependent, is found to be ineligible or whose eligibility cannot be verified subsequent to enrollment shall be removed from coverage by the State Health Benefits Program and the [contract] level of coverage of the employee or retiree shall be adjusted accordingly. Coverage for that person as a dependent shall be restored retroactively to the date of eligibility if acceptable documentation is provided to the Division of Pensions and Benefits, by the employee or retiree, within 60 days of written notification of the dependent's termination. If acceptable documentation is received after 60 days, the dependent shall not be restored retroactively and can only be added at the next permissible enrollment opportunity. Examples of acceptable documentation include both certificates, sworn affidavits, marriage certificates, certificates of domestic partnership, divorce and separation decrees, custody agreements and court orders. This list is not meant to be all inclusive and does not imply acceptance of any of the above without proper authentication.

17:9-3.5 Multiple coverage; employee and spouse

(a) For Traditional Plan coverage, an employee who is the spouse or eligible domestic partner of another employee may elect to forego coverage as an employee and to be enrolled for coverage as a dependent, in which event no coverage shall be provided for such spouse or eligible domestic partner as an employee while covered as a dependent. The employee of an employer other than the State, who has enrolled such spouse or eligible domestic partner, and who is required to pay the full cost of dependent coverage, may receive a refund from the Division of Pensions and Benefits equivalent in amount to the employer's cost for single coverage pursuant to N.J.S.A. 52:14-17.31. When both [husband and wife] spouses or eligible domestic partners are covered as employees, only one may enroll their children as dependents.

(b) A similar refund shall be authorized in the case of an employee of a local participating employer who is paying the full cost of dependent coverage for a spouse or eligible domestic partner who is an employee of the State and eligible for coverage.

(c) If [a husband and wife] spouses or eligible domestic partners are both eligible for coverage under the program as employees:

1. Each may elect coverage as an employee and for their qualified dependents, including the spouse or eligible domestic partner, under the Traditional Plan or NJ PLUS, but only one may elect coverage for the employee and for their qualified dependents, including the spouse or eligible domestic partner, in a participating health maintenance organization; and

2. Each may elect single coverage in any participating health maintenance organization, provided that the employee is not covered under participating health maintenance organization as a dependent of a spouse or eligible domestic partner.

17:9-5.5 Medicare refunds

a) Where the State, directly or indirectly, reimburses the retiree for the Medicare Part B charges:

1. The amount of the reimbursements made for Medicare Part B shall be determined by law or, through a collective bargaining agreement or contract, but in no case shall it exceed the standard monthly cost of Medicare Part B.

2. As Medicare Part B premium reimbursements are dependent upon sufficient annual appropriations from the legislature, eligible reimbursements regarding Medicare Part B premiums will include only those premiums that have been paid for the period up to 12 months immediately preceding receipt of proof of Medicare and not those paid prior to the 12 months immediately preceding receipt of proof of full Medicare entitlement.

3. Wherever possible, the reimbursement will be added directly to the retirement allowance.

4. Where the reimbursement cannot be added to the retirement allowance, a separate check for the reimbursement will be mailed to the retiree. All reimbursements made for Medicare Part B shall be made payable to the retiree.

[a)](b) Where authorized by law, a participating local employer paying for the cost of coverage for enrollment in a SHBP Plan for a retiree [subscriber] may reimburse the retiree for all or part of the cost of Part B of the Federal Medicare program for the retiree [subscriber] and enrolled spouse or eligible domestic partner, as appropriate. The participating local employer is responsible for the payment of such reimbursements.

[(b)](c) All reimbursements made pursuant to part [(a)](b) above shall be made payable to the retiree [ subscriber] constituting the most timely [charge] payment for Medicare Part B coverage. The amount of the reimbursement shall be determined by law or, through a collective bargaining agreement or contract, but in no case shall it exceed the standard monthly cost of Medicare Part B. The reimbursement shall be made as frequently as determined by the participating local employer, but not less frequently than annually. As with the State, local employers are limited by budget allocations; therefore, retroactive refunds are limited to one year.

[c)](d) In no event shall duplicate reimbursements be made to any [subscriber] retiree for the [subscriber] retiree or the [subscriber's] retiree's spouse or eligible domestic partner. If the spouse or eligible domestic partner of a retiree receives reimbursement for Medicare Part B by the State in their retirement allowances, then the spouse or domestic partner shall only be eligible for the Medicare Part B reimbursement based upon their employment and not the retiree's employment. Spouses or domestic partners reimbursed directly by their employer and not through the State must submit proof that they have waived that other Medicare Part B reimbursement in order to be reimbursed as a spouse or domestic partner of the retiree. In addition, the retiree is not eligible to receive reimbursement for the difference between the amounts reimbursed to a spouse or domestic partner from other Medicare Part B reimbursement and the amounts reimbursed to the retiree under the SHBP.

[(d) For retirees of the State, since Medicare Part B premiums reimbursements are dependent upon sufficient, annual appropriations from the legislature, eligible reimbursements regarding Medicare Part B premiums will include only those premiums that have been paid within the 12 months immediately preceding the date of submission on the appropriate claim for reimbursement form by the retiree subscriber. Medicare Part B premiums paid prior to the 12 months immediately preceding the date of submission of the appropriate claim for reimbursement form are not eligible for reimbursement.]

(e) Any overpayment of Medicare Part B premiums by the State shall be deducted from the retiree's retirement allowance or from any retirement or death benefit due the retiree's beneficiary or estate.

17:9-5.6 Refunds rejected

Any request for refund not specified in N.J.A.C. 17:9-3.5 and 5.5 shall be denied. For example, a member and spouse or eligible domestic partner may be employed in the same or in different locations, each location participating in the State Health Benefits Program and both having family coverage, or both having member and spouse or domestic partner coverage; in spite of the apparent duplication of coverage, neither of the covered employees would be eligible for a refund. Or, the spouse or eligible domestic partner carries only single employee coverage under the State program while the member is covered by a plan in private industry where the employer pays for employee and dependent coverage; no refund would be payable since both would have to have been in public employment covered by the [State program] SHBP. Or, if one spouse or eligible domestic partner applies for Medicare reimbursement for the member and spouse or eligible domestic partner, the other shall not receive duplicate reimbursement.

17:9-6.1 Retired employee defined

(a) (No change.)

(b) The definition of "retired employee" also includes the following classes of retired employees who are eligible for coverage:

1.-3. (No change.)

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

i.-ii. (No change.)

iii. [Elect] Within 60 days of enrollment in the full Federal Medicare program, elect to join the SHBP under the provisions of P.L. 1993, c.8 (N.J.S.A. 52:14-17.32h). A retired employee, upon enrollment in the SHBP pursuant to this rule, who qualified for benefits under the provisions of N.J.S.A. 52:14-17.32f, 17.32f1 or 17.32f2 shall be eligible for coverage paid by the State, either directly or through the retirement system or fund;

5.-8. (No change.)

(c) (No change.)

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

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

(f)-(g) (No change.)

(h) The definition of "retired employee" shall include any former employee, who retired from a State or locally administered retirement system or the spouse or eligible domestic partner of the former employee of an employer who becomes a participating employer if the employee [ or], spouse or eligible domestic partner:

1.-3. (No change.)

(i) The definition of "retired employee" shall include an employee who is eligible for continuation of coverage in the [program] SHBP at the time of retirement who waives or terminates coverage at that time, or at a later date, because the employee [is covered] has health benefit coverage (active or retired) through an employer or eligible retiree association as a dependent [of another covered employee] or as an active employee and who applies for continuation of coverage within [a reasonable time] 60 days after termination of coverage as a dependent or active employee. An eligible retiree association is an association whose membership is limited based on the employment of the employee or the employee's dependent. A certificate of continued coverage or employer or association letter certifying when coverage terminated must accompany the retiree application.

(j)-(k) (No change.)

17:9-6.2 Coverage for prospective retirants

(a) For purposes of retired coverage, continuity of coverage may be extendeduntil such time as the application for retirement is formally approved or denied by the Board of Trustees of the retirement system paying the benefit or by the investment carrier underwriting the individual annuity contracts.

1.-2. (No change.)

3. Should coverage lapse through no fault of the retired employee [or], the retired employee's spouse or eligible domestic partner who would be eligible to continue such coverage, retroactive coverage for no more than six months may be granted, provided that the retroactive and currently due premiums are received.

(b) Any employee, upon retirement, or an eligible survivor or eligible domestic partner of such employee will be notified by regular mail of the right to continuous coverage in the State Health Benefits Program. The retired employee [or], eligible survivor or eligible domestic partner must, within a 30-day period following the receipt of the letter offering retired continuing coverage, submit the appropriate application and, if required, the charges for such coverage. Any retired employee [ or], eligible survivor or eligible domestic partner not responding within the 30-day period shall receive a second notice.

17:9-6.3 Retiree coverage; limitation

(a) A retiree, but not the retiree's surviving spouse, eligible surviving domestic partner or dependent, may change coverage to include a spouse, eligible domestic partner and other dependents by submitting a completed application within 60 days of a change in family status (marriage, domestic partnership, birth or adoption of a child, or a significant change in health coverage due to [spouse] a spouse's or domestic partner's employment). The dependent shall be enrolled retroactively to the date of the qualifying event. A copy of the marriage certificate, certificate of domestic partnership or other documentation proving the dependent's relationship must be submitted with the completed application.

1. If a retiree, but not the retiree's surviving spouse, eligible domestic partner or dependent, wishes to add an eligible spouse, eligible domestic partner or dependent and the completed application is not received within 60 days of a family status change, there shall be a minimum waiting period of two full months upon the Division's receipt of a completed application to change coverage. A dependent may be enrolled as of the first day of the month following the two-month waiting period. A dependent added in this manner may be added to a retiree's contract only once.

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

(e) A retired employee [and/or spouse] or dependent, who has maintained coverage in the State Health Benefits Program following retirement and is subsequently removed from such coverage for not having the complete Federal Medicare coverage Parts A and B as required by statute, will be permitted to obtain prospective reentry into the State Health Benefits Program once proof of complete Federal Medicare coverage Part A and B has been provided to the Division of Pensions and Benefits.

17:9-6.6 Beneficiary, dependent or survivor

(a) (No change.)

(b) An eligible surviving spouse or eligible domestic partner will be offered the opportunity to continue participation in the State Health Benefits Program subsequent to the death of the retired member. The coverage will be no greater than the coverage that was in effect at the time of the retired member's death and will be limited to only those dependents covered at the time of the member's death. If the surviving spouse or domestic partner is not the recipient of any monthly retirement allowance from a State-administered retirement system upon the death of the retired member, the Division of Pensions and Benefits will bill the surviving spouse or domestic partner at the group rate.

17:9-6.7 Coverage for PFRS and SPRS accidental death benefit recipients

(a) For the purposes of this section, "eligible person" means the surviving spouse [or], eligible domestic partner pursuant to N.J.A.C. 17:1-5.5 and child, as defined in N.J.S.A. 43:16A-1, of a member of the Police and Firemen's Retirement System, to or for whom an accidental death benefit is payable under N.J.S.A. 43:16A-10, and the surviving spouse, eligible domestic partner and child, as defined in N.J.S.A. 53:5A-3, of a member of the State Police Retirement System, to or for whom an accidental death benefit is payable under N.J.S.A. 53:5A-14.

(b) (No change.)

(c) Persons eligible to participate in the program under this section shall participate in the retiree group. If there is a surviving spouse or eligible domestic partner, eligible children shall participate as dependents of the surviving spouse or domestic partner. If there is no surviving spouse or domestic partner, eligible children shall participate as members of the program, and their eligibility to participate shall continue as long as they qualify as children under the laws governing the retirement system of the deceased member.

(d) (No change.)

17:9-6.8 Premium-sharing for retired employee State Health Benefit Coverage and reimbursement for Medicare Part B costs

(a) All State employees, except nonaligned uniformed State Police officers, who accrue 25 years of service credit in a State-administered retirement system or retire on a disability retirement after July 1, 1997, for whom there is no majority representative for collective negotiations purposes, and who were hired by the State prior to July 1, 1995, shall, upon retirement, receive Medicare Part B reimbursement after retirement up to a cap of $46.10 per month per eligible employee and the employee's spouse or eligible domestic partner and be subject to payroll deductions for Traditional Plan coverage in advance of the coverage period in accordance with standard payroll procedures as set forth below. State employees, except nonaligned uniformed State Police officers, who accrue 25 years of service credit in a State-administered retirement system or who retire on a disability retirement after July 1, 1997, for whom there is no majority representative for collective negotiations purposes, and who were hired by the State on or after July 1, 1995, shall not be entitled to receive Medicare Part B reimbursement after retirement.

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

(g) Independent State authorities, boards, commissions, corporations, agencies or organizations who are excluded from determining by means of a binding collective negotiations agreement the payment obligations of the employer to pay the premium or periodic charges for SHBP coverage in retirement under the provisions of N.J.S.A. 52:14-17.38, and who are permitted by N.J.S.A. 52:14-17.28b to have their active employees premium share in the same manner as the State, may also have their retired employees premium share in the same manner as the State. The payment obligations of an employee under this subsection shall be the payment obligations applicable to the employee on the date the employee retired on a disability pension or the date the employee meets the service credit and service requirements for employer payment for the coverage, as the case may be.

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

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

(d) A qualified retiree who is ineligible for benefits under N.J.S.A. 52:14-17.32i et seq. because of employer payment for retiree coverage under (c)4 above or receipt of health benefits coverage in connection with employment after retirement under (c)5 above, shall be eligible for the benefits after termination of employer payment for retiree coverage or employer coverage if the retiree applies to the SHBP for the benefits within 60 days after the effective date of termination of employer payment or coverage. A certificate of continued coverage or employer letter certifying when coverage terminated must accompany the retiree application.

(e) The surviving spouse or eligible domestic partner of a retiree who was eligible or was enrolled for benefits under N.J.S.A. 52:14-17.32i et seq. shall be eligible to continue coverage, at full cost, in the State Health Benefits Program. If the deceased retiree would have been eligible for such coverage but was not enrolled due to active health benefit coverage as an employee or dependent, the surviving spouse or eligible domestic partner may enroll in the SHBP, on a prospective basis, within six months after the retiree's death. The surviving spouse or eligible domestic partner must inform the SHBP that they wish to enroll for coverage and must fill out an enrollment form and pay the required premiums before coverage may become effective.

(f) A qualified retiree who waives coverage at retirement, or at a later date, due to health benefit coverage (active or retired) through an employer as a dependent shall be eligible for the benefits after termination of dependent coverage if the retiree applies to the SHBP for the benefits within 60 days after the effective date of termination of dependent coverage. A certificate of continued coverage or employer letter certifying when coverage terminated must accompany the retiree application.

17:9-7.1 Termination effective date

(a)-b) (No change.)

(c) [Cessation of] Unless the subscriber requests termination of coverage, SHBP coverage for a member who is awaiting approval of a retirement benefit shall [not occur if the retiring member agrees, in writing, to the deduction of any] continue until the retirement is either approved or denied. Any retroactive SHBP premiums owed by the subscriber shall be deducted from the retirement benefit when approved, the withdrawal check, [or] the return of pension contributions, or from any retirement or death benefit received by the member's surviving spouse, domestic partner or dependent.

17:9-11.10 Coverage in retirement

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

(c) An eligible surviving spouse or eligible domestic partner 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 or eligible domestic partner must pay the full costs.


DIVISION OF PENSIONS AND BENEFITS
POLICE AND FIREMEN'S RETIREMENT SYSTEM
SERVICE CREDITED FROM MULTIPLE POSITIONS
OPTIONAL PURCHASES OF ELIGIBLE SERVICE
METHODS OF PAYMENT

Adopted New Rule: N.J.A.C. 17:4-5.2

Adopted Amendments: N.J.A.C. 17:4-5.3 and 5.4

Cite as 37 N.J.R. 39(a)

Submit comments by March 4, 2005

Adopted April 18, 2005

The agency proposal follows:

Summary

The Police and Firemen's Retirement System (PFRS) proposes a new rule at N.J.A.C. 17:4-5.2 which would define how much credited service may be earned in a single calendar year. The proposed new rule is necessary for a number of reasons. Although the Public Employees' Retirement System and Teachers' Pension and Annuity Fund statutes at N.J.S.A. 43:15A-39 and 18A:66-15 specifically prohibit credit for more than one year's service in any one calendar year, the Police and Firemen's Retirement System (PFRS) statutes are silent on this issue. To be eligible for enrollment in PFRS, an employee must be full-time. However, one can infer that a similar limitation ought to apply in the PFRS because it is doubtful that the Legislature would have sanctioned such a practice if it had considered the possibility of a member holding down more than one full-time job. Also, the Legislature has directed that the rules of the State-administered retirement systems be as consistent as possible to "permit the most economical and uniform administration of all such retirement systems" (N.J.S.A. 43:16A-13(7)).

The proposed amendment to N.J.A.C. 17:4-5.3(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. 17:4-5.3(b) 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 Administrative Code. The Board would expand the definition to include types of military service that cannot be purchased. A recent unpublished Appellate Division decision, Ewanus v. State of New Jersey, Division of Pensions and Benefits, Board of Trustees, Public Employees' Retirement System (Dkt. No. A-6348-00T2, December 24, 2002), determined that attendance at West Point or other military academies could not be purchased.

N.J.A.C. 17:4-5.4, Methods of repayment, would be amended to include direct rollovers and transfers of funds. Federal law was changed a number of years ago to permit this method of repayment 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. The section heading and N.J.A.C. 17:4-5.4(a) are also clarified to change "repayment" to "payment," and the codification of paragraph (a)4 is corrected to subsection (b).

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 :

17:4-5.2 [Reserved)] Service credited from multiple positions

Not more than one year of service shall be credited for all service in a calendar year.

17:4-5.3 Optional purchases of eligible service

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

1.-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. (No change.)

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

1. Active duty military service prior to enrollment. 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 does not 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 midshipmen at one of the service academies. Military service before enrollment cannot be used to qualify for an ordinary disability retirement;

2.-5. (No change.)

(c) (No change.)

17:4-5.4 Methods of [repayment] payment

(a) Methods of [repayment] payment include:

1.-3. (No change.)

4. 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.

[4.](b) Extra payroll deduction will include regular interest for the term of the installment.


DIVISION OF PENSIONS AND BENEFITS
POLICE AND FIREMEN'S RETIREMENT SYSTEM
EMPLOYMENT AFTER RETIREMENT

Adopted New Rule: N.J.A.C. 17:4-6.8

Submit comments by March 4, 2005

Cite as 37 N.J.R. 40(a)

Adopted April 18, 2005

The agency proposal follows:

Summary

The Police and Firemen's Retirement System (PFRS) Board of Trustees has recently been faced with a number of retired members who returned to employment in administrative or supervisory positions the same as or substantially similar to the positions held prior to retirement. These individuals have continued to collect retirement allowances and did not re-enroll in the PFRS. The members, in most cases, were required by the PFRS Board to cancel their retirements, be re-enrolled in the PFRS and repay any pension benefits they had received. The Board determined that the retired members had been appointed to these administrative or supervisory positions under the provisions of N.J.S.A. 43:16A-1 and 3.1 and, therefore, retained their PFRS membership in those titles. The retired members argued that they should not be subject to the re-enrollment provisions of N.J.S.A. 43:16A-15.3 because the positions were not those normally covered by the PFRS.

Although the Board has always considered the statutes regarding re-enrollment after retirement to be clear on their face, there have recently been a number of questions on this issue. Therefore, the Board proposes to clarify by rule when re-enrollment is required in this situation.

A recent Appellate Division decision, Kossup v. Board of Trustees, Police and Firemen's Retirement System (Dkt. No. A-0976-02T3, decided October 21, 2004), determined for those whose supervisory or administrative positions could become PFRS positions under the provisions of N.J.S.A. 43:16A-3.1 that these petitions are "a hybrid, in which the pension system covering the position depends on the status of the person who holds the job. If the person is a member of PFRS and is still eligible to contribute to the system, then the position is a PFRS position. If the appointee is not enrolled in PFRS or is not eligible to re-enroll or contribute, then the position is not covered by PFRS" (Page 13). The Board proposes to add this explanation of eligibility to the proposed new rule.

As a 60-day comment period is provided on this notice of proposal 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 :

17:5-6.8 [Reserved)]Employment after retirement

(a) A member, who is pending retirement or whose retirement has become effective pursuant to N.J.A.C. 17:4-6.2, is required to re-enroll in the Police and Firemen's Retirement System pursuant to N.J.S.A. 43:16A-15.3, regardless of whether the member is over age 35, if:

1. The member returns to the employment in a PFRS covered position;

2. The member continues in the same, or substantially the same, position held prior to retirement with no lapse in service after the retirement date. In this case, the member would not be considered to have a bona fide retirement and would not be entitled to any retirement benefits. The member would be reinstated to the former PFRS membership; or

3. The member returns to employment in a position which is the same, or substantially similar, to the position held by the member prior to retirement, and:

i. The position became a PFRS position for that member prior to retirement due to the provisions of N.J.S.A. 43:16A-1(2)(a) or (b) or 43:16A-3.1, which permit a member of the PFRS to continue membership if serving in an appointive administrative or supervisory capacity over police or firefighters, and the member returned to employment with the same employer;

ii. The position became a PFRS position at the option of the member prior to retirement pursuant to N.J.S.A. 43:16A-3.5 or other statutory authority; or

iii. The position remained a PFRS position under the provisions of N.J.S.A. 43:16A-1.2 for those serving in the position at the time of the P.L. 1989, c.204 review.

(b) If a member is eligible to contribute to the PFRS from a position, then the position is a PFRS position.

(c) If the position is not for a title which is eligible for enrollment in the PFRS and the member is not eligible to contribute to the PFRS due to having reached the mandatory retirement age of 65 (N.J.S.A. 43:16A-5), the position is not covered under the provisions of the PFRS, and the member is not eligible to re-enroll or contribute to the PFRS from that position. The member may work in that position without affecting his or her retirement allowance.


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