Linked below is a very interesting and powerful article published in Bloomberg Personal Finance that discusses the perils of various public employee pension systems across the United States. Every Public Employee in the State of New Jersey should take a few minutes to review this article to educate themselves regarding "the state" of Public Employee Pension Systems across America.
As reported on New Jersey State Senator Tom Kean’s website, Senator Kean appears to be pushing the Christie agenda of Civil Service reform and Public Employee Pension reform.
In a press release dated July 26, 2013, Kean stated: “I’m glad that Senate Democrats have finally decided to show up to work in Trenton this summer,” “But that’s only half the battle. I urge Senate President Sweeney to make this voting session mean more. Whenever we meet, we should be doing everything possible to address the people’s two top issues: taxes and jobs.”
Kean further bated Sweeney by stating: “Perhaps the Senate President has struggled to get his caucus to show up, because they have heard the people’s resounding message: We do not need legislators in Trenton who protect the status quo of high taxes and a noncompetitive job climate.” “Hopefully, their attendance on Monday means that they are ready to work on a bipartisan basis to pass real solutions to improve the quality of life for all New Jerseyans.”
Kean went on to list certain bills that he urges bi-partisan support. Each of these bills have potential long term effects on public safety officers and public employees that work in the state of New Jersey:
- Ending sick-leave “retirement jackpots” via S808 or Sweeney’s own bill S1564;
- Passing civil service reforms, and cut other duplicative spending at the local level, S1694;
- S601 (suspends public pensions of retired public employees who resume public employment with compensation greater than $15,000, in order to mitigate pension system burden and help ensure equal opportunity for new positions.
All New Jersey Public Employees must take note of the tone that Kean and other Senate Republicans are taking in regard to Civil Service reform and Public Employee Pension reform. These reforms could have long lasting effects into the foreseeable future.
On July 30, 2010, the Appellate Division decided James Henderson v. Board of Trustees, Public Employees’ Retirement System, Docket No.: A-6176-08T2. In the case, James Henderson appealed the Board of Trustees of the Public Employees’ Retirement System’s (“Board”) denial of his application for accidental disability benefits. Frank M. Crivelli, Esq. and Donald C. Barbati, Esq. of the Pellettieri, Rabstein & Altman law firm, and the authors of this blog, successfully argued to reverse the denial, thereby obtaining accidental disability benefits for Henderson.
The case addressed whether Henderson was entitled to accidental disability retirement benefits based upon two (2) separate work-related incidents. Notably, it was undisputed that the first incident causing Henderson injury constituted a “traumatic event.” After initially becoming injured, Henderson was unable to work for some period of time, returned to light duty for a while, and then, ultimately, returned to full duty. The injury was then aggravated and accelerated by a second incident in which Henderson attempted to perform an ordinary task within the scope of his duties and responsibilities of employment.
The Board initially denied Henderson’s application for accidental disability retirement benefits. To support the denial, the Board determined that the second accident did not constitute a “traumatic event” within the meaning of the applicable case law. The Board also found that the injury originally suffered by Henderson in the first incident constituted a “pre-existing disease or condition,” thereby precluding him from receiving said benefits. This appeal ensued.
On appeal, Henderson argued that: (1) the second incident constituted a “traumatic event” within the meaning of the applicable case law; and (2) the term “pre-existing disease or condition” was never intended to include injuries suffered in prior traumatic events for purposes of whether an individual qualifies for accidental benefits.
In its decision, the Appellate Division agreed with the Board’s initial determination that the second incident did not constitute a traumatic event within the meaning of the applicable law. Significantly, however, the Court agreed with our contention that the term “pre-existing disease or condition” does not include injuries suffered in prior traumatic events. Rather, the Court found that term has been uniformly applied to bodily diseases or conditions that were not caused by a traumatic event. The Court cited a litany of case law to support this contention and articulated that the Board’s suggestion that the injuries resulting from the original traumatic event and their sequelae should be treated as pre-existing diseases or conditions is utterly inconsistent with the applicable law.
The Asbury Park Press published an article in today's Sunday edition addressing the ability of The State of New Jersey to honor its pension obligations to those public employees that have been paying into the retirement system since the start of their public employment . The article, entitled "Can New Jersey Keep its Pension Promises?" unfortunately reiterated the same information that we have been hearing for the last several years.......The Pension System is Broke.
The article stated that as of June, 2009, the state's pension system faced unpaid liabilities in the amount of $45.8 billion dollars. However, this is assuming that the state receives an annual 8.25% return on its pension investments. At this point in time, everyone is aware that the State hasn't seen 8.25% for several years now. Furthermore, many studies have demonstrated that the unfunded liability of $45.8 billion is a conservative estimate and the true unfunded liability is more along the lines of $173.9 billion, with unfunded health care costs reaching $55 billion dollars. Eileen Norcross, a George Mason University researcher has been quoted as stating, "It's mathematically impossible to pay this out. It's too large."
However, despite the fact that the public employment pension system is in dire straits, Governor Christie, has made the decision to "skip" the state's 2010 $3billion dollar pension payment. In reviewing the administration's decision to forgo the payment, one has to question if the Christie administration has already given up on attempting to save the state pension system and the countless amount of money that has been withheld from public employee's paychecks on a weekly basis since the inception of the system. I bet many of you who are reading this article would like to skip a few pension payments or take a "pension holiday" the way that the state, county and local governments have over the last sever years.
A year or two ago, myself and other attorneys representing public employee labor unions filed suit against the State of New Jersey for failing to fund the State Employee Pension Systems. An argument was made that the state had a constitution mandate or obligation to fund the pension system. Unfortunately all of the suits were dismissed under the notion that the state had very broad discretion in making decisions on how to appropriate funds concerning fiscal obligations. However, the court did leave the door open and stated that a suit would be entertained if pension recipients did not receive payment due to the state's inability to pay. With that being said, one has to ask the question: "Wont it be to late at that point in time?"
We will continue to follow this issue on this blog. You, the public employees of the State of New Jersey, and retired public employees of the state of New Jersey need to take affirmative steps to attempt to revive your retirement system. If you do not take immediate affirmative steps to protect your retirement income, unfortunately, it appears as if it will be lost due to government irresponsibility and mismanagement.
As reported in the Trentonian on February 9, 2010, legislation requiring public workers to assume a portion of their health benefits costs and providing relief to the State pension system has been introduced. The package of bills introduced follows vows by Democratic leaders in the State Senate to revisit pension reform recommendations made four years ago.
One bill requires state, local, and school district workers to contribute at least 1.5 percent of their salary toward their health care costs. Another caps at $15,000 the amount of unused sick time that can be cashed in at retirement. A third bill repeals the 9 percent pension benefit increase put in place in 2001 by changing the way pensions are calculated. The last bill in the package requires the State to make its annual payment to the pension system, not skip it or short it, as has been the custom in recent years.
Most of the proposals would affect new hires, not those already in the pension system. However, the measure requiring public workers to contribute toward their health care costs would take effect when their current contract expires. No figures were immediately available on the potential savings.
The pension system is underfunded by about $34 billion and is in danger of becoming insolvent unless fixes are made. The proposals were first made in 2006 after the Legislature met in special session to come up with ways to lower New Jersey’s property taxes, which average $7,045 a household and are the highest in the country. Pension and health care costs are major drivers of property taxes.
Former Governor Jon Corzine halted some of the legislative-driven reforms, arguing that they should be part of the collective bargaining process. The State’s Unions, which have long resisted pension reforms, supported Corzine’s position.
Other highlights of the bills include: (1) limiting enrollment in the pension system to those considered full time; (2) enrollment in a defined contribution plan for part-timers; (3) calculating pension benefits based on the 5 highest years of salary, instead of the 3 highest years, for future public workers, and basing benefits on the 3 highest years, instead of the highest year, for future State Police employees; and (4) allowing pension benefits based on one job, not multiple positions.
Please check this blog periodically to ascertain updates with regard to this proposed legislation. Were the bills ultimately passed, there is no doubt they would have a drastic effect on New Jersey Public Safety Officers.
After much concern regarding the new Treasury Regulations promulgated by the Internal Revenue Service (“IRS”) and their potential impact on members of government pensions plans, the IRS and the Department of Treasury extended the date by which a government plan must comply with final regulations on distributions from a pension plan upon attainment of normal retirement age. Under the extension, the new regulations will be effective for a governmental plan for plan years beginning on or after January 1, 2013.
As described in three previous blog entries, the IRS modified Treasury Regulation §1.401(a)-1 to provide an exception to the rule that pension benefits be paid only after retirement by permitting a pension plan to commence payment of retirement benefits to a participant after the participant has attained normal retirement age even if the participant has not yet had a severance from employment with the employer maintaining the plan.
The new regulations also require a pension plan’s normal retirement age to be an age that is not earlier than the earliest age that is reasonably representative of the typical retirement age for the industry in which the covered workforce is employed. In the case of a retirement plan where substantially all of the participants are qualified public safety officers, a normal retirement age of age 50 or later is deemed not to be earlier than the earliest age that is reasonably representative of the typical retirement age for the industry in which the covered workforce is employed.
Notice 2007-69, which provided temporary relief of certain plans that may have to change their definitions of normal retirement age to satisfy the new regulations, indicated that the new regulations do not contain a safe harbor or other guidance with respect to a normal retirement age conditioned on the completion of a stated number years of service. The notice requested comments on whether and how a pension plan with a normal retirement age conditioned on the completion of a stated number of years of service satisfies the requirement in §1.401(a)-1 that a pension plan be maintained primarily to provide for the payment of definitely determinable benefits after retirement or attainment of normal retirement age and how such a plan satisfies the pre-ERISA vesting rules.
Although the implementation of the new regulations has been delayed, it is critical to keep apprised of the comments regarding whether a pension plan with a normal retirement age conditioned on the completion of a stated number of years of service satisfies the new regulations. Clearly, the resolution of this issue could drastically impact many public safety officers not only in New Jersey, but across the country. Please be sure to check this blog periodically as updates regarding these regulations will be posted as more information becomes available.
Recently, Karen Pierog and Jim Christie published an article addressing state pension overhauls during these tough economic times. Specifically, the article examines how Illinois, California, and other states have instituted reforms to combat increasing and debilitating unfunded pension liabilities.
According to the article, the National Association of State Retirement Administrators found a nearly $443 billion collective unfunded liability for the 125 state, local government, and teacher pension funds in its most recent survey. The situation is likely to worsen as the recession punches holes in budgets nationwide and causes big investment losses for defined-benefit pension plans that pay out a fixed income. As a result, it is suggested that the economic downturn may also lead to more reforms as politicians and taxpayers realize they can no longer afford plush pensions compared to defined-contribution 401(k) plans in the private sector which pay income based on variable investment returns.
This year, laws were enacted in Georgia, Louisiana, Nevada, New Mexico, Rhode Island, and Texas that reduced benefits for new employees. On the local level, New York City has repeatedly trimmed pension benefits for new hires by creating pension tiers. Illinois and California are among the states evaluating various reform suggestions and/or establishing pension commissions in order to adequately address the problem. In all, it is clear state pension systems are facing a major overhaul in response to the poor economic climate.
This article is of particular importance because the status of the New Jersey public pension system is vital to every resident of this state and especially crucial to public safety employees. Consequently, all current or retired New Jersey public safety officers should read this article in order to fully understand the measures being taken across the country to rectify the problems that have become prevalent in defined-benefit pension plans. To read the full article, click on the following link.
An association of retired cops has warned Hamilton Township to not tamper with their retirement package. The association alleges it would be illegal to change the terms of their benefits “in the middle of the stream.” The Mercer County Local 12 of the Retired Police and Firemen’s Association sent the warning to the Hamilton Township Business Administrator John Ricci this week in a letter.
Ricci confirmed he received the letter a letter from Trenton attorney Sid Lehman, saying the association “objected” to the Township’s plan to change retirees’ prescription drug co-pays to match the co-pay terms of active employees. “Sid sent a letter saying you can’t do that because they are retirees and they are entitled to the same benefit they had when they retired,” Ricci said. “He gave me the case law, and I agreed with him, and that was the end of that.”
Thomas Murphy,a retired Trenton cop and president of the 400-member Local 12, said there is nothing “adversarial” about the issue. “We want to sit down and see if we can come to an agreement at the table. We have precedent on our side, and we won’t hesitate to use it.”
“They’re not a union, they have no right negotiate,” Ricci said, “but they do have certain rights to continue receiving the same benefits they had when they retired, and that’s what this is about.”
Both Ricci and Murphy expressed optimism that the issue would be resolved without any legal action.
Most recently, the New Jersey Supreme Court heard argument and deceided the case of Hemsey v. Police and Firemen's Retirement System, A-15 September 2008 Term, on Certification from the Appellate Division, 393 NJ Super 254 (App. Div. 2007).
Hemsey was hired as a police officer by the City of Trenton in 1973. In 1998, he retired and began receiving retirement benefits from PFRS. Most of his employment with the city was spent as a police dispatcher. In the same year that he retired, Hemsey entered into a consulting contract with the City of Trenton in which he worked directly under the Department's commanding officer and evaluated and worked with police and fire communication center personnel. In 1999, Hemsey was appointed to the position of Director of Communications. This was a newly created civilian position of employment.
Thereafter, PFRS requested information from the City regarding Hemsey'e employment and called Hemsey before the board to answer questions regarding the same. In October 2002, PFRS informed Hemsey that he was required to re-enroll in the reitement system due to the fact that the functions he was performing as a retiree were essentially the same duties that he was performing prior to retirement. As a result of the ruling, Hemsey's retirement benefits were cancelled retroactively to January 1, 1999. Hemsey appealed and the case was sent to the Office of Administrative Law as a contested case.
The OAL concluded that the retirement benefits were properly cancelled, with the Appellate Division affirming the decision. However, the Supreme Court for the State of New Jersey reversed the Appellate Division and held that the retirement benefits were improperly cancelled because there was insufficient evidence to conclude that the duties of the two positions were the same and the position of civilian director of communications started six (6) months after Hemsey retired from employment with the police department.
New Jersey law dictates that an individual who retires and then accepts employment in a PFRS covered position will lose retirement benefits and be required to re-enroll in PFRS, N.J.S.A. 43:16A-3.1. Hemsey successfully argued that his new position of employment did not meet the statutory requirements that mandated re-enrollment in PFRS. After a review of all of the credible evidence including testimony and the consulting contract itself, the Supreme Court agreed with Hemsey.
To simplify this case for retirees collecting a PFRS pension and still performing duties in a law enforcement capacity, you must be very careful that your new duties are not substantially the same or similar to the duties for which you are collecting the pension. Furthermore, the duties associated with the new position of employment must not meet the statutory definition of a PFRS covered position. Each case is different and will be evaluated on a case by case basis with a thorough evaluation of the facts. Its always advisable to research and evaluate the facts before you accept re-employment. It is much easier to draft an employment agreement that falls outside the statutory requirements of PFRS than to have your pension benefits cancelled, whereby you are left with no choice but to appeal the issue before the Office of Administrative Law.
In a letter dated December 15, 2008, Wendy Jamison, Secretary for the Police and Firemen's Retirement System (PFRS), explained that PFRS has recently adopted amendments to the New Jersey Administrative Code that addresses training requirements for Police Officers and Firefighters and the potential affect of the same to pension eligibility for some members of PFRS.
In her letter, Ms. Jamison explained that in order for a member of PFRS to meet the eligibility criteria for the pension system, he or she must work in a title that meets the definition of "police officer" or "firefighter" and meet specific minimal training requirements. The training requirements for eligibility in PFRS is that each member of the retirement system must complete the basic training course for Police Officers as prescribed by the New Jersey Police Training Commission, and Firefighters must receive Firefighter 1 certification through the New Jersey Department of Community Affairs, Division of Fire Safety. What is important to note is that N.J.A.C. 17:4-2.4 mandates that should pension members not pass and/or receive said certification within eighteen (18) months after the final adoption of the new regulation, they will be dis-enrolled and removed as an active member of PFRS.
In essence, PFRS members that do not have the required training as specified under N.J.A.C. 17:4-2.4, have until June 30, 2010, to complete the required training. If any active member of the retirement system not be fully trained by July 1, 2010, they will be removed as an active member of PFRS.
in closing, Ms. Jamison notes that certain federal, state, or county training may be substituted for the training required under N.J.A.C. 17:4-2.4, so long as the same is approved by the New Jersey Police Training Commission and the PFRS Board of Trustees. However for Firefighters, no other training other than Firefighter 1 certification through the New Jersey Department of Community Affairs, Division of Fire Safety, will be accepted. It should also be noted that while the letter is silent regarding Corrections Officers; common sense dictates that completion of the Corrections Officers Training Academy (COTA) will satisfy the requirements of N.J.A.C. 17:4-2.4. However at this time we are contacting the Board of trustees to obtain clarification to ensure Corrections personnel are protected and covered.
The reason that we are bringing this to the attention of our readers is to ensure that all Public Safety Officers are made aware of the new regulation and that their training certification is up to date for purposes of qualifying as a member of the Police and Firemen's Retirement System. PFRS is regarded as the "gem" of the public employment retirement systems in the State of New Jersey. For obvious reasons, the retirement system garners great benefits for its membership in comparison to the other large public employment retirement systems provided by the state of New Jersey. over the years, PFRS and the New Jersey State Legislature has been lobbied by administrators and non public safety officer groups to obtain membership in the retirement system. With the passage of the new regulation, there should no longer be a question as to which employees have the right and ability to claim membership in PFRS.
Following up on our previous entry, this article will help our readers understand the criteria that must be met in order for a public employee to qualify for an ordinary or accidental disability pension within one of the following State pension systems, the Public Employees Retirement System, the Teachers Pension and Annuity Fund, the State Police Retirement System, and the Judicial Retirement System. While these pension plans are similar in defined benefits and criteria for eligibility, each has their own specific nuances that are particular to the membership they serve.
Accidental v. Ordinary Disability Benefits
In accordance with the Public Employees Retirement System (“PERS”) and Teachers Pension and Annuity Fund (“TPAF”) handbooks, in order to qualify for an ordinary disability retirement, an employee must:
· Have an active pension account;
· Have 10 or more years of New Jersey service credit;
· Be considered totally and permanently disabled; and
· Submit medical reports certifying the disability.
In order to qualify for an accidental disability retirement, a member must:
· Be considered totally and permanently disabled as a result of a “traumatic event” that happened during and as a direct result of carrying out the member’s regular or assigned job duties;
· File an application for disability retirement within five (5) years of the date of the “traumatic event”; and
· Be examined by physicians selected by the retirement system.
If an employee claiming membership to either one of these retirement funds qualified for accidental disability, his/her annual retirement allowance will be 72.7% of their salary at the time of the “traumatic event.”
Should the public employee be receiving periodic workers’ compensation benefits, the accidental disability retirement benefits will be reduced dollar for dollar by the periodic benefits paid after the retirement date. However, the retirement benefit is not reduced by any Social Security or private insurance benefits that may be payable.
The New Jersey Division of Pensions and Benefits reports accidental disability retirement benefits as exempt from federal income tax. The benefits are alsoContinue Reading...
Recently, it has come to our attention that many individuals aside from Public Safety Officers utilize this website as a reference guide for the various pension systems available to individuals employed by municipalities, counties, and the New Jersey state government. As such, this entry will focus upon a few of these pension systems and help our readers understand their background, membrship, and administration.
Overview of the Various Pension Systems
The State of New Jersey established the Public Employees Retirement System (“PERS”) in 1955 after repeal of the laws that created the former State Employees Retirement System. Like the Police and Firemen’s Retirement System (“PFRS”), the New Jersey Division of Pensions and Benefits is assigned all administrative functions of the retirement system except for investment of the assets.
The PERS Board of Trustees has the responsibility for the proper operation of the retirement system. The Board consists of six (6) employee representatives, the State Treasurer, and two (2) individuals appointed by the Governor with advice and consent of the Senate. The Board meets monthly to conduct its business.
Membership in the retirement system is generally required as a condition of employment for most employees of the State or any county, municipality, school district, or public agency. Generally, an employee is required to enroll in PERS if:
· They are employed on a regular basis in a position covered by Social Security;
· Their annual salary is $1,500.00 or more; and
· They are not required to be a member of any other State or local government retirement system on the basis of the same position which gives them membership in PERS.
The Teachers Pension and Annuity Fund (“TPAF”) was established in 1919 and completely reorganized in 1955. The New Jersey Division of Pensions and Benefits is assigned all administrative function of the retirement system except for investment of the assets.Continue Reading...
STATE'S AUTHORITY TO REVOKE A RETIRED POLICE OFFICER'S PERMIT TO CARRY A HANDGUN IS NOT PREEMPTED BY FEDERAL LAW
In the case of In re Carry Permit of Andros, A-4077-06T4, the Appellate Division held that the State of New Jersey’s authority to revoke a retired police officer’s permit to carry a handgun is not preempted by federal law.
James Andros was an Atlantic City police officer from 1968 to 2003. Prior to his retirement in good standing, Andros applied for and obtained a permit to carry a handgun. This action concerns Andros’ appeal from a judgment granting the State’s application, under N.J.S.A. 2C:39-6L(6), to revoke his permit to carry a firearm.
Andros challenged denial of his motion to dismiss the State’s application because of federal preemption under 18 U.S.C.A. § 926C, enacted as part of the Law Enforcement Officers’ Safety Act of 2004, which amended 18 U.S.C.A. § 921, et. seq., relating to firearms. Andros contended: (1) that the revocation was preempted; and (2) the Law Division erred in finding that the State had presented “good cause” for the revocation.
The Law Division Judge denied Andros’ motion to dismiss on the grounds that the State was not preempted from revoking the license under N.J.S.A. 2C:39-6L(6). The Judge found that N.J.S.A. 2C:39-6L(6) did not bar a retired New Jersey law enforcement officer, or officers from other states who are qualified in those states, from carrying a concealed weapon as long as he meets New Jersey’s qualification standards. Consequently, the Judge concluded that N.J.S.A. 2C:39-6L remained valid.
On appeal, the Appellate Division, in affirming the revocation, held that the federal Law Enforcement Officers’ Safety Act of 2004, 18 U.S.C.A. §926C, does not pre-empt a state from revoking a retired police officer’s permit to carry a handgun under N.J.S.A. 2C:39-6L. In conceding Andros satisfied the requirements of federal act, the Court indicated a retired officer’s conduct permits the licensing state to revoke the permit, as evidenced by the requirements for qualification and testing every year in U.S.C.A. § 926C(c)(5). In other words, the federal act expressly permits states to set standards for training and qualification consistent with those of “active law enforcement officers.”
The Court agreed with the Law Division Judge that the federal act merely preempts a state’s ability to preclude, or change the requirements for, carrying the firearm interstate, if the state permits licensing of the retired officer. As a result, New Jersey retains jurisdiction to hear the state’s contention that it can establish good cause justifying the revocation. With these principles in mind, the Court found no congressional intent to preclude the action taken by the State here and no basis for concluding that a state cannot revoke a handgun permit because Congress authorizes a carrier when licensed in one state to possess it in another.
This case illustrates the State’s ability to limit a retired public safety officer’s ability to carry a firearm. Recently, this topic has become an important issue for retired officers throughout the State of New Jersey. This case is significant in that shows the State of New Jersey is not precluded under federal law from seeking and ultimately obtaining revocation of an officer’s permit to carry a firearm. The evolving case law regarding retired officers and their ability to carry a firearm should be followed closely so as to ensure the officers’ rights are protected.
In Communication Workers of America v. State of New Jersey, the appellants challenged an amendment made by the State Health Benefits Commission to the retiree prescription drug card pilot plan. In support, appellants argued that the rule is invalid and unenforceable because it reduces post-retirement health care benefits.
The Appellate Division affirmed the amendment to N.J.A.C. 17:9-6.10(h) as well as a concurrent resolution. The Court held that the rule allowing adjustment of the cap on out-of-pocket expenditures is consistent with statutory authority governing the prescription drug benefit plan. The Court also noted that the pilot plan, as adopted, is reasonable and necessary to preserve the financial integrity of the plan.
This entry serves as follow up to the one regarding the State Health Benefits Program. As you can see, proposed changes or changes actually made to the State Health Benefits Program have become an increasingly important topic for all public employees. Recently, the State of New Jersey has become especially active in seeking to amend or alter the benefits packages offered to its employees through contract negotiations. Undoubtedly, as more collective bargaining units negotiate their contracts, this topic, which involves the potential for premium sharing by the employees, will come to the forefront.
After much concern regarding the new Treasury Regulations promulgated by the Internal Revenue Service (“IRS”) and their potential impact on members of government pension plans, the IRS and the Treasury intend to extend the date by which a governmental plan must comply with final regulations on distributions from a pension plan upon attainment of normal retirement age. Under the extension, the new Treasury Regulations will be effective for a governmental plan for plan years beginning on or after January 1, 2011.
As described in two previous blog entries, the IRS modified Treasury Regulation §1.401(a)-1 to provide an exception to the rule that pension benefits be paid only after retirement by permitting a pension plan to commence payment of retirement benefits to a participant after the participant has attained normal retirement age even if the participant has not yet had a severance from employment with the employer maintaining the plan.
The new regulations also require a pension plan’s normal retirement age to be an age that is not earlier than the earliest age that is reasonably representative of the typical retirement age for the industry in which the covered workforce is employed. In the case of a retirement plan where substantially all of the participants are qualified public safety officers, a normal retirement age of age 50 or later is deemed not be earlier than the earliest age that is reasonably representative of the typical retirement age for the industry in which the covered workforce is employed.
Notice 2007-69, which provided temporary relief for certain plans that may have to change their definitions of normal retirement age to satisfy the new regulations, indicated that the new regulations do not contain a safe harbor or other guidance with respect to a normal retirement age conditioned on the completion of a stated number of years of service. The notice requested comments on whether and how a pension plan with a normal retirement age conditioned on the completion of a stated number of years of service satisfies the requirement in §1.401(a)-1 that a pension plan be maintained primarily to provide for the payment of definitely determinable benefits after retirement or attainment of normal retirement age and how such a plan satisfies the pre-ERISA vesting rules.
Based upon this, in Notice 2008-98, the IRS indicated its intention to amend the new regulations to change the effective date for governmental plan to plan years beginning on or after January 1, 2011. Moreover, the notice provided that government plan sponsors may rely on this notice with respect to extension until such time as the new regulations are so amended.
Although the implementation of the new regulations has been delayed, it is critical to keep apprised of the comments regarding whether a pension plan with a normal retirement age conditioned on the completion of a stated number of years of service satisfies the new regulations. Clearly, the resolution of this issue could drastically impact many public safety officers not only in New Jersey, but across the country. Periodic updates to this website regarding these regulations will be posted as more information becomes available.
Recently, there has been much concern over new Department of Treasury regulations promulgated by the Internal Revenue Service (“IRS”) and their effect upon State legislated pension systems for public employees. This entry summarizes the new regulations and their potential impact on the members of the Police and Firemen’s Retirement System (“PFRS”). After conducting research and for the reasons set forth in detail below, it our belief the new Treasury Regulations will not alter the ability of a PFRS member to retire under any existing PFRS law, including the special retirement provision allowing retirement prior to attaining the age of 50.
By way of background, the New Jersey State PBA reported that the IRS adopted regulations that would prohibit any public safety officer in a state legislated pension system from retiring before the age of 50. As most public safety officers are aware, there is currently no minimum retirement age for a member of PFRS to qualify for a pension. In fact, all that is needed to qualify for a PFRS pension is twenty-five (25) years of service and retirement credits paid into the system. Specifically, N.J.S.A. 43:16A-11.1, entitled “Special Retirement; resignation with 25 years of creditable service; allowance; death benefit”, provides in pertinent part:
Should a member resign after having established 25 years of creditable service, he may elect “special retirement,” provided, that such election is communicated by such member to the retirement system by filing a written application, duly attested, stating at what time subsequent
to the execution and filing thereof he desires to be retired…
Treasury Regulation §1.401(a)-1 was recently modified. The modifications require qualified pension plans to revise the definition of normal retirement age to an age that is not earlier than the earliest age that is reasonably representative of the typical retirement age for the industry in which the covered workforce is employed. In addition, the regulations provide that a normal retirement age of at least 62 is deemed to be not earlier than the typical retirement age for the industry in which the covered workforce is employed. Thus, a plan satisfies this provision if its normal retirement age is age 62, or if its normal retirement age is the later than age 62 or another specified date, such as the later of age 62 or the fifth anniversary of plan participation. This is known as the “safe harbor” provision.Continue Reading...
The Public Employee Pension and Benefits Reform Act of 2008 and Its Affect on New Jersey Public Employees
Most recently New Jersey GovernorJon S. Corzine signed the Public Employee Pension and Benefits Reform Act of 2008. While this bill does not affect the members of the Police and Firemen’s retirement System (PFRS), it does affect members of the Public Employees Retirement System (PERS) and the Teachers Pension and Annuity Fund (TPAF). Certain Public Safety Officers in the State of New Jersey hold membership in PERS. The legislation, S-1962/A-2818, is touted to save New Jersey tax payers $150 million dollars by 2022 through new changes to the pension systems to include instituting a higher retirement age and new income eligibility requirements for enrollment in the major pension systems.
The significant changes signed into law today include:
- Increasing the annual salary required for new workers to qualify for the state pension system to $7,500. Previously, workers required an annual compensation of only $500 to qualify for the Teachers Pension and Annuity Fund, and a minimum salary of $1,500 a year for the Public Employees Retirement System.
- Raising the retirement age from 60 to 62 for new employees to qualify for a pension without a reduction.
- The number of paid holidays for state employees is reduced to 12. It eliminates the Lincoln's Birthday holiday and combines it with Washington's Birthday, to be observed as President's Day.
The new law also makes reforms to the State Health Benefits Program (SHBP), allowing the state to offer an incentive to employees to opt out of the program and accept health coverage from other sources such as a spouse's plan. The state has the power and authority to determine whether to offer the incentive and the amount, which could not exceed half of the amount saved because of the employee's waiver of coverage.
The bill was sponsored in the Senate by Senators Barbara Buono (D-Middlesex), Stephen Sweeney (D-Salem, Cumberland, Gloucester), Nicholas Scutari (D-Middlesex, Cumberland, Union), and Tom Kean (R-Essex, Morris, Somerset, Union), and in the Assembly by Speaker Joseph Roberts (D-Camden).
While the members of PFRS have been spared by this legislation, close watch must be kept on our elected officials as it appears they are prepared to enact any cost savings measures available due to the poor financial position of the state.
On its website, www.njspba.com, The New Jersey State PBA has reported that the Internal Revenue Service (IRS) has adopted regulations that would prohibit any public safety officer in a state legislated pension system from retiring before the age of 50. The regulation in its current form is slated to go into effect on January 1, 2009.
As all public safety officers throughout the State of New Jersey are aware, there is currently no minimum retirement age for a member of the Police and Firemen’s Retirement System to qualify for a pension. All that is needed to qualify for a PFRS pension is twenty five (25) years of service and retirement credits paid into the system. Based on the new regulations the State of New Jersey would be required to amend its pension laws or face the potential of being non compliant with the Federal tax code and regulations. The State PBA reports that this particular regulation has caught New Jersey politicians and the New Jersey Division of Pensions off guard and the State is not prepared to address the IRS regulations should they be enacted in 2009.
The New Jersey State PBA appears to have engaged in an extensive lobbying effort and has requested that the regulation be delayed indefinitely in order to seek a change in language impacting public safety employees. A formal request to delay the rule has already been made but the IRS has not yet acted upon it.
The PBA goes on to further state that if the IRS rejects its request to delay the enactment of the regulation they will be seeking either federal legislation to overrule the IRS Regulation or a legal remedy challenging the regulations as a violation of PFRS member’s constitutional rights.
The Publishers of the New Jersey Public Safety Officers Law Blog are currently looking into this regulation and the legalities of the same. We will report more on this topic in the immediate future.
Retirees Not Entitled to Collective Bargaining Unit Representation Under The New Jersey Employer-Employee Relations Act, N.J.S.A. 34:13A-1 et.seq
In the case of Grasso v. Fraternal Order of Police, Glassboro Lodge No. 108, 33-2-1617, the Superior Court of New Jersey, Appellate Division, held that under the New Jersey Employer-Employee Relations Act, N.J.S.A. 34:13A-1 et.seq, the Defendants owed no duty to the Plaintiff to represent him in a dispute with the Borough of Glassboro due to his status of not being an "employee" as defined under the act.
Grasso initially filed suit against the Borough of Glassboro for their failure to reimburse him for Medicare Part B. premiums pursuant to a collective bargaining agreement. Some time during the suit Grasso called on the FOP for representation as the matter dealt with an issue related to the collective bargaining agreement. The FOP declined representation of Grasso, and following his success in the underlying action against the Borough, Grasso then moved against the FOP for their failure to represent him.
The Appellate Panel affirmed the Trial Court's decision to grant Summary Judgment in favor of the FOP due to the fact that Grasso can not be considered an employee under the New Jersey Employer-Employee Relations Act, N.J.S.A. 34:13A-1 et.seq.
This case is important to both collective bargaining units and retired Public Safety Officers alike as it clearly defines the roles and responsibilities of each party under the New Jersey Employer-Employee Relations Act, N.J.S.A. 34:13A-1 et.seq