Chapter 78, P.L., 2011 (hereinafter referred to as “Chapter 78”) went into effect on June 28, 2011, and has increased the average healthcare contributions required of public employees substantially. However, not all employees and retirees are equally effected. This article will briefly outline the effect Chapter 78 will have on newly and prospective retirees.
Chapter 78 requires all New Jersey public employees and certain public retirees to contribute toward the costs of health care benefits based upon a “sliding” percentage of the cost of coverage. Under this legislation, all active public employees will pay a percentage of the cost of health care benefits coverage for themselves and any dependents. However, lower compensated employees will pay a smaller percentage and more highly compensated employees will pay a higher percentage. In addition, the applicable employee cost associated with coverage varies based upon whether the employee has family, individual, or member with child or spouse coverage.
The healthcare contributions mandated by Chapter 78 were codified under subsection (a) of N.J.S.A. § 52:14-17.28d. Furthermore, the health care contributions required under subsection (a) commenced as follows:
(1) for employees who do not have a majority representative for collective negotiations purposes Chapter 78 went into effect on June 28, 2011; or
(2) for those employees that are members of a collective negotiations unit, Chapter 78 went into effect upon the expiration of any applicable binding collective negotiations agreement that was in full force and effect on June 28, 2011.
(See N.J.S.A. § 52:14-17.28d).
Section Forty (40) of Chapter 78 also mandated that any employee with less than twenty (20) years of creditable pension service in one or more of the public employees’ retirement systems on the effective date that Chapter 78 went into effect make a statutorily specified contribution towards the cost of his or her health insurance when in retirement. More specifically, subsection (b) (2) illustrates in detail precisely which employees will be subject to the contribution rates delineated in Chapter 78. However, N.J.S.A. § 52:14-17.28d(b)(3) carves out an exception (or to be more precise, an exemption) for those employees who have twenty (20) or more years of creditable pension service in one or more State or locally-administered retirement systems on the effective date that Chapter 78 went into effect (June 28, 2011). The employees that are subject to the exemption shall not be subject to the significant contribution increases faced by employees that otherwise fall within the scope of subsection (b)(2) of the aforementioned statute.
In short, for those employees that have accumulated at least twenty (20) or more years of creditable service, but less than twenty-five (25) years of service, as of June 28, 2011 (Chapter 78’s effective date), the law provides that the amount these employees must pay towards healthcare is 1.5% of their retirement allowance or the amount negotiated in the collective bargaining agreement that was applicable at the time the law went into effect, so long as that agreement was not expired on the law’s effective date. Therefore, employees that fall within that category will pay the amount they are contractually obligated to pay, not the amount payable by current employees or retirees with less than twenty (20) years on the effective date of Chapter 78, nor the amount payable by those employees/ retirees with more than twenty (20) years of service credit on the statute’s effective date with expired collective bargaining agreements on said date. With June 28, 2016 quickly approaching, there will be many employees potentially effected by this exemption now that we are post five (5) years since the statute was enacted.