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Pensions and Benefits
CERTIFYING OFFICER LETTERS 2001
Subject Date
Program Changes Affecting Payroll Operations for the State Employees Deferred Compensation Plan (IRC 457b) December 2001
Program Changes Affecting Payroll Operations for the State-Administered
Defined Contribution Plans (IRC 403b and 457b)
December 2001
Return to PERS Employment after Retirement December 2001
Changes in Chiropractic Care for Traditional Plan and NJ PLUS Members December 2001
Combining Service Credit under Multiple Retirement Systems to Qualify for Employer-paid State Health Benefits Program Coverage October 2001
Request for List of Contracts Covering PFRS Members September 2001
Health Care Waivers September 2001
Benefit Continuation for Employees Called to Active Duty During Operations Noble Eagle and Enduring Freedom September 2001
Conversion of PERS Service Credit to PFRS Service Credit September 2001
Member Contribution Rate Change September 2001
SHBP Local Group Rate Actions for Retiree Coverage - Local Government Employers September 2001
SHBP Local Group Rate Actions - Education Employers September 2001
SHBP Local Group Rate Actions - Local Government Employers September 2001
SHBP Open Enrollment and State Rates - State Monthly August 2001
SHBP Open Enrollment and State Rates - State Biweekly August 2001
Open Enrollment for Tax$ave 2002 - Colleges and Monthly August 2001
Open Enrollment for TaxSave 2002 - Biweekly Payroll August 2001
Purchase of Military Service Prior to Enrollment for Members with Vested Rights to Military Reserve Retirement Benefits August 2001
Proposed Amendments to the New Jersey Administrative Code August 2001
SHBP Open Enrollment 2001 Announcement (Local employers) August 2001
SHBP Open Enrollment 2001 Announcement (State employers) July 2001
Expansion of Veteran Definition July 2001
Change in Retirement Calculation Formula, Increase for Retirees, and Change in TPAF Contribution Rate July 2001
Additional Retirement Payment Options - PERS & TPAF July 2001
Revised PFRS Bills April 2001
Loan Compliance for IRS Requirements in 2002 March 2001
Transfer of Non-concurrent PERS and TPAF Service March 2001
Revised PFRS Bill Due April 1, 2001 March 2001
Veteran Status Procedure Change March 2001
Pension Contributions for Employees Receiving Workers' Compensation March 2001

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December 14, 2001

TO: Defined Contribution Plan Participating Employers

FROM: Joseph Zisa, Plan Manager

SUBJECT: Program Changes Affecting Payroll Operations for the State Employees Deferred Compensation Plan (IRC 457b)

On June 7, 2001 President Bush signed the federal Economic Growth and Tax Relief Reconciliation Act of 2001. This legislation contains a number of requirements and plan options that will change the defined contribution plans administered by the Division of Pensions and Benefits.

This letter contains a summary of the changes that will be effective in 2002 for the State's section 457 plan, the New Jersey State Employees Deferred Compensation Plan.

Employer Payroll Deferral Reporting Requirements

No changes are required in the methods used to report payroll deferrals or the types of information reported to the Division of Pensions and Benefits.

Normal Deferral Limit

Under the Economic Growth and Tax Relief Reconciliation Act, 457(b) Deferred Compensation Plan participants can defer up to the lesser of $11,000 or 50% of compensation for the tax year 2002.

To calculate the maximum deferral amount for Deferred Compensation, the member's tax deferred contributions to other plans must first be subtracted from gross pay. These plans and their applicable IRS code are shown below:

  • Mandatory pension contributions - 414(h)

  • SACT Tax Deferred - 403(b)

  • ACTS - 403(b)

  • Alternate Benefit Program voluntary contributions - 403(b)

  • Tax$ave (Premium Option Plan, Unreimbursed Medical Spending Account, Dependent Care Spending Account) - 125

The maximum deferral for the 457(b) Deferred Compensation Plan is then 50% of the remaining salary up to the stated dollar limitation.

After 2002 the dollar maximums for the State Employees Deferred Compensation Plan will increase by $1,000 for each of the following tax years up to $15,000 in tax year 2006, after which the maximum will be indexed for inflation in $500 increments.

Coordination of 457(b) Deferrals with Contributions to Other Plans

Coordination of 457(b) deferrals with 403(b) salary reductions is not required after December 31, 2001. Prior to December 31, 2001, a member's ability to defer salary to a 457(b) deferred compensation plan was reduced by salary reductions under a 403(b) tax-sheltered annuity program such as those offered under SACT, ACTS, or ABP. For example, in 2001 the 457(b) deferral limit was $8,500. If a member had a salary reduction agreement under SACT/Tax-Shelter for $3,000, the deferral limit under 457(b) was reduced to $5,500; therefore the total deferral/reduction for the year was $8,500 between the two programs.

Starting in 2002 this coordination requirement is eliminated from section 457 of the Internal Revenue Code. Therefore, unless the member's salary deferrals are otherwise limited, an individual may defer $11,000 to the 457(b) deferred compensation plan and another $11,000 to any 403(b) tax-sheltered annuity program for a total deduction of $22,000 without invoking any of the permitted catch-up provisions.

Traditional Catch-up Limit

In the three years prior to retirement a Deferred Compensation Plan member may defer twice the normal limit. The eligibility requirements for this elective option under the plan remain unchanged. Prior to January 1, 2002, the annual catch-up deferral limit was set at $15,000. After December 31, 2001, the amount will be twice the prevailing normal deferral limit; for example, $22,000 in 2002 and $24,000 in 2003. The amount will increase until it reaches $30,000 in 2006 and thereafter be affected by indexing in the same manner as the normal deferral limit. A member must still have sufficient underutilization of deferrals (catch-up dollars) from prior years of plan participation and the election may only be used once. Members must still apply to take advantage of this catch-up provision. Members who have already used their three years of catch-up are not permitted to "re-start" catch-up under the higher limits.

"Enhanced" Deferral Amount for Those Age 50 or Older

A new "enhanced" deferral amount is permitted for those members age 50 or older. The new amount will first be effective in tax year 2002. The amount will be permitted in addition to the normal deferral amount (lesser of $11,000 or 50% of compensation for the tax year 2002) and be available to anyone at least 50 years of age at any point during the tax year. The "enhanced" deferral amount will not be available during any tax year in which the member elects to use the higher, traditional catch-up limit.

The additional amount available will be $1,000 in tax year 2002 for a maximum deferral of $12,000 and will increase by $1,000 per year through 2006 when it reaches $5,000 after which the maximum will be indexed for inflation in $500 increments. The member does not have to do anything to take advantage of this deferral other than select a contribution amount high enough to reach the maximum contribution limit.

Minimum Deferral Amount Reduction

To encourage greater participation, the Deferred Compensation Board has reduced the minimum contribution levels permitted under the rules of the plan. Beginning January 1, 2002, Deferred Compensation Plan participants may defer as little as the larger of 1% of pay or $10 per pay, $20 per month.

If you have any questions about this subject, please call the Defined Contributions Unit at (609) 292-3440.


December 14, 2001

TO: Defined Contribution Plan Participating Employers

FROM: Joseph Zisa, Plan Manager

SUBJECT: Program Changes Affecting Payroll Operations for the State-Administered Defined Contribution Plans (IRC 403b and 457b)

On June 7, 2001 President Bush signed the federal Economic Growth and Tax Relief Reconciliation Act of 2001. This legislation contains a number of requirements and plan options that will change the defined contribution plans administered by the Division of Pensions and Benefits.

This letter contains a summary of the changes that will be effective in 2002 for the State's section 457 and 403(b) plans. These plans include the New Jersey State Employees Deferred Compensation Plan, the Supplemental Annuity Collective Trust of New Jersey (SACT), the Additional Contributions Tax Sheltered Program (ACTS), and the Alternate Benefit Program (ABP).

Employer Payroll Deferral Reporting Requirements

No changes are required in the methods used to report payroll deferrals or the types of information reported to the Division of Pensions and Benefits.

Normal Deferral Limit - 457(b) & 403(b) Plans

Under the Economic Growth and Tax Relief Reconciliation Act, 457(b) Deferred Compensation Plan participants can defer up to the lesser of $11,000 or 50% of compensation for the tax year 2002.

To calculate the maximum deferral amount for the 457(b) Deferred Compensation Plan, the member's tax deferred contributions to other plans must first be subtracted from gross pay. These plans and their applicable IRS code are shown below:

  • Mandatory pension contributions - 414(h)

  • SACT Tax Deferred - 403(b)

  • ACTS - 403(b)

  • Alternate Benefit Program voluntary contributions - 403(b)

  • Tax$ave (Premium Option Plan, Unreimbursed Medical Spending Account, Dependent Care Spending Account) - 125

The maximum deferral for the 457(b) Deferred Compensation Plan is then 50% of the remaining salary up to the stated dollar limitation.

Participants in 403(b) tax-sheltered annuity plans (SACT tax deferred, ACTS, and ABP additional voluntary contributions) can defer up to the lesser of $11,000 or 100% of compensation (without reduction for deferrals to other plans) for the tax year 2002.

After 2002 the dollar maximums for all plans will increase by $1,000 for each of the following tax years up to $15,000 in tax year 2006, after which the maximum will be indexed for inflation in $500 increments.

Coordination of 457(b) Deferrals with Contributions to Other Plans

Coordination of 457(b) deferrals with 403(b) salary reductions is not required after December 31, 2001. Prior to December 31, 2001, a member's ability to defer salary to a 457(b) deferred compensation plan was reduced by salary reductions under a 403(b) tax-sheltered annuity program such as those offered under SACT, ACTS, or ABP. For example, in 2001 the 457(b) deferral limit was $8,500. If a member had a salary reduction agreement under SACT/Tax-Shelter for $3,000, the deferral limit under 457(b) was reduced to $5,500; therefore the total deferral/reduction for the year was $8,500 between the two programs.

Starting in 2002 this coordination requirement is eliminated from section 457 of the Internal Revenue Code. Therefore, unless the member's salary deferrals are otherwise limited, an individual may defer $11,000 to the 457(b) deferred compensation plan and another $11,000 to any 403(b) tax-sheltered annuity program for a total deduction of $22,000 without invoking any of the permitted catch-up provisions.

457(b) Traditional Catch-up Limit

In the three years prior to retirement, a Deferred Compensation Plan member may defer twice the normal limit. The eligibility requirements for this elective option under the plan remain unchanged. Prior to January 1, 2002, the annual catch-up deferral limit was set at $15,000. After December 31, 2001, the amount will be twice the prevailing normal deferral limit; for example, $22,000 in 2002 and $24,000 in 2003. The amount will increase until it reaches $30,000 in 2006 and thereafter be affected by indexing in the same manner as the normal deferral limit. A member must still have sufficient underutilization of deferrals (catch-up dollars) from prior years of plan participation and the election may only be used once. Members must still apply to take advantage of this catch-up provision. Members who have already used their three years of catch-up are not permitted to "re-start" catch-up under the higher limits.

403(b) and 457(b) "Enhanced" Deferral Amount for Those Age 50 or Older

A new "enhanced" deferral amount is permitted for those members age 50 or older. The new amount will first be effective in tax year 2002. The amount will be permitted in addition to the normal deferral amount (lesser of $11,000 or 50% of compensation for the tax year 2002) and be available to anyone at least 50 years of age at any point during the tax year. The "enhanced" deferral amount will not be available during any tax year in which the member elects to use the higher, traditional catch-up limit.

The additional amount available will be $1,000 in tax year 2002 for a maximum deferral in each plan of $12,000 and will increase by $1,000 per year through 2006 when it reaches $5,000 after which the maximum will be indexed for inflation in $500 increments. The member does not have to do anything to take advantage of this deferral other than select a contribution percentage amount high enough to reach the maximum contribution limit.

457(b) Minimum Deferral Amount Reduction

To encourage greater participation, the Deferred Compensation Board has reduced the minimum contribution levels permitted under the rules of the plan. Beginning January 1, 2002, Deferred Compensation Plan participants may defer as little as the larger of 1% of pay or $10 per pay, $20 per month.

If you have any questions about this subject, please call the Defined Contributions Unit at (609) 292-3440.


December 3, 2001

TO: Public Employees' Retirement System Certifying Officers, Institutions of Higher Education

FROM: Janice C. Curtin, Assistant Director, Pension Operations

SUBJECT: Return to PERS Employment after Retirement

Acting Governor DiFrancesco signed Chapter 253, P.L. 2001 into law on November 15, 2001. This law allows retired members of the Public Employees' Retirement System (PERS) to accept employment in teaching positions with institutions of higher education, regardless of salary, without being subject to suspension of their retirement benefits and re-enrollment in the PERS.

The law defines institutions of higher education to include Rutgers - the State University, the University of Medicine and Dentistry of New Jersey, the New Jersey Institute of Technology, the State colleges and universities, and the county colleges.

The law already permitted PERS retirees to return to work without affecting their retirement benefits, as long as their salary was below $10,000 per calendar year. Chapter 253 eliminates the earnings limit only for teaching positions at institutions of higher education.

PERS members must have a valid retirement to take advantage of this law. That is, they must have terminated all PERS covered employment prior to their retirement and due and payable dates, their retirement must be due and payable, and they must have at least a thirty-day break in employment after their effective retirement date. In other words, members must terminate employment prior to their retirement date and not start PERS covered employment again until after they have been issued their first retirement check.

If you have questions about this law, contact our Office of Client Services at (609) 292-7524.


December 2001

TO: SHBP Participating Local Government Employers, SHBP Participating Local Education Employers, State Biweekly Benefits Administrators, State Monthly Human Resource Directors/Benefit Administrators

FROM: New Jersey State Health Benefits Program

SUBJECT: Changes in Chiropractic Care for Traditional Plan and NJ PLUS Members

The State Health Benefits Commission recently adopted a change in policy for chiropractic care for members enrolled in the Traditional Plan and NJ PLUS. The policy change will be effective January 1, 2002.

The new policy allows for a 30-visit maximum per benefit year. Members will no longer need to submit updated medical records and/or treatment plans for review and approval for services rendered on or after January 1, 2002.

For all services received prior to January 1, 2002, the current chiropractic claim and utilization review program will continue to apply. Horizon Blue Cross Blue Shield of New Jersey has already notified Traditional Plan and NJ PLUS members who are currently in review status for chiropractic care of this change in policy.

Traditional Plan and NJ PLUS members with questions regarding this change of policy should contact Horizon Blue Cross Blue Shield of New Jersey at 1-800-414-SHBP (7427).


October 2001

TO: State Health Benefits Program Participating Employers

FROM: Florence J. Sheppard, Assistant Director, Health Benefits

SUBJECT: Combining Service Credit Under Multiple Retirement Systems to Qualify for Employer-paid State Health Benefits Program Coverage

P.L. 2001, Chapter 209, signed on August 15, 2001 by Acting Governor DiFrancesco, amended the statutes (N.J.S.A. 52:14-17.25 et seq.) governing a retiree's eligibility for state or employer-paid coverage under the State Health Benefits Program (SHBP). Chapter 209 provides for an aggregation of nonconcurrent pension credit in multiple pension funds to qualify for the 25 or more years of service credit needed for State or employer-paid retired SHBP benefits. Chapter 209 did not change the definition of a qualified retiree under the provisions of P.L. 1997, Chapter 330 which provides for the State payment of a portion of SHBP coverage for retired Police and Firemen's Retirement System members and law enforcement officers.

Before Chapter 209, retirees of the State, boards of education and state and county colleges, excepting those who retired on disability retirement benefits, needed 25 or more years of service credit in a single retirement system to qualify for State-paid retired SHBP coverage. Local participating employers could also choose to provide employer-paid SHBP coverage to their retirees who accrued 25 years of creditable service in a single State or locally administered retirement system.

Chapter 209 now permits the 25-year service credit requirement to be met by combining nonconcurrent service credit in one or more State or locally administered retirement systems.

The member must be receiving a retirement benefit from each membership and cannot have withdrawn or allowed the accounts to expire.

For example, a member with 15 years in a PERS account, who then accrues 10 years of nonconcurrent service in the TPAF, and retires and begins to receive a benefit from both accounts could be eligible. Conversely, a member with 15 years in a PERS account and 10 years in a TPAF account, who had concurrent service for 2 of those years, would not be eligible because they would only have 23 years of nonconcurrent service.

To qualify for coverage based on combined service in more than one retirement system, members must:

  • Retire and collect a benefit from each retirement system;
  • Have more than 25 years of nonconcurrent service credit in total;
  • Retire from the last retirement system after the effective date of this law, August 15, 2001;
  • Be eligible for employer-paid SHBP coverage immediately prior to retirement from the last contributing employer in the retirement system for retirees of the State or participating local employers who have agreed by resolution to pay for the coverage of their retirees. In order to receive state-paid SHBP coverage as a retiree of a school board or county college, a retiree must be eligible for employer-paid coverage immediately prior to retirement or separation from the school board or county college. The school board or county college must have been the retiree's last contributing employer; and
  • Notify the Division of Pensions and Benefits that they have an aggregate of 25 or more years of nonconcurrent service in more than one public retirement system in New Jersey.

Please note, the provisions of Chapter 209 are not retroactive. This new law does not affect members who retired prior to August 15, 2001.

Chapter 209 also changed the legal basis for Chapter 48, P.L. 1999 resolutions by removing the reference to the local government law (N.J.S.A. 40A:10-23). Local government units participating in the SHBP can use the provisions of Chapter 48 for greater flexibility in defining which employees qualify for post-retirement SHBP coverage. Chapter 48 provided that employers may, under uniform conditions, assume the cost of post-retirement medical coverage for retirees and their dependents who have:

  • Retired on a disability pension; and/or
  • Retired with 25 or more years of service credit in one or more State or locally administered retirement systems and a period of service of up to 25 years with the employer at the time of retirement, such period as established by the employer; or
  • Retired upon or after the attainment of age 65 with 25 or more years of service credit in one or more State or locally administered retirement systems and a period of service of up to 25 years with the employer at the time of retirement, such period as established by the employer; or
  • Retired on or after age 62 with at least 15 years of service with the employer.

If you would like more information regarding the filing of a Chapter 48 resolution, please review the certifying officers' letter, dated May 18, 1999, which may be found at www.state.nj.us/treasury/pensions/epbam/exhibits/pdf/hr0426.pdf Adobe PDF (8K)


September 2001

TO: Certifying Officers of Municipal Authorities Participating in the State Health Benefits Program

FROM: Florence Sheppard, Assistant Director, Health Benefits

SUBJECT: Health Care Waivers

On July 31, 2001, Chapter 189, P.L. 2001 became law with provisions affecting municipal authorities participating in the State Health Benefits Program (SHBP). This legislation allows a municipal authority that participates in the SHBP or another group health benefit plan to:

  • permit employees, who receive health care benefits as a dependent of their spouse, to waive coverage and receive an incentive. The incentive cannot exceed 50% of the amount saved by the municipality because of the waiver of benefits.

  • permit an employee, who has waived coverage under the provisions of this law, to immediately resume health coverage if they lose their coverage as a dependent.

The decision of the municipal authority to allow its employees to waive coverage and the amount of the incentive to be paid cannot be subject to the collective bargaining process.

The law requires employees participating in the SHBP to file a waiver with the Division of Pensions and Benefits when they accept an incentive in lieu of healtState Health Benefits Program Coverage Waiver/Reinstatementh coverage, and a declaration when they revoke the waiver. The attached form is to be used for these purposes in conjunction with the SHBP Application. This form is to be completed by any employee electing to waive health coverage to receive a cash incentive. The form is also to be used by an employee to reinstate waived health coverage due to the loss of the employee's spousal coverage. The employee must attach the form to a completed New Jersey State Health Benefits Application when filing with the Division.

Any municipal authority contemplating exercising its right to offer a cash incentive to waive health benefits should discuss with legal counsel the federal income tax consequences of such an action on its employees. If a cash incentive provided by an employer is not part of an Internal Revenue Code Section 125 plan, the health benefits provided to its other employees may be subject to federal taxes. Municipal authorities considering offering a cash incentive are urged to seek the advice of counsel that is knowledgeable with federal and state tax matters, especially with regard to employee benefits plans.

If you have any question regarding this law, please call the Division's Office of Client Services at (609) 292-7524.

Attachment


September 2001

TO: Certifying Officers of the Police and Firemen's Retirement System

FROM: Thomas P. Bryan, Director

SUBJECT: Request for List Of Contracts Covering PFRS Members

The Police and Firemen's Retirement System (PFRS) Board of Trustees has asked the Division of Pensions and Benefits to establish a program to monitor changes in pensionable compensation of members participating in the PFRS. The Board expects this program to include the review of individual employment agreements and collective bargaining unit contracts for PFRS members to ensure that compensation reported by employers as creditable for pension purposes meets the definition established in N.J.A.C. 17:4-4-1.

As a preliminary step in the development of this program, the Division needs to identify the number and type of contracts pertinent to PFRS members. Please complete the attached form listing this information and return it by October 30, 2001.

Instructions: Under Agreement or Contract, list the bargaining unit representing a group of covered employees and the union that represents that group, e.g., Superior Officers Association, PEA. For individual contracts, list the title(s) covered under the agreement, e.g., Chief of Police, Fire Chief.

Under # Employees Covered, list the number of employees covered under a collective bargaining contract. For individual employment contracts, list the first initial and last name of the covered member. Under Contract Period, list the starting and ending dates of the current contract period.

Sample Chart

Agreement or Contract # Emplovees Covered Contract Period
(from to dates)
Superior Officers Association, FOP 36 7/1/99 - 6/30/03
Chief of Police W. Brown 10/1/00 - 9/30/02

If you have any questions about this letter or the form, please contact the External Audit Unit at (609) 292-3664.

attachment


September 2001

TO: Certifying Officers, Teachers' Pension and Annuity Fund (TPAF), Public Employees' Retirement System (PERS), Police and Firemen's Retirement System (PFRS), State Police Retirement System (SPRS), Alternate Benefit Program (ABP)

FROM: Thomas P. Bryan, Director

SUBJECT: Benefit Continuation for Employees Called to Active Duty During Operations Noble Eagle and Enduring Freedom

President George W. Bush announced a call-up of reserve forces as part of Operation Noble Eagle and Operation Enduring Freedom in response to the recent terrorist attacks against the United States. Acting Governor Donald T. DiFrancesco issued Executive Order #133 extending benefits to certain State employees called-up to military duty for Operation Noble Eagle and Operation Enduring Freedom.

This memorandum provides guidance to employers on the subject of continuation of benefits of employees called-up for military duty.

Leave of Absence with Pay for Military Service - State Employees (Includes those receiving full pay, differential pay or no pay)

Employees covered by Executive Order #133 receive the following benefits while in active military service:

  • Full seniority and benefits consistent with state and federal military reemployment and seniority rights upon termination of active duty and return to state employment.

  • Health benefits, life insurance, and pension coverage during active duty service as though they were on a paid leave of absence.

  • Differential pay between their State gross salary and their military base pay.

Health Benefits. Although health benefits coverage can continue for employees who are called-up for military duty, it may not be in their interest to do so. This is particularly the case if there is a cost to the employee for continuing the coverage. Employees with single coverage will have their full medical needs met by the military. Family members could possibly have their needs met by the military or other coverage. Therefore, employees should be given the option of waiving the health benefits coverage in case they do not need the coverage while the employee is on military duty. If not expressly waived, that coverage will be continued while the employee is on military duty. If coverage is not waived and is continued, the employee will be responsible for normal employee contributions for this coverage. These contributions will be deducted from any differential pay provided. If there is no differential pay or if it is insufficient to cover the health benefits contributions, the employee contributions will be collected from the employee upon return from military duty.

The employee should be given the attached form, Waiver of State Health Benefits Program Coverage While on Military Duty, so the option to cancel coverage can be exercised. Dependent coverage cannot be continued without the employee being covered except under the provisions of COBRA.

Differential Pay and Deductions

The Office of Management and Budget will issue detailed guidance on this subject. Employees' regular pension contributions, contributory group life insurance premiums, and medical and dental premium payments will be deducted from their pay or paid by employers in the absence of sufficient pay. Upon the employee's return from military duty, the employer will collect any payments that were made on the employee's behalf.

If pension back deductions, arrears, and loan payments are not met from differential pay, their collection should be automatically resumed when the employee returns to employment. Employees who wish to make supplemental retirement plan contributions based on their full salary may do so upon return from military duty by filing a USERRA form, which is attached and described on page 3.

Alternate Benefit Program (ABP)

ABP employee contributions will be based upon the gross differential salary. Employer contributions to the ABP will be based upon full base salary and should be paid regardless of whether the employee receives differential pay. Employees who wish to make contributions based on their full salary may do so upon return from military duty by filing a USERRA form, which is attached and described on page 3.

Leave of Absence with Pay for Military Service - Local Employees

Local employers and independent authorities are not covered by the Executive Order. They have the option of paying compensation, however, to their employees who are called to active military duty. Whatever policy the employer adopts should be applied consistently to all affected employees.

Local employers who elect to consider employees called up for military duty as on a paid leave of absence should continue to report and remit regular pension contributions, and, if appropriate, State Health Benefits Program payments in the normal manner. If an employee receives no differential pay or if the differential pay is insufficient to cover all deductions in effect at the time of activation, the employer should pay the deductions for an employee's regular pension contributions, contributory group life insurance, and, if appropriate, State Health Benefits Program coverage. The employer may then bill the employee for these costs after the military leave is over. If the differential pay is not sufficient to cover back deductions, arrears, and loans, indicate that in the remarks column of the Report of Contributions. If you file your Report of Contributions by tape, do not reflect any of these payments and resume deductions upon the employee's return from military duty.

Leaves of Absence for Military Service without Pay

This situation applies to those employees whose employers elect not to extend similar benefits available to State employees under the Executive Order.

Public employees who are called to military duty and are not considered as being on a paid leave of absence may have pension entitlements when they return to work under the provisions of the Uniformed Services Employment and Reemployment Rights Act of 1994 (USERRA) 38 USC 4301 et seq. USERRA provides that an employee who leaves a civilian employer for the purpose of serving in the uniformed services, and who returns to employment with the employer, is entitled to restoration of certain pension and similar benefits that would have accrued but for the employee's absence due to qualified military service. These employees shall be treated as not having incurred a break in service with the employer by reason of the member's period of service in the uniformed services. The period of service shall count as if the member had never left for the purposes of vesting or determining eligibility for retirement and health benefits, but not for benefits calculation purposes. For example, a member with 24 years of pension credit and 1 year of eligible service in the uniformed services would have 25 years of service and would be eligible to collect a retirement benefit before age 60 for PERS and TPAF members, or be eligible for employer paid health benefit coverage (if this benefit is available). However, the actual pension calculation would use the 24 years of service. An example for vesting purposes would be that a member with 7 years of pension credit and 3 years of eligible service in the uniformed services would be vested.

When the member returns to covered employment within the time frames specified under USERRA, the employer shall notify the Division in writing that the member has returned from service in the uniformed services and the dates of such service using the attached USERRA form.

The member may also receive pension credit for the period of uniformed service by making the employee pension contributions that would have been required had the member not left employment to serve in the uniformed services. The member may request in writing that the Division schedule back deductions based upon the salary the member would have received but for the period of service; or if the determination of such rate is not reasonably certain, on the basis of the member's average rate of compensation during the 10 or 12 month period immediately preceding such service. The salary is then multiplied by the member's rate of contribution in effect when the member returned for the period of time in which no credit was received in the system for that service. Any payment to the plan described in this paragraph shall be made during the period that begins on the date of reemployment and continues for the lesser of either five years or three times the period of the uniformed service. The member may choose to pay the amount in one lump sum instead of back deductions. The Division must receive the request for this time within the lesser of either five years or three times the period of the uniformed service from the date of reemployment, to receive credit for such service. If the member decides to make contributions for this service, those contributions or lump sum payment shall be deferred from federal taxation.

The member is also permitted to make additional elective deferrals (Deferred Compensation, ACTS or SACT) in an amount not exceeding the maximum amount the employee would have been permitted to contribute during the period of military service if the employee had actually been employed by the employer during that period.

Life Insurance

Coverage for noncontributory death benefits continues for 93 days after the last day of paid covered employment. A member may convert coverage to an individual policy directly with Prudential within the 31 days beyond the 93 days of coverage as described above. If a member wants to keep converted coverage after reemployment, the member must prove insurability to restore the coverage through the retirement system. If the coverage is not converted or the converted coverage is surrendered, the coverage is reinstated automatically upon return to employment.

For continuation of existing contributory insurance coverage under PERS and TPAF, the member must prepay the contributions to the Division directly for the 93 days of coverage.

Health Insurance

A military leave of absence is treated as any other leave of absence without pay for health insurance purposes under SHBP. Notwithstanding the availability of health care services available through the military, employees may want to continue coverage under the State Health Benefit Program (SHBP) for themselves or their dependents.

For a Local employee in the SHBP, coverage terminates on the last day of the first month for which the employee received no salary payment. The employer may elect to permit the employee to continue their benefit coverage from the SHBP for up to nine months for themselves and eligible dependents by repaying the full cost of the coverage to the employer in advance. If the employee is still on leave beyond the time for which coverage has been purchased, coverage may then be extended under COBRA for a period not to exceed 18 months. If the employer does not offer this payment option while on leave, then the employee may elect to continue coverage under COBRA for a maximum time period of 18 months.

Employees and/or dependents have the right to continue their SHBP benefits under COBRA for the full 18 months. In these cases, the employees need not be covered. A dependent may independently elect to continue benefits under COBRA.

Upon return to employment, the employee must complete an SHBP enrollment application to reinstate benefits. The coverage is reinstated on the actual date of return to employment.

Please contact the Office of Client Services at (609) 292-7524 or e-mail us at pensions.nj@treas.state.nj.us if you have any questions about this subject.

attachments:

Request for USERRA - Eligible Service
Waiver of State Health Benefits Program Coverage While on Military Duty


September 2001

TO: Certifying Officer's of the Police and Firemen's Retirement System

FROM: Thomas P. Bryan, Director

Subject: Conversion of PERS Service Credit to PFRS Service Credit

Acting Governor DiFrancesco signed Chapter 201, P.L. 2001, into law on August 8, 2001. This law converts all of the service credit earned in the Public Employees' retirement System (PERS) to full Police and Firemen's Retirement System (PFRS) service credit for members who transferred to the PFRS under the provisions of Chapter 247, P.L. 1993. The new law also requires the reimbursement of any payments made by PFRS members who opted to pay for the conversion of their PERS service to PFRS service under the provisions of Chapter 247.

There is no cost to the member or the employer for this benefit enhancement. The law provides for funding of the benefit with excess assets from the PFRS fund.

Those members already retired who did not pay the cost to convert PERS service to PFRS service will have their retirement allowance recalculated. The law will be effective on the first of the month following ninety days after enactment. Therefore, it will affect all retirements beginning December 1, 2001.

The Division of Pensions and Benefits will take the following steps to implement this law.

  • Notifying all affected retirees of the increase in retirement benefits caused by this law. (A copy of the letter sent to retirees who do not have a PFRS loan is attached for information purposes only).

  • Notifying, through the employer, all active employees affected by this law. (A copy of the letter sent to active employees who do not have a PFRS loan is attached for information purposes only).

  • Instructing employers to stop payroll deductions for members still paying the liability for converting their PERS service to PFRS service under Chapter 247. A certification of payroll deductions will be sent for each affected member to stop these deductions effective September 30, 2001 (September 28 check for employees paid by State Centralized Payroll). If the member is also paying for the purchase of additional service credit through arrears, the balance due on that purchase will be separated and recertified effective October 1, 2001. Payments must be stopped on a specific future date so refunds can be calculated accurately.

  • Refunding payments made by PFRS members to convert their PERS service to PFRS service under Chapter 247. If the member or retiree has a PFRS loan, then the refund will be applied to the loan balance. Revised loan certifications will be sent to employers, as necessary, to stop or adjust the loan repayment schedule.

  • Recalculating retirement allowances of members and, where appropriate, survivors, of PFRS members who retired with Chapter 247 benefits. Changes will appear in the January 1, 2002 check.

If you have any questions, please call the Office of Client services at (609) 292-7524.

attachment A
attachment B


ATTACHMENT A

Text of letter to active employees transferred to PFRS under the provisions of Ch 247, P.L. 1993 who did not convert PERS service to PFRS service.

Dear (Active Employee),

Acting Governor DiFrancesco signed Chapter 201, P.L. 2001, into law on August 8, 2001. This law converts all of your service credit earned in the Public Employees' retirement System (PERS) to service credit in the Police and Firemen's Retirement System (PFRS). This means that when you retire, you will be entitled to receive the full benefits under the PFRS rather than partial benefits from both the PERS and the PFRS.

The law will be effective on the first of the month following ninety days after enactment. Therefore, it will affect all retirements beginning December 1, 2001. If you retire between now and the effective date of the law, your benefit will be recalculated when the law takes effect.

There is no cost to you for this benefit enhancement. The law provides for funding of the benefit with excess assets from the PFRS fund.

If you have any questions, please call the Office of Client services at (609) 292-7524.


ATTACHMENT B

Text of letter to retirees were transferred to PFRS under the provisions of Chapter 247, P.L. 1993 who will have their retirement allowance changed due to Chapter 201, P.L. 2001.

Dear (Retiree),

Acting Governor DiFrancesco signed into law a bill that will enhance your monthly retirement benefit. Chapter 201, P.L. 2001, signed on August 8, 2001, converts all of your service credit earned in the Public Employees' retirement System (PERS) to service credit in the Police and Firemen's Retirement System (PFRS). When you retired, we calculated your pension using the PERS formula for your PERS service credit and the PFRS formula for your PFRS service credit. We then added the two benefits together to produce your monthly retirement allowance. Since the PFRS retirement formula provides a significantly higher retirement benefit than that of the PERS, your retirement allowance will increase when we recalculate your retirement allowance using all PFRS service credit.

The law will be effective on the first of the month following ninety days after enactment, December 1, 2001. Therefore, you will see your first enhanced benefit payment in your retirement allowance check for December, which will be dated January 1, 2002. There is no provision in the law for any retroactive adjustment to benefits. If you are now receiving a Cost-of-Living Adjustment (COLA), your COLA will also increase because it is based on a percentage of your enhanced retirement benefit. Prior to you receiving your increased benefit, we will send you a revised summary of your retirement benefits that will include information on the amount of your enhanced benefit as well as any survivor's benefit payable.

If you chose an option on your PERS Application for Retirement Allowance to leave a pension benefit to a beneficiary upon your death, that PERS death benefit eligibility will cease on December 1, 2001. Instead, you will have the death benefits that other PFRS retirees have. The PFRS provides a pension of 50% of final compensation to your spouse upon your death plus an additional pension to your unmarried children under age 18. It also provides life insurance equal to half of your final compensation.

There is no cost to you for this benefit enhancement. The law provides for funding of the benefit with excess assets from the PFRS fund.

If you have any questions, please call the Office of Client services at (609) 292-7524.


September 2001

TO:  Certifying Officers  Teachers' Pensions and Annuity Fund

FROM: John D. Megariotis Assistant Director, Finance

SUBJECT: Member Contribution Rate Change

Chapter 133, P.L. 2001 decreases the rate of pension contributions for TPAF members to 3 percent of salary effective January 1, 2002. This TPAF employee contribution rate will remain in effect through 2002 and will continue there after as long as the excess assets of the TPAF permit. This is not a permanent change in the normal contribution rate of 5 percent of salary. Therefore, the minimum repayment for pension loans and the minimum deduction for the purchase of service credit, which is based on the full 5 percent contribution rate, will not change.

If you have any questions regarding this matter, please contact this Division's Audit/Billing Section at (609) 292-3630.


September 2001

TO: Participating State Health Benefits Program Local Government Employers and Independent State Authorities that Pay Post-Retirement Medical Costs for Retirees

FROM: Janice F. Nelson, Deputy Director

SUBJECT: Local Group Rate Actions for Retiree Coverage - Local Government Employers

This memorandum details the actions taken by the State Health Benefits Commission on June 29, 2001 concerning State Health Benefits Program (SHBP) rates and plan changes that affect retirees. For simplicity, this memorandum will only address the rate actions that apply to the retired coverage rates for Local Government Employers and Independent State Authorities. All rate actions are effective January 1, 2002 and are based upon the recommendation of the Commission's actuarial consultant, Milliman USA.

Unfortunately, medical trend rates for employer-sponsored health plans are returning to levels not seen since the early 1990s. This is occurring nationally, and New Jersey is not exempt from the forces driving these costs. Health care trend is the forecasted percentage change in a health plan's per capita claim cost. Factors such as utilization, improvements in technology, general inflation, mandated benefits, and changes in the mix of services are all components of trend. Nationally, industry experts have been reporting trends of 9%-15% for medical plans. Prescription drug plans are reporting trends of 18-20% for active employees and retirees younger than age 65. Higher trends are expected for retirees age 65 and older.

Milliman USA reports that both medical and prescription drug trends experienced by the SHBP in its largest plans were higher than anticipated at the last renewal analysis. This means that the claims experience for the group has been worse than expected. This pattern of higher trends is consistent with the nationwide results of other employers with similar programs, and is a result of increased utilization and higher medical costs resulting from factors such as continued advances in medical technology. In addition, the new rates had to take into account three additional months of trend due to the one-time use of an 18 month rating period (July 2000 through December 2001) instead of the usual 12 month period to transition SHBP rates from a fiscal to a calendar year basis. As a result of incorporating the three months of additional trend, the 2002 calendar year rate increases are higher by approximately 2% on medical coverage and 5% on prescription drug coverage.

It was necessary that the Commission approve the recommended increases in order to ensure that the State Health Benefit Program would have sufficient premium to cover the anticipated claims for the period. Since the SHBP self-funds most of its plans, the claims experience used in projecting 2002 costs are based upon the actual claims experience of the group. Rates for the self-funded plans are established on a self-supporting basis without margin or any intent to increase the plan balances.

Effective January 1, 2002

Plan Name Non-Medicare Retirees Medicare Retirees
Traditional Plan 30.4% 30.5%
NJ PLUS 36.3% 21.4%
Aetna USHealthcare 12.2% 23.7%
Amerihealth 16.0% 17.7%
CIGNA 14.8% 23.7%
Health Net (formerly PHS) 6.2% 9.3%
Oxford 8.3% 5.0%
University 13.9% 12.8%

Prescription drug coverage through a card plan is included in all medical plans.

Actions Taken by the State Health Benefits Commission to Control Rising Costs

The Commission approved the following plan changes to control rising costs:

  • Change in the SHBP Traditional and NJ PLUS Retiree Prescription Drug Card Plan retail pharmacy network - Effective January 1, 2002 retirees covered under this plan will have a customized network of participating retail pharmacies. The current network arrangement requires pharmacies in the network to provide brand name drugs at 13% off the Average Wholesale Price (AWP). Pharmacies that elect to participate in the new custom network will guarantee 15% off the AWP for brand drugs. These cost savings reduced the rate increases required for the Traditional Plan and NJ PLUS Medicare retiree rates by about 1.1-1.6% and are reflected in the chart above.

    A disruption analysis performed by Horizon Blue Cross and Blue Shield and Merck-Medco indicates that this modest reduction in retail pharmacy network size (from 99% of NJ pharmacies to about 90% of NJ pharmacies) will inconvenience about 5% of our members overall. These retirees will need to switch to other, nearby pharmacies to continue to enjoy the benefits of their card plan. The analysis performed by Horizon and Merck-Medco indicates that 100% of NJ members will have access to a participating network retail pharmacy within reasonable distance from their home. Retirees that have moved out of New Jersey will also continue to enjoy easy access to a participating retail pharmacy under the custom network.

  • Change in the Traditional Plan and NJ PLUS Retiree Prescription Drug Card Co-pays and Out-of-Pockets Maximum - In addition to the change in the retail pharmacy network detailed above, the Commission approved changes in the Traditional Plan and NJ PLUS retiree prescription drug pilot plan co-payments and out-of-pocket maximums as required by NJAC 17:9-6.10. Effective January 1, 2002, retail co-payments for retirees enrolled in the Traditional Plan and NJ PLUS will be as follows: $5 generic, $11 preferred brand and $21 non-preferred brand for a 30 day supply (an increase of $1 in both brand drug categories). Mail-order co-payments will also go up by $1 for the brand drug categories ($5 generic, $16 preferred brand, $26 non-preferred brand). The annual out-of-pocket maximum for prescription drug expenses will increase from $300 to $345.

  • Change in Prescription Drug Benefits Provided by HMOs -The Commission has updated the retiree prescription drug benefit provided by SHBP HMOs to a 3-tier design to encourage the use of less expensive brand name drugs when multi-source drugs are available. HMOs will provide prescription cards with retail pharmacy co-pays of $5/$10/$20 (generic/preferred brand/non-preferred brand) and appropriate co-pays for mail order. Milliman USA has indicated that the change in retiree co-pays reduced the HMO rates for Medicare retirees by about 1.5%. This reduction is reflected in the HMO rate actions listed above.

Since Horizon HMO has been eliminated from the medical plans offered by the SHBP, Horizon HMO members will receive a direct mailing informing them of the elimination of the HMO. No action is required unless they wish to select another plan other than NJ PLUS. Horizon HMO members who do not complete an application during open enrollment to transfer to another health plan will automatically be transferred to NJ PLUS effective January 1, 2002.

Please be assured the State Health Benefits Commission shares your concern about rising health care costs and your commitment to provide high quality health plans to employees and retirees at the best available price.

Calendar Year 2002 SHBP rate charts are attached. Information concerning plan and rate changes will be sent to retirees this fall.

If you have questions, contact Client Services at (609) 292-7524 or call the Employer Hotline at (609) 777-1082 and leave a message. A staff member will return your call on the next business day.


September 2001

TO: Participating State Health Benefits Program Local Education Employers

FROM: Janice F. Nelson, Deputy Director

SUBJECT: Local Group Rate Actions - Education Employers

This memorandum details the actions taken by the State Health Benefits Commission on June 29, 2001 concerning State Health Benefits Program (SHBP) plan changes and rates. For simplicity, this memorandum will only address the rate actions that apply to the active employee rates for Local Education Employers. All rate actions are effective January 1, 2002 and are based upon the recommendation of the Commission's actuarial consultant, Milliman USA.

Unfortunately, medical trend rates for employer-sponsored health plans are returning to levels not seen since the early 1990s. This is occurring nationally, and New Jersey is not exempt from the forces driving these costs. Health care trend is the forecasted percentage change in a health plan's per capita claim cost. Factors such as utilization, improvements in technology, general inflation, mandated benefits, and changes in the mix of services are all components of trend. Nationally, industry experts have been reporting trends of 9%-15% for medical plans. Prescription drug plans are reporting trends of 18-20% for active employees and retirees younger than age 65. Higher trends are expected for retirees age 65 and older. A recent annual survey in the August 15th issue of Managed Healthcare Market Report indicates that employers are reporting 15% increases in their managed care plans for 2002, with Texas, Florida, New Jersey, Ohio, Iowa, and Alabama experiencing the worst increases.

Milliman USA reports that both medical and prescription drug trends experienced by the SHBP in its largest plans were higher than anticipated at the last renewal analysis. This means that the claims experience for the group has been worse than expected. This pattern of higher trends is consistent with the nationwide results of other employers with similar programs, and is a result of increased utilization and higher medical costs resulting from factors such as continued advances in medical technology. In addition, the new rates had to take into account three additional months of trend due to the one-time use of an 18 month rating period (July 2000 through December 2001) instead of the usual 12 month period to transition SHBP rates from a fiscal to a calendar year basis. As a result of incorporating the three months of additional trend, the 2002 calendar year rate increases are higher by approximately 2% on the medical plans and 5% on the prescription drug plans.

It was necessary that the Commission approve the recommended increases in order to ensure that the State Health Benefit Program would have sufficient premium to cover the anticipated claims for the period. Since the SHBP self-funds most of its plans, the claims experience used in projecting 2002 costs are based upon the actual claims experience of the group. Rates for the self-funded plans are established on a self-supporting basis without margin or any intent to increase the plan balances.

Effective January 1, 2002

For employers that provide a separate prescription drug card plan
(no coverage for prescription drugs is provided through the SHBP medical plans)
For employers that do not provide a separate prescription drug card plan
(coverage for prescription drugs is provided
through the SHBP medical plans)
Plan Name Rate Action Plan Name Rate Action
NJ PLUS 12.0% NJ PLUS 8.5%
Traditional Plan 22.0% Traditional Plan 24.5%
Aetna USHealthcare 8.7% Aetna USHealthcare 11.7%
Amerihealth 12.2% Amerihealth 16.0%
CIGNA 12.4% CIGNA 14.5%
Health Net (formerly PHS) 8.6% Health Net (formerly PHS) 6.2%
Oxford 9.4% Oxford 8.2%
University 13.1% University 14.1%
SHBP Employee Prescription Card Plan 17.4% ******NA*****  

Actions Taken by the State Health Benefits Commission to Control Rising Costs

The Commission approved the following plan changes to help control rising costs:

  • Change in the SHBP Employee Prescription Drug Card Plan retail pharmacy network - Effective October 1, 2001 employees covered under this plan will have a customized network of participating retail pharmacies. The current network arrangement requires pharmacies in the network to provide brand name drugs at 13% off the Average Wholesale Price (AWP). Pharmacies that elect to participate in the new custom network will guarantee 15% off the AWP for brand drugs. These cost savings reduced the rate increase required for the prescription drug card plan by about 2.7%, and are reflected in the chart above

A disruption analysis performed by Horizon Blue Cross and Blue Shield and Merck-Medco indicates that this modest reduction in retail pharmacy network size (from 99% of NJ pharmacies to about 90% of NJ pharmacies) will inconvenience about 5% of our members overall. These employees will need to switch to other, nearby pharmacies to continue to enjoy the benefits of their card plan. The analysis performed by Horizon and Merck-Medco indicates that 100% of NJ members will have access to a participating network retail pharmacy within reasonable distance from their home.

  • Change in Prescription Drug Benefits Provided by HMOs - This change only affects employers that do not have a separate prescription card plan and therefore provide prescription drug coverage through the SHBP medical plans. The Commission has updated the prescription drug benefit provided by SHBP HMOs to a 3-tier design to encourage the use of less expensive brand name drugs when multi-source drugs are available. HMOs will provide prescription cards with retail pharmacy co-pays of $5/$10/$20 (generic/preferred brand/non-preferred brand) and appropriate co-pays for mail order. Milliman USA has indicated that the change in employee co-pays reduced the rates for HMOs for employers that do not provide a separate prescription drug card by about 1.5%. This reduction is reflected in the HMO rate actions listed above.
  • Elimination of Horizon HMO as a SHBP offering - The Department of the Treasury, Division of Purchase and Property has announced its intention to award the SHBP contracts for administrative services for NJ PLUS and the Traditional Plan to Horizon Blue Cross Blue Shield of New Jersey effective January 2002. The Commission therefore voted to eliminate the Horizon HMO plan from the list of SHBP HMOs during the upcoming open enrollment period for the following reasons:

    1. Since the NJ PLUS network is identical to the Horizon HMO network (NJ PLUS actually has one additional hospital that is not part of the HMO network) HMO members can be moved into the NJ PLUS network with zero disruption of participating providers. Further, NJ PLUS members have in-network access to large physician and hospitals networks in New York, Pennsylvania and Delaware that are not part of the Horizon HMO network.

    2. Since NJ PLUS in-network benefits are generally comparable to the HMO benefits and NJ PLUS provides out-of-network coverage to members, HMO members will benefit from the move to the NJ PLUS plan.

    3. The administrative service fees charged by Horizon for its HMO are considerably higher than the fees Horizon will be paid for the administration of NJ PLUS. This is primarily due to the size of the plans. While NJ PLUS covers more than 250,000 employees, retirees, and dependents, Horizon HMO only covers about 25,000 participants. The elimination of the smaller HMO plan and the transfer of its members to NJ PLUS will save the SHBP approximately $4.5 million overall in administrative service fees. Local education employers will receive their share in these savings through lower premiums for the employees transferred from Horizon HMO to NJ PLUS. Had the HMO remained in the SHBP, its premiums would have increased by 18.3% for employers that provide a separate prescription drug card and 19.2% for employers that do not provide a separate drug card. Because of the transfer to NJ PLUS, rates for these employees will decrease approximately -8% for employers that provides separate prescription drug card and -17% for employers that do not.

Horizon HMO members will receive further information through a direct mailing informing them of the elimination of the HMO. No action is required unless they wish to select another plan other than NJ PLUS. Horizon HMO members who do not complete an application during open enrollment to transfer to another health plan will automatically be transferred to NJ PLUS effective January 1, 2002.

Please be assured the State Health Benefits Commission shares your concern about rising health care costs and your commitment to provide high quality health plans to your employees at the best available price.

Calendar Year 2002 SHBP rate charts are attached. Information concerning plan changes will be sent to you for distribution to your employees later this month.

If you have questions, contact Client Services at (609) 292-7524 or call the Employer Hotline at (609) 777-1082 and leave a message. A staff member will return your call on the next business day.


September 2001

TO: Participating State Health Benefits Program Local Government Employersand Independent State Authorities

FROM: Janice F. Nelson, Deputy Director

SUBJECT: Local Group Rate Actions - Local Government Employers

This memorandum details the actions taken by the State Health Benefits Commission on June 29, 2001 concerning State Health Benefits Program (SHBP) plan changes and rates. For simplicity, this memorandum will only address the rate actions that apply to the active employee rates for Local Government Employers and certain independent state authorities. All rate actions are effective January 1, 2002 and are based upon the recommendation of the Commission's actuarial consultant, Milliman USA.

Unfortunately, medical trend rates for employer-sponsored health plans are returning to levels not seen since the early 1990s. This is occurring nationally, and New Jersey is not exempt from the forces driving these costs. Health care trend is the forecasted percentage change in a health plan's per capita claim cost. Factors such as utilization, improvements in technology, general inflation, mandated benefits, and changes in the mix of services are all components of trend. Nationally, industry experts have been reporting trends of 9%-15% for medical plans. Prescription drug plans are reporting trends of 18-20% for active employees and retirees younger than age 65. Higher trends are expected for retirees age 65 and older. A recent annual survey in the August 15th issue of Managed Healthcare Market Report indicates that employers are reporting 15% increases in their managed care plans for 2002, with Texas, Florida, New Jersey, Ohio, Iowa, and Alabama experiencing the worst increases.

Milliman USA reports that both medical and prescription drug trends experienced by the SHBP in its largest plans were higher than anticipated at the last renewal analysis. This means that the claims experience for the group has been worse than expected. This pattern of higher trends is consistent with the nationwide results of other employers with similar programs, and is a result of increased utilization and higher medical costs resulting from factors such as continued advances in medical technology. In addition, the new rates had to take into account three additional months of trend due to the one-time use of an 18 month rating period (July 2000 through December 2001) instead of the usual 12 month period to transition SHBP rates from a fiscal to a calendar year basis. As a result of incorporating the three months of additional trend, the 2002 calendar year rate increases are higher by approximately 2% on the medical plans and 5% on the prescription drug plans.

It was necessary that the Commission approve the recommended increases in order to ensure that the State Health Benefit Program would have sufficient premium to cover the anticipated claims for the period. Since the SHBP self-funds most of its plans, the claims experience used in projecting 2002 costs are based upon the actual claims experience of the group. Rates for the self-funded plans are established on a self-supporting basis without margin or any intent to increase the plan balances.

Effective January 1, 2002

For employers that provide a separate prescription drug card plan
(no coverage for prescription drugs is provided through the SHBP medical plans)
For employers that do not provide a separate prescription drug card plan
(coverage for prescription drugs is provided through the SHBP medical plans)
Plan Name Rate Action Plan Name Rate Action
NJ PLUS 15.5% NJ PLUS 11.6%
Traditional Plan 22.0% Traditional Plan 20.0%
Aetna USHealthcare 8.7% Aetna USHealthcare 11.7%
Amerihealth 12.2% Amerihealth 16.0%
CIGNA 12.4% CIGNA 14.5%
Health Net (formerly PHS) 8.6% Health Net (formerly PHS) 6.2%
Oxford 9.4% Oxford 8.2%
University 13.1% University 14.1%
SHBP Employee Prescription Card Plan 17.4% ******NA*****  

Actions Taken by the State Health Benefits Commission to Control Rising Costs

The Commission approved the following plan changes to control rising costs:

  • Change in the SHBP Employee Prescription Drug Card Plan retail pharmacy network - Effective October 1, 2001 employees covered under this plan will have a customized network of participating retail pharmacies. The current network arrangement requires pharmacies in the network to provide brand name drugs at 13% off the Average Wholesale Price (AWP). Pharmacies that elect to participate in the new custom network will guarantee 15% off the AWP for brand drugs. These cost savings reduced the rate increase required for the prescription drug card plan by about 2.7%, and are reflected in the chart above.

A disruption analysis performed by Horizon Blue Cross and Blue Shield and Merck-Medco indicates that this modest reduction in retail pharmacy network size (from 99% of NJ pharmacies to about 90% of NJ pharmacies) will inconvenience about 5% of our members overall. These employees will need to switch to other, nearby pharmacies to continue to enjoy the benefits of their card plan. The analysis performed by Horizon and Merck-Medco indicates that 100% of NJ members will have access to a participating network retail pharmacy within reasonable distance from their home.

  • Change in Prescription Drug Benefits Provided by HMOs - This change only affects employers that do not have a separate prescription card plan and therefore provide prescription drug coverage through the SHBP medical plans. The Commission has updated the prescription drug benefit provided by SHBP HMOs to a 3-tier design to encourage the use of less expensive brand name drugs when multi-source drugs are available. HMOs will provide prescription cards with retail pharmacy co-pays of $5/$10/$20 (generic/preferred brand/non-preferred brand) and appropriate co-pays for mail order. Milliman USA has indicated that the change in employee co-pays reduced the rates for HMOs for employers that do not provide a separate prescription drug card by about 1.5%. This reduction is reflected in the HMO rate actions listed above.
  • Elimination of Horizon HMO as a SHBP offering - The Department of the Treasury, Division of Purchase and Property has announced its intention to award the SHBP contracts for administrative services for NJ PLUS and the Traditional Plan to Horizon Blue Cross Blue Shield of New Jersey effective January 2002. The Commission therefore voted to eliminate the Horizon HMO plan from the list of SHBP HMOs during the upcoming open enrollment period for the following reasons:

    1. Since the NJ PLUS network in New Jersey is identical to the Horizon HMO network (NJ PLUS actually has one additional hospital that is not part of the HMO network) HMO members can be moved into the NJ PLUS network with zero disruption of participating providers. Further, NJ PLUS members have in-network access to large physician and hospitals networks in New York, Pennsylvania and Delaware that are not part of the Horizon HMO network.

    2. Since NJ PLUS in-network benefits are generally comparable to the HMO benefits and NJ PLUS provides out-of-network coverage to members, HMO members will benefit from the move to the NJ PLUS plan.

    3. The administrative service fees charged by Horizon for its HMO are considerably higher than the fees Horizon will be paid for the administration of NJ PLUS. This is primarily due to the size of the plans. While NJ PLUS covers more than 250,000 employees, retirees, and dependents, Horizon HMO only covers about 25,000 participants. The elimination of the smaller HMO plan and the transfer of its members to NJ PLUS will save the SHBP approximately $4.5 million overall in administrative service fees. Local governments and authorities will receive their share in these savings through lower premiums for the employees transferred from Horizon HMO to NJ PLUS. Had the HMO remained in the SHBP, its premiums would have increased by 18.3% for employers that provide a separate prescription drug card and 19.2% for employers that do not provide a separate drug card. Because of the transfer to NJ PLUS, rates for these employees will increase by approximately 5.5% for employers that provide a separate prescription drug card and decrease by -10% for employers that do not.

Horizon HMO members will receive further information through a direct mailing informing them of the elimination of the HMO. No action is required unless they wish to select another plan other than NJ PLUS. Horizon HMO members who do not complete an application during open enrollment to transfer to another health plan will automatically be transferred to NJ PLUS effective January 1, 2002.

Please be assured the State Health Benefits Commission shares your concern about rising health care costs and your commitment to provide high quality health plans to your employees at the best available price.

Calendar Year 2002 SHBP rate charts are attached. Information concerning plan changes will be sent to you for distribution to your employees later this month.

If you have questions, contact Client Services at (609) 292-7524 or call the Employer Hotline at (609) 777-1082 and leave a message. A staff member will return your call on the next business day.


August 20, 2001

TO: State Monthly Human Resource Directors/Benefits Administrators

FROM: Janice F. Nelson, Deputy Director

SUBJECT: Fall 2001 SHBP Open Enrollment

The State Health Benefits Program (SHBP) Open Enrollment period for State monthly employees will begin on October 1, and end on October 31, 2001. Completed employer certified health benefit and/or dental applications must arrive at the Health Benefits Bureau no later than November 8, 2001. All changes to coverage made during the fall open enrollment will be effective on January 1, 2002.

Unions representing most State employees have contracts in effect that provide for premium sharing arrangements with the State. The contracts are identical with respect to their premium sharing provisions. There is no premium cost to any employee who enrolls in NJ PLUS. Employees will pay 5 percent of the premium cost if enrolled in an HMO, or 25 percent of the premium cost if enrolled in the Traditional Plan. These percentages apply regardless of salary level or date of hire.

Enclosed you will find rate charts for your use, as well as, sample Open Enrollment announcement fliers that provide a list of medical and dental plans and the premium sharing costs for State employees not paid through Centralized Payroll. These fliers are master copies that can be reproduced for distribution to your employees. The fliers are provided for three different payroll schedules (Monthly, 24 Pay Periods, and 26 Pay Periods). Choose the flier that corresponds to your location's payroll schedule.

These fliers are designed to assist your employees in making informed decisions concerning their health care. Please distribute them to your employees prior to the start of the Open Enrollment.

Also included with this letter are:

  • A sample copy of the fall 2001 Health Capsule newsletter. The Health Capsule provides additional detail on changes being made to the health and dental plans for the 2002 plan year. The newsletters are scheduled for delivery to monthly employers prior to the start of the Open Enrollment.
  • A flier to publicize the SHBP's Unified Provider Directory. The Unified Provider Directory is an online service that provides a comprehensive listing of health care providers and facilities that deliver their services through one or more of the SHBP's health care plans. Updated monthly, you can access the Unified Provider Directory through the SHBP homepage at: www.state.nj.us/treasury/pensions/shbp.htm
  • A listing of marketing contacts for the various health and dental plans. Use these contacts to obtain provider directories or other plan specific literature. (These numbers are not for member services. Please do not give these numbers to your employees.)

Also scheduled for distribution, for the start of the Open Enrollment, are revised copies of the SHBP Summary Program Description (SPD), SHBP Comparison Chart, and the State Employees Group Dental Program Handbook.

  • Because of the changes to the health plans and the State Group Dental Program, you will be receiving a supply of the revised SPD and the revised Dental Program Handbook, sufficient for distribution to all of your employees who are currently enrolled in the those programs.
  • You will also receive a starter supply of the SHBP Comparison Chart (with information on how to request additional copies).

The SHBP Open Enrollment now runs concurrently with the State Employees Tax Savings Program (Tax$ave) Open Enrollment. Tax$ave is a benefit program, available to State employees who are eligible for the SHBP. Tax$ave can save your employees tax money by paying health benefit premiums and eligible unreimbursed medical and/or dependent care expenses from before-tax dollars. See the Tax$ave 2002 Open Enrollment materials for more information (watch for your Tax$ave mailing to arrive separately).

If you have any questions about the Open Enrollment, please contact our Office of Client Services at (609) 292-7524. Thank you for your cooperation.

Enclosures:

1. Health and Dental Plan Rate Charts/Fliers
2. Unified Provider Directory Flier
3. Health Capsule newsletter
4. Health/Dental Plan Marketing Contacts


August 20, 2001

TO: State Departmental Human Resource Directors State Biweekly Benefits Administrators

FROM: Janice F. Nelson Deputy Director

SUBJECT: Fall 2001 State Health Benefits Program (SHBP) Open Enrollment

The State Health Benefits Program (SHBP) Open Enrollment period for State biweekly employees will begin on September 4, and end on October 5, 2001. Completed employer certified health benefit and/or dental applications must arrive at the Health Benefits Bureau no later than October 15, 2001. All changes to coverage made during the fall open enrollment will be effective on December 29, 2001.

Unions representing most State employees have contracts in effect that provide for premium sharing arrangements with the State. The contracts are identical with respect to their premium sharing provisions. There is no premium cost to any employee who enrolls in NJ PLUS. Employees will pay 5 percent of the premium cost if enrolled in an HMO, or 25 percent of the premium cost if enrolled in the Traditional Plan. These percentages apply regardless of salary level or date of hire.

Enclosed you will find rate charts for your use, as well as, a sample Open Enrollment announcement flier that provides a list of medical and dental plans and the premium sharing costs for your employees. This flier is designed to assist your employees in making informed decisions concerning their health care coverage during this open enrollment.

State employees paid through the State's Centralized Payroll Unit should be given this flier with their August 31 paychecks. (A supply of the flier will be available from OMB Check Distribution as of August 24, 2001.)

Also included with this letter are:

  • A sample copy of the fall 2001 Health Capsule newsletter. The Health Capsule provides additional detail on changes being made to the health and dental plans for the 2002 plan year. The newsletters are scheduled for delivery to payroll locations on or before August 24, 2001.
  • A flier to publicize the SHBP's Unified Provider Directory. The Unified Provider Directory is an online service that provides a comprehensive listing of health care providers and facilities that deliver their services through one or more of the SHBP's health care plans. Updated monthly, you can access the Unified Provider Directory through the SHBP homepage at: www.state.nj.us/treasury/pensions/shbp.htm
  • A listing of marketing contacts for the various health and dental plans. Use these contacts to obtain provider directories or other plan specific literature. (These numbers are not for member services. Please do not give these numbers to your employees.)

Also scheduled for distribution, for the start of the Open Enrollment, are revised copies of the SHBP Summary Program Description (SPD), SHBP Comparison Chart, and the State Employees Group Dental Program Handbook.

  • Because of the changes to the health plans and the State Group Dental Program, you will be receiving a supply of the revised SPD and the revised Dental Program Handbook, sufficient for distribution to all of your employees who are currently enrolled in the those programs.
  • You will also receive a starter supply of the SHBP Comparison Chart (with information on how to request additional copies).

The SHBP Open Enrollment now runs concurrently with the State Employees Tax Savings Program (Tax$ave) Open Enrollment. Tax$ave is a benefit program, available to State employees who are eligible for the SHBP. Tax$ave can save your employees tax money by paying health benefit premiums and eligible unreimbursed medical and/or dependent care expenses from before-tax dollars. See the Tax$ave 2002 Open Enrollment materials (to be distributed September 7, 2001) for more information.

If you have any questions about the Open Enrollment, please contact our Office of Client Services at (609) 292-7524. Thank you for your cooperation.

Enclosures:

1. Health and Dental Plan Rate Charts/Flier
2. Unified Provider Directory Flier
3. Health Capsule newsletter
4. Health/Dental Plan Marketing Contacts


August 27, 2001

TO: State University and College Benefits Administrators, State Monthly Benefits Administrators

FROM: John D. Megariotis, Assistant Director, Finance

SUBJECT: Open Enrollment For The New Jersey State Employees Tax Savings Program (Tax$ave 2002)

The Annual Open Enrollment for the calendar year 2002 New Jersey State Employees Tax Savings Program (Tax$ave 2002) will be conducted from September 14 through October 31, 2001. Employees of the State, State Universities, and State Colleges, who are eligible for participation in the New Jersey State Health Benefits Program, may participate in Tax$ave.

This fall, the Tax$ave 2002 Open Enrollment period coincides with the State Health Benefits Program (SHBP) Open Enrollment for medical, dental, and prescription drug benefits. While Tax$ave is a separate program from the SHBP, the two programs complement each other. Tax$ave allows employees to save taxes on any SHBP premiums they pay and lets them set aside pre-tax income to pay many of the expenses not covered by the SHBP plans.

About Tax$ave

Tax$ave consists of three components:

1.The Premium Option Plan (POP);

2.The Unreimbursed Medical Spending Account (UMSA); and

3.The Dependent Care Spending Account (DCSA).

UMSA and DCSA are also referred to as Flexible Spending Accounts (FSA's).

Tax$ave offers eligible employees the opportunity to increase their available income by reducing their federal tax liability. Each year eligible employees should review their personal financial circumstances and decide if they wish to participate or not. Open Enrollment offers employees the opportunity to conduct this review and then act on their decision.

Premium Option Plan

Enrollment in the Premium Option Plan is automatic. This saves your employees tax money by paying health and dental premiums from pre-tax dollars and reducing their tax liability. If an employee does not wish to take advantage of the Premium Option Plan in 2002 (and therefore pay more in federal, Social Security, and Medicare taxes) he or she should file a Declination of Premium Option Plan (POP) form.

Flexible Spending Accounts

Unlike the POP or the plans of the SHBP, prior participation in a Tax$ave FSA in 2001 does not carry over automatically into 2002. Employees must enroll again to participate in an FSA for calendar year 2002.

Employees have three ways of enrolling in the Tax$ave FSA accounts this year: mail, telephone, and Internet. The Tax$ave publications will provide the following instructions to employees:

  • Mail: FSA Election Applications must be mailed directly to Horizon Healthcare. All election forms must be postmarked no later than October 31, 2001, to be accepted. Those postmarked after October 31, 2001 will be returned without action. Benefits offices should not be involved in processing or mailing FSA Election Applications.

  • Telephone: Employees may either enroll (or reenroll) in the UMSA or DCSA plans for 2002 over the phone by calling Horizon Healthcare's automated voice response unit at 1-800-224-4426. This is a great opportunity to quickly and easily go through the process of a new or repeat enrollment. Horizon will inform current participating employees of this opportunity through a direct mailing in September. The deadline for enrollment by telephone is midnight, October 31, 2001.

  • Internet: Again this year employees have the ability to enroll (or reenroll) over the Internet. Go to the Horizon Healthcare webpage through a link from the Division of Pensions and Benefits' Tax$ave page at: www.state.nj.us/treasury/pensions/taxsave.htm and follow the simple directions. The deadline for enrollment over the Internet is midnight, October 31, 2001.

Tax$ave Support Materials

The remainder of this letter provides information on the Tax$ave Open Enrollment publications and support available to assist you in explaining this important benefit program to your employees. Please do your best to make a concerted effort to inform your employees of the open enrollment and to educate them on the valuable benefits that Tax$ave offers them. We believe that more employees would participate in Tax$ave if they were made aware and understood the value of the tax savings offered by the program. (A separate letter will be provided specifically addressing the State Health Benefits Program Open Enrollment for health, dental, and prescription drug plans.)

Enclosed is the Tax$ave Open Enrollment Milestones chart that lists the critical dates of the Tax$ave 2002 Annual Open Enrollment and outlines the efforts being made to educate employees. Please use this chart as a checklist to guide your activities during the open enrollment.

The Division will also provide State Monthly employers, State Universities, and State Colleges with sufficient copies of the Tax$ave 2002 Open Enrollment News and the Premium Option Plan 2002 pamphlet for all eligible employees. Horizon Healthcare will provide sufficient copies of the FSA pamphlet for distribution to all of your eligible employees.

  • The Tax$ave 2002 Open Enrollment News that announces the open enrollment, outlines the components of the program with emphasis on its tax saving advantages, and identifies the October 31, 2001 deadline for submission of all election materials. A copy of this newsletter is enclosed;
  • The Premium Option Plan 2002 pamphlet that explains the advantages and disadvantages of participation. A copy of this POP pamphlet is enclosed; and

  • An FSA pamphlet that describes the UMSA and DCSA plans. This pamphlet has been redesigned for the 2002 plan year.

These publications will be shipped to employers early in September and you should distribute them to your employees before the Open Enrollment start date on September 14, 2001.

The other open enrollment materials you will need are the Declination of Premium Option Plan (POP) for Plan Year 2002 form and the FSA Election Kits. This letter includes a minimal supply of the declination forms. These can be copied for use by those few employees who do not wish to participate in the POP and, therefore, pay more in tax. (Note: do not distribute POP Declination forms to employees unless they ask for one.) A new FSA Election Kit for 2002 will be sent directly to benefits administrators by Horizon Healthcare, along with a request form for additional kits. Please provide the FSA Election Kits to those employees who request them.

We also encourage you to provide your employees with reminders of the Tax$ave Open Enrollment to ensure they don't allow this opportunity to slip by without action.

If an employee chooses not to save under the Tax$ave Premium Option Plan and wants to pay federal income, Social Security, and Medicare taxes on the salary used to pay their medical and dental premiums in 2002, they must complete a POP form declining the federal tax break they could receive. Employees should request these forms from you. We will be instructing employees to return the Declination of Premium Option Plan (POP) forms to benefits administrators by October 31, 2001. Benefits administrators must then forward declination forms to payroll.

Upon request, Horizon Healthcare will provide Tax$ave educational seminars, at your workplace, for interested employees. The seminars are about 60 minutes in duration (including questions and answers). These have proven to be very successful educational tools and we strongly encourage you to make one available to your employees. Please see the enclosed request form to schedule a Horizon Healthcare representative.

Your involvement in the Tax$ave Open Enrollment is key to your employees receiving the valuable benefits offered by this program. We appreciate your cooperation. If you have any questions about Tax$ave 2002 or the open enrollment, call the Horizon Healthcare Insurance Agency, Inc. at 1-800-224-4426, or visit the Division of Pensions and Benefits' Tax$ave Internet site at: www.state.nj.us/treasury/pensions/taxsave.htm

Enclosures:

Tax$ave 2002 Open Enrollment Milestones
Request for Tax$ave 2002 Employee Seminars
Tax$ave 2002 Open Enrollment News (sample)
The Premium Option Plan 2002 Pamphlet (sample)
Declination of Premium Option Plan (POP) for Plan Year 2002 (three copies enclosed)
Tax$ave Pamphlet - Savings You Can Bank On.(sample)


August 27, 2001

TO:  State Department Human Resource Directors, State Biweekly Payroll Locations Benefits Administrators

FROM: John D. Megariotis, Assistant Director, Finance

SUBJECT: Open Enrollment For The New Jersey State Employees Tax Savings Program (Tax$ave 2002)

The Annual Open Enrollment for the calendar year 2002 New Jersey State Employees Tax Savings Program (Tax$ave 2002) will be conducted from September 14 through October 31, 2001. Employees of the State, state universities and colleges, Palisades Interstate Parkway Commission, and the NJ Commerce and Economic Growth Commission, who are eligible for participation in the New Jersey State Health Benefits Program, may participate in Tax$ave.

This fall, the Tax$ave 2002 Open Enrollment period coincides with and extends beyond the State Health Benefits Program (SHBP) Open Enrollment for medical, dental, and prescription drug benefits. While Tax$ave is a separate program from the SHBP, the two programs complement each other. Tax$ave allows employees to save taxes on any SHBP premiums they pay and lets them set aside pre-tax income to pay many of the expenses not covered by the SHBP plans.

About Tax$ave

Tax$ave consists of three components:

1.The Premium Option Plan (POP);

2.The Unreimbursed Medical Spending Account (UMSA); and

3.The Dependent Care Spending Account (DCSA).

UMSA and DCSA are also referred to as Flexible Spending Accounts (FSA's).

Tax$ave offers eligible employees the opportunity to increase their available income by reducing their federal tax liability. Each year eligible employees should review their personal financial circumstances and decide if they wish to participate or not. Open Enrollment offers employees the opportunity to conduct this review and then act on their decision.

Premium Option Plan

Enrollment in the Premium Option Plan is automatic. This saves your employees tax money by paying health and dental premiums from pre-tax dollars and reducing their tax liability. If an employee does not wish to take advantage of the Premium Option Plan in 2002 (and therefore pay more in federal, Social Security, and Medicare taxes) he or she should file a Declination of Premium Option Plan (POP) form.

Flexible Spending Accounts

Unlike the POP or the plans of the SHBP, prior participation in a Tax$ave FSA in 2001 does not carry over automatically into 2002. Employees must enroll again to participate in an FSA for calendar year 2002.

Employees have three ways of enrolling in the Tax$ave FSA accounts this year: mail, telephone, and Internet. The Tax$ave publications will provide the following instructions to employees:

  • Mail: FSA Election Applications must be mailed directly to Horizon Healthcare. All election forms must be postmarked no later than October 31, 2001, to be accepted. Those postmarked after October 31, 2001 will be returned without action. Benefits offices should not be involved in processing or mailing FSA Election Applications.

  • Telephone: Employees may either enroll (or reenroll) in the UMSA or DCSA plans for 2002 over the phone by calling Horizon Healthcare's automated voice response unit at 1-800-224-4426. This is a great opportunity to quickly and easily go through the process of a new or repeat enrollment. Horizon will inform current participating employees of this opportunity through a direct mailing in September. The deadline for enrollment by telephone is midnight, October 31, 2001.

  • Internet: Again this year employees have the ability to enroll (or reenroll) over the Internet. Go to the Horizon Healthcare webpage through a link from the Division of Pensions and Benefits' Tax$ave page at: www.state.nj.us/treasury/pensions/taxsave.htm and follow the simple directions. The deadline for enrollment over the Internet is midnight, October 31, 2001.

Tax$ave Support Materials

The remainder of this letter provides information on the Tax$ave Open Enrollment publications and support available to assist you in explaining this important benefit program to your employees. Please do your best to make a concerted effort to inform your employees of the open enrollment and to educate them on the valuable benefits that Tax$ave offers them. We believe that more employees would participate in Tax$ave if they were made aware and understood the value of the tax savings offered by the program. (A separate letter will be provided specifically addressing the State Health Benefits Program Open Enrollment for health, dental, and prescription drug plans.)

Enclosed is the Tax$ave Open Enrollment Milestones chart that lists the critical dates of the Tax$ave 2002 Annual Open Enrollment and outlines the efforts being made to educate employees. Please use this chart as a checklist to guide your activities during the open enrollment.

The initial announcement of the open enrollment to employees paid through Centralized Payroll was made in an August 17 paycheck message. On the September 14 paychecks there will be another Tax$ave 2002 Open Enrollment announcement message and three payroll inserts. These inserts are:

  • The Tax$ave 2002 Open Enrollment News that announces the open enrollment, outlines the components of the program with emphasis on its tax saving advantages, and identifies the October 31, 2001 deadline for submission of all election materials. A copy of this newsletter is enclosed;

  • An FSA pamphlet that describes the UMSA and DCSA plans. This pamphlet has been redesigned for the 2002 plan year; and

  • The Premium Option Plan > 2002 pamphlet that explains the advantages and disadvantages of participation. A copy of this POP pamphlet is enclosed.

The other open enrollment materials you will need are the Declination of Premium Option Plan (POP) for Plan Year 2002 form and the FSA Election Kits. This letter includes a minimal supply of the declination forms. These can be copied for use for those few employees who do not wish to participate in the POP and, therefore, pay more in tax. (Note: do not distribute POP Declination forms to employees unless they ask for one.) A new FSA Election Kit for 2002 will be sent directly to benefits administrators by Horizon Healthcare, along with a request form for additional kits. Please provide the FSA Election Kits to those employees who request them.

In addition to announcing the open enrollment to employees paid through Centralized Payroll with their August 17 and September 14 paychecks, we will provide reminder messages about the Tax$ave 2002 Open Enrollment to employees through pay stub messages on October 12 and October 26. A copy of the text of these messages is enclosed.

If an employee chooses not to save under the Tax$ave Premium Option Plan and wants to pay federal income, Social Security, and Medicare taxes on the salary used to pay their medical and dental premiums in 2002, they must complete a POP form declining the federal tax break they could receive. Employees should request these forms from you. We will be instructing employees to return the Declination of Premium Option Plan (POP) forms to benefits administrators by October 31, 2001. Benefits administrators must then forward declination forms to payroll. State biweekly employee POP declination forms must reach Centralized Payroll by November 16, 2001.

Upon request, Horizon Healthcare will provide Tax$ave educational seminars, at your workplace, for interested employees. The seminars are about 60 minutes in duration (including questions and answers). These have proven to be very successful educational tools and we strongly encourage you to make one available to your employees. Please see the enclosed request form to schedule a Horizon Healthcare representative.

Your involvement in the Tax$ave Open Enrollment is key to your employees receiving the valuable benefits offered by this program. We appreciate your cooperation. If you have any questions about Tax$ave 2002 or the open enrollment, call the Horizon Healthcare Insurance Agency, Inc. at 1-800-224-4426, or visit the Division of Pensions and Benefits' Tax$ave Internet site at: www.state.nj.us/treasury/pensions/taxsave.htm

Enclosures:

Tax$ave 2002 Open Enrollment Milestones
Request for Tax$ave 2002 Employee Seminars
Open Enrollment Check Messages
Tax$ave 2002 Open Enrollment News (sample)
The Premium Option Plan 2002 Pamphlet (sample)
Declination of Premium Option Plan (POP) for Plan Year 2002 (three copies enclosed)
Tax$ave Pamphlet - Savings You Can Bank On (sample)


August 2001

TO: Certifying Officers, Public Employees' Retirement System, Teachers' Pension and Annuity Fund, Police and Firemen's Retirement System

FROM: William H. Kale, Assistant Director, Client Services

SUBJECT: Purchase of Military Service Prior to Enrollment for Members with Vested Rights to Military Reserve Retirement Benefits

If a member of the Public Employees' Retirement System (PERS), Teachers' Pension and Annuity Fund (TPAF), or the Police and Firemen's Retirement System (PFRS) had a vested right to a military retirement benefit, the Division of Pensions and Benefits prohibited them from purchasing service credit for active military service in accordance with state statutes. (See N.J.S.A. 43:15A-60.1 for members of the PERS, N.J.S.A. 18A:66-13.1 for members of the TPAF, and N.J.S.A. 43:16A-11.8 for members of the PFRS.)

The Division of Pensions and Benefits recently asked for clarification from our legal advisor, the Office of the Attorney General, regarding the interaction between the above-cited New Jersey statutes and the federal law on this subject. The federal law, 10 U.S.C. 12736, protects members who are receiving or entitled to receive a reserve military pension from being denied state or local pension benefits for which they would otherwise be eligible.

The Attorney General's Office has advised the Division that all future purchase requests for active military service should be considered in light of the controlling federal standard under the Supremacy Clause. That is, federal law in this area preempts state law. Therefore, the division will no longer apply the prohibitions found in NJ statute against purchasing prior active military service to members eligible for a military retirement based on service in the reserves. However, if the person's eligibility for a military retirement is based on active military service rather than on reserve military service, the person will still be prohibited from purchasing credit for prior military service.

Members who are receiving, or will be eligible to receive a military retirement through their reserve military service are, as of July 2001, eligible to purchase credit for prior active military service in accordance with the provisions of the applicable New Jersey Administrative Code. These citations are N.J.A.C. 17:2-5.5(b) and (c) for members of the PERS, N.J.A.C. 17:3-5.5(b) and (c) for members of the TPAF and N.J.A.C. 17:4-5.3(b) and (c) for members of the PFRS.

This change in our practice to conform to overriding federal statutes does not alter the type of military service eligible for purchase. Only active military service may be purchased. Reserve military service time, such as reserve unit drill periods and reserve unit annual training, is still not eligible for purchase.

Members eligible for a purchase of active military service should submit an Application to Purchase Service Credit to the Division of Pensions and Benefits. If you have any questions about this subject, call the Division's Office of Client Services at (609) 292-7524.


August 2001

To: Certifying Officers, Public Employees' Retirement System, Teachers' Pension and Annuity Fund, Police and Firemen's Retirement System, State Police Retirement System, Judicial Retirement System
Alternate Benefit Program

From:  William H. Kale Assistant Director, Client Services

Subject: Proposed Amendments to the New Jersey Administrative Code

The recent enactment of Public Law 2001, Chapter 5, which revises the administrative rule-making process requires administrative agencies to further publicize any proposed rule making. Proposed new rules and amendments are currently published in The New Jersey Register, a bi-weekly publication of the Office of Administrative Law, and posted to www.state.nj.us/treasury/pensions, the Division of Pensions and Benefits web page. In the future, notices of proposed rulemaking will also be sent directly to those most affected by the proposals.

Therefore, the Division of Pensions and Benefits will be sending, from time to time, notice of proposed new rules and amendments to existing rules to our Certifying Officers. These proposed changes may impact the administration of the Public Employees' Retirement System (PERS), the Police and Firemen's Retirement System (PFRS), the Teachers' Pension and Annuity Fund (TPAF), the State Police Retirement System (SPRS), the Judicial Retirement System (JRS) and the Alternate Benefit Program (ABP).

There are a number of proposed amendments, identified below, to the New Jersey Administrative Code (N.J.A.C.) which appear in the August 6th publication of the New Jersey Register. If you wish to view the text of any of these proposals, go to our web page and click on proposed rule changes.

Service Purchase - PERS, TPAF, PFRS

Proposed amendments to N.J.A.C. 17:2-5.6, for members of the PERS, N.J.A.C. 17:3-5.6 for members of the TPAF and N.J.A.C. 17:4-5.4 for members of the PFRS eliminate the minimum payment requirements for the initial partial lump sum payment for purchases. Currently, if a member wishes to make an initial partial lump sum payment toward a purchase, that sum must be at least $250.00. Many years ago, when the $250.00 minimum was adopted, it represented a large percentage of the entire purchase cost. Now, in many cases, it may equal less than the monthly minimum payment amount of one half of a full regular pension deduction. After these proposed rules are adopted, the Division will accept any amount as an initial partial lump sum payment.

Creditable Compensation - TPAF

Proposed amendments to N.J.A.C. 17:3-4.1 for members of the TPAF would clarify the meaning of compensation of members, for purposes of calculating employee contributions to the TPAF and for determining benefits under the Fund. The basic design of the Fund is that members pay contributions to the TPAF based upon their salaries during their active service to pay for statutorily defined death and retirement benefits. Compensation for pension purposes does not include bonuses, overtime pay, adjustments in anticipation of retirement and other types of remuneration not included in base salary. The proposed amendment would clarify that compensation for teaching a sixth period would be creditable so long as it is reported in regular periodic installments in accordance with the payroll cycle of the employer. The proposed amendment would also include as creditable, compensation for those employees who are required, as part of their positions, to work additional days in the summer months.

Board Organization - PFRS

Proposed N.J.A.C. 17:4-1.3 would add to the officers of the PFRS Board of Trustees, the positions of first and second vice chairperson.

Effective Retirement Date - JRS

Proposed N.J.A.C. 17:10-5.11 for members of the Judicial Retirement System would allow judges who are required to retire on their 70th birthday, to begin to receive their retirement benefits as of that date and not beyond that date as currently stated.

If you have any comments on any of these proposed amendments, please submit them within 30 days of the receipt of this memorandum to Mindy Smith-Sopko, Administrative Practice Officer, at the Division's address.


August 24, 2001

TO: State Health Benefits Program Participating Local Employers
State Health Benefits Program Participating Local Education Employers

FROM:  Janice F. Nelson, Deputy Director

SUBJECT: SHBP Open Enrollment 2001

The State Health Benefits Program (SHBP) Open Enrollment period for local government and local Board of Education employees will begin on October 1, 2001, and end on October 31, 2001. Completed employer certified health applications must arrive at the Health Benefits Bureau no later than November 8, 2001. All changes to coverage made during this open enrollment will be effective on January 1, 2002.

This letter includes preliminary information about changes to this year's open enrollment procedures, contact information, and a schedule of educational opportunities for human resource representatives. Enclosed you will also find a preview issue of the Health Capsule newsletter and a milestone chart that lists key open enrollment events and dates.

The SHBP's rate information for the 2002 plan year will follow in a later mailing.

NEW COMMUNICATION POLICIES

During the open enrollment period and throughout the year the employer's human resource representative is instrumental in assisting and advising employees in their selection of health plans. It is with this in mind that the State has renewed its efforts to keep human resource representatives informed of State Health Benefits Program activities and changes and to assist the human resource representative in their day to day responsibilities. To accomplish this renewed goal, there will be two types of seminars available.

E-SEMINARS

NEW online e-seminars will be offered for the first time over the Internet. Through a combined Internet/telephone link-up, human resource representatives will be able to view a Web-based presentation with an interactive audio narration providing details on key open enrollment issues. After the presentation, there will be a live question and answer session. Attendance for each session is limited to 30 participants and attendees must pre-register. You will find a link to the online registration form on the SHBP homepage at: www.state.nj.us/treasury/pensions/shbp.htm

REGIONAL SEMINARS

Regional seminars for human resource representatives will also be offered this year. It is essential that you or someone from your office attend either a regional seminar or take part in an e-seminar. Pre-registration is required - please use the enclosed seminar registration form.

Representatives from all health plans will be invited to these seminars. The human resource representatives will be able to ask questions and obtain marketing information. Provider directories will be available in limited supply. The availability of the Unified Provider Directory (see below) and the access to the health plans by phone for provider information should be sufficient for employees to select a plan.

WEB-BASED PRESENTATIONS

Additional Web-based presentations on the SHBP Open Enrollment will be available for both employers and employees 24 hours a day, seven days a week. These will be available for viewing on or before October 1, 2001. You will find the link on the SHBP homepage at: www.state.nj.us/treasury/pensions/shbp.htm

UNIFIED PROVIDER DIRECTORY

Participating provider information for all SHBP plans is available in the Unified Provider Directory (UPD). The UPD is an online service that provides a comprehensive listing of health care providers and facilities that deliver their services through one or more of the SHBP's health care plans. The UPD is updated monthly, you can access the UPD through the SHBP home page at: www.state.nj.us/treasury/pensions/shbp.htm A flier is included to publicize the UPD and can be posted or used as a handout to your employees.

HEALTH CAPSULE NEWSLETTER

The Health Capsule is written to announce the SHBP Open Enrollment period to employees and to present important information and changes that may affect their benefit selection. A supply of Health Capsule newsletters will be shipped to participating local government and Board of Education employers by mid-September for distribution to your employees.

SHBP PLAN COMPARISON SUMMARY CHART

The SHBP Plan Comparison Summary chart has been revised and offers a plan by plan comparison of selected benefits for employees and retirees to make an informed health plan choice. Copies of the chart will be provided to you prior to the open enrollment period for distribution to your employees.

SUMMARY PROGRAM DESCRIPTION BOOKLET

The revised SHBP Summary Program Description Booklet will also be provided to you for distribution prior to the open enrollment period. The booklet provides an overview of the SHBP, a description of each plan offered, and comparisons of selected benefits. In addition it provides important new information that may have occurred since the last open enrollment, key phone numbers, and other pertinent health care information.

HEALTH FAIRS DISCONTINUED

The State Health Benefits Program (SHBP) has been disappointed by the employees' response to health fairs that have been held in past years in connection with the open enrollment period. It is felt that the material distributed to employers by the SHBP during the annual enrollment period gives the best information available for employees to compare the benefits of the various plans and make an informed choice. With dwindling employee interest in the health fairs, the SHBP can no longer left the time and expense of hundreds of health fairs, particularly at a time when no major changes to the health plans have occurred.

The SHBP, and it's participating health plans, will not provide employee health fairs for this year's open enrollment period.

ADDITIONAL PLAN INFORMATION

A listing of marketing contacts for the various health plans is provided. Use these contacts to obtain provider directories or other plan specific literature for your employees. (These telephone numbers are not for member services. Please do not give the numbers to your employees.)

If you have any questions about the open enrollment or the information in this letter, please contact our Office of Client Services at (609) 292-5353, and select option #2 on the phone. When prompted, leave a message and a representative will return your call. Questions regarding the informational seminars should be addressed to the contact person shown on the attached forms. Thank you for your cooperation.

Enclosures:

  1. 2001 SHBP Open Enrollment Milestone Chart
  2. SHBP Employer Informational Seminar Registration Form
  3. Directions to Regional Seminars
  4. Unified Provider Directory Flier
  5. Health Capsule newsletter
  6. Health Plan Marketing Contacts

July 27, 2001

TO: State Departmental Human Resource Directors
State Biweekly Human Resources Representatives
State Monthly Universities, Colleges and Authorities

FROM: Janice F. Nelson, Assistant Director for Health Benefits

SUBJECT: SHBP Open Enrollment 2001

The State Health Benefits Program (SHBP) Open Enrollment period for State employees paid through the State's Centralized Payroll Unit will begin on September 4, 2001 and end on October 5, 2001. Completed employer certified health benefit and/or dental applications must arrive at the Health Benefits Bureau no later than October 12, 2001. All changes to coverage made during this open enrollment will be effective on December 29, 2001.

The SHBP Open Enrollment for all other State employees will begin on October 1, 2001 and end on October 31, 2001. Completed employer certified health benefit and /or dental applications must arrive at the Health Benefits Bureau no later than November 8, 2001. All changes to coverage made will be effective on January 1, 2002.

In August, Human Resources Representatives will receive the SHBP's Open Enrollment Announcement letter along with a preview issue of the Health Capsule newsletter and an updated list of medical and dental plans and their costs.

NEW COMMUNICATION POLICIES

During the open enrollment period and throughout the year the employer's Human Resources Representative is instrumental in assisting and advising employees in their selection of health and dental plans. It is with this in mind that the State has renewed its efforts to keep Human Resources Representatives informed of State Health Benefits Program activities and changes and to assist the Health Benefits Representative in their day to day responsibilities. To accomplish this renewed goal, there will be two types of seminars available.

E-SEMINARS

NEW online e-seminars will be offered for the first time over the Internet. Through a combined Internet/telephone link-up, Human Resources Representatives will be able to view a Web-based presentation with an interactive audio narration providing details on key Open Enrollment issues. After the presentation, there will be a live question and answer session. Attendance for each session is limited to 30 participants and attendees must pre-register. You will find a link to the online registration form on the SHBP homepage at: www.state.nj.us/treasury/pensions/shbp.htm

REGIONAL SEMINARS

Regional seminars for Human Resources Representatives will also be offered this year. It is essential that you or someone from your office attend either a regional seminar or take part in an e-seminar.

Representatives from all health and dental plans will be invited to these seminars. The Human Resources Representatives will be able to ask questions and obtain marketing information. Provider directories will be available in limited supply. The availability of the Unified Provider Directory (see below) and the access to the health and dental plans by phone for provider information should be sufficient for employees to select a plan.

In addition to rate and benefit information on medical, dental, and prescription drug plans, you will be provided with Tax$ave Open Enrollment information, new dental program changes, and an introduction to the State's new Long-term Care Program.

WEB-BASED PRESENTATIONS

Additional Web-based presentations on the SHBP Open Enrollment will be available for both employers and employees 24 hours a day, seven days a week. These will be available for viewing after August 15, 2001. You will find the link on the SHBP homepage at: www.state.nj.us/treasury/pensions/shbp.htm

UNIFIED PROVIDER DIRECTORY

Participating provider information for all SHBP plans is available in the Unified Provider Directory (UPD). The UPD is an online service that provides a comprehensive listing of health care providers and facilities that deliver their services through one or more of the SHBP's health care plans. Updated monthly, you can access the UPD through the SHBP home page at: www.state.nj.us/treasury/pensions/shbp.htm

HEALTH CAPSULE NEWSLETTER

The Health Capsule is written to announce the SHBP Open Enrollment period to employees and to present important information and changes that may affect their benefit selection. On August 31, the Health Capsule newsletter and Open Enrollment fliers will be distributed with paychecks to all employees paid through the State's Centralized Payroll Unit. All other State monthly Human Resources Representatives will receive their Open Enrollment materials by mid-September for distribution to their employees.

SHBP PLAN COMPARISON SUMMARY CHART

The SHBP Plan Comparison Summary chart has been revised and offers a plan by plan comparison of selected benefits for employees and retirees to make an informed health plan choice. Copies of the chart will be provided to you prior to the open enrollment period for distribution to your employees.

SUMMARY PROGRAM DESCRIPTION BOOKLET

The revised SHBP Summary Program Description Booklet will also be provided to you for distribution prior to the open enrollment period. The booklet provides an overview of the SHBP, a description of each plan offered, and comparisons of selected benefits. In addition it provides important new information that may have occurred since the last open enrollment, key phone numbers, and other pertinent health care information.

HEALTH FAIRS DISCONTINUED

The State Health Benefits Program (SHBP) has been disappointed by the employees' response to health fairs that have been held in past years in connection with the open enrollment period. It is felt that the material distributed to employers by the SHBP during the annual enrollment period gives the best information available for employees to compare the benefits of the various plans and make an informed choice. With dwindling employee interest in the health fairs, the SHBP can no longer left the time and expense of hundreds of health fairs, particularly at a time when no major changes to the health plans have occurred.

The SHBP will not provide health fairs for this year's open enrollment period.

Enclosed you will find milestone charts (biweekly) (monthly) that list key Open Enrollment 2001 events and dates, and the projected delivery schedule for all Open Enrollment publications.

If you have any questions about the Open Enrollment or the information in this letter, please contact our Office of Client Services at (609) 292-5353, and select option #2 on the phone. When prompted, leave a message and a representative will return your call. Questions regarding the informational seminars should be addressed to the contact person shown on the attached forms. Thank you for your cooperation.

Enclosures:

  1. 2001 SHBP Open Enrollment Milestone Charts
  2. SHBP Employer Informational Seminar Registration Form
  3. Directions to Regional Seminars

July 2001

TO: Certifying Officers, Public Employees' Retirement System; Teachers' Pension and Annuity Fund; Police and Firemen's Retirement System

FROM: Thomas P. Bryan, Director

SUBJECT: Expansion of Veteran Definition

Two recently enacted laws have expanded the definition of veteran in the Teachers' Pension and Annuity Fund (TPAF), Public Employees' Retirement System (PERS), and Police and Firemen's Retirement System (PFRS).

Chapter 127, P.L. 2001 extends eligibility for veterans benefits to veterans of the Lebanon Crisis of 1958. To qualify under this law as a veteran, the member must have served in Lebanon or on board any ship actively engaged in patrolling the territorial waters of that nation, for a period, continuous or in the aggregate, of at least 14 days commencing between July 1, 1958 and on or before November 1, 1958 or the date of termination of that conflict as proclaimed by the President of the United States or Congress, whichever date of termination is later. Any person receiving an actual service-incurred injury or disability while serving in the Lebanon area shall be classed as a veteran whether or not that person has completed the 14 days' service required by the law.

The benefits entitled through Chapter 127 include civil service preference, property tax exemption, and pension benefits.

Chapter 128, P.L. 2001 extends eligibility for veterans benefits for veterans of peace-keeping operations in Somalia and the Republic of Bosnia and Herzegovina. To qualify under this law as a veteran, the member must have served in

  1. Operation "Restore Hope" in Somalia or on board any ship actively engaged in patrolling the territorial waters of that nation, for at least 14 days, continuously or in the aggregate, commencing on or after December 5, 1992, or the date of inception of that operation as proclaimed by the President of the United States or the Congress, whichever date is earlier, and terminating on March 31, 1994, or the date of termination as proclaimed by the President of the United States or the Congress, whichever date is later, or

  2. Operations "Joint Endeavor" and "Joint Guard" in the Republic of Bosnia and Herzegovina, in the airspace above the Republic of Bosnia and Herzegovina, or on board a United States naval vessel operating in the Adriatic Sea, for a period of at least 14 days, continuously or in the aggregate, commencing on or after November 20, 1995 or December 20, 1996, as the case may be, and terminating on December 20, 1996 or on such date as the United States Secretary of Defense may designate.

Any person receiving an actual service-incurred injury or disability while serving in the above peace-keeping operations will be classed as a veteran whether or not that person completed the 14 days service requirement.

Chapter 128 only addresses pension benefits since previous legislation (P.L. 1998, c.49) had conveyed civil service preference and the property tax exemption for veterans of these peace-keeping operations.

Questions about this legislation should be directed to the Department of Military and Veterans Affairs, the state's proponent agency for all veterans' issues. See their Internet Home Page at http://www.state.nj.us/military/veterans/status.html or write to them at P.O. Box 340, Trenton, NJ 08625-0340.


July 2001

TO: Certifying Officers, Public Employees' Retirement System, Teachers' Pension and Annuity Fund

FROM: Thomas P. Bryan, Director

SUBJECT: Change in Retirement Calculation Formula, Increase in Allowance for Retirees, and Change in TPAF Contribution Rate

A new law, Chapter 133, P.L. 2001, changes the formula for the calculation of retirement benefits for most types of retirement for the Public Employees' Retirement System (PERS) and the Teachers' Pension and Annuity Fund (TPAF). The law also provides for an equivalent increase in retirement benefits for most members already retired. It further decreases the contribution rate for TPAF members. These changes are explained in detail below.

Change in Retirement Calculation Formula

For those retiring October 1, 2001 and later under a Service Retirement, Early Retirement, or Deferred Retirement, the calculation formula will change as shown below.

Retirements Prior to 10/1/01

Years of Service X Final Average Salary = Maximum Annual Allowance
60        

Retirements 10/1/01 and beyond

Years of Service X Final Average Salary = Maximum Annual Allowance
55        

"Service" means years of service credit in the pension plan. "Final Average Salary" means the salary on which pension contributions were based in the three years immediately preceding your retirement or the three highest fiscal years of salary, whichever provides the higher benefit.

This change in formula will result in a 9.09% increase in retirement allowance for these types of retirement. This change in calculation is a permanent change to the calculation formula, not a limited-time change. There is no change in the Service Retirement age. Members must still be at least age 60 to qualify for a Service Retirement.

The law also changes the formula for calculating a Veteran Retirement for those military veteran members who have 35 or more years of service credit in the pension plan. The calculation formula will change as shown below:

Retirements Prior to 10/1/01

Years of Service X Final Year's Salary = Maximum Annual Allowance
60        

Retirements 10/1/01 and beyond

Years of Service X Final Year's Salary = Maximum Annual Allowance
55        

The law also changed the age that a military veteran with 35 or more years of service credit in the pension plan can qualify for this type of retirement. Previously they had to be at least age 60. Under this law, they qualify at age 55.

There is no change in calculation for Ordinary Disability Retirement, Accidental Disability Retirement, or Veteran Retirement with less than 35 years of service. These retirement types provide a benefit with a set percentage of salary (40%, 66 2/3% and 50%, respectively) that is higher than the formula based retirements.

Increase in Allowance for Retirees

Certain members of the PERS and TPAF who are already retired or who retire between now and October 1, 2001 will also benefit from this law. Those who retired on a Service Retirement, Early Retirement, Deferred Retirement, or those who retired on a Veteran Retirement with 35 years or more of service at age 60 will receive a 9.09% increase in their regular retirement allowance beginning with their November 1, 2001 pension check (which is payment for the month of October 2001.

This percentage increase is the equivalent of the change in retirement formula mentioned above. Since the Cost-of-Living Adjustment (COLA) is based on a percentage of the regular retirement allowance, those already collecting a COLA (retired for at least two years) will see their COLA increase as well.

Decrease in TPAF Members' Pension Contribution

The law also decreases the rate of pension contributions for TPAF members to 3 percent of salary beginning January 1, 2002. This brings the TPAF contribution rate in line with the PERS contribution rate, which was changed to 3 percent of salary in January 2000. This TPAF employee contribution rate will remain in effect through 2002 and will continue thereafter as long as the excess assets of the TPAF permit. This is not a permanent change in the normal contribution rate of 5 percent of salary. Therefore, the minimum repayment for pension loans and the minimum deduction for the purchase of service credit, which is based on the full 5 percent contribution rate, will not change.

Enclosed are revised copies of Fact Sheet #4, Applying for Retirement Adobe PDF (21K) and Fact Sheet #14, Deferred Retirement Adobe PDF (17K) that incorporate the new formula for calculating retirement benefits where appropriate.


July 2001

TO: Certifying Officers, Public Employees' Retirement System, Teachers' Pension and Annuity Fund

FROM: Thomas P. Bryan, Director

SUBJECT: Additional Retirement Payment Options - PERS & TPAF

A new law, Chapter 120, P.L. 2001, provides PERS and TPAF members with four additional retirement options to leave a benefit to a beneficiary. Under these new options, when a member dies after retirement the member's beneficiary would receive a lifetime monthly allowance equal to 100%, 75%, 50%, or 25% of the member's retirement allowance. Unlike existing options 2, 3 and 4, under the new options the member's retirement allowance increases to the Maximum Option if the member's beneficiary dies before the member. Chapter 120 became effective for members whose retirement became due and payable after July 1, 2001.

Those already collecting a retirement allowance cannot change their option selection. However, members who have filed an Application for Retirement Allowance and have not yet been paid their first pension check may select one of the new options. Those members with retirements pending have been sent a letter advising them of the new options along with a quotation of the amount payable under all options if they chose an option 2, 3, or 4 on their Application for Retirement Allowance. A form was provided with the letter to change options, if desired, within 30 days of the date of the letter. For those pending retirement who chose Maximum Allowance or Option 1, a letter was sent to advise them of the new options and to inquire as to whom they would consider for an option beneficiary. If they return the form enclosed with that letter showing the name and birth date of their beneficiary by August 1, 2001, they will be sent a quotation of the amounts payable under all options and a form to change options, if desired.

We have enclosed a copy of Fact Sheet #5, Pension Options, which gives more detail on the various options available. Members contemplating retirement within the next two years may complete a Request for Retirement Estimate to receive an estimate of their benefit under all of the options. Those members whose retirement date is more than two years from now may use our new Fact Sheet #54, Calculating Your Own Retirement Allowance, to estimate their own allowance. A copy of that fact sheet is enclosed as well.

The Application for Retirement Allowance has been changed to accommodate the additional option choices. We have enclosed a copy of this new application. To obtain additional copies of this application or any of our forms or fact sheets, call the Employer Forms Request Hotline at (609) 777-4357.

Enclosures - Fact Sheets #5, Pension Options, Adobe PDF (33K) Fact Sheet #54, Calculating Your Own Retirement Allowance, Adobe PDF (40K) and the PERS/TPAF Application for Retirement Allowance.


April 9, 2001

TO: Certifying Officers Police and Firemen's Retirement System

FROM: Thomas P. Bryan,  Director

SUBJECT: Revised PFRS Bills

On March 29, 2001, Acting Governor DiFrancesco signed into law, Chapter 44, P.L. 2001 (S1961(1R)) that reduces local Police and Firemen's Retirement System (PFRS) employer pension contributions by $150 million. In anticipation of this, on March 5th we sent you a revised employer contribution bill with a cover letter explaining that the Legislature was considering a funding measure that would reduce local employer contributions by $150 million. The revised bill reflected the amount your location must pay if the funding measure were enacted.

Since the new law has been enacted, if you haven't already done so, you should pay the amount reflected on the March 5th revised bill before the end of the 30 day grace period, May 1, 2001. If you paid the full amount of the original bill and we deposited your check, the Division will refund the overpayment. If you paid the full amount of the original bill and we did not deposit your check, the Division will return the original check to you. When you receive your original check, you should pay the revised bill amount.

If you have any questions about your bill, please call (609) 984-4518.


March 2001

To: All Pension Fund Certifying Officers

From: Thomas P. Bryan,  Director

Subject: Loan Compliance for IRS Requirements in 2002

New Internal Revenue Service regulations effective January 1, 2002 will result in changes to the Division of Pensions and Benefits' loan policies. Internal Revenue Section Code 72(p) requires that loan balances may not exceed $50,000 and must be repaid within five years. As a result, for any loan checks dated after January 1, 2002, loan balances cannot total more than $50,000 and will have to be repaid within five years. The regulations also require members to make timely payments toward outstanding loan balances. Failure to repay the loan as scheduled may result in the unpaid loan balance being declared a taxable distribution at the time the loan is determined to be in default.

Members, whose current loan balance is over $50,000 or whose loan repayment schedule exceeds five years, may still take a new loan for the remainder of 2001 without being affected by the new regulations. Only loan checks dated January 1, 2002 or after will be affected by this change in policy. However, please note that loan applications must be received at the Division by close of business December 21, 2001 to be included in the final loan disbursement for 2001.

The following policy changes will apply only to loan checks dated after January 1, 2002:

  • After January 1, 2002 if a member applies for a loan and that loan added to any existing loan balance totals $50,000 or more, a check will be sent for the difference under the $50,000 limit. The Division will notify the member that the requested loan amount would have caused the loan balance to exceed the $50,000 limit. If the member is not satisfied with the payment schedule or the check amount, the uncashed loan check can be returned.

  • Loan checks dated after January 1, 2002 will have a maximum repayment schedule of five years. Because the repayment schedule must be within a five-year period - upon taking a new loan, those members with large existing loan balances will either have an increase in the repayment schedule or may be required to take a smaller loan amount due to the requested payment exceeding 25 percent of the base salary per month. If the member is not satisfied with the payment schedule or the check amount, the uncashed loan check can be returned.

The new IRS regulations also stipulate that if regular payments are not made on pension loans, then the loan is to be considered in default and determined to be a taxable distribution to the member. Therefore, members who take a loan after January 1, 2002 and subsequently fail to remit loan payments may also be subject to IRS limitations as follows:

Non-vested members will be notified after 18 consecutive months of nonpayment that after 24 months the loan will be considered in default and determined to be a taxable distribution. If the member does not return to employment, the loan will be deemed a taxable distribution and a 1099-R will be generated at the end of the year.

However, if a non-vested member is on a leave of absence, the member will be given the option of:

  • a lump sum loan repayment;

  • repayment through personal billing; or

  • taking a taxable distribution. In this case, a 1099-R will be generated at the end of the year and interest on the outstanding loan balance will continue to accrue and will be collected when the loan is repaid.

Vested members will be notified after 18 consecutive months of nonpayment that after 24 months the loan will be considered in default and determined to be a taxable distribution.

A vested member will be given the option of:

  • a lump sum loan repayment;

  • repayment through personal billing; or

  • taking a taxable distribution. In this case, a 1099-R will be generated at the end of the year and interest on the outstanding loan balance will continue to accrue and will be collected when the loan is repaid.

Due to the complex nature of this issue, many of our services and publications must be revised to include this policy change. We are in the midst of revamping the Loan Application to include this new information. Later this year, the Automated Information System (609) 292-7524 will be updated specifically to help members affected by the loan policy change who need to access loan information. Also new publications are in development, among them is a fact sheet regarding loans.

If you have any questions, contact Client Services at (609) 292-7524 or E-mail us at pensions.nj@treas.state.nj.us


March 2001

TO: Certifying Officers,Public Employees' Retirement System, Teachers' Pension and Annuity Fund

FROM: Janice C. Curtin, Assistant Director, Operations

Subject: Transfer of Non-concurrent PERS & TPAF Service

Prior to Chapter 6, P.L. 2001, if an employee was a contributing member of the Public Employees' Retirement System (PERS) and the Teachers' Pension and Annuity Fund (TPAF) at the same time for even one month (a dual member), the two accounts could never be merged into one account. Chapter 6, enacted on January 16, 2001, permits such an interfund transfer in certain circumstances.

A member in the TPAF, who is, at the same time, a contributing member of the PERS, may transfer the PERS service and contributions to the TPAF account if, within two years of enrolling in TPAF, the member ceases to be an actively contributing member of the PERS. The law also permits the same type of transfer for TPAF members who enroll in the PERS and cease contributions to the TPAF within two years of enrolling in PERS. If there are more than two years of concurrent TPAF and PERS service, the interfund transfer cannot be permitted.

The non-concurrent service and all of the credited salary will be transferred. The concurrent service will not be credited because the member already has received credit for that service in the other retirement system. Contributions for the concurrent service will not be refunded because the salary for that service is being credited and a possible benefit could accrue from that credit.

The transfer must be made before the previous account expires. If the member is vested in that account, the account does not expire so the transfer can be made at any time prior to retirement. If the member is not vested, the transfer has to be made within two years of the last contribution to that account.

Continue to use the current Application for Interfund Transfer (ET-0343-1097) until a new form is available from the Division. Ignore the instructions under the title, as a new Enrollment Application is not required with a transfer under the provisions of Chapter 6, P.L. 2001.

Call the Office of Client Services at (609) 292-7524 if you have questions about this issue.


March 2001

To: Certifying Officers, All Pension Systems

From: William H. Kale, Assistant Director, Client Services

Subject: Pension Contributions for Employees Receiving Workers' Compensation

The attached Fact Sheet #45, Workers' Compensation, Adobe PDF (28K) reflects a change being made to the Administrative Code as a result of a New Jersey Supreme Court decision last year. The proposed rule, Workers' compensation: Employer's Obligation Regarding Employee Contributions (NJAC 17:1-4.39), will codify specific conditions regulating when continued pension contributions are required from employers for employees who are receiving periodic awards of permanent disability benefits without pay. This recent change alters the responsibility of employers in this area.

The change to the rule was necessary due to the NJ Supreme Court decision, James v. Board of Trustees of the Public Employees' Retirement System, 164 NJ 396, 753 A. 2d 1061 (2000). in James, the court eliminated the "in lieu of normal compensation" distinction and required that an employee who receives workers' compensation benefits must be retained on payroll and have pension contributions made by the employer. In doing this, the Court essentially eliminated the distinction between a temporary and permanent workers' compensation award. The Court recognized the employer's ability to file an involuntary disability retirement application for a totally and permanently disabled employee. The Court also recognized valid terminations from employment as a means of terminating the employer's requirement to pay pension contributions. The Administrative Code and the Fact Sheet list the circumstances under which an employer is obligated to make pension contributions for members receiving workers' compensation and when this obligation ceases.

If you have questions about this letter, please write to the address above, E-mail the Division at pensions.nj@treas.state.nj.us or call Client Services at (609) 292-7524.

attachment Adobe PDF (28K)


March 2001

TO: Certifying Officers, Public Employees' Retirement System, Teachers' Pension and Annuity Fund

FROM: Thomas P. Bryan, Director

SUBJECT: Veteran Status Procedure Change

Members of the Public Employees' Retirement System and the Teachers' Pension and Annuity Fund who are military veterans are entitled to special retirement benefits. Therefore, it is important that they notify the Division of Pensions and Benefits of this veteran status. Until now, we have asked employers to submit a copy of a military discharge to the Division of Pensions and Benefits along with the retirement system enrollment application for new employees. That procedure is changing.

Effective March 1, 2001, State law (Chapter 127, P.L. 2000) makes the New Jersey Department of Military and Veterans' Affairs (NJDMAVA) responsible for determining veteran status for pension purposes and for civil service preference. Therefore, you should no longer send a military discharge to the Division of Pensions and Benefits. A copy of the military discharge (DD214) should be sent, instead, to the following address:

NJ Department of Military & Veterans Affairs
ATTN: DVP-VBB
PO Box 340
Trenton, NJ 08625

Since people apply for veteran status for more than one reason, a note should be attached to the discharge giving the employee's address and indicating that the discharge is being sent to obtain veteran status in the retirement system. If you or the employee have questions about veteran status, you can call the NJDMAVA at 1-800-624-0508 or check their Web site at

www.state.nj.us/military/veterans/status.html


March 5, 2001

TO: Certifying Officers, Police and Firemen's Retirement System

FROM: Thomas P. Bryan, Director

SUBJECT: Revised PFRS Bill Due April 1, 2001

Enclosed is a revised invoice for your pension contribution requirements to the Police and Firemen's Retirement System (PFRS) due April 1, 2001. The revised invoice reflects the impact of Senate Bill Number 1961 that is currently pending before the Legislature. If enacted, this legislation will reduce your pension contribution requirements for 2001. The aggregate savings to local employers will be $150 million.

The enclosed revised invoice shows both your original pension contribution requirement and a Pension Cost Stabilization Act Credit for the amount of savings your location will realize from the legislation if it is enacted. A Chapter 8 Funding Credit will still appear on this invoice.

If the legislation is not enacted, you will be advised to pay the amount reflected on your original invoice, and have a reasonable amount of time to pay the contribution without interest. Since payment is not due until the statutory date of April 1, 2001, it is recommended you not make your payment until that date to be sure that you pay the appropriate amount. There is also a 30-day grace period before interest is charged for the late payment of pension contributions. If you have already paid your bill and the legislation is enacted reducing your pension contribution requirement, your overpayment will be refunded.

If there are any questions, please call (609) 984-4518.



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