EARLY RETIREMENT INCENTIVE (ERI)
FOR LOCAL EMPLOYEES

Governor McGreevey has signed four new laws (Chapter 127, 128, 129, and 130, P.L. 2003 — described below ) that allow local governmental employers to offer their retirement-eligible employees an incentive to retire. Click on the titles of each eligible employee group, in chart below, to view additional information on the eligibility requirements and incentives offered for each group.

New ERI Laws
(Click on titles for details)

Authorities, Boards, Commissions, and other Agencies NOT eligible for the Local ERI.

Commonly Asked ERI Questions and Answers

• For county, county college, or municipal employees who are PERS, TPAF or ABP members
• For PERS or TPAF members employed by school boards
• For local government police and fire employees
• For PERS members employed by local agencies or local authorities
• For Employers (applies to all four laws)

Guidance to Employers

The Early Retirement Incentive legislation is being enacted to provide employers with a tool to help reduce current operational budgets. Unfortunately, these short-term operational savings come with long-term costs in the form of increased pension payments. Therefore, an employer must make a careful analysis of savings and costs to determine if it should adopt an ERI resolution.

The savings from an ERI normally comes from salary, benefits costs, and employer FICA payments avoided when an employee retires. These savings are incurred only if the employee is not replaced after retirement. If the employee is replaced, then savings would occur only if the employee were replaced by someone at a lower salary. Any savings that occurs will end when the employee would have retired had there not been an ERI, within one to five years.

The costs from this ERI will come from several areas — additional pension costs, post-retirement medical costs and payments for unused sick and vacation days.

• Pension costs include the cost of the incentive itself (the extra three years or the $500 per month for two years) plus the additional costs incurred because the employee is retiring earlier than he or she otherwise would have had there not been an ERI. The amount of these costs is dependent upon the age and service of the employees at the ERI effective date selected by the employer. This is not absolutely predictable because employees not apparently eligible may be able to purchase service credit to qualify and some eligible employees may not wish or be able to retire. Additionally, if the employer extends critical employees under the ERI, their pension costs could probably increase because of the additional service earned at the present salary.
  
  
• Post-retirement medical costs (PRM) depend upon the Medicare status of the retiree, the level of coverage provided (e.g., single, family) and the rates of the specific plan selected. These costs are recurring - every year that the employee is retired - and the current trend is for them to increase every year. Note for school boards and county colleges: you will be responsible for paying the PRM costs (premium costs and Medicare Part B reimbursement) of your category 1 retirees for the first three years of their retirement after which time the State will begin paying those costs. You will be responsible for these costs for your category 2 employees for their entire retirement.
  
  
• Payment for unused sick and vacation time is a cost the employer must consider. The impact on the operational budget will depend upon the extent to which those costs have been prefunded.

The Division will provide a listing of eligible employees, by ERI category, as of the last possible effective date permitted by the law. You can use this list to do a preliminary analysis of potential costs and savings. If you decide that your location can seriously consider offering its employees the ERI, you can then provide the Division instructions on which specific dates you would like us to use to give you the best possible estimate of costs for the ERI.

ERI Related Forms

These downloadable forms are in PDF format and require Acrobat Reader which is available free from Adobe.

APPLICATIONS

PERS/TPAF Application for Retirement Allowance (size 113k)

PFRS Application for Retirement Allowance (size 21k)

Category 3 Rollover Election Form (size 82k) — Required from all applicants eligible for ERI Category 3.

FORMS FOR EMPLOYERS

PERS/TPAF Certification of Service and Final Salary (size 90k)

PFRS Certification of Service and Final Salary (size 13k)

Local ERI Sample Resolution Form (size 44k)