PENSIONS AND BENEFITS WEBINAR — June 7, 2010
Chapters 1, 2, and 3, P.L. 2010
Archived recording of the Webinar
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Webinar slides (no audio) Adobe
The Webinar presents a brief overview of the new pension and health benefit laws.
For assistance with detailed issues, please refer to the actual legislation (linked below)
or e-mail the Pensions and Benefits Employer Education Unit or the Department of Community Affairs.
WEBINAR QUESTIONS AND ANSWERS
The questions and answers listed below were submitted during the webinar
and may not be
to all situations. If you have questions regarding this legislation,
please refer to the
full text links
or direct your specific questions to the
Division of Pensions and Benefits, Employer Education Unit.
Chapter 1 Questions | Chapter 2 Questions | Chapter 3 Questions | General Questions
CHAPTER 1 QUESTIONS
- Q: We have gone to a four day work week to cut salary expenses. The employees now work 31 hours per week. Will new employees be precluded from joining the pension system? Will they go into DCRP instead of PERS?
A: After May 21, 2010, new Local Government employees who work less than 32 hours per week cannot enroll in the PERS. If the annual salary is at least $5,000, these employees are eligible for enrollment in the DCRP.
- Q: We currently have employees who are in their first year of employment (not yet eligible for PERS because they are still in the one year temporary service period and have to be enrolled in the system after May 21st date). Do we enroll them in DCRP or PERS once they've been on board for one year.
A: As of the 13th month of continuous employment employees must work at least 32 hours per week to be eligible for PERS enrollment. Otherwise, if the annual salary is at least $5,000, these employees are eligible for enrollment in the DCRP.
- Q: Would seasonal recreation employees need to be enrolled in DCRP?
A: No. In addition to the DCRP minimum annual salary of $5,000, an employee must also be otherwise eligible for PERS enrollment except for the minimum number of hours. Under State statute, seasonal employees are ineligible for PERS enrollment. Therefore, they are also ineligible for the DCRP.
- Q: What do we do about an elected official who we enrolled in DCRP but is enrolled in PFRS in another town?
A: An elected official can participate in the DCRP (provided that the annual salary is at least $5,000) and also be an actively employed member of the PFRS. The individual would be a Dual Member of both the DCRP and PFRS.
- Q: I believe statement was made that DCRP contributions must be made every pay. What if employee is on unpaid leave? Can contributions double up upon return?
A: If an employee is on an approved leave of absence without pay, DCRP contributions are not required and cannot be submitted.
- Q: I believe a statement was made that DCRP cannot be transferred. If you have a DCRP employee who becomes full-time, what happens to the DCRP contributions?
A: If an employee enrolled in the DCRP becomes full-time and eligible for enrollment in Tier 4 of the PERS, contributions to the DCRP stop and the employee is to be enrolled in the PERS. Prior contributions may be left invested in the DCRP; taken as a systematic withdrawal; taken as a full or partial lump-sum distribution; transferred to an eligible retirement plan or IRA; or used to purchase an annuity.
Note: All distribution options are subject to federal and state tax rules that apply to minimum or early distributions. These distributions will also cause the individual to be considered “retired” making the individual ineligible for future participation in the DCRP, Alternate Benefit Program (ABP), or enrollment into a State-administered Retirement System (PERS, TPAF, PFRS, etc.).
- Q: Is a retiree from the Jersey City Employees Retirement System still eligible for DCRP?
A: No. A retiree of another State or locally-administered pension fund or retirement system, is not permitted to participate in the DCRP with respect to any public employment, office, or position.
- Q: When will the Tier 4 option be on the DCRP enrollment form? I have a new employee that needs to be enrolled.
A: The online applications in EPIC for DCRP Enrollment have been reprogrammed to accommodate PERS Tier 4 enrollment and the minimum DCRP salary of $5,000.
- Q: How does an employer budget for the 3% employer contribution to the DCRP
A: It’s a budget line item, handled similarly to a PERS or PFRS line item, except that it’s an estimate based on history.
- Q: How do you charge the employer share for DCRP if you do not have a budget for it and have a new employee in DCRP?
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A: If it’s post budget adoption, it can be passed as an emergency resolution.
CHAPTER 2 QUESTIONS
- Q: Local Finance Notice 2010-12, Section E, refers to appointed officers elected or appointed on or after May 21, must work minimum of 35 hours per week to qualify for employers to provide health benefits. As I interpret it, anyone appointed prior to May 21, 2010 this would not apply? Specifically, for CFO, CTC;s, and Municipal Clerk's who work 32.50 hours.
A: Correct. The hours limit only affects new hires, electeds, or appointees.
- Q: We appointed a new CFO in 2009 with a one year contract. That contract expired on April 1, 2010. How does the 35 hour work week effect a new contract?
A: It doesn't. The date is about the original appointment to the office. So your CFO is fine.
- Q: Are re-elected officials considered newly elected officials for purposes of the 35 hours or are they considered continuing and not subject to the 35 hour rule?
A: Local Finance Notice 2010-12, Section E, covers this question. As long as the re-elected official did not have a break in service, and are elected to the same position, they are considered to be continuously employed.
- Q: Can "local" employers require their employees work more than 25 hours per week to be eligible for SHBP? Can we mirror the State's requirement of 35 hrs per week?
Chapter 2, P.L. 2010, Section 9, defines employee and further allows the governing body the authority to determine, by resolution, the average number of hours per week to be considered full-time. Appointees prior to May 21, 2010, with continuous service, must be working not less than 20 hours per week. Those appointed after May 21, 2010 must now work a minimum of 25 hours per week, but the governing body can require more weekly hours.
- Q: If someone's salary is in excess of the $106,800 but waives DCRP for the excess, what is the 1.5% based upon?
A: The 1.5% is based on full salary – pensionable salary up to the $106,800 limit plus any additional salary that would be subject to DCRP whether or not the member waived DCRP participation.
- Q: Does an elected official or an employee who is already retired from the pension system need to contribute the 1.5% for health benefits?
A: Local Finance Notice 2010-12, Section B, Question 10, clarifies this point. Current retirees will not be required to make a minimum contribution for health coverage if they are currently receiving this coverage; however, previously established local policies requiring post-retirement payments are not affected.
- Q: If the municipality belongs to the State Health Benefits Program but has a non-SHBP dental, do the employees have to pay 1.5% of the non-SHBP dental in addition to the 1.5% towards their SHBP benefits?
A: No, the 1.5% contribution would apply to both the SHBP coverage and the non-SHBP dental coverage.
- Q: Clarification is needed on employee copayments. Through contract negotiations, our employees get the NJ DIRECT15 at no cost. If they elect the NJ DIRECT10, they have to pay the difference in the monthly premium. Upon expiration of their collective bargaining unit agreement, when they start paying the 1.5%, do they continue to pay the difference if they elect NJ DIRECT10? Our employees are already planning to switch from NJ DIRECT15 to NJ DIRECT10 if they don't have to.
Here's the wording from the contract...
Section 1. The Employer agrees to maintain health insurance coverage through the New Jersey State Health Benefits Plan for all employees and their dependents as defined under the respective policies of insurance as those policies may be amended or modified. Effective upon contract signing and completion of an open enrollment period, the employer shall provide New Jersey Direct 15 and the available HMOs with no premium contribution by employees, but those employees electing coverage under the Direct 10 Plan shall pay the difference in cost between the Direct 10 and Direct 15 to the Town by way of payroll deduction.
A: At the conclusion of the current contract period the employees would be required to pay 1.5% of base salary towards their health coverage, whichever plan that might be. Whether or not to maintain the premium differential between plans is up to the employer.
- Q: In our Township, we allow to waive medical and prescription drug coverage only. Employees do not waive dental coverage when waiving medical coverage. Does this mean these individuals have to pay the 1.5%, even though they did not choose to keep the dental coverage?
A: For non-SHBP employers, the full range of health benefits is covered-major medical, prescription, dental, vision. The 1.5% is deducted regardless of the employee’s specific coverage, but should not exceed the cost of the selected coverage.
- Q: We are involved with a Health Insurance Fund. We have employees that pay $0 for Medical, but make a contribution toward their dental plan. Does this Dental Contribution count toward their 1.5% minimum contribution.
A: For non-SHBP employers, the full range of health benefits is covered, including dental. Having dental and medical coverage does trigger the 1.5% contribution; however, the 1.5% contribution should not exceed the cost of selected coverage.
- Q: For non-union employees such as managment, if they agree to a contract for a set fee for Health are they still suppose to pay up to the 1.5% anyway?
A: If there was no contract in effect as of May 21, 2010, they must start contributing the 1.5%. Any agreement with the employer can include an additional contribution, but the 1.5% is now a minimum.
- Q: I do understand that the 1.5% is put into the Payroll Agency Account because it is a deduction from the employees, but where does the money get sent from the Agency Account, Can the Municipality do it as an offset to its budget appropriation.
A: By budgeting the net health insurance appropriation, the employee contribution portion would be deposited in and then the bill paid directly from the payroll trust account. Like other payroll agencies, it would be combined with a budget appropriation payment and the total amount sent to the recipient vendor for payment purposes. Budget offsets are not allowed.
- Q: We have employees in the FMBA (non-uniformed division) who specifically contribute 1.5% toward their retirement health benefits (a benefit added to their contract 3 years ago) as opposed to their current health benefit. We have been advised to charge them an additional 1.5% since they are not contributing toward their "current" health benefits. Just asking again to reconfirm the Division's opinion.
A: Yes. The advice has not changed!
- Q: Our municipality already put the 1.5% of retirement to be paid for SHBP if anyone RETIRES after January 1, 2011. Was this a little premature? How can the town pull that off? Is the 1.5% contribution upon retirement also "pre-tax"?
A: Chapter 2 provides that employees who become members of a State or locally administered retirement system on or after May 21, 2010 will be required to pay 1.5% of their retirement allowance toward the cost of their health benefits coverage. Section 125 Plans are for active employees only, not retirees. You must consult with a tax specialist to discuss whether or on what basis retiree payments can be “pre-tax.”
- Q: What mechanism will be set up to return the 1.5% pension deduction to the local authority who has paid for the health benefits?
A: There is nothing to return, because the 1.5% is deducted by the employer from employee payroll. Those funds are then to be used by the employer to help pay any costs for employee health benefits coverage - either when billed by the SHBP or by a non-SHBP plan - as appropriate.
- Q: For 2011 budgets, is the 1.5% deduction to be considered an offset (rider) to health benefits costs, thereby reducing the budget appropriation?
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For 2011, the local unit should appropriate a net amount (full payment less payroll-based contribution) in their budget, and the vendor payment made from the combined budget-based payment and the payroll agency account. (See also Question 22)
- Q: For a non-SHBP plan, is an employee with a Waiver [required] to pay the 1.5%?
A: If the employee has waived his/her health benefits coverage there is no need for payment of the 1.5%. The 1.5% payment is for the cost of health benefits coverage received by an employee and provided by the employer. See Local Finance Notice 2010-12, FAQ #17.
- Q: Was it said that employers do not have the right to ask the employees who receive waivers if their other coverage is part of the SHBP?
A: No. Non-SHBP employers do not have the authority to ask their employees if the spouse of an employee has SHBP coverage. SHBP coverage issues will be addressed by the Division of Pensions and Benefits by providing information to employers and employees over the next few months about dual coverage.
- Q: Please clarify... If an employee's spouse is a teacher, waiver from the local government organization is not allowed?
A: It depends on the type of health benefits coverage each has. If the local government employee has SHBP and the teacher does not, the local government employee can waive coverage. However, if the waiver will now be filed for the first time, it is subject to the reduced amounts (the lesser of $5,000 or 25% of the costs saved). If each has SHBP and includes the other as covered, they cannot each have dual coverage and one must either drop coverage (no waiver possible) or they each choose a coverage category that does not include their spouse (and each pays 1.5% of salary for their coverage).
- Q: Do individuals receiving waivers because of a spouse's enrollment in the SHBP forfeit reimbursement? Or is it up to the Municipality if they are going to allow them to collect this benefit?
A: The employee would no longer qualify for the waiver since multiple coverage under SHBP is prohibited. The municipality has no discretion under Chapter 2 to approve a waiver in this circumstance. See Local Finance Notice 2010-12, Sections C and D.
- Q: If we have two employees who are married. One is eligible for health care and no waiver offered to the other. Does the employee who has no option of waiver and on spouse's insurance contribute the 1.5%?
A: An employee who does not have coverage is not required to pay the 1.5% contribution.
- Q: What is the full statute reference regarding waivers being non-negotiable.
A: The waiver authorization language is N.J.S.A. 40A:10-17.1. The last words in the section read "...shall not be subject to the collective bargaining process".
- Q: One employee (wife) gets a waiver and the other (husband) has full coverage for the family. Should the wife continue to get a waiver?
A: The waiver continues to be paid until the employee changes the coverage or employment.
- Q: Can you please confirm that if two employees (married) are enrolled in the SHBP, and one employee opts-out of that coverage; that employee is not entitled to an opt-out payment?
A: The SHBP plan does not allow multiple coverage and the employee that opts-out is not entitled to an opt-out (waiver) payment.
- Q: When will we be receiving a list of employees who have dual SHBP coverage?
We received nothing from the SHBP to show anyone who may have "double coverage". Is this going to happen? And if so, when?
A: The Division of Pensions and Benefits is in the process of preparing reports that list SHBP and SEHBP members with multiple coverage. These will be mailed to SHBP/SEHBP participating employers within the next few weeks. The mailing will also include information and applications employers should provide to the employees indicated in the report, so they may make any necessary changes to their SHBP/SEHBP coverage.
- Q: If you do have a husband and wife working and one chooses [Member & Spouse] coverage, do both employees have to pay the 1.5% or just the employee who holds the coverage?
A: Only the spouse that chooses coverage would be required to pay the 1.5%.
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CHAPTER 3 QUESTIONS
- Q: Is there an applicable maximum amount for Unused Sick Time for PFRS Tier 2?
A: Chapter 3, P.L 2010 (which created PFRS Tier 2 membership) includes provisions that affect all local unit employees hired after May 21, 2010 (effective date of Chapter 3). Sections 1 through 5 of the law are the provisions concerning limits on sick leave and vacation accumulation of all employees, without regard to pension system.
- Q: Can this Power Point presentation be e-mailed to participants? Can I get a copy of the presentation?
A: Please see the links at the top of this page.
- Q: What is your contact information?
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A: See the e-mail links below.
You can e-mail
the Division of Pensions and Benefits at: firstname.lastname@example.org
with "Employer Education Unit" as the subject line;
or e-mail the Division of Local Government Services at: email@example.com