Pension Plan and Retirement Programs

Classified Employees

Retirement dates are always the first of a given month.

Retirement under Public Employees' Retirement System (PERS)
Service Retirement
Service retirement is available to employees aged 60 or older with no minimum number of years of service credit required. The annual annuity for employees meeting these criteria is calculated based on the following formula:
(Years of Service/55) X Final Average Salary

Final Average Salary is the average of the salaries for the last three years before retirement or the three highest fiscal years, whichever yields the higher benefit. Salary is the employee's base salary on which pension contributions are based.

Early Retirement
Early retirement is available before age 60 to employees having 25 or more years of service credit. A reduced allowance is payable if an employee retires under Early Retirement before age 55. The benefit formula is the same as the one used for Service Retirement. However, there is a permanent reduction of the annuity payable, by 0.25 per cent for each month under age 55.

Veteran Retirement
Employees having veteran status with the retirement system may retire at age 62 with 20 years of service, with an annual allowance equal to one-half the salary received during the last year of credited service or highest 12 consecutive months of employment in which contributions were made. The age 62 requirement also applies to qualified veterans whose service has not been continuous since January 1, 1955. It is the employee’s responsibility to notify the Division of Pensions and Benefits of the higher 12 months of salary at the time of retirement. Otherwise, the last 12 months will be used. Qualified veterans age 60 or older with 35 or more years of service may retire with an annual allowance based on the following formula:

(Years of Service/55) X Last Year's Salary

The highest 12 consecutive months to be used in the benefit calculation does not apply to veterans retiring at age 60 or older with 35 or more years of service. Eligibility requirements must be met before leaving payroll. Veteran benefits cannot be deferred.

A veteran may elect these special benefits or retire on the same basis as non-veterans. Please refer to the respective pension booklets for qualifications regarding veteran status and corresponding retirement benefits.

Deferred Retirement
Deferred retirement occurs when an employee leaves active employment without immediately receiving monthly retirement allowance checks. It is available to employees having terminated covered employment with 10 or more years of service credit. Benefits, calculated using the Service Retirement formula, are payable the first of the month following the employee’s 60th birthday. In most cases, there is no continuation of the group State Health Benefits Program (SHBP) coverage when a person defers retirement. However, if the person continues the group SHBP coverage under the provisions of COBRA law up until the official retirement date, that person may continue coverage into retirement.

Retirement under Police and Firemen's Retirement System (PFRS)
Service Retirement
Service retirement is available to all employees age 55 or older with no minimum number of years of service credit required. The annual allowance is equal to 2 per cent of the employee’s final average compensation for each year of service up to 30 years plus 1 per cent for each year of service over 30 or 1/60 of final average compensation multiplied by the number of years of creditable service, whichever is greater. Employees with 20-24 years of service at any age (if enrolled on 1/18/2000) are entitled to an annual allowance of 50 per cent of final compensation.

Special Retirement
Special retirement is available at any age to employees having 25 or more years of service credit. The annual allowance is equal to 65 per cent of final compensation plus 1 per cent of final compensation for each year of creditable service over 25 years, but not more than 30 years. Therefore the maximum allowance is 70 per cent of final compensation

Deferred Retirement
Deferred retirement is available when an employee leaves active employment without immediately receiving monthly retirement allowance checks. It is available to employees having terminated covered employment with 10 or more years of service credit. Benefits, calculated using the Service Retirement formula, are payable the first of the month following the employee's 55th birthday. In most cases, there is no continuation of the group State Health Benefits Program (SHBP) coverage when a person defers retirement. However, if the person continues the group SHBP coverage under the provisions of COBRA law up until the official retirement date, that person may continue coverage into retirement.

Mandatory Retirement
Effective July 1, 1997, retirement is mandatory on the first of the month following the employee attaining age 65. If a retirement application is not filed prior to the mandatory retirement date, he/she is automatically retired on that date. However, benefits are not payable until the application is filed.

Accidental Disability Retirement
Employees who are totally and permanently disabled as a direct result of a traumatic event arising out of the performance of their regular or assigned duties may file for an accidental disability retirement allowance. This provides a benefit equal to 2/3 of the employee’s salary at the time of the accident or at the time of retirement, whichever is higher.

Ordinary Disability Retirement
Employees with at least four years of service who are totally and permanently disabled, not as a direct result of a traumatic event arising out of the performance of their regular or assigned duties, may file for an ordinary disability retirement allowance. This provides a benefit equal to 40 per cent of the employee’s final salary.

 

Credit for prior service

An active employee may purchase credit for prior public service, including provisional service.

• Out-of-state: If an employee has worked for a public employer in another state, he/she may be eligible to purchase credit for up to 10 years of comparable public service. The employee must not be receiving, nor be eligible to receive, a pension based on this service from the other state.
• Former membership: If the employee is a former member of a New Jersey state-administered retirement system, he/she may purchase credit for this time.
• Temporary or provisional service: An employee may purchase all temporary or provisional services immediately preceding his/her enrollment date in the retirement system.
• Military service: An employee may purchase military service credit rendered prior to enrollment in the Public Employees Retirement System.
• Government service: Service rendered to the US Government may also be purchased.
• Forms for the purchase of prior service are available from the Benefits Office in the Division of Human Resources.

Pension Loans
To borrow from PERS or PFRS, an employee must:

• have at least three years of contributing membership credited to his/her account;
• repay such loans at 4 per cent interest;
• make no more than two loans in any calendar year;
• be actively employed when the application for a loan is filed.

An employee may borrow amounts from $50 up to one-half of posted contributions. Repayment of a loan is 5 per cent of base salary, and cannot exceed 25 per cent of an employee's gross salary. Employees who retire without repaying the outstanding value of their loan may continue their loan payments in retirement. Loan applications are available in the Benefits Office in the Division of Human Resources.

Withdrawing Contributions
If the employee ceases to be an active member for any cause other than death or retirement, he/she may withdraw all his/her contributions less any outstanding loan or other obligation that may have been charged to the account. Upon withdrawal, all rights and privileges of membership end. To withdraw, the employee must file a properly completed and notarized withdrawal application available in the Benefits Office in the Division of Human Resources.

Retirement Procedures
When an employee is contemplating retirement, he/she may obtain a pension estimate form from the Benefits Office in the Division of Human Resources. This form is completed and sent to the New Jersey Division of Pensions and Benefits. The Division of Pensions and Benefits estimates the monthly retirement benefit the employee would receive under each of the retirement options. These options are explained in the PERS brochure.

Once a retirement date is determined, the employee should complete a Retirement Application with the Benefits Office in the Division of Human Resources or the Division of Pensions and Benefits. The Division’s pension counselors are available Monday through Friday from 8:30 a.m. to 4:00 p.m. It is not necessary to make an appointment. The address is One State Street Square, 50 West State Street, 3rd Floor, Trenton, NJ 08607.

Once a retirement date is chosen, the employee should provide written notification to his/her supervisor and send a copy of the notice to the Benefits Office in the Division of Human Resources.

Health Coverage at Retirement
Any employee retired from a state-administered pension fund will be eligible to continue participation in the State Health Benefits Program, provided he/she was eligible for coverage immediately preceding the effective date of retirement. A Retired Status Application furnished by the Division of Pensions and Benefits must be completed in its entirety by the employee for continuation of health coverage during retirement. This coverage includes medical plans only. The dental, prescription, and vision care programs may be continued through COBRA. Retirees receive a prescription drug benefit through the medical plan.

State-Paid Health Benefits in Retirement
Previously, state law provided state-paid health benefits for state employees enrolled in the State Health Benefits Program (SHBP) who retired with 25 years of service in the retirement system. That law was changed by Chapter 8, P.L. 1996 to allow negotiation between the state and unions on payment of premiums for retirees. Those already retired are not affected by this change in law. The effect of Chapter 8 is outlined below.

For those with at least 25 years of service credit in the retirement system on June 30, 1997, the state will pay the cost of whatever State Health Benefit plan the employee selects for him/her and his/her covered dependents, whenever an employee retires, up to the cost of the Traditional Plan. Those electing a deferred retirement are not normally eligible for SHBP coverage in retirement. These benefits represent no change from what was provided to employees prior to the enactment of Chapter 8, P.L. 1996.

For those who attain 25 years of service credit in the retirement system on or after July 1, 1997, state payment of SHBP costs in retirement will be in accordance with the union contract that applies to the employee at the time he/she reaches 25 years of service credit in the retirement system, regardless of his/her date of retirement. If an employee is not in a title eligible for union representation, the State Health Benefits Commission will determine the state's payment of health benefits costs in retirement by applying the terms of one of the union contracts in effect at the time the employee reaches 25 years of service credit in the retirement system. Current contracts call for retirees to pay a portion of the cost for the Traditional Plan and HMOs, with no cost for NJ PLUS, but this could change in future union contracts.

Medicare Coverage at Age 65
Retired group members eligible for Medicare must enroll in Parts A and B of Medicare and attach a photocopy of their Medicare card to the application for SHBP coverage. Upon enrollment in Medicare, the SHBP becomes a secondary provider. If the retiree and his/her spouse are age 65 at retirement and have not enrolled in both parts of Medicare, they should contact Social Security to apply for full Medicare coverage at this time.

Life Insurance Coverage during Retirement
Public Employees Retirement System

Contributory coverage ceases at retirement.

Type of Retirement	Death before Age 60	Death at Age 60 or older
Disability	1/2 times salary	3/16 times salary
Early	3/16 times salary	3/16 times salary
Deferred	None	3/16 times salary
Service	N/A	3/16 times salary

The definition of salary in these charts is the total base salary upon which an employee’s pension contributions were based in the last year (10 or 12 months) of service.

Police and Firemen's Retirement System
If an employee dies after retirement, the employee’s named beneficiary (or estate where there is no named beneficiary) will receive an amount equal to one-half of the employee’s final salary compensation (the total base salary upon which the employee’s pension contributions were based during the year preceding retirement). However, if an employee retires on a Disability Retirement, the amount will be equal to 3_ times the employee’s final salary compensation until age 55. After age 55, the amount will be reduced to one-half of final compensation.

Upon the retiree's death, the spouse will be sent a letter offering continuation of the SHBP coverage which was in effect at the time of the retiree's death. If premiums were being deducted through monthly annuity payments and if the spouse will be receiving a monthly check large enough to cover the cost, the cost will be deducted monthly. If the retiree was paying SHBP directly, or if the spouse will not receive a pension check, or if the pension check is not large enough to cover the cost, the spouse will be billed quarterly for the premiums. If the retiree and his/her spouse were receiving employer-paid health coverage prior to the retiree's death, the spouse must now pay for the continued coverage.

Lump Sum Payment of Unused Sick Leave
Upon retirement from a state-administered pension fund, the University will make a lump sum payment to eligible retirees as supplemental compensation for earned and unused sick leave. All classified employees of the state and all unclassified administrators of the state are eligible for this payment. Faculty who have served in an administrative capacity are eligible for this payment for the time served in an administrative capacity only. Such employees, if eligible, shall be entitled to payment based on sick leave and salary earned while serving in the administrative title.

The amount to be paid to eligible employees for unused sick leave shall be computed at the rate of one-half the employee's daily rate of pay for each day of earned and unused accumulated sick leave up to a maximum of $15,000. The daily rate of pay is based on the employee’s annual base salary received during the last full year of active employment. Overtime pay or other supplemental pay and periods of leave of absence without pay shall not be included in the computation.

An individual eligible for lump sum unused sick leave payment may defer the payment for up to one year from the effective date of retirement.

Employment after Retirement
Persons who have retired from any state-administered retirement program should be aware that public employment after retirement might affect the pension benefit they receive. Please consult with the Benefits Office in the Division of Human Resources if consideration is being given to working after retirement.