Unclassified Employees - Alternate Benefit Program
Full-time faculty, officers, and certain professional administrative staff required to possess a college degree or its equivalent are permitted to participate in ABP. Full-time has been defined to include anyone receiving 50 per cent or more of base salary and may include anyone on sabbatical or paid leave of absence. Individuals not eligible for membership include part-time or adjunct faculty, temporary employees, faculty members temporarily in the US under an F or J visa, employees in a career service title as defined by the NJ State Department of Personnel, employees in clerical and other non-professional positions, and any employee receiving a retirement benefit from any NJ state retirement system including ABP. Employees receiving a pension from an out-of-state retirement system are required to enroll in ABP if otherwise eligible.
Employees annually contribute 5 per cent of base or contractual salary matched by an 8 per cent employer contribution to a tax-deferred investment account.
Six investment carriers are authorized to provide investment options and services in the Alternate Benefit Program. Whether an employee is a new participant or has been enrolled in the ABP for many years, the employee may direct ABP contributions to any or all of the investment vendors. Employees may also transfer existing accumulations from one vendor to another. ABP features include loans and, at retirement or separation from service, cash distributions and annuity options.
ABP Long-Term Disability
Employees enrolled in the Alternate Benefits Program (ABP) for at least one year, may apply for LTD against lost or loss of income in instances where they have been determined to be totally disabled. There is a six-month waiting period from the time the participant becomes disabled. The monthly benefit may be paid by the carrier up to age 70 as long as the participant remains disabled or up to the time the participant elects to retire and receives a retirement annuity or cash distribution. Please refer to the Alternate Benefits Program Retirement Section for the benefits offered while on Long Term Disability. Under LTD, there is no stipulation that earned sick leave must be applied in advance of receiving the benefit.
Six months before their intended retirement date, employees should contact their authorized investment carrier(s) for information regarding benefits and options.
The employee’s supervisor should be given written notification of his/her intent to retire once the retirement date is selected. A copy of the notice should be submitted to the Benefits Office in the Division of Human Resources.
An employee may elect to receive all or a portion of his/her account in a lump-sum distribution, or as a fixed term or life annuity. The types of payout plans vary from carrier to carrier. All tax deferred returns of contributions and earnings are considered taxable in the year they are received.
There is no minimum retirement age under ABP. An employee may begin collecting an annuity or take a lump-sum distribution, full or partial, at any time after termination of employment. Lump-sum cash distributions to employees under the age of 55 are limited to the employee’s contributions and earnings. The remaining employer contributions and earnings are only available after age 55. Should any amount be withdrawn from an investment carrier upon termination, the employee will automatically be considered retired. Therefore, should he/she return to public employment in New Jersey, he/she could not participate in any state-administered retirement system.
Life Insurance Coverage during Retirement
A life insurance benefit is available in retirement to employees age 60 or older who have completed 10 years of participation in ABP at an eligible New Jersey institution of higher education and were active employees in the 12 months immediately preceding the initial receipt of a retirement annuity payment. This life insurance benefit is equal to one-half of the annual base salary earned the year prior to retirement. If an employee does not qualify for this life insurance benefit, his/her insurance coverage ceases 31 days after termination of employment. During the 31-day period following termination of employment, the employee may convert existing group life insurance coverage (less any amount of coverage carried over into retirement) into an individual whole life policy, without medical examination. To do so, employees should contact the nearest Prudential agency and provide policy number #14800.
Health Coverage at Retirement
Employees who are covered by the State Health Benefits Program (SHBP) as active employees shall be offered retiree health coverage when they retire provided they take at least a minimal distribution from an investment carrier within 60 days of retirement.
The employer will continue to cover the employee in the active employee group for one month beyond the retirement date. Continuation beyond the first month requires the completion of an enrollment form.
Approximately two weeks before an employee’s retirement date, the Division of Pension and Benefits will send an application for enrollment in the retired group of the State Health Benefits Program along with a chart showing the cost for each type of coverage. To enroll, the employee must complete the Retired Status Application and return it to the Division of Pension and Benefits. If the employee is not eligible for full employer-paid coverage, he/she will be asked to send a check with the completed health benefits application to pay for the first three months of retired group coverage. Some investment carriers will make the necessary premium deductions from the employee’s monthly annuity payments and remit payment directly to the Division of Pensions and Benefits for them. Check with the investment carrier to see if they offer this service.
If the employee had dental, prescription, or vision care coverage through his/her employer, federal COBRA guidelines require the employer to offer continued coverage under those plans for up to 18 months after retirement at the retiree’s expense. To apply, the retiree must contact his/her employer for a COBRA application upon termination of employment.
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 for the cost of whatever State Health Benefits plan the retiree chooses for him/herself and his/her covered dependents whenever the employee retires up to the cost of the Traditional Plan. Those electing 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 an employee at the time he/she reached 25 years of service credit in the retirement system, regardless of the date of retirement. If the 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 reached 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 only with no cost for NJ PLUS (similar to what is now being done for active employees), 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.
Upon the retiree’s death, the spouse will be sent a letter offering continuation of the SHBP coverage that 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.
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.