Download - 1 Joint Committee on Public Employee Benefits Reform Division of Pensions & Benefits August 9, 2006
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Joint Committee on Public Joint Committee on Public Employee Benefits ReformEmployee Benefits Reform
Division of Pensions & BenefitsDivision of Pensions & Benefits
August 9, 2006August 9, 2006
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OverviewOverview
Second largest public employee benefitsSecond largest public employee benefits program in nation program in nation
Mission: to help to attract and retain skilled Mission: to help to attract and retain skilled employees in public service employees in public service
33
Plans AdministeredPlans Administered
• 9 Pension Systems9 Pension Systems
• 3 Supplemental Retirement Savings Plans3 Supplemental Retirement Savings Plans
• State Health Benefits ProgramState Health Benefits Program
• Voluntary Benefit Plans (Voluntary Benefit Plans (§§125, LTC, etc.)125, LTC, etc.)
44
Covered LivesCovered Lives
740,000+ active and retired participants740,000+ active and retired participants in Defined Benefit Plans in Defined Benefit Plans
16,000+ in Defined Contribution Plan16,000+ in Defined Contribution Plan
802,000+ covered lives in SHBP802,000+ covered lives in SHBP
122,000+ in Voluntary Benefits Plans122,000+ in Voluntary Benefits Plans
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Participating EmployersParticipating Employers
1,700 state and local employers1,700 state and local employers• State Departments, Authorities & CommissionsState Departments, Authorities & Commissions• Police & Fire DepartmentsPolice & Fire Departments• MunicipalitiesMunicipalities• CountiesCounties• Colleges & UniversitiesColleges & Universities• School BoardsSchool Boards• Local Authorities & CommissionsLocal Authorities & Commissions
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Defined Benefit PlansDefined Benefit Plans
1.1. Public Employees Retirement System – 322,985Public Employees Retirement System – 322,9852.2. Teachers’ Pension & Annuity Fund – 154,854Teachers’ Pension & Annuity Fund – 154,8543.3. Police and Firemen’s Retirement System – 45,263Police and Firemen’s Retirement System – 45,2634.4. State Police Retirement System – 2,950State Police Retirement System – 2,9505.5. Judicial Retirement System - 427Judicial Retirement System - 4276.6. Prison Officers Pension Fund (closed 1960)Prison Officers Pension Fund (closed 1960)7.7. Consolidated Pension Fund (closed 1955)Consolidated Pension Fund (closed 1955)8.8. Central Pension Fund (closed)Central Pension Fund (closed)
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Pension System EnrollmentPension System Enrollment
Condition of EmploymentCondition of Employment1.1. Earn Service CreditEarn Service Credit
vesting, benefits eligibility & calculationvesting, benefits eligibility & calculation
2.2. Salary HistorySalary History For benefits calculationFor benefits calculation
3.3. Group Life Insurance CoverageGroup Life Insurance Coverage
4.4. Employee ContributionsEmployee Contributions PERS & TPAF = 5%PERS & TPAF = 5% PFRS = 8.5%PFRS = 8.5% SPRS = 7.5%SPRS = 7.5%
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Retirement BenefitsRetirement Benefits
PERS & TPAFPERS & TPAFIRC 401(a) Defined Benefit PlanIRC 401(a) Defined Benefit Plan
PERS PERS
Active – 322,985Active – 322,985
Retired – 121,177Retired – 121,177
TPAFTPAF
Active – 154,854Active – 154,854
Retired – 65,401Retired – 65,401
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Retirement EligibilityRetirement Eligibility
Service – Age 60Service – Age 60
Early – 25 years serviceEarly – 25 years service (Reduced Under 55)(Reduced Under 55)
Deferred –10 years of serviceDeferred –10 years of service (Collect at age 60) (Collect at age 60)
VeteranVeteran
DisabilityDisability
1010
Basic Benefit Formula Basic Benefit Formula (PERS & TPAF)(PERS & TPAF)
Service Credit includes all serviceService Credit includes all service Worked & PurchasedWorked & Purchased
FAS = Final Average SalaryFAS = Final Average Salary Usually last 3 years Usually last 3 years
Years/Months
55X FAS =
GrossAnnualPension
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Special Benefit Formulas Special Benefit Formulas (PERS & TPAF)(PERS & TPAF)
Veterans RetirementsVeterans Retirements 54.5% or more X Highest Year Salary54.5% or more X Highest Year Salary
Disability RetirementsDisability Retirements Ordinary = 43.6% FASOrdinary = 43.6% FAS Accidental = 72.7% Salary at time of AccidentAccidental = 72.7% Salary at time of Accident
1212
Active Death Benefits
Return of Contributions (plus interest)
+
Group Life Insurance Benefit
1313
PERS Active GLI
Non-Contributory = 1.5 x last year salary Contributory = 1.5 x last year salary
Total Value = 3 x last year salary
Employee Premium = .50 of 1% of base salary
1414
TPAF Active GLI
Non-Contributory = 1.5 x last year salary Contributory = 2 x last year salary
Total Value = 3.5 x last year salary
Employee Premium = .40 of 1% of base salary
1515
Retired Group Life InsurancePERS and TPAF
If retired with 10+ years Service Credit
Paid up Death Benefit
PERS = 3/16th of last year salary
TPAF = 7/16th of last year salary
1616
Retirement BenefitsRetirement Benefits
PFRS & SPRSPFRS & SPRSIRC 401(a) Defined Benefit PlanIRC 401(a) Defined Benefit Plan
PFRSPFRS
Active – 45,263Active – 45,263
Retired – 29,192Retired – 29,192
SPRSSPRS
Active – 2,950Active – 2,950
Retired – 2,299Retired – 2,299
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Retirement EligibilityRetirement Eligibility
Service – 3 types, usually age 55Service – 3 types, usually age 55
Mandatory Mandatory PFRS at 65PFRS at 65 SPRS at 55SPRS at 55
Special – 25 years Service CreditSpecial – 25 years Service Credit
Deferred –10 years of serviceDeferred –10 years of service (Collect at age 55) (Collect at age 55)
DisabilityDisability
1818
Retirement Benefits
Service RetirementService Retirement Usually 50%+ x Final CompensationUsually 50%+ x Final Compensation
Special RetirementSpecial Retirement 65%+ x Final Compensation65%+ x Final Compensation
Deferred RetirementDeferred Retirement 2% Final Compensation x Years Service2% Final Compensation x Years Service
Disability RetirementsDisability Retirements 40% - 67% x Final Compensation 40% - 67% x Final Compensation
1919
Active Death BenefitsActive Death Benefits
If not in Line of Duty
Survivor Pension
(50% Final Comp)
++
Group Life Insurance Benefit
(3.5 x Final Comp)
Final Comp = High 12 months salary
2020
Active Death BenefitsActive Death Benefits
Accidental Death
Survivor Pension
(70% Final Comp)
++
Group Life Insurance Benefit
(3.5 x Final Comp)
2121
Retired Survivor BenefitsRetired Survivor Benefits
50% Pension to Surviving Spouse50% Pension to Surviving Spouse
++
50% Final Comp Life Insurance Benefit50% Final Comp Life Insurance Benefit
2222
Cost of Living AdjustmentsCost of Living Adjustments
Two years after retirementTwo years after retirement Yearly thereafterYearly thereafter ..60 x % change in CPI60 x % change in CPI
2323
Purchase of Service CreditPurchase of Service Credit
Why?Why?
To reach threshold for To reach threshold for
1.1. Retirement eligibilityRetirement eligibility
2.2. Retired health benefit eligibilityRetired health benefit eligibility
3.3. Increase overall pension benefitIncrease overall pension benefit
2424
What Can You Purchase?What Can You Purchase?
Temporary Service Temporary Service
Leave of Absence Leave of Absence
Former MembershipFormer Membership
Out-of-State ServiceOut-of-State Service
Uncredited ServiceUncredited Service
Local or Municipal ServiceLocal or Municipal Service
U.S. Government ServiceU.S. Government Service
U.S. Military ServiceU.S. Military Service
2525
Pension LoansPension Loans
3 years posted service3 years posted service 1/2 of posted contributions 1/2 of posted contributions 2 loans per calendar year2 loans per calendar year Repayment through Payroll DeductionsRepayment through Payroll Deductions Interest rate is 4% Interest rate is 4% Loans may be paid in full at any timeLoans may be paid in full at any time
2626
Terminating MembershipTerminating Membership
If Terminate NJ Public Employment andIf Terminate NJ Public Employment and
NotNot Eligible for Retirement Allowance: Eligible for Retirement Allowance:
1.1. Account Expires After 2 Years, andAccount Expires After 2 Years, and
2.2. Must Withdraw Contributions from SystemMust Withdraw Contributions from System
2727
Post-Retirement EmploymentPost-Retirement Employment
Cannot return to work under same NJ Cannot return to work under same NJ retirement system ( $ Thresholds)retirement system ( $ Thresholds)
Still allows work in:Still allows work in:1.1. Private IndustryPrivate Industry
2.2. Federal GovernmentFederal Government
3.3. Other State GovernmentOther State Government
4.4. Position covered by different NJ Position covered by different NJ Retirement system Retirement system
2828
Defined Contribution PlanDefined Contribution Plan
Alternate Benefits ProgramAlternate Benefits ProgramIRC 403(b) PlanIRC 403(b) Plan
State College & University FacultyState College & University Faculty
16,920 members16,920 members
2929
ABPABP
EligibilityEligibility
Full-time faculty, officers, some administratorsFull-time faculty, officers, some administrators
at NJ Community Colleges, State Colleges and at NJ Community Colleges, State Colleges and Universities & HESAAUniversities & HESAA
3030
ABPABP
Contribution Rate:Contribution Rate: Member = 5% (tax deferred)Member = 5% (tax deferred) Employer = 8%Employer = 8%
Vested after 1 yearVested after 1 year
Additional tax deferred contributions Additional tax deferred contributions permittedpermitted
3131
ABPABP
6 Approved Carriers for Investment6 Approved Carriers for Investment
Group Life Insurance – employer paidGroup Life Insurance – employer paid Benefit = 3.5 x last 12 months salaryBenefit = 3.5 x last 12 months salary Retired GLI benefit = 50% final salaryRetired GLI benefit = 50% final salary
Long Term Disability Benefit = 60%Long Term Disability Benefit = 60%
3232
ABPABP
Retirement Benefits Payable Retirement Benefits Payable
Earliest at 59-1/2Earliest at 59-1/2
Lump Sum Distribution and/orLump Sum Distribution and/or Life Annuity, orLife Annuity, or Fixed AnnuityFixed Annuity
3333
Voluntary Benefits PlansVoluntary Benefits Plans
Supplemental Retirement Savings AcctsSupplemental Retirement Savings Accts
Total 38,000+ membersTotal 38,000+ members
NJSEDCP – 457 plan for State employeesNJSEDCP – 457 plan for State employees SACT – Tax Sheltered – 403b for EducatorsSACT – Tax Sheltered – 403b for Educators SACT – Regular – all public employeesSACT – Regular – all public employees ACTS – 403b for College/University facultyACTS – 403b for College/University faculty
3434
Supplemental Retirement Supplemental Retirement Savings AccountsSavings Accounts
Deferred Compensation (Deferred Compensation (§ § 457) 457) – – State employees onlyState employees only
Supplemental Annuity Collective TrustSupplemental Annuity Collective Trust Regular (post-tax)Regular (post-tax) Tax Sheltered (Education only)Tax Sheltered (Education only)
Additional Contributions Tax ShelteredAdditional Contributions Tax Sheltered Higher EducationHigher Education
3535
NJ State Employees Deferred NJ State Employees Deferred Compensation Plan (Compensation Plan (§ 457)§ 457)
Open to all state employeesOpen to all state employees
Minimum: Minimum: 1% of base salary1% of base salary
Maximum: Maximum: $15,000 for 2006$15,000 for 2006
$20,000 if over 50$20,000 if over 50
3636
Supplemental Annuity Collective Supplemental Annuity Collective Trust - Trust - § 403(b)§ 403(b)
SACT RegularSACT Regular Open to all NJ public employeesOpen to all NJ public employees Post-tax contributionsPost-tax contributions 1 – 10% of Base Salary up to $15,0001 – 10% of Base Salary up to $15,000 Quarterly adjustments allowedQuarterly adjustments allowed Distribution at retirement, termination orDistribution at retirement, termination or
death death
3737
Supplemental Annuity Collective Supplemental Annuity Collective Trust - Trust - § 403(b)§ 403(b)
SACT Tax-ShelteredSACT Tax-Sheltered Open to all NJ public Open to all NJ public educationeducation employees employees Pre-tax contributionsPre-tax contributions 1 – 10% of Base Salary up to $15,0001 – 10% of Base Salary up to $15,000 Quarterly adjustments allowedQuarterly adjustments allowed Distribution at retirement, termination or Distribution at retirement, termination or
death death
3838
Additional Contributions Additional Contributions Tax-Sheltered - Tax-Sheltered - § 403(b)§ 403(b)
Open to NJ Higher Education employeesOpen to NJ Higher Education employees Pre-tax contributionsPre-tax contributions 1 – 10% of Base Salary up to $15,0001 – 10% of Base Salary up to $15,000 Quarterly adjustments allowedQuarterly adjustments allowed Investment Options: Same as ABPInvestment Options: Same as ABP Distribution at retirement, termination or deathDistribution at retirement, termination or death
3939
NJ State Health Benefits ProgramNJ State Health Benefits Program
802,000 Covered Lives 802,000 Covered Lives 7 Health Plans7 Health Plans 11 Dental Plans11 Dental Plans Rx PlanRx Plan
Active GroupActive Group Retired GroupRetired Group
$3 Billion Program$3 Billion Program
4040
NJ State Health Benefits ProgramNJ State Health Benefits Program
State and Local Employer GroupsState and Local Employer Groups1.1. State Bi-weekly and MonthlyState Bi-weekly and Monthly
2.2. Local EducationLocal Education
3.3. Local Non-EducationLocal Non-Education
Active & Retired Group CoverageActive & Retired Group Coverage 7 Health Plans7 Health Plans 11 Dental Plans11 Dental Plans 2 Rx Plans2 Rx Plans
4141
NJ State Health Benefits ProgramNJ State Health Benefits Program
State employee contractsState employee contracts Active GroupActive Group
113,000 Medical & Rx113,000 Medical & Rx 103,000 Dental103,000 Dental
Retired GroupRetired Group 34,000 Medical & Rx34,000 Medical & Rx 10,000 Dental (retiree pay)10,000 Dental (retiree pay)
4242
NJ SHBPNJ SHBP
Local Education & Municipal ContractsLocal Education & Municipal Contracts
981 Participating Employers981 Participating Employers Active GroupActive Group
119,200 Medical119,200 Medical 34,500 Rx34,500 Rx 1,100 Dental1,100 Dental
Retired GroupRetired Group 91,500 Medical91,500 Medical 28,900 Dental28,900 Dental
4343
NJ SHBPNJ SHBP
Medical Plan Offerings (Active & Retired)Medical Plan Offerings (Active & Retired)
Traditional (Indemnity) – 127,000 total contractsTraditional (Indemnity) – 127,000 total contracts NJ PLUS (POS) – 158,000 contractsNJ PLUS (POS) – 158,000 contracts HMOs – 75,000 ContractsHMOs – 75,000 Contracts
Aetna Health Aetna Health Cigna HealthCareCigna HealthCare OxfordOxford AmeriHealthAmeriHealth Health NetHealth Net
4444
NJ SHBPNJ SHBP
Rx CoverageRx Coverage
Active Member Co-PayActive Member Co-Pay 2 tier copay (generic, name brand)2 tier copay (generic, name brand) Retail Pharmacy – 30 day supplyRetail Pharmacy – 30 day supply Mail Order – 90 day supplyMail Order – 90 day supply
Retired-Member Co-Pay Retired-Member Co-Pay 3 tier copay (generic, preferred name brand, other)3 tier copay (generic, preferred name brand, other) Retail Pharmacy – 30 day supplyRetail Pharmacy – 30 day supply Mail Order – 90 day supplyMail Order – 90 day supply
4545
NJ SHBPNJ SHBP
Dental CoverageDental Coverage – –
Active EmployeeActive Employee
Dental Expense Plan Dental Expense Plan (Indemnity)(Indemnity)
10 Dental Plan 10 Dental Plan Organizations (DPO)Organizations (DPO)
BeneCareBeneCare Community Community DentalDental
CIGNA DentalCIGNA Dental Group Dental Group Dental HealthHealth
Flagship DentalFlagship Dental Dental Group of Dental Group of NJNJ
Horizon DentalHorizon Dental Aetna DMOAetna DMO
4646
NJ SHBPNJ SHBP
Retiree Dental Coverage – Retiree Dental Coverage –
Dental Expense Plan (Indemnity) onlyDental Expense Plan (Indemnity) only
Member Pays PremiumMember Pays Premium
4747
Voluntary Benefit PlansVoluntary Benefit Plans
Tax$ave – MedicalTax$ave – Medical 3 plans w/ 84,800 participants3 plans w/ 84,800 participants
Commuter Tax$aveCommuter Tax$ave 2 plans w/ 1,113 participants2 plans w/ 1,113 participants
Long-Term CareLong-Term Care Flexible savings plan with 3,000 Flexible savings plan with 3,000
participantsparticipants
4848
Tax$ave – MedicalTax$ave – Medical
§ 125 Plans for State Employees§ 125 Plans for State Employees
PPremium remium OOption ption PPlan lan - Pre-tax medical premium payments- Pre-tax medical premium payments
UUnreimbursed nreimbursed MMedical edical SSpending pending AAccountccount
- - Pre-tax Medical Expense Pre-tax Medical Expense ReimbursementReimbursement
DDependent ependent CCare are SSpending pending AAccountccount- Pre-tax dependent care reimbursement- Pre-tax dependent care reimbursement
4949
Commuter Tax$aveCommuter Tax$ave
§ 132 Plan for State Employees§ 132 Plan for State Employees
Pre-tax dollars for commuter expensesPre-tax dollars for commuter expenses
1.1. Mass Transit ExpensesMass Transit Expenses
2.2. Commuter Parking ExpensesCommuter Parking Expenses
5050
Long-Term Care InsuranceLong-Term Care Insurance
Open to State employees, dependents and Open to State employees, dependents and retireesretirees
Pre-tax dollars accrue to defray long-term Pre-tax dollars accrue to defray long-term care costscare costs
5151
State Benefit Program SpendingState Benefit Program Spending
PENSION
HEALTH BENEFITS-
ACTIVE
HEALTH BENEFITS-RETIRED $3.6 B
$2.43B
$6.3B
Debt Service
$-
$1
$2
$3
$4
$5
$6
$7
2002 2003 2004 2005 2006 2007 2008 2009 2010
FISCAL YEAR
$B
5252
Asset/Liability Comparison All Systems Asset/Liability Comparison All Systems Funded Ratio: 82.3%Funded Ratio: 82.3%
Assets
Liability
40
50
60
70
80
90
100
110
1995 1997 1999 2001 2003 2005
Fiscal Year
$ B
5353
Debt Service Debt Service On Pension BondsOn Pension Bonds
5454
QuestionsQuestions