M E M State of New Jersey B Police E and R Firemen’s Retirement...

MEMBER

HANDBOOK

State of New Jersey

Policeand

Firemen’sRetirement

System

Department of the TreasuryDivision of Pensions and Benefits

September 2011

Police and Firemen’s Retirement System Handbook

September 2011 i

FOREWORD

The New Jersey Police and Firemen’s Retirement System (PFRS) Member Handbook provides a sum-mary description of the benefits of the plan and outlines the rules and regulations governing the plan.The PFRS Member Handbook should provide you with all the information you need about your PFRSbenefits. It is as accurate as we could make it, however, if there is a conflict with statutes governingthe plan or regulations implementing the statutes, the statutes and regulations will take precedence.Complete terms governing any employee benefit program are set forth in the New Jersey StatutesAnnotated. Regulations, new or amended, are published in the New Jersey Register by the State Officeof Administrative Law supplementing the New Jersey Administrative Code. This handbook, containingcurrent updates, is available for viewing over the Internet at:

www.state.nj.us/treasury/pensions/epbam/exhibits/handbook/pfrsbook.pdf

If you are unsure of or have questions about any aspect of your PFRS benefits, you should ask youremployer representative or a counselor at the Division of Pensions and Benefits about them.

Since this is your handbook, we would appreciate any comments or suggestions for improvement thatyou might have. Please send them to the address listed below. An evaluation form is available for youruse on page 41.

Division of Pensions and BenefitsATTN: Publications Unit

P.O. Box 295Trenton, NJ 08625-0295


September 2011ii

FOREWORD ........................................................ i

CONTACTING THE DIVISION OF PENSIONS AND BENEFITS ............................ iv

DIRECTIONS TO THE DIVISION OF PENSIONS AND BENEFITS ............................ v

PLAN INFORMATION .......................................... vi

THE RETIREMENT SYSTEM ................................ 1

MEMBERSHIP .................................................... 1PFRS Membership Tiers ................................ 1Eligibility Criteria ............................................ 1Eligible Job Titles ............................................ 2Training Requirements.................................... 2Medical Requirements .................................... 2Age Requirements .......................................... 2Volunteer Firefighters...................................... 3Candidates Who Exceed the Age Limit .......... 3Part-time Employees ...................................... 3

ENROLLMENT .................................................... 4Enrollment/Certification of Payroll Deductions .......................................... 4Proof of Age .................................................... 4Designating a Beneficiary .............................. 4Public Information and Restrictions ................ 5Member Contribution Rate.............................. 5

DUAL MEMBERSHIP .......................................... 6

TRANSFERS ........................................................ 6Intrafund Transfer............................................ 6Interfund Transfer............................................ 6

SERVICE CREDIT ................................................ 7

VESTING ............................................................ 7

CREDIT FOR MILITARY SERVICE AFTER ENROLLMENT .......................................... 7

PURCHASING SERVICE CREDIT ........................ 8

TYPES OF SERVICE ELIGIBLE FOR PURCHASE ................................ 8

Temporary Service .......................................... 8Leave of Absence Without Pay ...................... 8Former Membership Service .......................... 8Out-of-State Service........................................ 8U.S. Government Service .............................. 8

Military Service before Enrollment .................. 9Military Service after Enrollment .................... 9Uncredited Service.......................................... 9Employment with Other Agencies .................. 9Layoff .............................................................. 9Local Retirement System Service .................. 9

IMPORTANT PURCHASE NOTES ........................ 9

COST AND PROCEDURES FOR PURCHASING SERVICE CREDIT ........................ 10

Purchase Rate Chart ...................................... 10Estimating the Cost of a Purchase ................ 10Partial Purchases............................................ 11Applying to Purchase Service Credit .............. 11Rollover for Purchase Payment ...................... 12

LOANS ................................................................ 12Applying for a Loan ........................................ 13Early Loan Repayment .................................. 14Loans at Retirement, Death, orTermination of Employment ............................ 14Internal Revenue Service Requirements ........ 14

POLICE AND FIREMEN’SMORTGAGE PROGRAM ...................................... 15

SUPPLEMENTING YOUR PENSION...................... 15New Jersey State EmployeesDeferred Compensation Plan ........................ 15Local Deferred Compensation Plans .............. 15Supplemental Annuity Collective Trust (SACT) .................................. 15Defined Contribution Retirement Program (DCRP).......................... 16

RETIREMENT ...................................................... 16Mandatory Retirement .................................... 16Types of Retirement........................................ 16Service Retirement ........................................ 16Special Retirement.......................................... 17Deferred Retirement ...................................... 17Ordinary Disability Retirement ........................ 18Involuntary Ordinary Disability Retirement .... 19Special Disability Retirement .......................... 19Accidental Disability Retirement .................... 19

THE RETIREMENT PROCESS .............................. 206-8 Months before Retirement ........................ 20

Retirement Estimates .................................. 20

State of New JerseyPolice and Firemen’sRetirement SystemTABLE OF CONTENTS


September 2011 iii

4-6 Months before Retirement ........................ 21Retirement Applications .............................. 21Disability Retirement Applications .............. 22Life Insurance .............................................. 22Other Retirement Plans .............................. 22

Approximately 3 Months before Retirement .. 22Health Benefits Coverage at Retirement .... 22

Approximately 2 Months before Retirement .. 23Unsatisfied Balances ...................................... 23

Loans .......................................................... 23Purchase Arrears ........................................ 23Shortages .................................................... 23

Approximately 1 Month before Retirement .... 23Board Approval ............................................ 23COBRA ........................................................ 23

AFTER YOUR RETIREMENT DATE ...................... 23Statement of Retirement Allowance ............ 23Retirement Checks ...................................... 23Due and Payable ........................................ 23Change of Address ...................................... 24Direct Deposit/Electronic Fund Transfer...... 24Withholding Federal and NJ State Income Tax.................................... 24Federal Income Tax after Retirement .......... 24NJ State Income Tax after Retirement ........ 25Cost-of-Living Adjustment............................ 25Social Security ............................................ 25

REDUCTION OR SUSPENSION OF YOUR BENEFITS............................................ 25

Divorce or Dissolution of a Civil Union/Domestic Partnership .................. 26Misconduct ...................................................... 26

EMPLOYMENT AFTER RETIREMENT .................. 27IRS Provisions ................................................ 27Bona Fide Retirement .................................... 27Returning to a Position under the PFRS ........ 28

Failure to Reenroll in the PFRS .................. 28Exception for Retirees in Elected Office...... 28Active Members Serving in Elected Office .. 29Reenrollment in the PFRS .......................... 29Retiring for a Second Time.......................... 29

Returning to Work in a PositionCovered by a State of New JerseyAdministered Retirement System Other than the PFRS ...................................... 29

Police or Fire Supervisory Positions............ 29Disability Retirees Restored to Active Service ................................................ 29Health Benefits Coverage .............................. 29Social Security Earnings Test ........................ 30

ACTIVE AND RETIRED DEATH BENEFITS .......... 30Payment of Pension to a Family Member ...... 30Active Members .............................................. 30Retired Members ............................................ 31

ACCIDENTAL DEATH BENEFIT ............................ 31

GROUP LIFE INSURANCE.................................... 32Coverage for Active Members ........................ 32Coverage for Retired Members ...................... 32Choosing a Beneficiary .................................. 32Payment of Group Life Insurance .................. 32Taxation of Group Life Insurance Payments .. 33Group Life Insurance and Leave of Absence .......................................... 33Taxation of Group Life Insurance Benefits...... 33IRS Premium Rates ........................................ 33Waiving Noncontributory GroupLife Insurance Over $50,000 .......................... 34

CONVERSION OF GROUP LIFE INSURANCE .................................. 34

Conversion: At Retirement .............................. 35Conversion: Termination of Employment or Leave of Absence.................. 35Conversion: Return to Public Employment .... 35Group Life Insurance CoverageWhile Receiving Workers’Compensation Without Pay ............................ 36

WITHDRAWAL FROM THE RETIREMENT SYSTEM ................................ 36

When Membership Ends ................................ 36Terminating Employment ................................ 36Expired Accounts ............................................ 36Withdrawing Contributions .............................. 37

WORKERS’ COMPENSATION .............................. 38

APPEALS ............................................................ 39

EVALUATION FORM ............................................ 41


September 2011iv

Member Benefits Online System

The Member Benefits Online System (MBOS) allowsregistered PFRS members access to their pensionand, if applicable, health benefits account informa-tion online. Resources available through MBOSinclude: member account information; beneficiarydesignation, online pension loan, purchase of serv-ice, and retirement applications; and (if applicable)State Deferred Compensation Plan, SACT plan, andhealth benefits account information.

Retirees may also use MBOS to view retirementaccount information, update an address, changedirect deposit information, or update federal and/orNew Jersey State income tax withholding.

Before you can begin using MBOS, you must be reg-istered with MBOS and the MyNewJersey Web site.Registration is free and can be started at:www.state.nj.us/treasury/pensions/mbosregister.shtml

Be sure to read and carefully follow the registrationinstructions, as the process requires several steps.

If, after following the MBOS registration instructions,you need assistance registering for MBOS, call theMBOS Help Desk at (609) 777-0534 or send an e-mail with the subject line "MBOS E-mail" to:

[email protected]

Telephone Numbers

• For computerized information about your individ-ual pension account 24 hours a day, seven days aweek, call our Automated Information System at(609) 777-1777. With Interactive Voice Responseand added services — including the loan applica-tion — all you need is your Social Security numberand a touch-tone phone to hear personalized ben-efits information on loans, purchases, retirementbenefits, and withdrawal.

• To speak with a counselor about your Police andFiremen’s Retirement System account or healthbenefits account, call (609) 292-7524 weekdaysbetween 7:30 a.m. and 4:30 p.m. (except Stateholidays). If you are hearing impaired, call the TDDat (609) 292-7718.

• To speak with a plan representative about the NewJersey State Employees Deferred CompensationPlan, call Prudential at 1-866-NJSEDCP (1-866-657-3327) weekdays between 8:00 a.m. and 9:00p.m. (except State holidays). A plan representativewill answer your questions about the DeferredCompensation Plan and provide enrollment anddistribution forms.

• To speak with a plan representative about theSupplemental Annuity Collective Trust (SACT),call (609) 633-2031 weekdays between 8:15 a.m.and 4:30 p.m. (except State holidays). SACT rep-resentatives will answer your questions about theSACT and provide enrollment and distributionforms.

Internet and E-Mail

General information and most publications of theDivision of Pensions and Benefits can be found onthe Internet at: www.state.nj.us/treasury/pensions

You can e-mail the Division at:

[email protected]

Mailing Address

On all correspondence, be sure to include your mem-bership number or Social Security number.

Division of Pensions and Benefits

PO Box 295

Trenton, NJ 08625-0295

Counseling Services

The Division of Pensions and Benefits offers coun-seling services to members of the retirement sys-tems and benefit programs. Counselors are avail-

able by appointment Monday through Friday, 7:40a.m. to 3:30 p.m. Appointments can be made onlineat: www.state.nj.us/treasury/pensionsThe office is located at:

One State Street Square

50 West State Street, 1st Floor

Trenton, NJ

Directions to the office appear on the next page.

CONTACTING THE DIVISION OF PENSIONS AND BENEFITS


September 2011 v

The Division of Pensions and Benefits is located at50 West State Street (One State Street Square)which is a half-block east of the State House. Thedirections below will take you to the offices of theDivision of Pensions and Benefits. Visitors must usethe front entrance of the building (on West StateStreet). Check in with the guard in the main lobbywhere you will be directed to the Office of ClientServices.

Parking: Metered, on-street parking is available inthe blocks surrounding our building. Pay parking lotsand parking ramps are also available throughoutdowntown Trenton.

From Northeast New Jersey via the NJ Turnpike Take the NJ Turnpike South to Exit 7A. Follow I-195West until it ends, then follow signs for Route 29.After passing through a tunnel and two traffic lights,take the Calhoun Street exit. At the first traffic light,turn right onto West State Street. Pass the StateHouse and proceed through the next traffic light. Ouroffices will be on the left at 50 West State Street (OneState Street Square).

From Northeast New Jersey via Route 1

Take Route 1 South toward Trenton. Just north ofTrenton Route 1 splits into two roads. Stay to the left(do not use Route 1 Alternate). From Route 1 takethe Perry Street exit. At the end of the exit ramp, turnleft onto Perry Street. At the fourth traffic light afterturning onto Perry Street turn left onto Warren Street.At the second light, turn right onto West State Street.Our offices are located on the right, just before thenext traffic light, at 50 West State Street (One StateStreet Square)

From Northwest New Jersey

Take Route 31 South to I-95 South to Exit 1 (Route29). Follow Route 29 South for five miles to theCalhoun Street exit. At the first traffic light, turn rightonto West State Street. Pass the State House andproceed through the next traffic light. Our offices willbe on the left at 50 West State Street (One StateStreet Square).

From Southern New Jersey

If using the Turnpike, take exit 7A and follow thedirections from Northeast New Jersey via the NJTurnpike.

If using I-295 North, take exit 60 to Route 29 and fol-low the directions for using Route 206 North (below)beginning with Route 29.

If using Route 206 North, about four miles beforereaching center-city Trenton take the I-295 exit but,once on the interstate highway, follow the signs forRoute 29, not I-295. After passing through a tunneland two traffic lights, take the Calhoun Street exit. Atthe first traffic light, turn right onto West State Street.Pass the State House and proceed through the nexttraffic light. Our offices will be on the left at 50 WestState Street (One State Street Square).

From the New Jersey Shore

Take I-195 West, then follow the directions fromNortheast New Jersey via the NJ Turnpike.

DIRECTIONS TO THE DIVISION OF PENSIONS AND BENEFITS


September 2011vi

PLAN INFORMATION

Name of Plan

The Police and Firemen’s Retirement System of New Jersey.

Administration

The Police and Firemen’s Retirement System is a defined benefit plan administered by the:

New Jersey Division of Pensions and Benefits

PO Box 295

Trenton, New Jersey

08625-0295

(609) 292-7524

Provisions of Law

The Police and Firemen’s Retirement System was established by New Jersey Statutes andcan be found in the New Jersey Statutes Annotated, Title 43, Chapter 16A. Changes in the lawcan only be made by an act of the State Legislature. Rules governing the operation and admin-istration of the system may be found in Title 17, Chapter 1 and 4 of the New JerseyAdministrative Code.

Funding

The funds used to pay benefits come from three sources: employer contributions, employeecontributions, and investment income from those contributions. All contributions not requiredfor current operations are invested by the State Division of Investment.

Plan Year

For record keeping purposes the plan year is July 1 through June 30.

Service of Legal Process

Legal process must be served on the Attorney General of New Jersey pursuant to New JerseyCourt Rules, R. 4:4-4(7)

Employment Rights Not Implied

Membership in the Police and Firemen’s Retirement System does not give you the right to beretained in the employ of a participating employer, nor does it give you a right of claim to anybenefit you have not accrued under terms of the system.

Benefits and provisions of the Police and Firemen’s Retirement System are subject to changes by the leg-islature, courts, and other officials. While this booklet outlines the benefit and contribution schedules ofthe Police and Firemen’s Retirement System, it is not a final statement. Complete terms governing anyemployee benefit program are set forth in the New Jersey Statutes Annotated. Regulations, new oramended, are published in the New Jersey Register by the State Office of Administrative Law supple-menting the New Jersey Administrative Code.

POLICE AND FIREMEN’S RETIREMENT SYSTEM (PFRS)

as of September 2011

THE RETIREMENT SYSTEM

The State of New Jersey established the Police andFiremen’s Retirement System (PFRS) in 1944. TheDivision of Pensions and Benefits is assigned alladministrative functions of the retirement systemexcept for investment.

The PFRS Board of Trustees has the responsibilityfor the proper operation of the retirement system.The Board consists of two elected police representa-tives, two elected fire representatives, one electedretired member representative, the State Treasurer,and five individuals appointed by the Governor withthe advice and consent of the Senate. The Boardmeets once a month. A PFRS member who wishes tobe a candidate for the PFRS Board of Trustees mustbe nominated by petitions bearing the signatures of500 active members in the case of a police trustee,300 active members in the case of a fire trustee, and100 retired members in the case of a retired membertrustee. Nominating petition forms, together withinstructions for filing, are available upon writtenrequest to the Secretary of the PFRS Board ofTrustees, Division of Pensions and Benefits, PO Box295, Trenton, New Jersey 08625-0295.

The purpose of this handbook is to provide you withinformation about the retirement system to assist youin making decisions concerning your future and yourfamily’s future. If you have questions concerning yourretirement system benefits, please see page iv forinformation on contacting the Division of Pensionsand Benefits.

This handbook is available for viewing on theDivision of Pensions and Benefits Web site:www.state.nj.us/treasury/pensions While at theDivision’s home page, be sure to check for PFRSrelated forms, fact sheets, and news of any newdevelopments affecting the PFRS.

MEMBERSHIP

Membership in the PFRS is required for permanent,full-time employees appointed to positions in lawenforcement or fire fighting in the State of NewJersey.

PFRS Membership Tiers

The passage of Chapter 1, P.L. 2010, changed com-pensation and retirement criteria for PFRS membersenrolled as of certain dates. These differences inPFRS membership — referred to as “membershiptiers” — are defined as follows:

• Membership Tier 1 — PFRS Members whowere enrolled on or before May 21, 2010.

• Membership Tier 2 — PFRS Members whowere enrolled after May 21, 2010 and on orbefore June 28, 2011.

• Membership Tier 3 — PFRS Members whowere enrolled after June 28, 2011.

Unless otherwise indicated by membership tier, thebenefits listed in this handbook are the same for allPFRS members.

Eligibility Criteria

Eligibility in the PFRS is determined by:

• Your job title;

• Your age;

• Your health; and

• Successful completion of approved trainingcourses.

Please note that:

• Municipal employees in eligible job titles whodo not meet the age and/or medical require-ments for membership in the PFRS are ineligible for enrollment in the PFRS or anyother State-administered retirement system.

• State and county employees in eligible PFRStitles, who do not meet the age and/or medicalrequirements, are eligible to enroll in the PublicEmployees’ Retirement System (PERS) andpossibly, depending on job title, as LawEnforcement Officers (LEO) in the PERS.

Over the years, the eligibility criteria for membershipin the PFRS has been subject to change and reinter-pretation. If you have specific questions concerningeligibility for enrollment in the PFRS, see Fact Sheet#8, Enrollment Eligibility and Age Limits, or you maycontact the Division of Pensions and Benefits foradditional information.

September 2011 1


www.state.nj.us/treasury/pensions/epbam/exhibits/factsheets/fact08.pdf


Eligible Job Titles

A new employee hired as a permanent, full-time lawenforcement officer (police officer) or firefighter in aneligible PFRS job title or classification (who alsomeets the age, medical, and training criteria formembership) must be enrolled in the PFRS.

Because the list of the PFRS eligible job titleschanges periodically, an updated list of civil serviceand non-civil service PFRS titles is available on theDivision of Pensions and Benefits Web site at:

www.state.nj.us/treasury/pensions/pfrs1.shtml

Fact Sheet #78, Requirements for Review of a Titlefor Participation in the PFRS, provides instructionsfor initiating a title review.

If a job title is not found on the list and an employeeor employer of a law enforcement unit or firefightingunit believes that the employee’s duties meet the def-inition of “police officer” or “firefighter,” the employeeor employer may file an application for membershipin the PFRS with the Director of the Division ofPensions and Benefits, stating in detail, the basis forthe belief that the position qualifies as a police officeror firefighter title. The Division will review the appli-cation and determine whether the employee meetsthe definition of “police officer” or “firefighter” andthen make a recommendation to the PFRS Board ofTrustees as to whether the employee’s title should beincluded in the system.

If, after considering the recommendation of theDivision, the Board determines that the employeemeets the definition of “police officer” or “firefighter”the Board will publish a notice in the New JerseyRegister proposing to include the employee’s posi-tion in the retirement system. Interested parties willbe given 30 days to comment on the proposal.

If the Board determines that the employee does notmeet the definition of “police officer” or “firefighter.”the employee will be offered an opportunity for ahearing.

Training Requirements

For a position to be eligible for participation in PFRSit must include the mandate that a candidate for theposition successfully complete specific trainingrequirements.*

• Police officers enrolled in the PFRS must becertified in the basic training course for policeofficers as prescribed by the Police TrainingCommission (PTC).

• Correction officers enrolled in the PFRS mustbe certified in the basic training course for cor-rection officers as prescribed by the PoliceTraining Commission (PTC).

• County investigators enrolled in the PFRSmust be certified in the basic training course forcounty investigators as prescribed by thePolice Training Commission (PTC).

• Firefighters enrolled in the PFRS must com-plete and receive Firefighter 1 certificationthrough the New Jersey Department ofCommunity Affairs, Division of Fire Safety.

Medical Requirements

There are medical requirements for acceptance intothe PFRS. When you apply for membership, youmust have a medical examination to determine if yousatisfy these requirements. The examination, docu-mented on the authorized PFRS Report ofExamining Physician form, may be given by thedepartment physician, another physician designatedby the employer, or if required, a physician designat-ed by the retirement system.

Age Requirements

Current law prescribes a maximum age for entry intothe PFRS. Employees must not be one day past their35th birthday to qualify for enrollment.

Determining the age for entry in the PFRS may varybetween Civil Service and non-Civil Service jurisdic-tions. All employees covered by:

• Civil Service (Title 11) — whether State, coun-ty, or municipal — candidates cannot be pasttheir 35th birthday as of the announced closingdate of the Civil Service examination. Thosecandidates meeting the age requirements atthat time will be considered as having met themaximum age requirement for the duration ofthe ensuing Civil Service Eligibility List fromwhich appointments may be made.

• Non-Civil Service — primarily, municipal —employees cannot be one day past their 35thbirthday as of their official date of hire.

There are certain exceptions to the maximum agerequirement:

September 20112


*Prescribed for police positions in N.J.S.A. 43:16A-1and 52:17B-66 et seq.; and for firefighter positions inN.J.S.A. 43:16A-1 and 52:17B-66 et seq.


www.state.nj.us/treasury/pensions/epbam/exhibits/pdf/pf1061.pdf


• Military Service — Once you have met thedefinition of a veteran for pension purposes,certain periods of military service may be usedon a one-for-one basis to “reduce” one’s agefor entry. Such military service must haveoccurred during the:

— Lebanon Conflict, September 26, 1982 toDecember 1, 1987

— Grenada Conflict, October 23, 1983 toNovember 21, 1983

— Panama Peacekeeping Mission, December20, 1989 to January 31, 1990

— Operation Desert Shield/Storm – August 2,1990 to February 28, 1991

— Operation Restore Hope in Somalia –December 5, 1992 to March 31, 1994

— Operations Joint Endeavor/Joint Guard-Republic of Bosnia and Herzegovina –November 20, 1995 to June 20, 1998

— Operation Enduring Freedom – September11, 2001 to present

— Operation Iraqi Freedom – March 19, 2003to present

The prospective member must have served atleast 14 days in the country or region or onships patrolling in the territorial waters of thesenations.

— If the start of the member's service beganon or after the beginning date of the warera, veteran status will be granted as longas any one of the 14 days of service fell onor within the dates listed above.

— If the start of the member's service wasprior to the beginning date of the war era,then the member must have served all 14days in the area within the dates specifiedfor the conflict in order to be considered aveteran.

Only that period of service in the area of con-flict may be subtracted from an individual’s agefor PFRS eligibility purposes.

The 14-day requirement for service can bewaived if the veteran was discharged becauseof a service-incurred disability.

Absent Without Leave (AWOL) status must bededucted from active service and if thisreduces the active service to less than the 14-day service requirement, consideration will bedenied.

• Prior Police Service — In order to meet themaximum age requirement of 35 years for theposition of a municipal police officer — a for-mer State trooper, sheriff’s officer or deputy,county or municipal police officer, SEPTA,Delaware River Port Authority, BurlingtonCounty Bridge Commission, or Amtrak policeofficer is permitted to use that previous serviceto reduce actual age. Prior experience in fed-eral law enforcement agencies or law enforce-ment agencies of other states would also qual-ify to reduce a candidate’s age for the positionof municipal police officer. No person may beappointed over the age of 45 except for thosewho were previously terminated involuntarily(laid-off, or part of a Reduction-In-Force) fromtheir former employment.

Volunteer Firefighters

While volunteer firefighters may be appointed to paidpositions within part-paid fire departments up to age40 (N.J.S.A. 40A:14-44), any such firefighter overage 35 is eligible for enrollment in the PublicEmployees’ Retirement System (PERS), but not thePFRS.

Candidates Who Exceed the Age Limit

Individuals employed by the State or County whoexceed the maximum age requirement in the PFRS,but who are otherwise eligible for the position, mustestablish membership in the PERS immediatelyupon being permanently appointed to the title.

Individuals seeking employment with a municipalityin an eligible PFRS title, who are over age 35 on thedate of hire, even after any “reductions in age” havebeen taken into account, cannot establish member-ship in any State-administered retirement system.Since enrollment in the PFRS is a condition of

employment, these individuals cannot be hired.

Part-time Employees

Employees who are “part-time” officers should beenrolled into the PERS if they are otherwise eligiblefor enrollment pursuant to N.J.A.C. 17:2-2.8. Theycannot be enrolled in the PFRS.

September 2011 3


ENROLLMENT

The PFRS date of enrollment for employees in a reg-ular classified appointment that is covered by CivilService, or a regular budgeted position not coveredby Civil Service, is the first of the month* followingsuccessful completion of required police or firefightertraining.

Employees in unclassified service are considered tobegin service as of the date of employment with acompulsory PFRS enrollment date the first of themonth following successful completion of requiredpolice or firefighter training.

Enrollment usually takes about two months toprocess and requires the submission of a PFRSEnrollment Application and a Report of ExaminingPhysician.

Enrollment/Certification of Payroll Deductions

Your employer must complete a PFRS EnrollmentApplication to enroll you in the retirement system.

• An online PFRS Enrollment Application isavailable to State PFRS employers through theEmployer Pensions and Benefits InformationConnection (EPIC). Online enrollments areprocessed immediately by the Division ofPensions and Benefits. You and the employerreceive a confirmation that includes your PFRSmembership number. More information aboutusing EPIC is available at:

www.state.nj.us/treasury/pensions

• County and municipal employers — and in cer-tain circumstances State employers — will sub-mit a paper PFRS Enrollment Application. Thecompleted application, along with the results ofyour medical examination, is mailed to theDivision of Pensions and Benefits for process-ing. Please allow four to six weeks for pro-cessing of a mailed application.

When enrollment processing is complete, you andyour employer will receive a Certification of PayrollDeductions showing the date deductions will begin,your rate of contribution, and any back deductionsdue.

You may wish to keep the Certification of PayrollDeductions on file with your other important papers asa record of your enrollment in the retirement system.

Proof of Age

All members of the PFRS must provide documenta-tion that proves their age. Acceptable evidence ofyour age includes a photocopy of:

• Your birth certificate;

• Your passport;

• Naturalization or immigration papers; or

• Certain other records including baptismalrecords, military records, census records,school or business records, age recorded onmarriage licenses and insurance or children’sbirth records.

You should attach evidence of your proof of age toyour enrollment application. For more informationabout PFRS age requirements see page 2.

Designating a Beneficiary

When the Enrollment Application is submitted, thenew member should also submit a Designation ofBeneficiary to the Division of Pensions and Benefits.

• Members can register for the Member

Benefits Online System (MBOS) and com-

plete the Designation of Beneficiary online.

Your PFRS membership number is requiredand is included in the confirmation of an onlineenrollment and in the Certification of PayrollDeductions. Information on using MBOS canbe found in the MBOS Users’ Guide, availableon MBOS and on the Division’s Web site at:

www.state.nj.us/treasury/pensionsSee page iv for more information about regis-tering for MBOS.

• Members may also mail a Designation ofBeneficiary form to the Division of Pensionsand Benefits. The form is available under“Forms and Publications” on the Division’sWeb site at: www.state.nj.us/treasury/pensions

Note: The new member’s estate is the beneficiary onrecord until the Division of Pensions and Benefitsreceives a properly completed designation.

For your protection, beneficiary designations cannotbe accepted or confirmed over the telephone or by e-mail. Active employees can verify beneficiary desig-nations on MBOS. Otherwise, the Division will onlyaccept a written request from the member.

September 20114


*First day of the following biweekly pay period if theemployee is paid through State Centralized Payroll.








www.state.nj.us/treasury/pensions/epbam/exhibits/pdf/eb214.pdf




www.state.nj.us/treasury/pensions/mboskit.htm

Public Information and Restrictions

Most of the information maintained by the retirementsystem, including member salary and/or pensionbenefit information, is considered a public recordunder N.J.S.A. 47:1A-1 et seq., the Open PublicRecords Act. However, certain personal information,such as a member’s address, telephone number,Social Security number, pension membership num-bers, beneficiary information, and medical informa-tion is restricted from public access.

Further restrictions to “personal health information”exist under the privacy provisions of the federalHealth Insurance Portability and Accountability Act(HIPAA). Members may be required to provide spe-cific written authorization for the release of medicalinformation to a third party who is not a doctor, hos-pital, or business partner of the Division or the healthbenefit programs. Information about HIPAA is avail-able on the health benefits programs’ Web site:www.state.nj.us/treasury/pensions/health-benefits.shtml

The Division has implemented additional protectionfor members in accordance with the New JerseyIdentity Theft Prevention Act, N.J.S.A. 56:11-28 etseq. “Security Freeze” procedures are available torestrict access to the accounts of members who are,or have a serious risk of becoming, victims of identi-ty theft. Additional information is available in FactSheet #72, Identity Theft and Your Benefits.

Member Contribution Rate

Chapter 78, P.L. 2011, the Pension and HealthBenefit Reform Law, increased the PFRS membercontribution rate to 10% of base salary. The increaseis effective with the first payroll to be paid on or afterOctober 1, 2011.

Note: While Chapter 78 became effective June28, 2011, the contribution rate increase begins inOctober 2011 to provide employers with time forimplementation.

The increase in the PFRS contribution rate alsoincreased the minimum repayment amount for pen-sion loans or for the cost of a purchase of servicecredit if the repayment is certified after the date of therate change.

Prior to the enactment of Chapter 78, P.L. 2011, thecontribution rate for members of the PFRS was 8.5%of base salary.

Pensionable Salary — Your contribution rate isapplied to your base salary to determine your pen-sion deductions. Base salary means the annual com-

pensation of the member in accordance with theestablished salary policies of the member’s employ-er for all employees in the same position, or allemployees covered by the same collective bargain-ing agreement. Base salary is paid in regular, period-ic installments in accordance with the payroll cycle ofthe employer.

• The PFRS contribution rate for Tier 1 mem-bers enrolled on or before May 21, 2010, isapplied to the full pensionable salary (up to the“federal pensionable maximum” describedlater in this section).

• The PFRS contribution rate for Tier 2 and Tier

3 members enrolled after May 21, 2010, isapplied to the pensionable salary up to a com-pensation limit based on the annual maximumwage for Social Security deductions ($106,800in 2011 and $110,100 in 2012). Tier 2 and Tier3 members who earn in excess of the annualcompensation limit will be enrolled in theDefined Contribution Retirement Program(DCRP) in addition to the PFRS. A contributionof 5.5% of the salary in excess of the limit (plus3% from the employer) will be forwarded to aDCRP account (see page 16).

Extra compensation is not included in base salary.Extra compensation means individual salary adjust-ments granted primarily in anticipation of retirementor as additional compensation for performing tempo-rary duties beyond the regular workday. Extra com-pensation includes but is not limited to overtime,bonuses, lump sum longevity, vacation pay, holidaypay, and compensation not included in normal rou-tine paychecks (for more information, see Fact Sheet#56, Creditable Compensation - PFRS).

Federal Pensionable Maximum — Since the PFRSis a “qualified” pension plan under the provisions ofthe Internal Revenue Code, Section 401(a)(17), thecurrent federal ceiling on pensionable compensation($245,000 in 2011 and $250,000 in 2012) applies tothe base salaries of PFRS members.

Tax Deferral — Since January 1987, all mandatorypension contributions to the PFRS have been feder-ally tax deferred. Under the 414(h) provisions of theInternal Revenue Code this reduces your grosswages subject to federal income tax. Purchases ofservice credit are voluntary pension contributionsand are not tax deferred unless funded by a rolloverfrom another tax-deferred plan (see “Rollover forPurchase Payment” on page 12).

September 2011 5






DUAL MEMBERSHIP

You are considered a dual member if you are amember of more than one New Jersey State-admin-istered retirement system at the same time.

EXAMPLE: If you are a county corrections officerenrolled in the PFRS and a part-time municipaladministrative assistant enrolled in the PublicEmployees’ Retirement System (PERS), you are adual member.

When establishing dual membership, EnrollmentApplications are filed by each employer with the dif-ferent retirement systems.

A dual member’s contributions and service credit arekept separate.

Benefits for a dual member are paid separately fromeach retirement system in the event of retirement,death, or withdrawal.

A dual member may also retire from one retirementsystem and remain an active contributing member ofthe second retirement system.

TRANSFERS

Intrafund Transfer

An Intrafund Transfer is the transfer of your accountfrom one PFRS employer to another PFRS employer.

If you terminate your current PFRS position andaccept a PFRS position with a different employer,you are eligible to transfer your PFRS account andmaintain your original PFRS membership tier statusprovided:

• You have not withdrawn your membership (see“Withdrawal from the Retirement System” onpage 36); and

• It has not been more than two consecutiveyears since your last pension contribution; and

• You meet the eligibility requirements of PFRSmembership with the new PFRS employer.

If you meet the criteria listed above, your newemployer should file a Report of Transfer form withthe Division of Pensions and Benefits.

Note: PFRS members who are serving with a munic-ipal police or fire department and receive an appoint-ment to an administrative or supervisory position with

the same department or the police or fire departmentof any other municipality are permitted to continuetheir PFRS membership in the new administrative orsupervisory capacities. To be eligible for this contin-ued PFRS membership, the appointment to the posi-tion must occur within six months of your last PFRScontribution.

• If there has been a break in service of more

than two consecutive years since your lastpension contribution, you cannot continue con-tributions under your prior PFRS membership.The new employer should file a PFRSEnrollment Application with the Division ofPensions and Benefits. You will be enrolled ina new PFRS account under the membershiptier in effect at the time you return to PFRSemployment.

If you are vested in your prior, inactive PFRSaccount (see “Vesting” on page 7), you may beeligible for a transfer of your old membershipaccount to your new membership account.This type of transfer is called a “Tier-to-TierTransfer” and is completed by submitting aTier-to-Tier Transfer Form. It is important to

note that by completing a Tier-to-Tier Transferyou waive all rights to retirement benefits asprovided under the original, inactive member-ship tier.

If you are not vested in your prior, inactivePFRS account, you may withdraw your contri-butions. (see “Withdrawal from the RetirementSystem” on page 36).

• If you have withdrawn your prior PFRS

account, whether you have a break in serviceof more than two consecutive years or not, thenew employer should file a PFRS EnrollmentApplication with the Division of Pensions andBenefits and you will be enrolled in a newPFRS account under the membership tier ineffect at the time you return to PFRS member-ship. The service credit under the prior, inac-tive membership may then be eligible for pur-chase as Former Membership.

Interfund Transfer

An Interfund Transfer is the transfer of your accountfrom a PFRS employer to employment covered by adifferent New Jersey State-administered retirementsystem (or vice versa).

September 20116







www.state.nj.us/treasury/pensions/epbam/exhibits/pdf/et0547.pdf


If you terminate your current PFRS covered positionand accept a position covered by a different NewJersey State-administered retirement system, youmay transfer your contributions and service credit tothe new retirement system provided:

• You have not withdrawn your membership (see“Withdrawal from the Retirement System” onpage 36) or retired from the PFRS; and

• It has not been more than two consecutiveyears since your last pension contribution; and

• You are not a dual member with any concur-rent service in any other retirement system(see the definition of a “dual member” on page6); and

• You meet the eligibility requirements of the newretirement system, and

• You apply for the Interfund Transfer within 30days of the date you meet the eligibility require-ments of the new retirement system.

If you are interested in transferring your membershipaccount, an Enrollment Application for the new retire-ment system and an Application for InterfundTransfer should be submitted by your employer to theDivision of Pensions and Benefits. Applications mustbe received within 30 days of the date you meet theeligibility requirements of the new retirement system.

If you are vested in the PFRS (see “Vesting” below),you should determine if it is more advantageous toselect a Deferred Retirement from the PFRS ortransfer your pension contributions and service cred-it to the other retirement fund.

If there has been a break in service of more than

two consecutive years since your last pension con-tribution — or if you have withdrawn your account —you cannot transfer your prior PFRS contributionsand service credit to the new retirement system. Youwill be enrolled in a new account with the new retire-ment system. Your new employer should file anEnrollment Application for the new retirement systemwith the Division of Pensions and Benefits.

SERVICE CREDIT

Since retirement benefits are based in part on accu-mulated service credit, it is important that you receivethe correct amount of credit for the amount of timeyou work. You receive one month of service credit foreach month you make a full pension contribution.

• Employees whose employers report serviceand contributions biweekly will receive one payperiod of service credit for each pay period afull pension contribution is made.

VESTING

You are vested in the PFRS after you have attained10 years of service credit.

Being vested in the PFRS means that you are guar-anteed* the right to receive a retirement benefit whenyou reach age 55.

• If you are vested and terminate your employ-ment, you must file a retirement applicationprior to receipt of any benefits for which youmay qualify (see page 16 for the types of retire-ment including Deferred Retirement) or youmay voluntarily withdraw from the retirementsystem (see page 36).

• If you are vested, terminate your employmentwithout retiring or withdrawing, and return tocovered employment within two consecutiveyears of the last pension contribution, you maycontinue to make contributions to — and accrueservice in — the existing pension account.

• If you are vested, terminate your employmentwithout retiring or withdrawing, and return tocovered employment two or more years afterthe last pension contribution, you cannotresume contributions to the vested account.Instead — if eligible — you would be enrolledin a new PFRS account.

• If you are not vested and you terminate employ-ment before retiring, your options vary depend-ing on the nature of your termination and/oryour age at the time of your termination (see“Terminating Employment” on page 36).

CREDIT FOR MILITARY SERVICE AFTER ENROLLMENT

The federal Uniformed Services Employment andReemployment Rights Act of 1994 (USERRA) pro-vides that a member who leaves employment toserve on active duty is entitled to certain pensionrights upon return to employment with the same

September 2011 7


*Vesting provisions may not apply to PFRS mem-bers who are terminated for cause on charges ofmisconduct or delinquency (see page 26).





employer. The time in military service is to count, forvesting and retirement qualification purposes, asthough the employee had not left. However, themember will have to make the pension contributionsnormally required to have the military service timeincluded in the calculation of the retirement benefit.

When an employee returns from uniformed militaryservice to PFRS covered employment within the timeframes specified under USERRA, the employershould notify the Division of Pensions and Benefitsno later than 30 days after the employee’s return bysubmitting a Request for USERRA-Eligible Serviceform. Once notified, the Division will annotate theemployee’s pension account to reflect the USERRAcredit for benefits eligibility and will provide theemployee with a quotation for the cost for purchasingthe pension service credit so that it counts toward thecalculation of benefits.

For additional information see Fact Sheet #36,Military Service after Enrollment and USERRA.

PURCHASING SERVICE CREDIT

Since your retirement allowance is based in part onthe amount of service credit posted to your accountat the time of retirement, it may help you to purchaseadditional service credit if you are eligible to do so.

Only active members of the retirement systems arepermitted to purchase service credit. An active mem-ber is one who has not retired or withdrawn, and whohas made a contribution to the retirement systemwithin two consecutive years of the purchaserequest.

In no case can you receive more than one year ofservice credit for any calendar or fiscal year. A dual

member (see page 6) cannot purchase concurrentservice from any other retirement system.

TYPES OF SERVICE ELIGIBLE FOR PURCHASE

If a type of service is not listed below; it is not eligiblefor purchase.

Temporary Service

Members may be eligible to purchase temporaryemployment provided the service rendered was in atitle eligible for participation in the PFRS, was contin-uous, and immediately preceded a permanent or reg-ular appointment.

• Members are allowed to purchase temporaryservice rendered under a former account.

• Members are not allowed to purchase serviceas a Special Police Officer.

Leave of Absence Without Pay

Members may be eligible to purchase credit for timespent on official, authorized leaves of absence with-out pay (up to two years for personal illness; up tothree months for personal reasons).

• Maternity leave is considered personal illness.*

• Child care leave is eligible for purchase as aleave for personal reasons.

• A leave of absence without pay under a formermembership in a New Jersey State-adminis-tered retirement system may be eligible forpurchase.

Former Membership Service

Members may be eligible to purchase service credit-ed under a previous membership (PERS, TPAF,PFRS) which has been terminated after two consec-utive years of inactivity in accordance with statute orby withdrawal by the member of the contributionsmade under such membership.

Out-of-State Service

Members may be eligible to purchase up to 10 yearsof public employment rendered in any state, county,municipality, school district, or public agency inanother state provided the service rendered wouldhave been eligible for membership in a New Jerseyadministered retirement system. This service is onlyeligible for purchase if the member is not receiving oreligible to receive retirement benefits from the out-of-state public pension fund.

U.S. Government Service

Members may be eligible to purchase up to 10 yearsof credit for civilian service rendered with the UnitedStates government if the public employment wouldhave been eligible for credit in a New Jersey admin-istered retirement system. This service is only eligi-ble for purchase if the member is not receiving or eli-gible to receive retirement benefits from the federalgovernment based in whole or in part on this service.

September 20118


*A certification from a physician that a member wasdisabled due to pregnancy and a resulting disabilityfor the period in excess of three months is required.Otherwise, three months is the maximum period ofpurchase for maternity.



Military Service before Enrollment

Members may be eligible to purchase up to 10 yearsof active-duty military service rendered prior to enroll-ment provided the member is not receiving or eligibleto receive a military pension or a pension from anyother state or local source for such military service.

Active military service eligible for purchase meansfull-time duty in the active military service of theUnited States and includes full-time training duty,annual training duty, and attendance, while in theactive military service, at a school designated as aservice school by law or by the Secretary of the mili-tary department concerned. It cannot include periodsof service of less than 30 days. It does not includeweekend drills or annual summer training of a nation-al guard or reserve unit.

Active military service that has been combined withreserve component service to qualify for a militarypension as a reserve component member may be eli-gible for purchase.

If you qualify as a veteran, you may be eligible to pur-chase an additional five years of military service (see“Important Purchase Notes” below).

Military Service after Enrollment

Under the requirements of the federal UniformedServices Employment and Reemployment Rights Actof 1994 (USERRA), members may receive credit formilitary service rendered after October 13, 1994 (seepage 7). However, USERRA eligible service will onlybe used to determine eligibility for benefits. The cal-culation of retirement benefits will not use the USER-RA eligible service unless the employee pays therequired pension contributions for the period of mili-tary service.

Note: There is a time sensitive element to this pur-chase (see page 7 and Fact Sheet #36, MilitaryService after Enrollment and USERRA).

Uncredited Service

Members may be eligible to purchase regularemployment with a public employer in New Jersey forwhich the member did not receive service credit butwhich would have required compulsory membershipin the retirement system at the time it was rendered.

Employment with Other Agencies

If you have at least 20 years of service credit in thePFRS and you leave to accept a full-time position(with your employer’s approval) in one of the agen-

cies listed below, you may be eligible to purchase amaximum of three years of such service upon yourreturn to covered employment.

• A federal agency;

• An agency of another state or local govern-ment; or

• An organization whose principal function isoffering professional, advisory, research, edu-cational, or developmental services to govern-ments or universities concerned with policemanagement.

Layoff

Members of the PFRS who were laid off and were ingood standing at the time of separation from employ-ment (not released for misconduct or delinquency),and who are subsequently rehired to a similar (policeor firefighter) service position in the PFRS, may beeligible to purchase up to three years for the timeperiod in which the member was laid off. The mem-ber must now be an actively contributing member ofPFRS to make this type of purchase.

The cost of a layoff purchase is calculated using thesalary for the 12 months prior to the layoff.

Local Retirement System Service

Members may be eligible to purchase service estab-lished under a local retirement system in New Jersey.Purchase is not permitted if you are receiving retire-ment benefits from that public pension fund.

IMPORTANT PURCHASE NOTES

• If you qualify as a non-veteran, you are eligibleto purchase an aggregate of 10 years of serv-ice credit for work outside New Jersey (Out-of-State, Military, and U.S. Government Service).

• If you qualify as a military veteran (see page 3),you may be eligible to purchase an additionalfive years of military service rendered duringperiods of war for an aggregate of 15 years ofservice outside New Jersey (Out-of-State,Military, and U.S. Government Service).

• To qualify for an Ordinary DisabilityRetirement, PFRS members need 4 years ofNew Jersey service; therefore, the purchase ofU.S. Government, Out-of-State, or MilitaryService cannot be used to qualify for this typeof retirement.

September 2011 9




• Purchases of service credit are voluntary pen-sion contributions and are not tax deferredunless funded by a rollover from another tax-deferred plan (see “Rollover for PurchasePayment” on page 12).

COST AND PROCEDURES FOR PURCHASING SERVICE CREDIT

You can receive an estimate of the cost of purchas-ing service credit by calling the AutomatedInformation System at (609) 777-1777 or by usingthe online Purchase Cost Calculator on the Divisionof Pensions and Benefits’ Web site at:


The cost of a purchase is based on four factors:

• A purchase factor based on your nearest ageat the time the Division receives your purchaseapplication (see chart);

• The higher of either your current annual salaryor highest fiscal year salary (July - June) post-ed to your membership account (except for lay-off purchase);

• The years and months of service being pur-chased; and

• The type of service purchased.

The cost of the purchase will generally increase withan increase in your age and/or salary.

The cost of purchasing service is borne by both youand the participating employers with the importantexceptions of Military Service, U.S. GovernmentService, Local Retirement System Service, Layoff,and Employment with Other Agencies — wherestatute specifically provides that the employer shallnot be liable for any costs of the purchase. If you pur-chase U.S. Government Service, Military ServiceBefore Enrollment, Local Retirement SystemService, Layoff, or Employment with Other Agencies,you, as the member, are responsible for the full cost;therefore, the cost quoted to you for purchasingthese types of service will be twice the cost for othertypes of purchase.

Estimating the Cost of a Purchase

To estimate the cost of a purchase, multiply the high-er of your current annual salary or highest fiscal yearsalary times the purchase factor (see chart) corre-sponding to your nearest age. The result is the costof one year of service. Multiply this cost by the appro-priate number of years being purchased. This proce-dure can be used for calculating the cost ofTemporary Service; Former Membership; Leaves of Absence; Military Service After Enrollment,*Uncredited Service; and Out-of-State Service.

To calculate the purchase cost of Military ServiceBefore Enrollment, U.S. Government Service, LocalRetirement System Service, or Employment withOther Agencies the same procedure is used exceptthe resulting cost is doubled.

For Layoff Service use the annual salary for the 12months prior to the layoff and double the resultingcost.

EXAMPLE: Member, age 45, earning $60,000 a year,wishes to purchase 18 months Temporary Service:Purchase Factor (from chart) = 0.102150

Purchase Annual Time Being PurchaseFactor X Salary X Purchased = Cost

0.102150 X $60,000 X 1.5 years = $9,193.50

September 201110


*Note: The cost of purchasing Military Service AfterEnrollment under USERRA (see page 7) is based onthe required pension contributions for the period ofmilitary service.

Purchase Rate Chart

Purchase Purchase

Age Factor Age Factor

33 (and

under) 0.075000 50 0.120350

34 0.076016 51 0.120798

35 0.077350 52 0.121323

36 0.078913 53 0.121923

37 0.080704 54 0.122600

38 0.082724 55 0.123353

39 0.084973 56 0.124181

40 0.087450 57 0.125086

41 0.090109 58 0.126067

42 0.092926 59 0.127124

43 0.095880 60 0.128257

44 0.098957 61 0.129466

45 0.102150 62 0.130751

46 0.105461 63 0.132113

47 0.108902 64 0.133550

48 0.112501 65 0.135000

49 0.116298 (and older)

If the same member were to purchase 18 months ofMilitary Service, the Purchase Cost would be$18,387 (twice the amount of the TemporaryService).

An online Purchase Cost Calculator and additionalpurchase of service credit resources are available onthe Division of Pensions and Benefits Web site at:


Partial Purchases

You may purchase all or part of any eligible service.If you make a partial purchase, you may purchaseany remaining eligible service at a later date. Thecost of any later purchase will be based upon yourage and the annual salary or highest fiscal yearsalary at the time of your subsequent request to pur-chase.

Applying to Purchase Service Credit

Before you can purchase service credit, you mustsubmit a purchase request to the Division ofPensions and Benefits.

All purchase requests must be submitted using

the Purchase Application program of the Member

Benefits Online System (MBOS).

MBOS provides registered members with fast, effi-cient processing of purchase requests. You receiveimmediate confirmation and a follow-up e-mail thatyour application has been received.

Information on using MBOS and the PurchaseApplication can be found in the MBOS Users’ Guide,available on MBOS and on the Division’s Web site at:

www.state.nj.us/treasury/pensionsSee page iv for more information about registeringfor MBOS.

If, after following the MBOS registration instructions,you still need assistance registering for MBOS, callthe MBOS Help Desk at (609) 777-0534 or send ane-mail with the subject line "MBOS E-mail" to: [email protected]

Exceptions to the MBOS Purchase Application —While PFRS members are required to submit pur-chase requests through MBOS, members are notable to use MBOS for the following reasons:

• Members applying for a purchase fewer than30 days before their retirement date or

Board of Trustees approval date. The mem-ber must request a paper Purchase Applicationby e-mailing: [email protected] application will be provided upon verifica-

tion of the Board or retirement date status.Members without a valid board or retirementdate will be instructed to apply using MBOS.

• Members applying for the purchase of Military

Service after Enrollment under the provisionsof USERRA. To purchase this service theemployer must submit the Request for USER-RA Eligible Service form within the time framesrequired under the law (see page 7).

Please note that these are the only circumstanceswhere a paper purchase request is permitted.Limited access to a computer or a member’s reluc-tance to use MBOS are not considered sufficient cir-cumstances for accepting a paper purchase requestfor processing. Any paper Application to PurchaseService Credit received by mail will not be processedand the member will be mailed instructions on sub-mitting the request through MBOS.

Upon receipt of your MBOS Purchase Application —and any required supporting documentation — aquotation of cost will be calculated provided that allpurchase eligibility criteria are met. Processing timesvary and a request cannot be completed until theDivision receives all required verification of eligibility.It is the member’s responsibility to obtain certificationof employment from a former employer for the pur-chase of Out-of-State or U.S. Government Service.

After the Division of Pensions and Benefits verifiesemployment, you will receive a Purchase QuotationLetter indicating the cost of any service approved forpurchase. You must respond to the quotation letterwithin the specified time period (usually 90 days).

When you agree to purchase a certain amount ofservice credit, the Division of Pensions and Benefitsassumes that you will complete the purchase andcredits your account with the entire amount of serv-ice, even if you are paying the cost through payrolldeductions. Any estimates of retirement allowanceyou receive, including your Personal BenefitsStatement, are based on the full amount of credit youagreed to purchase.

You may pay the cost of purchasing service credit:

• In one lump-sum payment;

• By having extra payroll deductions withheldfrom your pay. The minimum deduction isequal to one-half of your normal rate of contri-bution to the retirement system over a maxi-mum period of 10 years and includes interestof 8.25%; or

September 2011 11



• By paying a single down payment and havingthe remainder paid through payroll deductions.

If you retire before completing a purchase, you maychoose to receive prorated credit for the amount ofservice you have paid for, or you can pay the balanceat the time of retirement to receive full credit.

A member who authorizes a purchase of servicecredit through payroll deductions may cancel thosedeductions at any time. No refunds will be made ofany lump-sum payments, partial payments, or install-ment payments. The member will receive proratedservice credit for the service purchased to the dateinstallment payments cease. Any subsequentrequests to purchase the remaining service creditshall be based on the laws and rules in effect on thedate that the subsequent request is received.

If you have an outstanding arrears obligation for thepurchase of additional service credit, interest may beassessed if there is a lapse of two years or more inpayments toward the purchase.

Rollover for Purchase Payment

Members may pay for all or part of a purchase bytransferring or rolling over tax-deferred funds from aneligible or qualified retirement savings plan. Thetypes of plans from which a transfer or rollover canbe made are:

• 401 (a) qualified plan (including 401(k) plan)and 403(a) qualified annuity

• 403 (b) - Tax-Sheltered Annuity Plan

• 457 (b) - State and Local Government DeferredCompensation Plan

— IRA - With tax-deferred funds

— Traditional IRA

— Simple IRA (must have been open for two ormore years)

— Simplified Employee Pension Plan (SEP)

— Conduit IRA

— Rollover IRA

Note: The Division cannot accept rollovers from aRoth IRA or a Coverdell Education Savings Account(formerly known as an education IRA).

Additional information on requesting a transfer orrollover of tax-deferred funds for the purchase ofservice credit is included in the purchase cost quota-tion letter you receive upon the Division’s determina-tion of your eligibility to purchase service.

LOANS

If you are an active contributing member of the PFRS,you may be eligible to borrow from your account twiceper calendar year. You may borrow up to one-half ofyour posted pension contributions or a maximum loanbalance of $50,000, whichever is less.

Loans are governed by the following conditions:

• Service Credit — You must have three yearsof pension service credit posted to your retire-ment system account. Pension contributionsare posted to your account on a quarterlybasis. It normally takes 45 days after the end ofa quarter for your contributions to be posted toyour account. For example, if you enrolled inthe retirement system on January 1, 2009, youwould not have three years posted to youraccount until March 2012.

• Number of Loans Per Year — You may borrowtwice in any calendar year. This is determinedby the date of the check, not the date of therequest. For example, if you make a requestfor a loan on December 24th but the check isdated January 5th, the loan is considered yourfirst for the new year.

• Loan Amount — The minimum amount youmay borrow is $50, and loan amounts thenincrease in increments of $10.

The maximum you may borrow is one-half ofyour contributions that are posted to youraccount, up to a maximum loan balance of$50,000, whichever is less.

You may learn the amount you may borrow,see different loan amount and repayment com-binations, and apply for a loan by using theonline Loan Application on the MemberBenefits Online System (MBOS), or by callingthe Automated Information System at (609)777-1777.

• Interest Rate — Interest is charged on thedeclining balance of the loan at a commercial-ly reasonable rate set annually by the NewJersey State Treasurer. The current interestrate is posted on the Division of Pensions andBenefits Web site at:


When you borrow, you will have the sameinterest rate for the life of your loan unless youborrow again in a different calendar year whenthe interest rate is different. Every time you

September 201112


borrow, the entire outstanding balance is re-certified at the current year's interest rate.

The interest rate is determined using the PrimeRate as of December 1st of the previous yearplus two percent.

• Administrative Fee — An administrative pro-cessing fee applies to all pension loans. Theadministrative processing fee is set annuallyand is based on the actual costs associatedwith administering the pension loan program.The current administrative processing fee isposted on the Division of Pensions andBenefits Web site at:


• Loan Repayment — Loans must be repaid

within five years. The minimum deductiontoward the repayment of a loan is equal to thepension contribution rate of 10% for PFRSmembers. The maximum allowable deductiontoward the repayment of your loan is 25% ofyour base salary.

Provided that the minimum loan repaymentamount will repay the loan balance within fiveyears, the repayment amount of a loan will besimilar whether you borrow $500 or $5,000;however, the repayment of a larger loan willcontinue for a longer period of time than for asmaller loan.

Loan repayments will increase to more thanthe minimum deduction if the entire loan bal-ance cannot be paid within the five yearrequirement (or if you have an outstandingloan and take another loan — see below).

If you have an outstanding loan balance andtake another loan, the Internal RevenueService requires that the new combined loan

balance must be repaid within five years of

the date of the first loan. This means that therepayment amount may be substantially higherto ensure full repayment of the total loan bal-ance within five years of the issuance of theoriginal loan. Furthermore, the requested loanamount may be reduced, or the loan requestmay be rejected, if the payroll deductionsrequired to repay the loan within this five-yearperiod would exceed the 25% of salary restric-tion in State law (see “Internal RevenueService Requirements” on page 14).

Find out your minimum deduction toward therepayment of a loan by using the online Loan

Application on the Member Benefits OnlineSystem (MBOS), or by calling the AutomatedInformation System at (609) 777-1777.

• Canceling a Loan — If you are not satisfiedwith a loan amount or the repayment schedulewhen you receive your loan check, you maycancel the loan by returning the original,

uncashed and unmarked loan check. Whena loan check is returned, the funds are deposit-ed back into your retirement system accountand will be available with the next quarterlyposting.

Note: By cashing the loan check you areagreeing to the loan amount and the terms andconditions of the repayment schedule.

• Timely Repayment Is Required — TheInternal Revenue Service requires members tomake timely payments toward outstanding loanbalances. While your employer will withholdand submit loan deductions from your salary, ifyou are out of work without pay, a failure torepay a loan may have significant tax conse-quences. See the Internal Revenue Servicerequirements for loan repayment on page 14.

Applying for a Loan

All pension loan requests must be submitted usingeither:

• The Loan Application available by calling theAutomated Information System at (609) 777-1777; or

• The Loan Application program of the MemberBenefits Online System (MBOS).

Both the Automated Information System and MBOSprovide fast, efficient processing of pension loanrequests. You receive immediate confirmation thatyour loan application has been received.

In most cases, a loan application submitted beforethe close of business (4:30 p.m.) on a Friday isprocessed and mailed on the following Wednesday.

See page iv for more information on using theAutomated Information System.

Information on using the Loan Application on MBOScan be found in the MBOS Users’ Guide, available onMBOS and on the Division’s Web site at:


September 2011 13



If, after following the MBOS registration instructions,you still need assistance registering for MBOS, callthe MBOS Help Desk at (609) 777-0534 or send ane-mail with the subject line "MBOS E-mail" to:

[email protected]

Exceptions to the MBOS Loan Application — Whilemembers are required to process loan requeststhrough MBOS or the Automated InformationSystem, some members may not be able to accessthe Loan Application for one of the following reasons:

• You are applying for a loan within 6 months ofreturning from a leave of absence;

• You are applying for a loan within 6 months oftransferring to a new employer within the sameretirement system, or between different retire-ment systems; or

• You are a State employee who is paid on asupplemental payroll schedule.

In these cases your employer must complete aCertified Loan Request Form to verify your salaryand/or certify that you are actively employed.

• If your employer was late in submitting theReport of Contributions for the quarterly post-ing, you may still be able to borrow, however,your employer must complete a Certified LoanRequest Form to verify your salary, active paystatus, and you may only borrow based on theprior quarter’s posted pension contributions.

• If you have established a security freeze onyour pension account due to identity theft youcannot access MBOS and must contact theDivision’s Identity Theft Coordinator to requesta loan (for more information see Fact Sheet#72, Identity Theft and Your Benefits).

Please note that these are the only circumstanceswhere paper loan requests are permitted. Limitedaccess to a computer or a member’s reluctance touse MBOS or the Automated Information System arenot considered sufficient circumstances for acceptinga paper loan request for processing. Any paper LoanApplication received by mail will not be processedand the member will be mailed instructions on sub-mitting the loan request through MBOS or theAutomated Information System.

Early Loan Repayment

You may request a repayment figure for your full loanbalance any time prior to the end of your regular

repayment schedule. Only a lump-sum payoff of yourfull loan balance is permitted — partial payments arenot allowed.

To request a lump-sum payoff, contact the Division’sOffice of Client Services at (609) 292-7524, or e-mail:[email protected] and request a LoanPayoff Letter. Be sure to include your name, address,and pension membership number or Social Securitynumber in your request. The Loan Payoff Letter willindicate the lump-sum payoff amount, the date bywhich the payment must be received, and the dateon which scheduled loan repayments from payroll willend.

Loans at Retirement, Death, or Termination of Employment

You may apply for a loan regardless of your age. Ifyou retire before repaying the outstanding balance ofyour loan, your loan payments will be carried intoretirement. That is, your retirement allowance will bereduced by the same monthly amount you were pay-ing towards your loan just prior to retirement.

You may also repay your outstanding loan balance inone lump sum prior to retirement.

If you die before repaying your loan (either before orafter retirement), the outstanding balance will bededucted from the proceeds of any benefits to bepaid to your beneficiaries.

If you terminate employment and withdraw your con-tributions before repaying your loan, all your contri-butions less the loan balance will be returned to you(see “Internal Revenue Service Requirements”below).

Internal Revenue Service (IRS) Requirements

Internal Revenue Code Section 72(p) requires thatloan balances cannot exceed $50,000 and must berepaid within five years. Furthermore, if you take asubsequent loan (or loans) and your original loan bal-ance is not completely paid off, the repayment periodwill remain five years from the date of the first

loan. The repayment rules on subsequent loans mayresult in either a substantial increase in your repay-ment amount — or may even limit the amount thatyou can borrow if the payroll deductions to repay theloan exceeds the 25% of base salary restriction onloan repayments.

The IRS regulations also require members to maketimely payments toward outstanding loan balances.While it is your employer’s responsibility to withhold

September 201114




loan deductions from your salary, if you are out ofwork without pay, your employer has no salary fromwhich to take deductions. Members who leave pay-roll with an outstanding loan balance will be notifiedafter six months of nonpayment and offered theoption of paying off the entire loan balance or makingloan repayments through a monthly personal billing.

Failure to repay the loan as scheduled (througheither lump-sum payment, personal billing, or returnto payroll) will result in the unpaid loan balance beingdeclared in default. If a loan is in default, the loan bal-ance is declared a taxable or “deemed distribution”and will be reported to the IRS. For the tax year inwhich the default occurs, the Division of Pensionsand Benefits will send you a Form 1099-R for tax fil-ing purposes in January of the following year. You willbe required to include the portion of the loan repre-senting before-tax contribution as income on yourfederal return. In addition, if you are under age 59½,you will be required to pay an additional 10% tax fortaking an early pension distribution.

If you default on your loan, it will be your responsibil-ity to make an estimated tax payment to the IRS tocover your tax liability on the deemed distribution; nowithholding will be deducted from your account bythe Division.

A deemed distribution cannot be canceled by resum-ing your loan payments or repaying the loan in fullprior to the end of the tax year in which the defaultoccurs. If you resume your loan repayments after thedefault, the payments received are posted to youraccount as after-tax contributions that will increasethe nontaxable portion of your pension at retirement.

Unlike a normal pension distribution, a loan treatedas a distribution cannot be rolled over to an IRA orother qualified retirement plan.

POLICE AND FIREMEN’SMORTGAGE PROGRAM

A currently employed police officer or firefighter whois a member of the PFRS with at least one-year ofcreditable service is eligible to apply for a mortgagethrough the PFRS. The mortgage program is administered through private lenders in New Jerseyand is applicable to an owner-occupied principal res-idence. The maximum mortgage amount is $417,000(for 2009). Second Mortgages are not permitted.

For additional information on interest rates, fees, orfor a list of participating lending institutions, contact

the New Jersey Housing and Mortgage FinanceAgency, at (609) 278-7570, or view current information online at: www.state.nj.us/treasury/pensions/pfrsmortgagepage.shtml

SUPPLEMENTING YOUR PENSION

In addition to your regular pension contributions,there are other opportunities to supplement yourretirement income and possibly set aside money ona tax-deferred basis.

New Jersey State Employees DeferredCompensation Plan

If you are an employee of the State, you may be eli-gible for the New Jersey State Employees DeferredCompensation Plan (IRC Section 457). Contribu-tions to the plan are not subject to federal income taxuntil you take a distribution from the plan, either atretirement or termination before retirement. The mainbenefits of the plan are to help you save on federalincome tax now and to supplement your retirementincome through investments.

For plan and investment information, visit the StateEmployees Deferred Compensation Plan Web site at:www.prudential.com/njsedcp or call 1-866-NJSEDCP(1-866-657-3327).

Other information about the plan is available by writ-ing to: Division of Pensions and Benefits, New JerseyState Employees Deferred Compensation Plan, POBox 295, Trenton, NJ 08625-0295.

Local Deferred Compensation Plans

PFRS members employed by a municipality, county,or county college may also be eligible to contribute toother employer sponsored deferred compensationplans. Contact your employer to see what plans areavailable to you.

Supplemental Annuity Collective Trust (SACT)

The Supplemental Annuity Collective Trust (SACT) isa voluntary investment program that provides retire-ment income separate from, and in addition to, yourbasic pension plan. Your contributions are investedconservatively in the stock market. The program con-sists of two separate plans.

• The SACT-Regular Plan is available to allactively contributing members of a New JerseyState-administered retirement system.Contributions to this plan are made afterdeductions for federal income tax.

September 2011 15


• The SACT-Tax Sheltered Plan (IRC Section403(b)) is available to actively contributingmembers of public educational institutions.Contributions to this plan are made beforedeductions for federal income tax.

SACT brochures and enrollment packets are avail-able on the Division of Pensions and Benefits Website at: www.state.nj.us/treasury/pensions/sact.shtml

You can also contact the SACT office by calling (609)633-2031 or by writing to: Division of Pensions andBenefits, Supplemental Annuity Collective Trust, POBox 295, Trenton, NJ 08625-0295.

Defined Contribution Retirement Program(DCRP)

The Defined Contribution Retirement Program(DCRP) was established under the provisions ofChapter 92, P.L. 2007, and Chapter 103, P.L. 2007,and expanded to include the PFRS under the provi-sions of Chapter 1, P.L. 2010. The DCRP provideseligible members with a tax-sheltered, defined contri-bution retirement benefit, along with life insuranceand disability coverage.

Individuals eligible for membership in the DCRPinclude employees enrolled after May 21, 2010, inmembership Tier 2 of the PFRS who earn salary inexcess of established “maximum compensation” lim-its ($106,800 in 2011 and $110,100 in 2012).

The DCRP is administered for the Division ofPensions and Benefits by Prudential Financial.Prudential provides DCRP information, includinginformation about investment and distributionoptions, on its New Jersey Defined ContributionProgram Web site: www.prudential.com/njdcrp

Employers and members can contact PrudentialFinancial by telephone through Prudential's toll-freenumber 1-866-653-2771.

In certain circumstances an eligible employee canvoluntarily waive participation in the DCRP by sub-mitting a DCRP Waiver Form to the Division ofPensions and Benefits.

Additional information about DCRP enrollment, con-tribution rates, plan benefits, and waiver can befound in Fact Sheet #79, DCRP for PERS, TPAF,PFRS, and SPRS Members, which is available bycontacting the Division of Pensions and Benefits oron the Division’s Web site at:


RETIREMENT

Mandatory Retirement

Retirement for PFRS members is mandatory at

age 65 (see exceptions). If you do not file anApplication for Retirement Allowance before age 65,you are automatically retired on the first of the monthfollowing your 65th birthday. Retirement benefits,however, are not payable until you file the applica-tion.

Exceptions

• PFRS members hired prior to January 1, 1987may continue employment until attaining theage of 68 or 25 years of creditable service,whichever comes first.

• Elected officials are exempt from mandatoryretirement from their elected position.

Types of Retirement

There are several types of retirement for which youmay qualify. The calculation of your retirement bene-fit is based on your Final Compensation.

• ‘Final Compensation’ — for a PFRS Tier 1

member enrolled on or before May 21, 2010,Final Compensation means the salary uponwhich pension contributions were based in thelast 12 months of creditable service precedingretirement.

For a PFRS Tier 2 or Tier 3 member enrolledafter May 21, 2010, Final Compensationmeans the average salary upon which pensioncontributions were based for any three fiscalyears (July-June) of membership precedingretirement that provides the largest possiblebenefit.

Service Retirement

The eligibility requirements for a Service Retirementfall into two categories.

• If you are a member in service and age 55 orolder you may retire without any required min-imum years of service.

• If you have at least 20 years of service atretirement you may retire at any age providedyou were enrolled in the PFRS as of January18, 2000.

September 201116




www.state.nj.us/treasury/pensions/ret-app-page.shtml

The annual benefit calculations for a ServiceRetirement are:

• If you have less than 20 years of service cred-it, you will receive 2% of your FinalCompensation for each year of service.

• If you have at least 20 years but less than 25years of service credit, you will receive 50% ofyour Final Compensation.

• If you are age 65 (mandatory retirement age)and have 20 or more years of service credit,you will receive 50% of your FinalCompensation, plus 3% of your FinalCompensation for each year of service over20, up to 25 years, if enrolled in the PFRS asof January 18, 2000.

• If you have at least 30 years of service credit,you will receive 2% per year of your averageFinal Compensation for the first 30 years ofservice, plus an additional 1% of your averageFinal Compensation for each year of servicecredit over 30 years.

Special Retirement

Available to members at any age, who have a mini-mum of 25 years of service credit in the PFRS.

• For a PFRS Tier 1 or Tier 2 member enrolledon or before June 28, 2011, the annual benefitfor a Special Retirement is equal to 65% ofyour Final Compensation plus 1% for eachyear of creditable service over 25 years but notto exceed 30 years. The maximum allowanceis therefore 70% of your Final Compensation.

• For a PFRS Tier 3 member enrolled afterJune 28, 2011, the annual benefit for a SpecialRetirement is equal to 60% of your FinalCompensation plus 1% for each year of cred-itable service over 25 years but not to exceed30 years. The maximum allowance is therefore65% of your Final Compensation.

Deferred Retirement

Available to members who have at least 10 years ofservice credit and are not yet 55 years of age whenthey terminate employment. The retirement wouldbe effective on the first of the month after attainingage 55. The annual benefit for a Deferred Retirementis equal to 2% of Final Compensation for each yearof service.

You must file an Application for RetirementAllowance for the retirement to take effect. Youmay apply for a Deferred Retirement when you ter-minate covered employment or at any time prior toage 55. Under no circumstances can a retirementbecome effective prior to the date the application isreceived by the Division of Pensions and Benefits.

If a member is removed from employment for causeon charges of misconduct or delinquency, the mem-ber will be ineligible for Deferred Retirement.

At any time before your Deferred Retirementbecomes effective, you may change your mind andapply for a lump-sum withdrawal of all your pensioncontributions instead. However, once you cancelyour Deferred Retirement and withdraw your contri-butions, all the rights and privileges of membership inthe retirement system end.

Please note the following important informationabout your life insurance, health care coverage,loans, and purchase arrears if you are considering aDeferred Retirement:

• Life Insurance — Your life insurance coveragewill end 31 days after you terminate employ-ment and will not be in effect until yourDeferred Retirement becomes payable. If youdie before your Deferred Retirement becomeseffective, the last named beneficiary willreceive a return of your pension contributions.There is no life insurance benefit under thesecircumstances. However, during the 31-dayperiod after you terminate employment youmay convert your group life insurance cover-age to a private policy with PrudentialFinancial. For more information see DeferredRetirement in “Conversion: At Retirement” onpage 35.

• Health Benefits — PFRS members electingDeferred Retirement, who are covered underthe State Health Benefits Program (SHBP) orSchool Employees’ Health Benefits Program(SEHBP) cannot transfer their active healthcare coverage to the retired group of the SHBPor SEHBP. However, those electing DeferredRetirement may be eligible for continuation ofSHBP or SEHBP coverage under federalCOBRA legislation for up to 18 months if theywere covered by the SHBP or SEHBP just priorto terminating employment. If the actual retire-ment commences while the 18 months ofCOBRA coverage is in effect, the retiree maythen transfer from the COBRA coverage and

September 2011 17




continue the SHBP or SEHBP coverage intoretirement. If the 18 months of COBRA cover-age ends before the retirement commences,the member will not be entitled to maintainhealth coverage through the SHBP or SEHBP.Participants should contact their employer tosee if they qualify for COBRA continuation.

COBRA: The Consolidated Omnibus BudgetReconciliation Act (COBRA) of 1985.

• Loans — If you terminate employment, failureto repay a pension loan as scheduled mayresult in the unpaid loan balance beingdeclared a taxable distribution that will bereported to the IRS. See page 14 for moreinformation about the IRS regulations regard-ing the repayment of pension loans.

• Purchase Arrears — If you have an outstand-ing arrears obligation for the purchase of addi-tional service credit, interest may be assessedif there is a lapse in payments of two years ormore. Purchases will be canceled after twoyears with no payments and the service creditprorated. Members returning from an approvedleave of absence, however, can have the orig-inal purchase resumed.

• Supplemental Compensation on Retirement(SCOR) — State employees who retire on aDeferred Retirement are not eligible for pay-ment for unused sick days under the SCORprogram. See your payroll administrator formore information.

Ordinary Disability Retirement

To qualify for an Ordinary Disability Retirement youmust:

• Be a member in service at the time the applica-tion is filed with the Division of Pensions andBenefits. “Member in service” means that themember or employer was making pension con-tributions to the retirement system at the time offiling the Application for a Disability Retirement.It may also mean that the member was on anapproved leave of absence, paid or unpaid, orsuspension, paid or unpaid, at the time of filingthe Application for a Disability Retirement. If themember had pending litigation for wrongful ter-mination filed against the employer, the mem-ber has 30 days from the date the litigation isresolved to file for disability retirement in orderto be considered a “member in service.”

• Have four or more years of New Jersey servicecredit (Out-of-State, Military, and U.S.Government Service purchases cannot beused to attain the four years);

• Be considered totally and permanently dis-abled (you must prove that you are physicallyor mentally incapacitated from performing yournormal or assigned job duties or any otherposition your employer may assign); and

• Submit any and all medical reports or corroborating evidence on file that supportsyour disability.

Note: If the medical documentation supplied byyou is not sufficient to support your claim ofdisability, the Division of Pensions and Benefitsmay also require you to be examined by physi-cians selected by the retirement system. Theexamination will be scheduled at no cost to youby the Division of Pensions and Benefits. All

medical information is confidential and

only for use by the PFRS Board of Trustees

in evaluating your application.

If you qualify and are approved for an OrdinaryDisability Retirement, the annual benefit calculationis equal to 40% of your Final Compensation or 1.5%of your Final Compensation for each year of servicecredit, whichever is higher.

The application process begins by filing theApplication for Disability Retirement with the Divisionof Pensions and Benefits (see “Disability RetirementApplications” on page 22).

Note: Your employer also has the right to apply for anOrdinary Disability Retirement on your behalf —either with your consent or on an “involuntary” basis(see “Involuntary Ordinary Disability Retirement”below).

The Application for Disability Retirement containsforms for your physician(s) to complete and a form torelease health information related to your disability.The application requires corroboration of your condi-tion by at least two medical sources. The more com-plete the application, the faster it can be evaluated,although the process may take six months or more.

It is the applicant’s responsibility to arrange for

all physicians’ statements, hospital records, and

other health information to be sent to the

Division of Pensions and Benefits.

September 201118




Once the Board of Trustees approves a member fora disability retirement allowance, the member’sretirement application cannot be withdrawn, can-celed, or amended.

Approval for Workers’ Compensation or SocialSecurity disability benefits has no bearing on yourapplication for an Ordinary Disability Retirement.However, if you are approved for Ordinary DisabilityRetirement benefits and receive a Workers’Compensation award, your Workers’ Compensationaward may be reduced by the amount of yourOrdinary Disability Retirement benefit. If you haveany questions concerning this issue, please contactthe Division of Workers’ Compensation at (609) 292-2515 or send e-mail to: [email protected]

Involuntary Ordinary Disability Retirement

Your employer has the right to apply for anInvoluntary Ordinary Disability Retirement on yourbehalf provided that you meet the qualifications forOrdinary Disability Retirement shown above.

• If you are required to retire upon application bythe employer and have at least 4 years of NewJersey service, but less than 20 years, you willreceive an Ordinary Disability retirementallowance of 40% of Final Compensation, or1.5% of Final Compensation for each year ofservice, whichever is higher.

• If you are required to retire upon application bythe employer and have 20 or more years ofservice, you will receive an allowance equal to50% of Final Compensation plus an additional3% of Final Compensation for every year ofservice over 20 up to a maximum of 25 years.

Along with the retirement application State employ-

ers must provide a letter from the Department’shighest ranking authority and local employers must

provide a copy of a resolution adopted by the gov-erning body. The letter/resolution must indicate theintent to involuntarily retire the employee and statethat, in the employing authority's opinion, theemployee is "totally and permanently disabled" fromfulfilling his or her job duties (employers should alsoinclude any pertinent medical records).

Note: The member cannot change the date of retire-ment under an Involuntary Ordinary DisabilityRetirement.

Special Disability Retirement

To qualify for a Special Disability Retirement youmust:

• Be a member in service at the time the appli-cation is filed with the Division of Pensions andBenefits (an official leave of absence is con-sidered in service); and

• Have five or more years of New Jersey servicecredit; and

• Receive a heart transplant.

The annual benefit calculation for a Special DisabilityRetirement is equal to 50% of Final Compensation.

Accidental Disability Retirement

To qualify for an Accidental Disability Retirement youmust:

• Be a member in service at the time the appli-cation is filed with the Division of Pensions andBenefits. “Member in service” means that themember or employer was making pension con-tributions to the retirement system at the timeof filing the Application for a DisabilityRetirement. It may also mean that the memberwas on an approved leave of absence, paid orunpaid, or suspension, paid or unpaid, at thetime of filing the Application for a DisabilityRetirement. If the member had pending litiga-tion for wrongful termination filed against theemployer, the member has 30 days from thedate the litigation is resolved to file for disabili-ty retirement in order to be considered a “mem-ber in service.”

• Be considered totally and permanently dis-abled (you must prove that you are physicallyor mentally incapacitated from performing yournormal or assigned job duties or any otherposition your employer may assign) as a“direct result of a traumatic event” (see defini-tion below) that happened during and as adirect result of carrying out your regular orassigned job duties;

• Be an active member of the PFRS on the dateof the “traumatic event”;

• File an Application for Disability Retirementwithin five years of the date of the “traumaticevent”;

• Submit any and all accident reports, witnessreports, and corroborating evidence on file for

September 2011 19





any and all accidents for which you are filing;and

• Be examined by physicians selected by theretirement system. The examination will bescheduled at no cost to you by the Division ofPensions and Benefits. All medical informa-

tion is kept confidential and used only by

the PFRS Board of Trustees in reviewing

your claim.

If you qualify and are approved for AccidentalDisability Retirement, your annual retirementallowance will be 2/3 of your salary at the time of the“traumatic event” or at the time of retirement,whichever is higher.

‘Direct Result of a Traumatic Event’ has beendefined by the courts as an occurrence that is:

• Identifiable as to time and place;

• Undesigned and unexpected;

• Caused by a circumstance external to themember (not the result of preexisting diseasethat is aggravated or accelerated by the work);

• Occurred during and as a result of the mem-ber’s regular or assigned duties;

• Was not the result of the member’s willful neg-ligence; and

• Results in the member’s permanent and totalincapacitation from performing his or her usualor any other duty.

• When there is an issue of mental incapacity,the member must also establish that the eventthat forms the basis for an accidental disabilitywas objectively capable of causing a reason-able person in similar circumstances to suffer adisabling mental injury, based on a finding thatthe disability resulted from “direct personalexperience of a terrifying or horror-inducingevent that involves actual or threatened deathor serious injury, or a similarly serious threat tothe physical integrity of the member or anotherperson.”

The application process begins by filing theApplication for Disability Retirement with the Divisionof Pensions and Benefits (see “Disability RetirementApplications” on page 22).

Note: Your employer has the right to apply for anAccidental Disability Retirement on your behalf (see

the employer requirements under “InvoluntaryOrdinary Disability Retirement” on page 18).

The Application for Disability Retirement containsforms for your physician(s) to complete, a form foryour employer to complete with questions regardingthe “traumatic event”, and a release for health infor-mation relating to your disability. The more completethe application, the faster it can be evaluated,although the process may take six months or more.

It is the applicant’s responsibility to arrange for

all physicians’ statements and hospital records

to be sent to the Division of Pensions and

Benefits.

Once the Board of Trustees approves a member fora disability retirement allowance, the member’sretirement application cannot be withdrawn, can-celed, or amended.

Approval for Workers’ Compensation or SocialSecurity disability benefits has no bearing on yourapplication for Accidental Disability Retirement.However, if you receive periodic Workers’Compensation benefits while receiving an AccidentalDisability Retirement, the pension portion of yourretirement allowance will be reduced dollar-for-dollarby the amount of the periodic benefits.

If you apply for Accidental Disability Retirement andare found by the Board of Trustees to be totally andpermanently disabled but not as a result of a “trau-matic event”, you may be retired on an OrdinaryDisability Retirement if you have the required servicecredit (see page 18).

THE RETIREMENT PROCESS

The time frames in this section serve as a guide tohelp you understand the retirement process. Actualprocessing times, however, may vary and cannotbegin until the Division of Pensions and Benefitsreceives all the necessary information and formsfrom both you and your employer.

6-8 Months before Retirement

When planning for a successful retirement, it isimportant to give yourself enough time to review yourbenefits and options. You should inquire about

retirement at least six months before your retire-

ment date.

Retirement Estimates — Members within 2 years ofretirement can:

September 201120




• Obtain an Estimate of Retirement Benefitsusing the Member Benefits Online System

(MBOS). This provides you with a printableestimate of the retirement allowances availableand the amount of your group life insurancebenefits. Using the MBOS Retirement EstimateCalculator allows you to obtain and compareestimates for different retirement dates. Seepage iv for more information about registeringfor MBOS.

• Hear an estimate of retirement benefits overthe phone, by calling the Division of Pensionand Benefit's Automated Information System at(609) 777-1777.

• Submit a Request for Retirement Estimate tothe Division of Pensions and Benefits. Thisprovides you with a written estimate of theretirement allowances available and theamount of your group life insurance benefits.Please allow 4-6 weeks for manual estimateprocessing and mailing. The request form isavailable from your benefits administrator, bycalling the Division’s Office of Client Servicesat (609) 292-7524, or on the Division’s Website at: www.state.nj.us/treasury/pensions

Your employer is not notified if you request a retire-ment estimate.

For long term retirement planning, the Division alsoprovides an online retirement estimate calculator thatuses service and salary information that you provide.This calculator is available on our Web site at:


4-6 Months before Retirement

Retirement Applications — It is your responsibilityto file an Application for Retirement Allowance withthe Division of Pensions and Benefits.

Note: If you are applying for a disability retirement,see “Disability Retirement Applications” (page 22).

The Application for Retirement Allowance should

be submitted online using the Member Benefits

Online System (MBOS).

Using MBOS provides fast, efficient processing ofyour retirement application. Information on usingMBOS and the Application for Retirement Allowancecan be found in the MBOS Users’ Guide, available onMBOS and on the Division’s Web site at:


You can also obtain an Application for RetirementAllowance form and instructions:

• From your employer or by printing the application from the Division’s Web site at:www.state.nj.us/treasury/pensions

• By contacting the Office of Client Services at(609) 292-7524 or by e-mail request to: [email protected]

• By writing to the Division of Pensions andBenefits, PO Box 295, Trenton, NJ 08625-0295

If you apply for retirement using MBOS, do not sendin a duplicate paper application, as it will delay pro-cessing.

All retirements are effective on the first of a

month. You can submit your Application forRetirement Allowance no more than one year beforeyour retirement date — and as late as the last busi-ness day prior to your retirement date — but four tosix months advance filing is recommended. Under nocircumstances can a retirement become effectiveprior to the date the application is received by theDivision of Pensions and Benefits. Processing timesvary and cannot begin until the Division has receivedall the necessary information and forms from bothyou and your employer.

• If you have not furnished proof of your age tothe Division of Pensions and Benefits, youmust do so when applying for retirement (seepage 4 for acceptable proofs of age). If anyproof of age documents are given under amaiden name, please identify them as such.Attach photocopies of any proof of age docu-ments to your retirement application, as wecannot guarantee that original documents willbe returned. Please also be sure to write yourpension membership number or SocialSecurity number on all documentation that yousubmit. Your retirement application will not

be processed until the Division receives

copies of birth date evidence.

• Ask your employer to submit a Certification ofService and Final Salary to the Division ofPensions and Benefits.

When your application is received by the Division ofPensions and Benefits, members who submitted

the application online using MBOS receive e-mail

confirmation of its receipt. Otherwise, you will besent a letter acknowledging receipt of your retire-ment application.

September 2011 21






Disability Retirement Applications — TheApplication for Disability Retirement can be submit-ted online using the Member Benefits Online System(MBOS). See page iv for more information about reg-istering for MBOS.

You can also obtain an Application for DisabilityRetirement form and instructions:

• By printing the application from the Division’sWeb site at: www.state.nj.us/treasury/pensions

• By contacting the Office of Client Services at(609) 292-7524 or by e-mail request to: [email protected]

• By writing to the Division of Pensions andBenefits, PO Box 295, Trenton, NJ 08625-0295

The Application for Disability Retirement containsforms for your physician(s) to complete and for therelease of health information related to your disability.It is the applicant’s responsibility to arrange for all

physicians’ statements and hospital records to be

sent to the Division. Please be certain that youobtain the most current version of the application andforms from the Web site or the Office of ClientServices (older versions will be returned to the mem-ber for resubmission using the correct forms).

The more complete the application, the faster it canbe evaluated, although the process may take sixmonths or more.

Completed Applications for Disability Retirementshould be sent to:


Disability Review Unit

PO Box 297


See pages 18-20 for additional information about dis-ability retirement benefits.

Life Insurance — The amount of your life insurancecoverage through the PFRS decreases at retirementor terminates if you have less than 10 years of serv-ice credit. You may convert the dollar differencebetween the group coverage you had before retire-ment and the group coverage you will have afterretirement to a non-group life insurance policy.

To protect your conversion privilege it is suggestedthat you apply for conversion of your insurance at thetime you file your retirement application with theDivision of Pensions and Benefits (however, you can-not file to convert your life insurance any earlier thansix months prior to your retirement date).

See “Conversion of Group Life Insurance” on page34 and Fact Sheet #13, Conversion of Group LifeInsurance, for details.

Other Retirement Plans — If you participate in otherretirement savings plans, you must inform them sep-arately of your plans to retire.

• Contact the State Employees Deferred

Compensation Plan at 1-866-NJSEDCP ifyou participate in the plan.

• Contact the Supplemental Annuity

Collective Trust (SACT) at (609) 633-2031 ifyou participate in SACT.

• Contact the Defined Contribution

Retirement Program (DCRP) at 1-866-653-2771 if you participate in the DCRP.

Approximately 3 Months before Retirement

Health Benefits Coverage at Retirement — If youfall into one of the categories listed below, you will beoffered coverage under the New Jersey State HealthBenefits Program (SHBP) or the School Employees’Health Benefits Program (SEHBP) in retirement:

• Members already covered by the SHBP orSEHBP through their employer. (If you are noteligible for State-paid or employer-paid cover-age, you may continue the coverage into retire-ment by paying the appropriate premium);

• PFRS members who retire from an employerwho does not provide any payment towardsthe retiree’s health coverage or reimbursementof Medicare Part B premiums, may be eligiblefor retired group SHBP coverage under theprovisions of Chapter 330, P.L. 1997 (see FactSheet #47, Health Benefits Retired Coverageunder Chapter 330).

Note: Enrollment for coverage as a retiree in theSHBP or SEHBP is not automatic. You must

submit a health benefits Retired CoverageEnrollment Application to enroll.

If you are 65 or older, contact your local SocialSecurity Administration office for full Medicare enroll-ment. You must be covered by both Part A and PartB of Medicare to be eligible to enroll in the SHBP orSEHBP at retirement.

If you do not qualify for retired SHBP or SEHBP

coverage under the criteria listed above, see youremployer to explore other options that may be avail-able for continuing your health coverage.

September 201122







www.state.nj.us/treasury/pensions/epbam/exhibits/pdf/hr0801.pdf

www.state.nj.us/treasury/pensions/epbam/exhibits/pdf/hr0801.pdf

http://www.state.nj.us/treasury/pensions/ret-app-page.shtml

Approximately 2 Months before Retirement

You will receive a Quotation of Retirement Benefitsletter which shows your monthly retirementallowance with:

• Any benefits payable to an eligible survivor;

• A quote of any outstanding loan balance withrepayment options; and

• A notice of any unsatisfied balance on youraccount (see next section).

Unsatisfied Balances

Loans — If you retire with an outstanding loan bal-ance, you may:

• Pay the loan in full prior to receiving any retire-ment benefits; or

• Continue your monthly loan repayment sched-ule, plus interest, into retirement.

Purchase Arrears — When you apply for a purchaseof service credit, the Division of Pensions andBenefits assumes that the obligation will be paidbefore your retirement. Therefore, your account iscredited with the full amount of service you haveagreed to purchase. If this obligation has not beenfully paid when you retire, your Quotation ofRetirement Benefits will state the balance of yourarrears (purchase) as of your retirement date. At thattime, you must pay the balance of your arrears.

If you do not pay off the balance, the service creditwhich has not been paid for will be subtracted fromyour total years and months of service. This willreduce the amount of your retirement allowance andmay even affect your eligibility to retire.

For Deferred Retirees who have an outstandingarrears obligation for the purchase of additional serv-ice credit, interest may be assessed if there was alapse in payments of two years or more.

Shortages — A shortage in your pension accountoccurs when your employer does not deduct the prop-er pension contribution from your salary. You will benotified by the Division of Pensions and Benefits ofthe amount of any shortage. You are responsible forpayment of any shortages at retirement.

No retirement will be paid until purchase arrears

and shortage obligations have been satisfied.

Approximately 1 Month before Retirement

Board Approval — Your retirement will be presentedto the PFRS Board of Trustees for approval.

• You will receive a Board Approval Letter. Youhave 30 days from the Board approval date oryour effective retirement date (whichever islater) to request a change to your retirementdate (see “note” below). If you wish to make achange after Board approval, your new selec-tion must again be approved by the Board ofTrustees. This may delay your first retirementcheck.

• You may choose to cancel your retirementwithin 30 days of your retirement date or Boardapproval date — whichever is later (see “note”below). This request must be in writing to theDivision of Pensions and Benefits. Canceling

your retirement does not guarantee contin-

ued employment with your employer.

Note: Members who are approved for DisabilityRetirement cannot cancel their retirement or changetheir date of retirement.

COBRA — You may want to discuss with youremployer the possibility of continuing benefits underthe provisions of COBRA — The ConsolidatedOmnibus Budget Reconciliation Act (COBRA) of1985.

AFTER YOUR RETIREMENT DATE

Statement of Retirement Allowance — You willreceive a letter confirming your retirement and deathbenefits. The letter will also supply figures needed infiling your income tax return. Keep this with yourimportant papers.

Retirement Checks — Your first retirement checkcannot be issued earlier than 30 days following yourretirement date. If processing of your retirement isdelayed, your first check will be retroactive to thedate of your retirement.

Regular retirement checks are dated on the first ofthe month to cover the allowance for the previousmonth. For example, if you retire on July 1st, yourfirst retirement check would be “due and payable” onAugust 1st and is payment for the month of July.

Due and Payable — Your retirement becomes “dueand payable” after there has been a break in employ-ment without pay of at least 30 days following yourretirement date, or 30 days following approval of your

September 2011 23


retirement by the PFRS Board of Trustees, whichev-er is later.

Once your retirement becomes “due and payable”you cannot change your retirement date.

Note: If you return to a PFRS eligible position beforethe 30 days have elapsed, on either a paid or volun-tary basis, your retirement may be considered invalidand you could be required to reimburse the retire-ment system and reenroll in the PFRS (see“Employment after Retirement” on page 27 for addi-tional requirements of a valid retirement).

Change of Address — Although retirement checkscan be forwarded to a new address, it is importantthat you inform the Division of Pensions and Benefitsof the change.

• You can change your address by using theRetiree Change of Address function in theMember Benefits Online System (MBOS) forretirees. See page iv for more information aboutregistering for MBOS.

• Change your address by calling the Automated

Information System at (609) 777-1777.

• If notifying the Division of a change of addressin writing, be sure to include both your old andyour new address and your retirement numberor Social Security number.

Direct Deposit/Electronic Funds Transfer — Direct

deposit of retirement checks is mandatory(except for foreign mailing addresses). Direct depositwill prevent your retirement checks from being lost,stolen, or delayed in the mail.

When you apply for retirement, sign up for direct

deposit using the Direct Deposit/Electronic Funds

Transfer application available to pending retirees

on the Member Benefits Online System (MBOS).

• Registered retirees can also start or changedirect deposit online, at any time, using MBOS.

See page iv for more information about registeringfor MBOS.

You may also use the Authorization of Direct Depositform. The form is included in the Application forRetirement Allowance packet or can be printed fromthe Division of Pensions and Benefits Web site.

Please allow approximately 60 days for a new directdeposit, or changes to an existing direct deposit, tobegin.

Withholding Federal and NJ State Income Tax —The Division of Pensions and Benefits will provide forthe withholding of federal and New Jersey Stateincome tax from your retirement check.

The Division is obligated to withhold federal incometax unless you file a Form W-4P with instructions notto do so.

New Jersey income tax withholding is voluntary, andnone will be withheld unless you give instructions todo so. Please keep in mind that if you live outsideNew Jersey your retirement benefits are not subjectto New Jersey State income tax, but may be subjectto state or local taxes in the jurisdiction in which youreside. There is no provision for withholding any localor out-of-state taxes.

New retirees will automatically receive a federalForm W-4P and New Jersey Form NJ W-4P for with-holding income tax. After that, you may obtain a fed-eral or New Jersey State Form NJ W-4P by calling orwriting the Division of Pensions and Benefits, orprinting the forms from the Division’s Web site at::


Retirees can increase or decrease existing withhold-ing amounts by calling the Automated Information

System at (609) 777-1777.

Online federal and New Jersey W-4P applicationsare also available to retirees who are registeredusers of the Member Benefits Online System

(MBOS). See page iv for more information about registering for MBOS.

The Division of Pensions and Benefits

cannot provide tax advice.

• Questions about your federal income tax shouldbe directed to the Internal Revenue Service at1-800-TAX-1040.

• Questions about New Jersey income tax shouldbe directed to the New Jersey Division ofTaxation at 1-800-323-4400.

Federal Income Tax after Retirement — EveryJanuary, the Division of Pensions and Benefitsissues each retiree an annual Form 1099-R reflectingthe taxable retirement allowance paid during the pre-ceding tax year. The degree to which your pension istaxed, other than Accidental Disability Retirement,depends on whether or not the payments you receivehave been previously taxed. Employee contributionsmade prior to 1987 were made with after tax dollars.That is, they were federally taxed prior to being

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ww.state.nj.us/treasury/pensions/tax-info.shtml

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made. Contributions for the purchase of service cred-it are also made with after tax dollars unless fundedby a rollover from another tax-deferred plan.

If you began contributing to the pension plan in 1987or after, and you have not made a purchase of serv-ice credit, your entire pension is subject to federalincome tax because your contributions have neverbeen taxed.

If you contributed to the pension plan before 1987, orif you have made a purchase of service credit since1987, your pension is immediately taxable based onthe “expected return rule.” Part of your retirementallowance comes from your own pension contribu-tions that were already taxed, and the InternalRevenue Service (IRS) allows you to recover thesecontributions tax-free. This recovery is spread outover your expected lifetime or the combined lifetimeof you and your beneficiary, according to IRS lifeexpectancy tables. This means that a small “tax-exclusion amount” of each monthly retirement checkis tax-free. The remainder of the monthly benefit issubject to federal income tax.

If you retired on an Accidental Disability Retirement— or if you are a surviving spouse receiving AccidentalDisability or Accidental Death benefits — the Divisionof Pensions and Benefits currently reports your ben-efit as exempt from federal income tax.

Ordinary Disability Retirement benefits are subject tofederal tax to the same extent as other pensions.

Any federal tax questions should be referred to theIRS at 1-800-TAX-1040.

NJ State Income Tax after Retirement — If you livein New Jersey, you will be subject to New JerseyState income tax when you have recovered in pen-sion checks the amount of pension contributions youmade to the retirement system while working.However, if you will not recover your total contribu-tions within three years of retirement, contact the NewJersey Division of Taxation at 1-800-323-4400, or seethe NJ Gross Income Tax Return Form 1040 instruc-tions to determine how your pension is taxed.

If you are receiving an Ordinary Disability orAccidental Disability retirement allowance, your pen-sion is exempt from New Jersey income tax if you areunder age 65. When you reach age 65, your disabil-ity pension is treated as a regular pension and is con-sidered taxable for New Jersey income tax.

Cost-of-Living Adjustment — Chapter 78, P.L. 2011,the Pension and Health Benefit Reform Law, sus-

pended Cost-of-Living Adjustments (COLA) for

retirees of all retirement systems. Please note,however, that there is no reduction to any COLAincreases that were already added to retiree benefitsprior to June 28, 2011, the effective date of the law.

Prior to the suspension of COLA, the PensionAdjustment Program provided an annual Cost-of-Living Adjustment to eligible retirees and their sur-vivors who received a monthly retirement allowancefrom the PFRS.

For additional information about COLA — includingcalculation examples — see Fact Sheet #18, Cost-of-Living Adjustments.

Prior Cost-of-Living Adjustments are shown underthe Current Earnings section of the retirement bene-fit Statement of Allowances and Deductions (checkor EFT stub).

Retirees can also verify current allowance anddeduction information at any time using the retireeaccount information available through the Member

Benefits Online System (MBOS) or by calling theAutomated Information System at (609) 292-7524.

See page iv for more information about using or reg-istering for MBOS.

See page iv for more information on using theAutomated Information System.

Social Security — Your pension is not reduced by

any Social Security benefits you may receive (see“Social Security Earnings Test” on page 30).

REDUCTION OR SUSPENSIONOF YOUR BENEFITS

Normally, you will receive retirement benefits as longas you live. Your benefits, however, could be reducedor suspended if:

• You return to a position covered by the PFRSand are required to reenroll (see “Employmentafter Retirement” on page 27).

• You become mentally or physically incompe-tent. Your benefits will not be reinstated until alegal representative has been appointed.

• You have an outstanding purchase arrears bal-ance or a shortage in your account at the timeof your retirement.

September 2011 25




• You receive salary from your employer forservice rendered after your date of retirement.

• You waive your right to a portion of any pen-sion to which you are entitled.

• As an Accidental Disability retiree, you receiveperiodic Workers’ Compensation benefits afteryour retirement date.

• As a disability retiree, you fail to appear for aperiodic medical re-examination when request-ed to do so.

• You fail to file a Certificate of Eligibility whenyou are asked to do so. This certificate is nec-essary, for example, if you or one of your ben-eficiaries has a change in marital status.

• You are incarcerated (although the Board ofTrustees may permit the continuance of yourbenefits to your dependents).

• An accounting error is made and the PFRSmust be repaid.

Your pension is normally exempt from any liensagainst it. Exceptions are: tax liens imposed by thefederal Internal Revenue Service and court orders forchild support, alimony, or equitable distribution.

The order is effective only when you withdraw yourfunds or when you begin to receive monthly retire-ment payments.

Divorce or Dissolution of a CivilUnion/Domestic Partnership

The retirement system will implement matrimonial/civil union dissolution court orders granting alimony,child support, or equitable distribution.

Matrimonial/civil union dissolution orders regardingyour withdrawal from the retirement system will takeeffect if you voluntarily apply to withdraw your PFRSaccount (see page 36).

Matrimonial/civil union dissolution orders regardingyour retirement will not take effect until you retire andbegin receiving a monthly retirement allowance. Thecourt order can designate a specific dollar amount orpercentage, or a percentage based on the number ofyears of pensionable service you accrued during themarriage/civil union, to be withheld from your retire-ment allowance. The amount withheld is sent direct-ly from the Division of Pensions to your formerspouse/partner unless the order specifies anotherpayee (i.e. a probation department).

Any court ordered withholding paid to your formerspouse/partner from your retirement allowance willterminate upon your death or the death of the formerspouse/partner.

Group Life Insurance — In cases of divorce or dis-solution, N.J.S.A. 3B:3.14 states that even if yourDesignation of Beneficiary form indicates a formerspouse/partner and/or relatives of the formerspouse/partner as beneficiaries for life insurance,they cannot receive the benefit. Therefore, the lifeinsurance proceeds become payable to your remain-ing primary beneficiaries, if any; contingent benefici-aries, if any; or your estate. However, the followingexceptions will be honored and considered valid:

• Court orders are filed that specifically desig-nate your former spouse/partner to receive alife insurance benefit; or

• You file a Designation of Beneficiary after thefinal date of judgment that names your formerspouse/partner and/or relatives of your formerspouse/partner as the life insurance beneficiary.

Misconduct

The receipt of retirement benefits is expressly condi-tioned upon the rendering of honorable service by apublic officer or employee. Your benefits may bereduced or forfeited if you are convicted of a crime inany way related to your employment, or if you aresuspended or dismissed from your employment.

In accordance with N.J.S.A. 43:1-3.1, the court mayorder the forfeiture of all or part of the retirementallowance in certain cases.

Also, in accordance with N.J.S.A. 43:1-3, the Boardof Trustees is required to order the forfeiture of all orpart of the retirement allowance of a member for mis-conduct during public service, which renders theservice, in whole or in part, dishonorable*. The Boardevaluates the member's disciplinary and/or criminalcharges using the following 11 factors to determinewhether the member's public service is consideredhonorable.

1. The employee's length of service;

2. The basis for retirement, i.e., age, service,disability, etc. (includes the effective date ofretirement);

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*Except for Deferred Retirement when removed forcause on charges of misconduct or delinquency —N.J.S.A. 43:16A-11.2.



3. The extent to which the employee's pensionhas vested;

4. The duties of the particular employment;

5. The employee's public employment andservice (includes the date of last pensioncontribution);

6. The employee's other public employmentand service;

7. The nature of the misconduct or crime,including the gravity or substantiality of theoffense, whether it was a single or multipleoffense and whether it was continuing or iso-lated;

8. The relationship between the misconductand the employee's public duties;

9. The quality or moral turpitude or the degreeof guilt and culpability, including the employ-ee's motives and reasons, personal gain andthe like;

10. The availability and adequacy of other penalsanctions; and

11. Other personal circumstances relating to theemployee bearing upon the justness of theforfeiture.

The Division of Criminal Justice in the Department ofLaw and Public Safety, the County and MunicipalProsecutor's Offices, and the Civil ServiceCommission are required to inform the Division ofPensions and Benefits whenever a public official oremployee is prosecuted or convicted. State andLocal public employers are also required to notify theDivision of Pensions and Benefits whenever a publicemployer takes formal disciplinary action to remove amember from public office or employment for causeon charges of misconduct or delinquency. In thesecases, the Board of Trustees will consider all relevantdocumentation to render a determination on anyappropriate action.

The Division may suspend processing of a member'sapplication for retirement pending the receipt of thefinal disposition of charges against the member. Allclaims for retirement, death benefits, or the return ofthe member's contributions cannot be processeduntil the criminal or administrative matter has beenresolved to the satisfaction of the Board of Trustees.The Division will postpone action on all claims wherethere is pending litigation against the member's

employment. In this case, the Division will hold allapplications or requests in abeyance until such timeas the matter is fully resolved. Once all the requiredinformation is provided to the Division, the Board ofTrustees will consider each case on its own merits.

New Jersey law stipulates that a retired member isnot eligible to collect retirement benefits if the retireeis confined in a penal institution as a result of a con-viction of a crime involving moral turpitude. The lawprovides that an eligible dependent may continue tocollect a retirement benefit if they can prove to thesatisfaction of the Board of Trustees that they rely onthe retiree's benefits for their maintenance.

The member should contact the Division's Board andTrustee Administration Office, in writing, if any of theconditions listed should occur in order to obtain morespecific instruction on how to proceed.

For additional information, see Fact Sheet #76,Honorable Service, which is available on the Divisionof Pensions and Benefits Web site at:


EMPLOYMENT AFTER RETIREMENT

For most PFRS retirees, working for private industry,the federal government, or a government agency inanother state will not affect your retirement benefits.

For PFRS retirees who resume public employment inNew Jersey after retirement, there are several areasof concern.

IRS Provisions

A PFRS retiree who returns to public employmentbefore age 59½ may be subject to 10% additionalfederal tax withholding for an in service distributionunder the Internal Revenue Code. Because thisissue is fact sensitive, you should consult with theInternal Revenue Service or a qualified tax consult-ant and are strongly advised to use caution if con-

sidering a return from retirement to public

employment.

Bona Fide Retirement

In applying the return to employment provisionsdescribed throughout this section, it is assumed thatthe PFRS retirement is considered to be “bona fide.”This means the retiree has made a good faith

action to retire and that the employer/employee

relationship is completely severed.

September 2011 27




A “bona fide” retirement must also be “due andpayable.” Your retirement does not become “due andpayable” until there has been a cessation of employ-ment of at least 30 days following your retirementdate, or 30 days following approval of your retirementby the PFRS Board of Trustees, whichever is later. Ifyou return to a PFRS covered position — on either apaid or voluntary basis — before the 30 days haveelapsed, you should expect to continue enrollment inthe PFRS. Your retirement will be considered invalid,and you will remain an active employee under youroriginal PFRS account.

Other situations where a retirement may not be con-sidered “bona fide” include, but are not limited to, thefollowing examples:

• If you make arrangements prior to your retire-ment to return to the same or similar publicemployment as a regular employee, contractemployee, leased employee, or an independ-ent contractor, the employer/employee rela-tionship has not been completely severed —regardless of the length of any break inemployment — and your retirement will bedetermined to be invalid. In this case youwould be required to remain an active employ-ee under the retirement system in the newposition.

• If you are re-employed or appointed by thesame employer to the same or a similar posi-tion that would have qualified for continuedmembership in the retirement system had theretirement not occurred, this may indicate thatthe employer/employee relationship has notbeen completely severed and, therefore, yourretirement may be determined to be invalid. Inthis case you would be required to remain anactive employee under the retirement systemin the new position.

If your retirement is determined to be invalid (not“bona fide”), you will be required to reimburse theretirement system for the amount of any retirementbenefits you receive from the date of retirement andbe required to pay pension contributions in the formof back deductions going back to the date when youshould have been reenrolled. There is no limitation

on the amount of reimbursement that may be

recovered by the retirement system in these situ-

ations.

The information contained in the rest of this sec-

tion assumes that the returning retiree has a

“bona fide” retirement.

If it is established at any time that the retirement wasnot made in good faith or that the employer/employ-ee relationship was not completely severed, the pro-visions described below will not apply.

Returning to a Position under the PFRS

If, as a “bona fide” PFRS retiree, you accept regularemployment in a position that makes you eligible forthe PFRS you must reenroll in the PFRS as a condi-tion of employment. All eligibility requirements for thePFRS must be met except the age requirement (see“Exception for Retirees Serving in Elected Office”below and the special rules for “Police or FireSupervisory Positions” on page 29).

Your prospective employer should be able to tell youif the employment you are considering is covered bythe PFRS. However, if there is any doubt, you shouldhave the prospective employer contact the Divisionof Pensions and Benefits for verification prior to youraccepting any public employment after retirement.You will be responsible for any penalties imposedbased on violation of the law.

Failure to Reenroll in the PFRS — If you return toemployment under the PFRS and:

• You are eligible for membership but you fail toreenroll; or

• It is determined that your PFRS retirement isnot “bona fide” (see page 27);

You will be required to reimburse the retirement sys-tem for the amount of all retirement benefits youreceive from the date you should have enrolled, and— if still employed — reenroll in the PFRS. In addi-tion, you will be required to pay pension contributionsin the form of back deductions going back to the dateyou should have been reenrolled.

There is no limitation on the amount of reim-

bursement that may be recovered by the retire-

ment fund in these situations.

Exception for Retirees Serving in Elected Office —Under N.J.S.A. 43:3C-3, a bona fide retired member(see page 27) of a State-administered retirementsystem who is elected to public office may either con-tinue to receive a retirement benefit from the formeremployment and would not be eligible for enrollmentin the new retirement system, or may suspend the

September 201128


retirement benefit (and any related health benefitscoverage) from the former employment and enroll inthe new retirement system while serving in the elect-ed office. Upon termination of the elected office, theretirement benefit from the former employment wouldbe reinstated.

Active Members Serving in Elected Office —Chapter 78, P.L. 2011, the Pension and HealthBenefit Reform Law, repealed N.J.S.A. 43:16A-5.1(Chapter 96, P.L. 1999). As a result, a member of thePFRS can no longer retire and collect a PFRS retire-ment allowance while continuing to hold an electivepublic office covered by the PFRS.

Note: PFRS retirees who were granted a retirementallowance under N.J.S.A. 43:16A-5.1 prior to itsrepeal on June 28, 2011, may continue to receive thepension benefit and salary provided that they contin-ue to serve, without interruption, in the same electedoffice.

Reenrollment in the PFRS — If required to reenroll,your date of reenrollment is determined under thegeneral enrollment procedures of the PFRS (see“Enrollment” on page 4) and you are treated as anew active PFRS member in all respects. You will

be enrolled in a new PFRS account under the

“membership tier” in effect at the time you return

to employment (see special rules for “DisabilityRetirees Restored to Active Service” below).

If reenrolled, your retirement allowance and anyrelated health benefits will be canceled for the dura-tion of your employment. If you die while in the sec-ond membership, no benefits from the previousmembership or retirement are payable. This includessurvivor or death benefits.

Retiring for a Second Time — When you retireagain, you must meet the retirement qualifications ofyour PFRS membership tier and file an Applicationfor Retirement Allowance with the Division ofPensions and Benefits before any benefits can bepaid. In no case will retirement benefits be paidretroactively for a period prior to receipt of the appli-cation.

Upon application, the first retirement allowance isrestored and a second retirement allowance is calcu-lated based solely on your second membership.Each retirement account stands alone and cannot becombined to provide a larger benefit or another typeof benefit. The two calculations will be paid in sepa-rate retirement checks.

Returning to Work in a Position Covered by aNew Jersey State-administered RetirementSystem Other than the PFRS

In this case, provided that you are a “bona fide”retiree — and except as noted for supervisory posi-tions in the next section — your retirement allowancecontinues and you can receive salary but you cannotbecome a member of that retirement system (see“IRS Provisions” on page 27 about federal tax impli-cations).

Police or Fire Supervisory Positions — If a PFRSretiree is appointed to a position with a law enforce-ment unit or firefighting unit with administrative orsupervisory duties over police officers and/or fire-fighters (such as Police Director, Fire Director,Director of Public Safety, etc.) less than six monthsafter retirement from the PFRS, that retiree must sus-pend his or her retirement and must reenroll in thePFRS (per N.J.S.A. 43:16A-3.1).

Disability Retirees Restored to Active Service

If you retired on a PFRS disability retirement but areno longer disabled, before you can return to activeservice in a PFRS eligible title with any publicemployer, you must be under age 55 and prove tothe satisfaction of the Board of Trustees that you areno longer disabled. If approved to return to activeservice in a position covered by the PFRS, your

original PFRS account and “membership tier”

are restored, deductions for pension resume, andyou are treated as an active member in all respects.

Upon subsequent retirement, you must meet theretirement qualifications of your PFRS membershiptier and file an Application for Retirement Allowancewith the Division of Pensions and Benefits before anybenefits can be paid. You will receive a benefit basedon total service.

Health Benefits Coverage

Returning to public employment in New Jersey mayaffect your eligibility to continue coverage under theState Health Benefit Program (SHBP) or the SchoolEmployees’ Health Benefits Program (SEHBP). Ifyour retirement allowance is canceled because youreturn to work in a position covered by the PFRS,your retired SHBP or SEHBP coverage is also can-celed until you retire again.

Returning to a position not covered by the PFRS willnot affect your eligibility for SHBP or SEHBP retiredgroup coverage, provided that the other coverage is

September 2011 29





not also through the SHBP or SEHBP — multipleSHBP/SEHBP coverage as both a retiree and anemployee is prohibited.

Social Security Earnings Test

There is an earnings test for people receiving SocialSecurity benefits under the normal retirement age(age 65 to 67 depending on year of birth). Check withthe Social Security Administration at 1-800-772-1213for information on their earnings limit before accept-ing employment after retirement.

ACTIVE AND RETIRED DEATH BENEFITS

Upon the death of an active or retired PFRS member,two benefits are payable:

• A monthly survivor’s pension paid to a specific family member (or return of contribu-tions to a beneficiary); and

• Group life insurance

The monthly survivor’s pension to a family member isexplained below. An explanation of group life insur-ance begins on page 32.

Payment of Pension to a Family Member

Upon the death of an employed or retired member,the spouse, civil union partner, eligible domestic part-ner, child(ren), or dependent parents of the membermay be entitled to a monthly pension. The benefitsvary according to the status of the member at thetime of the death. The terms used in the explanationsof benefits are explained here.

‘Spouse’ — A person of the opposite sex to whomyou were married on the date of your death and whohas not remarried or entered into a civil union (exceptfor an Accidental Death Benefit, see page 31). A pho-tocopy of the Marriage Certificate is required for ver-ification.

‘Civil Union Partner’ — A person of the same-sex asdefined by Chapter 103, P.L. 2006, with whom youwere partnered in a civil union until the date of yourdeath and who has not entered into a new civil unionor married (except for an Accidental Death Benefit,see page 31). A photocopy of the New Jersey CivilUnion Certificate or a valid certification from anotherjurisdiction that recognizes same-sex civil unions isrequired for verification. See Fact Sheet #75, CivilUnions, for details.

’Domestic Partner’ — A person of the same-sex asdefined by Chapter 246, P.L. 2003, with whom youwere partnered in a domestic partnership until thedate of your death and who has not entered into acivil union or married (except for an Accidental DeathBenefit, see page 31). For an employee or retiree ofa local public entity, the local entity’s governing bodymust have adopted a resolution to provide Chapter246 pension benefits. A photocopy of the New JerseyCertificate of Domestic Partnership dated prior toFebruary 19, 2007, or a valid certification from anoth-er jurisdiction that recognizes same-sex domesticpartners is required for verification See Fact Sheet#71, Benefits Under the Domestic Partnership Act, fordetails.

’Child’ — Your unmarried child:

• Under the age of 18; or

• 18 years of age or older and enrolled in highschool;

• Any age, who at the time of your death, is dis-abled because of mental or physical incapacityand is incapable of substantial gainful employ-ment because of the impairment. This incapac-ity must last or be expected to last for a con-tinuous period of not less than 12 months asdetermined by the Medical Review Board; or

• For an Accidental Death Benefit (see page 31),a “child” may also mean an unmarried childunder the age of 24 who is enrolled in collegein a degree program for at least 12 hours persemester.

’Parent’ — Your parent who was receiving at leastone-half support from you in the 12 months immedi-ately preceding your death (or the accident which ledto your death in cases of an Accidental DeathBenefit). The dependency of the parent will be con-sidered terminated if he or she remarries after thedeath of the member.

Active Members

Upon your death as an active member your survivingspouse/partner is eligible to receive a pension bene-fit equal to 50% of your Final Compensation.

• ‘Final Compensation’ — for a Tier 1 member

enrolled on or before May 21, 2010, FinalCompensation means the salary upon whichpension contributions were based in the last 12months of creditable service preceding yourdeath as an active member.

September 201130






For a Tier 2 or Tier 3 member enrolled afterMay 21, 2010, Final Compensation means theaverage salary upon which pension contribu-tions were based for any three fiscal years ofmembership preceding your death as an activemember that provides the largest possible ben-efit.

If there is no surviving spouse/partner, the followingbenefit is payable to eligible children:

• 50% of Final Compensation to three or moreeligible children;

• 35% of Final Compensation to two eligible chil-dren; or

• 20% of Final Compensation to one eligiblechild.

If there is no surviving spouse/partner or children, apension is paid to your eligible parents as follows:

• 40% of Final Compensation to two parents; or

• 25% of Final Compensation to one parent.

If there is no surviving spouse/partner, children, orparents, the employee’s contributions to the retire-ment system are paid to the named beneficiary. Inthe event that a specific beneficiary is not named, thefunds will be paid to the member’s estate.

Retired Members

For PFRS members who retired January 1, 1968 andafter, upon your death your surviving spouse/partneris eligible to receive a pension benefit equal to 50%of your Final Compensation, plus 15% of your FinalCompensation for one eligible child or 25% of yourFinal Compensation for two or more eligible children.

• ‘Final Compensation’ — for a Tier 1 member

enrolled on or before May 21, 2010, FinalCompensation means the salary upon whichpension contributions were based in the last 12months of creditable service preceding yourretirement.

For a Tier 2 or Tier 3 member enrolled afterMay 21, 2010, Final Compensation means theaverage salary upon which pension contribu-tions were based for any three fiscal years(July-June) of membership preceding yourretirement that provides the largest possiblebenefit.

If there is no surviving spouse/partner, the followingbenefit is payable to eligible children:

• 50% of Final Compensation to three or moreeligible children;

• 35% of Final Compensation to two eligible chil-dren; or

• 20% of Final Compensation to one eligiblechild.

ACCIDENTAL DEATH BENEFIT

If you die as a result of an accident during the per-formance of your regular or assigned duties, andyour death is not a result of willful negligence, yourfamily may be entitled to an Accidental Death Benefit.A report of an accident must be filed with the retire-ment system within 60 days of the accident. AnApplication for Accidental Death Benefits must befiled within five years of the date of death.

In cases resulting in an Accidental Death Benefit,your eligible surviving spouse, civil union partner, oreligible same-sex domestic partner (as defined onpage 30) is paid an annual pension of 70% of yourCompensation. This benefit is a lifetime benefit toyour surviving spouse or partner.

• ‘Compensation’ — For all PFRS membersCompensation means the salary upon whichpension contributions were based in the 12months immediately preceding your death orthe accident which led to your death.

If there is no eligible surviving spouse/partner, or ifthe surviving spouse/partner dies, a pension is paidto your eligible children (as defined on page 30) inthese amounts:

• 50% of Compensation to three or more eligiblechildren;

• 35% of Compensation to two eligible children;or

• 20% of Compensation to one eligible child.

If there is no eligible surviving spouse/partner or chil-dren, a pension will be paid to your eligible depend-ent parents (as defined on page 30) in theseamounts:

• 40% of Compensation to two eligible parents;or

• 25% of Compensation to one eligible parent.

If there is no surviving spouse, child, or parent, yourpension contributions will be paid to your named ben-eficiary. In the event that a specific beneficiary is notnamed, the funds will be paid to the member’s estate.

September 2011 31


GROUP LIFE INSURANCE

Your employer pays the cost of your group life insur-ance. This noncontributory group life insurance isprovided through policies issued by the insurancecarrier (Prudential Financial).

The group policy number for the PFRS is G-14800.

• ‘Compensation’ — PFRS group life insurancebenefits are calculated using the salary onwhich pension contributions were based in the12 months immediately preceding your deathor retirement.

Coverage for Active Members

If your death occurs in active service before retire-ment, your named beneficiary (or estate where thereis no named beneficiary) receives a group life insur-ance benefit equal to 3½ times your Compensation.If you die during the first year of creditable service,the benefit is 3½ times your creditable base salaryupon which pension contributions were paid.

Coverage for Retired Members

If you die after retirement, your named beneficiary (orestate where there is no named beneficiary) receivesa group life insurance benefit equal to ½ of yourCompensation. However, if you retired on a DisabilityRetirement, the amount is equal to 3½ times yourCompensation until age 55 when it is reduced to ½ ofCompensation.

Group life insurance for retired members of thePFRS who were enrolled on or after July 1, 1971, ispayable only if the member retired with 10 or moreyears of pension membership credit or retired on adisability retirement.

Choosing a Beneficiary

When a member is enrolled in the PFRS, the newmember’s estate is the group life insurance benefici-ary on record until the Division of Pensions andBenefits receives a new and properly completedDesignation of Beneficiary.

• Active members can complete the

Designation of Beneficiary online using the

Member Benefits Online System (MBOS).

See page iv for more information about regis-tering for MBOS.

• Members may also mail a Designation ofBeneficiary form to the Division of Pensionsand Benefits. The form is available under

“Forms and Publications” on the Division’sWeb site at: www.state.nj.us/treasury/pensions

When you submit the Designation of Beneficiary, youname beneficiaries for your group life insurance ben-efits (and, if applicable, the return of your pension con-tributions). You may name any person, organization,your estate, or trust as beneficiary. You may changeyour designation at any time during your active mem-bership using MBOS or by submitting a new andproperly completed Designation of Beneficiary.

At retirement, you are asked on your Application forRetirement Allowance to name a beneficiary(ies) forgroup life insurance benefits. You may name any per-son, organization, your estate, or trust as beneficiaryfor group life insurance benefits.

• The designation of a beneficiary on anApplication for Retirement Allowance that isfiled with and accepted by the Division ofPensions and Benefits supersedes any olderdesignation of beneficiary on file. The designa-tion is effective upon acceptance by theDivision, even if the retirement date on theapplication is in the future or the member latercancels the retirement application.

Retirees may also change group life insurance des-ignations at any time during retirement by filing a newand properly completed Designation of Beneficiary.

The Designation of Beneficiary form can be obtainedon the Division’s Web site at:

www.state.nj.us/treasury/pensions or by contacting the Division of Pensions andBenefits.

Note: Beneficiary information for retirees is not avail-able on MBOS.

If you have additional questions regarding designa-tions, please see Fact Sheet #68, Designating aBeneficiary.

For your protection, beneficiary designations cannotbe accepted or confirmed over the telephone or by e-mail. Active employees can verify beneficiary des-ignation on MBOS. Otherwise, the Division will onlyaccept a written request from the member.

Payment of Group Life Insurance

Group life insurance benefits for active members canbe paid in one of several ways (group life insurancefor retirees must be paid in a lump sum). The optionsare:

September 201132











• Lump Sum — A single payment to your bene-ficiary.

• Annuity Certain — Equal installments over aselected period of years.

• Life Annuity — Paid monthly to your benefici-ary for life.

Death benefits cannot be paid until all the necessaryinformation and claim forms have been received fromyour beneficiary by the Division of Pensions andBenefits.

To report a death, contact the Office of ClientServices at (609) 292-7524.

Taxation of Group Life Insurance Payments

Information regarding death claim payments are sup-plied to the New Jersey Division of Taxation, in accor-dance with their requirements. A beneficiary or ben-eficiaries may be considered by the Division ofTaxation to be personally liable for any and all inher-itance and/or estate taxes until paid.

Group Life Insurance and Leave Of Absence

Your group life insurance coverage will continue infull force for an official leave of absence without payunder the following conditions:

• Up to two years while on an official leave ofabsence for personal illness.

• Up to one year while on an official leave to ful-fill a residency requirement for an advanceddegree or as a full-time student at an institutionof higher education.

• Up to 93 days while on official leave for per-sonal reasons (also family leave).

An official leave of absence requires documentationthat establishes the nature of the leave and the con-tinuing relationship between the employer and themember.

Note: A member who has been suspended withoutpay is covered for group life insurance for up to 93days.

Taxation of Group Life Insurance Benefits

The Internal Revenue Service classifies all employ-er-provided life insurance coverage over $50,000 asa fringe benefit subject to taxation. The amount of lifeinsurance coverage is not taxable but rather the pre-mium required to pay for the life insurance coverageis taxable.

To determine the taxable amount, if any, subtract$50,000 from that total value of your noncontributorygroup life insurance coverage. The premium ratesare then applied to the remaining life insuranceamount. The premium costs for the life insurance aredetermined by the IRS based on your age (see chart)and the life insurance in excess of $50,000. Theremaining premium cost (if any) is the taxableamount and is added to your income on the Form W-2 for that year.

EXAMPLE: A PFRS member is age 56 and has non-contributory life insurance coverage.

The member’s annual base salary is $60,000. Themember’s life insurance coverage totals $210,000(3.5 x $60,000).

The fringe benefit amount is determined by subtract-ing $50,000 from the total benefit amount, $210,000.That equals $160,000.

According to the IRS, the premium cost for an indi-vidual 52 years of age is $2.76 per $1,000 of cover-age. The premium cost in this example is $441.60(160 x $2.76) and this amount would be added toyour taxable income.

September 2011 33


IRS Premium Rates*as of 7/1/99

(Annual cost per $1,000 of coverage)

Age Premium

Under age 25 $ 0.60

25-29 0.72

30-34 0.96

35-39 1.08

40-44 1.20

45-49 1.80

50-54 2.76

55-59 5.16

60-64 7.92

65-69 15.24

70 and older 24.72

*These rates are subject to change by the IRS.

Waiving Noncontributory Group Life Insuranceover $50,000

PFRS members are permitted to waive their noncon-tributory group life insurance over $50,000 to avoid apossible federal and State tax liability on that benefit.

Waivers of partial amounts are not permitted. Anymember who waives noncontributory group life insur-ance, must waive the total amount of noncontributo-ry coverage in excess of $50,000.

In the example (above), the member’s noncontribu-tory life insurance coverage equals $210,000 (3.5 x$60,000). In this example the member could waive$160,000 of noncontributory life insurance coveragebecause members are only permitted to waive non-contributory life insurance coverage over $50,000.The net taxable value would be reduced to $0.00.

You may waive your noncontributory group life insur-ance coverage in excess of $50,000 by completing aWaiver of Group Life Insurance in Excess of $50,000form and submitting it to the Division of Pensions andBenefits. The form is available from the Division ofPensions and Benefits or your employer. The waiverform must be received by the Division of Pensionsand Benefits before December 31 in order to be effec-tive January 1 of the next calendar year. Once a waiv-er form has become effective it shall be irrevocablefor the entire calendar year. The waiver will remain ineffect until you submit a reinstatement form to theDivision of Pensions and Benefits. The reinstatementwill become effective the following January 1.

If a waiver is in effect at the time of termination ofemployment or retirement, you will not be permittedto convert any amount of your noncontributory grouplife insurance coverage over $50,000.

Before completing the waiver, you should completelyunderstand the ramifications of waiving your noncon-tributory life insurance. For more information, refer toInternal Revenue Service Publication 525, Taxableand Nontaxable Income.

CONVERSION OFGROUP LIFE INSURANCE

If you are covered by group life insurance whileemployed, the coverage ends 31 days after youcease employment (whether for reasons of retire-ment, termination of employment, or leave ofabsence without pay).

You are eligible to convert your group life insurancecoverage to an individual policy with Prudential

Financial, without medical examination and at yourown expense, when you retire, terminate employ-ment, or lose coverage while on a leave of absencewithout pay.

Conversion to a Prudential policy is guaranteed (youcannot be denied coverage for health or other rea-sons), but it may be more expensive or less suitableto your needs than other policies for which you mayqualify from Prudential or other insurance carriers.You should consider contacting other insurance car-riers and compare the available policies and costsbefore you decide to purchase the conversion policy.(Other carriers may accept or reject your applicationbased on their evaluation of the status of your healthand other factors.)

If you wish to purchase a conversion policy, you havea one-time option to do so prior to the 31st day afteryou cease employment. After that date, you will notbe eligible to purchase a conversion policy.

You may convert your life insurance to any individual,non-group policy customarily offered by Prudential.You cannot convert to term insurance or a policy con-taining disability benefits. Under a guaranteed con-version, the premiums you would pay would be atPrudential’s “standard” rates for the type of policy towhich you would be converting rather than the “pre-ferred” rates that would be used for applicants ingood health. The individual policy will be effective atthe end of the 31 day conversion grace period. If youdo not convert to an individual policy by the end ofthe 31 day period, your coverage will end.

To initiate the purchase of a conversion policy, youmust contact Prudential Financial through any of itslocal offices, or by calling 1-877-889-2070 or 1-800-262-1112 (do not contact the Division of Pensionsand Benefits about conversion).

You will need to provide your PFRS group insurancepolicy number: G-14800.

The conversion policy can be for any amount ofinsurance up to the amount that you had whileemployed. In the case of a retirement, the maximumamount that you can purchase will be reduced by theamount of any life insurance that you will automati-cally receive in retirement under your retirementplan.

To protect your conversion privilege it is suggestedthat you send your application for conversion toPrudential with at least one month’s premium, at thetime you file your retirement application with theDivision of Pensions and Benefits (however, you can-

September 201134


not file to convert your life insurance any earlier thansix months prior to your retirement date).

The following sections provide more detailed infor-mation about conversion policies for the specific sit-uations of retirement, termination of employment,leave of absence, and return to public employment.

Conversion: At Retirement

Service or Special Retirement — If you retire with10 or more years of service credit in the retirementsystem, the amount of your group life insurance willbe substantially reduced when you retire. Theamount of your coverage will be listed on theQuotation of Retirement Benefits that you will receiveprior to your retirement. It will be identified as the“Lump Sum Death Benefit.” You will automatically becovered by this insurance and do not need to do any-thing to qualify.

If you retire on a service retirement with less than 10

years of service credit in the retirement system, youwill not be entitled to any group life insurance inretirement.

The reduction (or elimination) of your life insurancecoverage will be effective 31 days after your termina-tion of employment or date of retirement, whicheveris earlier. If you wish to supplement this coveragewith either a conversion policy from Prudential oranother type of policy from either Prudential or anoth-er insurance carrier, it is best to begin exploring youroptions at least four months prior to your retirement.

EXAMPLE: If you had group life insurance of$175,000 through the retirement system whileemployed, and that life insurance coverage drops to$25,000 at retirement, you can purchase up to$150,000 in life insurance coverage under an indi-vidual non-group policy by contacting a Prudentialagent within 31 days following your termination ofemployment.

Deferred Retirement — If you retire with a DeferredRetirement, your life insurance coverage will end 31days after termination of employment. Any life insur-ance coverage to which you are entitled upon retire-ment will not take effect until you reach age 55 andbegin to receive retirement benefits.

You have the one-time option to purchase a conver-sion policy prior to the 31st day after termination ofemployment (not at the time that you reach normalretirement age). The maximum amount of coveragethat you may purchase will be the difference between

the amount of coverage you had while employed andthe amount of coverage that you will automaticallyreceive when you begin to receive retirement bene-fits.

Disability Retirement — Your life insurance cover-age will continue while your disability retirement ben-efits are being processed provided that the retire-ment application was filed within 30 days of endingyour employment. You do not need to make contri-butions to the contributory plan during this time.

If you are approved for a disability retirement you willautomatically be covered by life insurance in theamount of 3½ times your Final Compensation untilyou reach age 55. At age 55, your life insurance cov-erage reduces to ½ times your Final Compensation.

You will have the option to purchase a conversionpolicy up until the day you reach age 55. The maxi-mum amount of coverage that you may purchase willbe the difference between the amount of noncontrib-utory coverage you had while employed and theamount of coverage that you will automaticallyreceive when you reach the normal retirement age of55.

Conversion: Termination of Employment orLeave of Absence

If you terminate employment without applying forretirement or your insured period during a leave ofabsence expires, you will continue to be covered forthe next 31 days. Up until the end of that 31-day peri-od, you may convert your group life insurance, with-out medical examination, to any individual policy cus-tomarily offered by Prudential except term insuranceor a policy containing disability benefits.

EXAMPLE: If you had group life insurance of $96,000through the retirement system while employed, thatlife insurance coverage is eliminated at termination ofemployment. You can purchase up to $96,000 in lifeinsurance coverage under an individual non-grouppolicy by contacting a Prudential agent before 31days following your termination of employment.

Conversion: Return to Public Employment

If you return to public employment after the purchaseof a conversion policy, you must discontinue yourindividual conversion policy. If you do not, you will berequired to submit satisfactory proof of insurabilitybefore you can be covered again in full under a grouplife insurance policy.

September 2011 35


Group Life Insurance Coverage While ReceivingWorkers’ Compensation Without Pay

If you are disabled due to an illness or injury that is adirect result of your regular job duties, you may beout of work on an official leave of absence for illness.If so, your group life insurance will automatically con-tinue for the duration of the leave of absence, up totwo years.

During the interval between the time you are withoutpay and the actual receipt of the Workers’Compensation award, you must be on an officialleave of absence granted by your employer.

WITHDRAWAL FROM THE RETIREMENT SYSTEM

When Membership Ends

Your active membership in the PFRS ends 30 daysafter your retirement date or 30 days after theapproval of your retirement by the PFRS Board ofTrustees, whichever is later; or if:

• You die;

• You end your employment and withdraw yourcontributions from the PFRS; or

• If you have not been contributing to the retire-ment system for two consecutive years.

— If you have less than 10 years of PFRSservice credit, two consecutive years is thelimit for inactive membership before aPFRS account expires (see “ExpiredAccounts” below).

— If you have 10 years or more of PFRSservice credit, your PFRS account is vest-ed. This means that you are guaranteed*the right to receive a retirement benefitbased on that service and salary (see“Vesting” on page 7). However, two con-secutive years remains the limit for inactivemembership. If you return to PFRS cov-ered employment after two or more con-secutive years without a payroll contribu-tion, you will be reenrolled in a new PFRSaccount at the time that you return.

Terminating Employment

If you terminate employment before you are eligibleto retire, your options regarding your PFRS accountvary depending on your vesting status at the time ofyour termination (see “Vesting” on page 7).

If you are vested when you terminate employ-

ment, you can apply for a Deferred Retirement, withpayments to begin at age 55 (see “DeferredRetirement” on page 17).

If you are not vested before you terminate

employment, you will not be eligible to receive amonthly retirement benefit before your accountexpires — unless you are age 53 or older, or eligiblefor an Ordinary or Accidental Disability Retirementbenefit.

If you terminate employment before vesting, you canchoose to:

• Make an immediate withdrawal of your contri-butions; or

• Leave your contributions on deposit with thePFRS and retain all the service credit you haveearned, in the event you return to coveredemployment and resume membership. As ageneral rule (see “Exceptions” listed later inthis section), if you do not resume active mem-bership within two years, your account willautomatically expire and you will be requestedto withdraw your contributions.

If your account expires or you elect to voluntarilywithdraw your personal contributions, all servicecredit represented by the withdrawal is canceled. Ifyou later return to PFRS covered employment, youmay then be eligible to purchase the service (see“Purchasing Service Credit” on page 8) to have itcredited to your new account.

Expired Accounts

If your membership has been inactive for 18 consec-utive months, you are not vested, and you have notfiled for and received a withdrawal of contributions,the Division of Pensions and Benefits will send anExpiration Notice to your last known address (and acopy to your last employer in case they have a morecurrent address) to remind you that your money isstill being held in the retirement system. When noti-fied, you should submit an Application for Withdrawalto obtain your contributions in the retirement system.

After two years has passed, if the Division ofPensions and Benefits is unable to contact you, or

September 201136


*Except if terminated for cause on charges of mis-conduct or delinquency (see page 26).

you do not reply to the Expiration Notice by submit-ting an Application for Withdrawal, your account will

expire.

Should you return to covered employment before thetwo-year period ends, you have the option of anIntrafund or Interfund Transfer if you otherwise qual-ify (see “Transfers” on page 6).

Should you return to covered employment after youraccount has expired or you have withdrawn youraccount, you will be treated as a new member in allrespects. Service credit from a former membershipmay be purchased by members returning to the sys-tem after the withdrawal of money from a formeraccount.

Exceptions

Your PFRS membership will not end two years afteryour last contribution if:

• You are granted an official leave of absencebeyond the two-year period. If your leave ofabsence extends beyond two years, your two-year inactive period will not begin until yourleave of absence ends;

• You lose your job through no fault of your own,either laid off or your position is abolished. Yourinactive membership can be extended up to 5years for the purpose of return to employment.

For an extension to be granted in these cases, youmust submit documentation from your employershowing that your leave of absence was officiallyextended or that your employment was not terminat-ed voluntarily or for cause.

This extension only gives you the right to retain yourcontributions and service credit in the retirement sys-tem should you again obtain public employment(police members of the PFRS see “AgeRequirements — Prior Police Service” on page 3). Itgives you no other right to benefits. Therefore, youcannot qualify for a retirement benefit unless youreturn to PFRS employment during the period ofextended inactive membership in order for youraccount to be reactivated. You would then be eligibleto apply for a retirement allowance provided that youmeet all other qualifications for retirement.

EXAMPLE: If you were age 50 with five years of mem-bership credit at the time of layoff, your accountcould remain inactive until you reach age 55; howev-er, you would not be able to qualify for retirementbenefits at age 55 unless you returned to activeemployment before filing for retirement.

Withdrawing Contributions

If you terminate covered employment before retire-ment, you may withdraw all your contributions to thefund, less any outstanding loan or other obligations.You may withdraw only the money you have con-tributed and partial withdrawals are not permitted.Upon your withdrawal, all rights and privileges of

membership end.

Since the employer/employee relationship must besevered, no withdrawal will be paid if there are unre-solved legal matters concerning your termination ofemployment.

All withdrawal requests must be submitted using

the Application for Withdrawal program of the

Member Benefits Online System (MBOS).

MBOS provides registered members with fast, effi-cient processing of a withdrawal. You receive imme-diate confirmation and a follow-up e-mail that yourapplication has been received.

Information on using MBOS and the Application forWithdrawal can be found in the MBOS Users’ Guide,available on MBOS and on the Division’s Web site at:


If, after following the MBOS registration instructions,you still need assistance registering for MBOS, callthe MBOS Help Desk at (609) 777-0534 or send ane-mail with the subject line "MBOS E-mail" to: [email protected]

• Exception to the MBOS Application forWithdrawal — While PFRS members arerequired to process withdrawal applicationsthrough MBOS, members are not able to reg-ister or log onto MBOS once the account hasexpired. This usually occurs after two consec-utive years have passed without a pensioncontribution (see “Expired Accounts” on page36). Members with expired accounts can stillwithdraw their contributions, but must write orsend e-mail to the Withdrawal Section of theDivision of Pensions and Benefits. In any cor-respondence members should include their fullname, pension membership number or SocialSecurity number, a current mailing address,and e-mail address. Upon determination of thestatus of the account, the Division will provideadditional instructions to the member for com-pleting the withdrawal.

September 2011 37



Please note that this is the only circumstancewhere a paper withdrawal application may bepermitted. Limited access to a computer or amember’s reluctance to use MBOS are notconsidered sufficient circumstances for accept-ing a paper withdrawal application for process-ing. Any paper Application for Withdrawalreceived by mail will not be processed and themember will be mailed instructions on submit-ting the request through MBOS.

In accordance with federal law, income tax must bewithheld on certain pension distributions that pro-duce an annual taxable income of $200 or moreunless the taxable amount is directly rolled over intoan individual retirement arrangement (IRA) or a newemployer’s retirement plan (if applicable). To qualify,this direct rollover must occur within 60 days of thewithdrawal check date. If payment is made directly toyou, the taxable portion is subject to 20% federalincome tax withholding. In addition, if you receivepayment before you reach age 59½ and you do notroll over the taxable amount, you may have to pay anextra tax equal to 10% of the taxable portion of anypayment. If you have any questions concerning thisfederal law, call the Internal Revenue Service at 1-800-829-1040.

You may call the Division of Pensions and BenefitsAutomated Information System at (609) 777-1777 forgeneral information concerning withdrawals or infor-mation pertaining to your particular withdrawal claim.If you are age 55 or older or have 10 years or moreof service credit when you file for withdrawal, youmust waive any rights you have to any retirement ordeath benefit. At the time you apply for withdrawal,the Division will indicate how to obtain an estimatedamount of any retirement benefit and will require asigned waiver of such benefits, should you still wishto withdraw.

No withdrawal application can be processed until allthe necessary information has been received fromyou and your former employer.

WORKERS’ COMPENSATION

As long as you are receiving Workers’ Compensationbenefits (either temporary or permanent), you retainthe same status as an active member. You cannotwithdraw from the PFRS while you are receivingWorkers’ Compensation, have a claim pending, orare involved in litigation regarding Workers’Compensation unless the employer/ employee rela-tionship is severed and you complete a waiver ofretirement benefits.

Your employer is obligated by statute to pay yourpension contribution based on the full salary youwere receiving immediately before you start receiv-ing Workers’ Compensation benefits, even if the totalcompensation you receive is less than 100% of yourfull salary.

Your employer is not obligated, however, to makevoluntary contributions, such as loans or purchasearrears payments.

The employer's obligation to make pension contribu-tions for members receiving Workers' Compensationceases when:

• The employee voluntarily files for a retirementallowance that is subsequently approved;

• The employer files an involuntary disabilityretirement application for the employee that issubsequently approved (see page 19);

• The employee voluntarily resigns from employ-ment for reasons other than the inability to per-form the job's functions due to the incident thatwas the basis for the Workers' Compensationclaim; or

• The employee is terminated by the employerfor reasons unrelated to a Workers'Compensation award.

If you are approved for Ordinary DisabilityRetirement benefits and receive a Workers’Compensation award, your Workers’ Compensationaward may be reduced by the amount of yourOrdinary Disability Retirement benefit.

If you are approved for Accidental DisabilityRetirement benefits and receive receive periodicWorkers’ Compensation benefits, the pension portionof your retirement allowance will be reduced dollar-for-dollar by the amount of the periodic benefits.

For additional information, see Fact Sheet #45,Workers’ Compensation.

September 201138




APPEALS

If you wish to appeal any administrative decision ofthe Division of Pensions and Benefits, address yourappeal to:

Secretary to the Board of Trustees

Police and Firemen’s Retirement System


PO Box 295

Trenton, New Jersey 08625-0295

Your appeal to the Board of Trustees must include acopy of the administrative decision, a detailed expla-nation of your basis for disagreement with the deci-sion, and all supporting documentation that you wishto be considered by the Board.

The Board of Trustees will address your appeal andissue a written determination.

If you disagree with the determination of the Board ofTrustees, you may request a formal hearing beforean Administrative Law Judge within the Office ofAdministrative Law (OAL), by sending a written state-ment to the Board of Trustees within 45 days fromthe date of the Board’s decision. State in detail thereasons for your disagreement with the Board’s

determination and submit any and all supporting doc-umentation if you have not already done so. If nosuch written statement is received within the 45-dayperiod, the determination shall be considered final.

If your request for a formal hearing is approved bythe Board of Trustees, the Board will submit the mat-ter to the OAL. Upon completion of this hearing, theAdministrative Law Judge will submit to the Board aninitial decision which the Board may adopt, reject, ormodify. If the Board rejects or modifies the initial deci-sion, it shall issue a detailed findings of fact and con-clusions of law which will become the Board’s finaladministrative determination and may then beappealed to the Superior Court, Appellate Division.

When the Board of Trustees reviews your request fora hearing in the OAL, it determines whether the mat-ter involves contested facts or is solely a question oflaw. If the appeal involves solely a question of law, anOAL hearing is not likely to be approved. In that case,the Board shall reject your hearing request and issuedetailed findings of fact and conclusions of law.These findings and conclusions will become theBoard’s final administrative determination and maybe appealed to the Superior Court, AppellateDivision.

September 2011 39


Benefits and provisions of the Police and Firemen’s Retirement System are subject to changes by the leg-islature, courts, and other officials. While this booklet outlines the benefit and contribution schedules ofthe Police and Firemen’s Retirement System, it is not a final statement. Complete terms governing anyemployee benefit program are set forth in the New Jersey Statutes Annotated. Regulations, new oramended, are published in the New Jersey Register by the State Office of Administrative Law supple-menting the New Jersey Administrative Code.

September 201140


NOTES

September 2011 41


POLICE AND FIREMEN’S RETIREMENT SYSTEM

HANDBOOK EVALUATION FORM

Please rate the following aspects of this handbook:

1. Explanation of the provisions of the Police and Firemen’s Retirement System.

Excellent Above Average Below Poor Average Average

2. Ease of use (readability, ease in finding needed information, etc.).


3. Usefulness as a future reference.


4. I found the following section(s) or subject(s) helpful:

5. I found the following section(s) or subject(s) confusing:

6. Questions or comments:

If you need an answer to a question, be sure to include your full name, Social Security number or PFRSmembership number, a daytime telephone number, and return address:

Name:

SSN or Member Number: Phone:

Address:

Please mail your completed evaluation form to:


ATTN: Publications Unit

PO Box 295


Thank you for your time and consideration in completing and returning this evaluation.

SP-0492-0512

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