11

Joint Committee on Public Joint Committee on Public Employee Benefits ReformEmployee Benefits Reform

Division of Pensions & BenefitsDivision of Pensions & Benefits

August 9, 2006August 9, 2006

22

OverviewOverview

Second largest public employee benefitsSecond largest public employee benefits program in nation program in nation

Mission: to help to attract and retain skilled Mission: to help to attract and retain skilled employees in public service employees in public service

33

Plans AdministeredPlans Administered

• 9 Pension Systems9 Pension Systems

• 3 Supplemental Retirement Savings Plans3 Supplemental Retirement Savings Plans

• State Health Benefits ProgramState Health Benefits Program

• Voluntary Benefit Plans (Voluntary Benefit Plans (§§125, LTC, etc.)125, LTC, etc.)

44

Covered LivesCovered Lives

740,000+ active and retired participants740,000+ active and retired participants in Defined Benefit Plans in Defined Benefit Plans

16,000+ in Defined Contribution Plan16,000+ in Defined Contribution Plan

802,000+ covered lives in SHBP802,000+ covered lives in SHBP

122,000+ in Voluntary Benefits Plans122,000+ in Voluntary Benefits Plans

55

Participating EmployersParticipating Employers

1,700 state and local employers1,700 state and local employers• State Departments, Authorities & CommissionsState Departments, Authorities & Commissions• Police & Fire DepartmentsPolice & Fire Departments• MunicipalitiesMunicipalities• CountiesCounties• Colleges & UniversitiesColleges & Universities• School BoardsSchool Boards• Local Authorities & CommissionsLocal Authorities & Commissions

66

Defined Benefit PlansDefined Benefit Plans

1.1. Public Employees Retirement System – 322,985Public Employees Retirement System – 322,9852.2. Teachers’ Pension & Annuity Fund – 154,854Teachers’ Pension & Annuity Fund – 154,8543.3. Police and Firemen’s Retirement System – 45,263Police and Firemen’s Retirement System – 45,2634.4. State Police Retirement System – 2,950State Police Retirement System – 2,9505.5. Judicial Retirement System - 427Judicial Retirement System - 4276.6. Prison Officers Pension Fund (closed 1960)Prison Officers Pension Fund (closed 1960)7.7. Consolidated Pension Fund (closed 1955)Consolidated Pension Fund (closed 1955)8.8. Central Pension Fund (closed)Central Pension Fund (closed)

77

Pension System EnrollmentPension System Enrollment

Condition of EmploymentCondition of Employment1.1. Earn Service CreditEarn Service Credit

vesting, benefits eligibility & calculationvesting, benefits eligibility & calculation

2.2. Salary HistorySalary History For benefits calculationFor benefits calculation

3.3. Group Life Insurance CoverageGroup Life Insurance Coverage

4.4. Employee ContributionsEmployee Contributions PERS & TPAF = 5%PERS & TPAF = 5% PFRS = 8.5%PFRS = 8.5% SPRS = 7.5%SPRS = 7.5%

88

Retirement BenefitsRetirement Benefits

PERS & TPAFPERS & TPAFIRC 401(a) Defined Benefit PlanIRC 401(a) Defined Benefit Plan

PERS PERS

Active – 322,985Active – 322,985

Retired – 121,177Retired – 121,177

TPAFTPAF

Active – 154,854Active – 154,854

Retired – 65,401Retired – 65,401

99

Retirement EligibilityRetirement Eligibility

Service – Age 60Service – Age 60

Early – 25 years serviceEarly – 25 years service (Reduced Under 55)(Reduced Under 55)

Deferred –10 years of serviceDeferred –10 years of service (Collect at age 60) (Collect at age 60)

VeteranVeteran

DisabilityDisability

1010

Basic Benefit Formula Basic Benefit Formula (PERS & TPAF)(PERS & TPAF)

Service Credit includes all serviceService Credit includes all service Worked & PurchasedWorked & Purchased

FAS = Final Average SalaryFAS = Final Average Salary Usually last 3 years Usually last 3 years

Years/Months

55X FAS =

GrossAnnualPension

1111

Special Benefit Formulas Special Benefit Formulas (PERS & TPAF)(PERS & TPAF)

Veterans RetirementsVeterans Retirements 54.5% or more X Highest Year Salary54.5% or more X Highest Year Salary

Disability RetirementsDisability Retirements Ordinary = 43.6% FASOrdinary = 43.6% FAS Accidental = 72.7% Salary at time of AccidentAccidental = 72.7% Salary at time of Accident

1212

Active Death Benefits

Return of Contributions (plus interest)

+

Group Life Insurance Benefit

1313

PERS Active GLI

Non-Contributory = 1.5 x last year salary Contributory = 1.5 x last year salary

Total Value = 3 x last year salary

Employee Premium = .50 of 1% of base salary

1414

TPAF Active GLI

Non-Contributory = 1.5 x last year salary Contributory = 2 x last year salary

Total Value = 3.5 x last year salary

Employee Premium = .40 of 1% of base salary

1515

Retired Group Life InsurancePERS and TPAF

If retired with 10+ years Service Credit

Paid up Death Benefit

PERS = 3/16th of last year salary

TPAF = 7/16th of last year salary

1616

Retirement BenefitsRetirement Benefits

PFRS & SPRSPFRS & SPRSIRC 401(a) Defined Benefit PlanIRC 401(a) Defined Benefit Plan

PFRSPFRS

Active – 45,263Active – 45,263

Retired – 29,192Retired – 29,192

SPRSSPRS

Active – 2,950Active – 2,950

Retired – 2,299Retired – 2,299

1717

Retirement EligibilityRetirement Eligibility

Service – 3 types, usually age 55Service – 3 types, usually age 55

Mandatory Mandatory PFRS at 65PFRS at 65 SPRS at 55SPRS at 55

Special – 25 years Service CreditSpecial – 25 years Service Credit

Deferred –10 years of serviceDeferred –10 years of service (Collect at age 55) (Collect at age 55)

DisabilityDisability

1818

Retirement Benefits

Service RetirementService Retirement Usually 50%+ x Final CompensationUsually 50%+ x Final Compensation

Special RetirementSpecial Retirement 65%+ x Final Compensation65%+ x Final Compensation

Deferred RetirementDeferred Retirement 2% Final Compensation x Years Service2% Final Compensation x Years Service

Disability RetirementsDisability Retirements 40% - 67% x Final Compensation 40% - 67% x Final Compensation

1919

Active Death BenefitsActive Death Benefits

If not in Line of Duty

Survivor Pension

(50% Final Comp)

++

Group Life Insurance Benefit

(3.5 x Final Comp)

Final Comp = High 12 months salary

2020

Active Death BenefitsActive Death Benefits

Accidental Death

Survivor Pension

(70% Final Comp)

++

Group Life Insurance Benefit

(3.5 x Final Comp)

2121

Retired Survivor BenefitsRetired Survivor Benefits

50% Pension to Surviving Spouse50% Pension to Surviving Spouse

++

50% Final Comp Life Insurance Benefit50% Final Comp Life Insurance Benefit

2222

Cost of Living AdjustmentsCost of Living Adjustments

Two years after retirementTwo years after retirement Yearly thereafterYearly thereafter ..60 x % change in CPI60 x % change in CPI

2323

Purchase of Service CreditPurchase of Service Credit

Why?Why?

To reach threshold for To reach threshold for

1.1. Retirement eligibilityRetirement eligibility

2.2. Retired health benefit eligibilityRetired health benefit eligibility

3.3. Increase overall pension benefitIncrease overall pension benefit

2424

What Can You Purchase?What Can You Purchase?

Temporary Service Temporary Service

Leave of Absence Leave of Absence

Former MembershipFormer Membership

Out-of-State ServiceOut-of-State Service

Uncredited ServiceUncredited Service

Local or Municipal ServiceLocal or Municipal Service

U.S. Government ServiceU.S. Government Service

U.S. Military ServiceU.S. Military Service

2525

Pension LoansPension Loans

3 years posted service3 years posted service 1/2 of posted contributions 1/2 of posted contributions 2 loans per calendar year2 loans per calendar year Repayment through Payroll DeductionsRepayment through Payroll Deductions Interest rate is 4% Interest rate is 4% Loans may be paid in full at any timeLoans may be paid in full at any time

2626

Terminating MembershipTerminating Membership

If Terminate NJ Public Employment andIf Terminate NJ Public Employment and

NotNot Eligible for Retirement Allowance: Eligible for Retirement Allowance:

1.1. Account Expires After 2 Years, andAccount Expires After 2 Years, and

2.2. Must Withdraw Contributions from SystemMust Withdraw Contributions from System

2727

Post-Retirement EmploymentPost-Retirement Employment

Cannot return to work under same NJ Cannot return to work under same NJ retirement system ( $ Thresholds)retirement system ( $ Thresholds)

Still allows work in:Still allows work in:1.1. Private IndustryPrivate Industry

2.2. Federal GovernmentFederal Government

3.3. Other State GovernmentOther State Government

4.4. Position covered by different NJ Position covered by different NJ Retirement system Retirement system

2828

Defined Contribution PlanDefined Contribution Plan

Alternate Benefits ProgramAlternate Benefits ProgramIRC 403(b) PlanIRC 403(b) Plan

State College & University FacultyState College & University Faculty

16,920 members16,920 members

2929

ABPABP

EligibilityEligibility

Full-time faculty, officers, some administratorsFull-time faculty, officers, some administrators

at NJ Community Colleges, State Colleges and at NJ Community Colleges, State Colleges and Universities & HESAAUniversities & HESAA

3030

ABPABP

Contribution Rate:Contribution Rate: Member = 5% (tax deferred)Member = 5% (tax deferred) Employer = 8%Employer = 8%

Vested after 1 yearVested after 1 year

Additional tax deferred contributions Additional tax deferred contributions permittedpermitted

3131

ABPABP

6 Approved Carriers for Investment6 Approved Carriers for Investment

Group Life Insurance – employer paidGroup Life Insurance – employer paid Benefit = 3.5 x last 12 months salaryBenefit = 3.5 x last 12 months salary Retired GLI benefit = 50% final salaryRetired GLI benefit = 50% final salary

Long Term Disability Benefit = 60%Long Term Disability Benefit = 60%

3232

ABPABP

Retirement Benefits Payable Retirement Benefits Payable

Earliest at 59-1/2Earliest at 59-1/2

Lump Sum Distribution and/orLump Sum Distribution and/or Life Annuity, orLife Annuity, or Fixed AnnuityFixed Annuity

3333

Voluntary Benefits PlansVoluntary Benefits Plans

Supplemental Retirement Savings AcctsSupplemental Retirement Savings Accts

Total 38,000+ membersTotal 38,000+ members

NJSEDCP – 457 plan for State employeesNJSEDCP – 457 plan for State employees SACT – Tax Sheltered – 403b for EducatorsSACT – Tax Sheltered – 403b for Educators SACT – Regular – all public employeesSACT – Regular – all public employees ACTS – 403b for College/University facultyACTS – 403b for College/University faculty

3434

Supplemental Retirement Supplemental Retirement Savings AccountsSavings Accounts

Deferred Compensation (Deferred Compensation (§ § 457) 457) – – State employees onlyState employees only

Supplemental Annuity Collective TrustSupplemental Annuity Collective Trust Regular (post-tax)Regular (post-tax) Tax Sheltered (Education only)Tax Sheltered (Education only)

Additional Contributions Tax ShelteredAdditional Contributions Tax Sheltered Higher EducationHigher Education

3535

NJ State Employees Deferred NJ State Employees Deferred Compensation Plan (Compensation Plan (§ 457)§ 457)

Open to all state employeesOpen to all state employees

Minimum: Minimum: 1% of base salary1% of base salary

Maximum: Maximum: $15,000 for 2006$15,000 for 2006

$20,000 if over 50$20,000 if over 50

3636

Supplemental Annuity Collective Supplemental Annuity Collective Trust - Trust - § 403(b)§ 403(b)

SACT RegularSACT Regular Open to all NJ public employeesOpen to all NJ public employees Post-tax contributionsPost-tax contributions 1 – 10% of Base Salary up to $15,0001 – 10% of Base Salary up to $15,000 Quarterly adjustments allowedQuarterly adjustments allowed Distribution at retirement, termination orDistribution at retirement, termination or

death death

3737

Supplemental Annuity Collective Supplemental Annuity Collective Trust - Trust - § 403(b)§ 403(b)

SACT Tax-ShelteredSACT Tax-Sheltered Open to all NJ public Open to all NJ public educationeducation employees employees Pre-tax contributionsPre-tax contributions 1 – 10% of Base Salary up to $15,0001 – 10% of Base Salary up to $15,000 Quarterly adjustments allowedQuarterly adjustments allowed Distribution at retirement, termination or Distribution at retirement, termination or

death death

3838

Additional Contributions Additional Contributions Tax-Sheltered - Tax-Sheltered - § 403(b)§ 403(b)

Open to NJ Higher Education employeesOpen to NJ Higher Education employees Pre-tax contributionsPre-tax contributions 1 – 10% of Base Salary up to $15,0001 – 10% of Base Salary up to $15,000 Quarterly adjustments allowedQuarterly adjustments allowed Investment Options: Same as ABPInvestment Options: Same as ABP Distribution at retirement, termination or deathDistribution at retirement, termination or death

3939

NJ State Health Benefits ProgramNJ State Health Benefits Program

802,000 Covered Lives 802,000 Covered Lives 7 Health Plans7 Health Plans 11 Dental Plans11 Dental Plans Rx PlanRx Plan

Active GroupActive Group Retired GroupRetired Group

$3 Billion Program$3 Billion Program

4040

NJ State Health Benefits ProgramNJ State Health Benefits Program

State and Local Employer GroupsState and Local Employer Groups1.1. State Bi-weekly and MonthlyState Bi-weekly and Monthly

2.2. Local EducationLocal Education

3.3. Local Non-EducationLocal Non-Education

Active & Retired Group CoverageActive & Retired Group Coverage 7 Health Plans7 Health Plans 11 Dental Plans11 Dental Plans 2 Rx Plans2 Rx Plans

4141

NJ State Health Benefits ProgramNJ State Health Benefits Program

State employee contractsState employee contracts Active GroupActive Group

113,000 Medical & Rx113,000 Medical & Rx 103,000 Dental103,000 Dental

Retired GroupRetired Group 34,000 Medical & Rx34,000 Medical & Rx 10,000 Dental (retiree pay)10,000 Dental (retiree pay)

4242

NJ SHBPNJ SHBP

Local Education & Municipal ContractsLocal Education & Municipal Contracts

981 Participating Employers981 Participating Employers Active GroupActive Group

119,200 Medical119,200 Medical 34,500 Rx34,500 Rx 1,100 Dental1,100 Dental

Retired GroupRetired Group 91,500 Medical91,500 Medical 28,900 Dental28,900 Dental

4343

NJ SHBPNJ SHBP

Medical Plan Offerings (Active & Retired)Medical Plan Offerings (Active & Retired)

Traditional (Indemnity) – 127,000 total contractsTraditional (Indemnity) – 127,000 total contracts NJ PLUS (POS) – 158,000 contractsNJ PLUS (POS) – 158,000 contracts HMOs – 75,000 ContractsHMOs – 75,000 Contracts

Aetna Health Aetna Health Cigna HealthCareCigna HealthCare OxfordOxford AmeriHealthAmeriHealth Health NetHealth Net

4444

NJ SHBPNJ SHBP

Rx CoverageRx Coverage

Active Member Co-PayActive Member Co-Pay 2 tier copay (generic, name brand)2 tier copay (generic, name brand) Retail Pharmacy – 30 day supplyRetail Pharmacy – 30 day supply Mail Order – 90 day supplyMail Order – 90 day supply

Retired-Member Co-Pay Retired-Member Co-Pay 3 tier copay (generic, preferred name brand, other)3 tier copay (generic, preferred name brand, other) Retail Pharmacy – 30 day supplyRetail Pharmacy – 30 day supply Mail Order – 90 day supplyMail Order – 90 day supply

4545

NJ SHBPNJ SHBP

Dental CoverageDental Coverage – –

Active EmployeeActive Employee

Dental Expense Plan Dental Expense Plan (Indemnity)(Indemnity)

10 Dental Plan 10 Dental Plan Organizations (DPO)Organizations (DPO)

BeneCareBeneCare Community Community DentalDental

CIGNA DentalCIGNA Dental Group Dental Group Dental HealthHealth

Flagship DentalFlagship Dental Dental Group of Dental Group of NJNJ

Horizon DentalHorizon Dental Aetna DMOAetna DMO

4646

NJ SHBPNJ SHBP

Retiree Dental Coverage – Retiree Dental Coverage –

Dental Expense Plan (Indemnity) onlyDental Expense Plan (Indemnity) only

Member Pays PremiumMember Pays Premium

4747

Voluntary Benefit PlansVoluntary Benefit Plans

Tax$ave – MedicalTax$ave – Medical 3 plans w/ 84,800 participants3 plans w/ 84,800 participants

Commuter Tax$aveCommuter Tax$ave 2 plans w/ 1,113 participants2 plans w/ 1,113 participants

Long-Term CareLong-Term Care Flexible savings plan with 3,000 Flexible savings plan with 3,000

participantsparticipants

4848

Tax$ave – MedicalTax$ave – Medical

§ 125 Plans for State Employees§ 125 Plans for State Employees

PPremium remium OOption ption PPlan lan - Pre-tax medical premium payments- Pre-tax medical premium payments

UUnreimbursed nreimbursed MMedical edical SSpending pending AAccountccount

- - Pre-tax Medical Expense Pre-tax Medical Expense ReimbursementReimbursement

DDependent ependent CCare are SSpending pending AAccountccount- Pre-tax dependent care reimbursement- Pre-tax dependent care reimbursement

4949

Commuter Tax$aveCommuter Tax$ave

§ 132 Plan for State Employees§ 132 Plan for State Employees

Pre-tax dollars for commuter expensesPre-tax dollars for commuter expenses

1.1. Mass Transit ExpensesMass Transit Expenses

2.2. Commuter Parking ExpensesCommuter Parking Expenses

5050

Long-Term Care InsuranceLong-Term Care Insurance

Open to State employees, dependents and Open to State employees, dependents and retireesretirees

Pre-tax dollars accrue to defray long-term Pre-tax dollars accrue to defray long-term care costscare costs

5151

State Benefit Program SpendingState Benefit Program Spending

PENSION

HEALTH BENEFITS-

ACTIVE

HEALTH BENEFITS-RETIRED $3.6 B

$2.43B

$6.3B

Debt Service

$-

$1

$2

$3

$4

$5

$6

$7

2002 2003 2004 2005 2006 2007 2008 2009 2010

FISCAL YEAR

$B

5252

Asset/Liability Comparison All Systems Asset/Liability Comparison All Systems Funded Ratio: 82.3%Funded Ratio: 82.3%

Assets

Liability

40

50

60

70

80

90

100

110

1995 1997 1999 2001 2003 2005

Fiscal Year

$ B

5353

Debt Service Debt Service On Pension BondsOn Pension Bonds

5454

QuestionsQuestions