New Jersey Employee Pension and Health Care Reform 2011

July 19, 2011
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New Jersey Public Employees now have new rules regarding pension and health care benefits. Governor Chris Christie signed the law on June 28, 2011, and it affects the Teacher’s Pension and Annuity Fund (TPAF), the Public Employee’s Retirement System (PERS), the Police and Firemen’s Retirement System (PFRS), the State Police Retirement System (SPRS), and the Judicial Retirement System (JRS). Most significantly, the new bill requires employees to contribute more to their pension fund and health insurance. In addition, public employers are required to establish flexible spending arrangements for its employees.

Increased Pension Contribution:

Public employees are now required to contribute more towards their pensions. Teacher and public employee pension contributions will be increased to 6.5% of their base salary and their contribution will gradually increase by .14% per year for the next seven (7) years until 7.5% is reached. Pension contributions for police and firefighters will be increased to 10% of their base salary. The increases must be implemented on or after October 1, 2011.

New Age Retirement Requirements:

Retirement qualifications are also modified by the law. The retirement age for teachers and public workers is increased from 62 to 65 years of age. The new law also increased the penalty for early retirement of teachers and public employees to 3% of their pension per year. Police and firefighters are eligible for special retirement at age 65 with 30 years of service or age 60 with 25 years of service.

New Committees Formed:
The new law establishes new committees for the TPAF, SPRS, PERS and PFRS pension groups. Half of the committee members will be chosen by the governor and the remaining positions will be selected by union members. Once a target funded ratio is achieved for the system, the committees will have the authority to determine various factors affecting the pension systems including: member contribution rate; formula for calculation of final compensation or final salary; fraction used to calculate a retirement allowance; age at which a member may be eligible and the benefits for service or early retirement; and benefits provided for disability retirement.

Increased Health Care Contributions:

All public employees will now contribute a percentage of their salaries towards their health care benefits as dictated by the new law. The new contribution for health benefits is effective immediately for employees whose current union contract has expired and employees not covered by a union contract. Employees currently under a union contract will not be impacted until after their contract expires. Employees will now be required to contribute to their health premiums in percentages that are based on their salary as set forth in the new law.

Flexible Spending Accounts:
All public employers must now establish a flexible spending arrangement that satisfies the requirements under Section 125 of the Internal Revenue Code for reimbursement of medical and dental plan costs.

If you would like to discuss this Legal Update, please contact:

Ramon E. Rivera, Chair, Labor and Employment Law Group:
(201) 806-3388 (201) 806-3388 or

Christina M. Michelson, Associate:
(201) 623-1230 (201) 623-1230 or

This Scarinci Hollenbeck Legal Update has been prepared for the general information of clients and friends of the firm. It is not meant to provide legal advice with respect to any specific matter and should not be acted upon without professional counsel.