1 Joint Committee on Public Employee Benefits Reform Division of Pensions & Benefits August 9, 2006

2 Overview Second largest public employee benefits program in nation Second largest public employee benefits program in nation Mission: to help to attract and retain skilled employees in public service Mission: to help to attract and retain skilled employees in public service

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

4 Covered Lives 740,000+ active and retired participants in Defined Benefit Plans 740,000+ active and retired participants in Defined Benefit Plans 16,000+ in Defined Contribution Plan 16,000+ in Defined Contribution Plan 802,000+ covered lives in SHBP 802,000+ covered lives in SHBP 122,000+ in Voluntary Benefits Plans 122,000+ in Voluntary Benefits Plans

5 Participating Employers 1,700 state and local employers 1,700 state and local employers State Departments, Authorities & Commissions State Departments, Authorities & Commissions Police & Fire Departments Police & Fire Departments Municipalities Municipalities Counties Counties Colleges & Universities Colleges & Universities School Boards School Boards Local Authorities & Commissions Local Authorities & Commissions

6 Defined Benefit Plans 1.Public Employees Retirement System – 322,985 2.Teachers Pension & Annuity Fund – 154,854 3.Police and Firemens Retirement System – 45,263 4.State Police Retirement System – 2,950 5.Judicial Retirement System Prison Officers Pension Fund (closed 1960) 7.Consolidated Pension Fund (closed 1955) 8.Central Pension Fund (closed)

7 Pension System Enrollment Condition of Employment Condition of Employment 1. Earn Service Credit vesting, benefits eligibility & calculation vesting, benefits eligibility & calculation 2. Salary History For benefits calculation For benefits calculation 3. Group Life Insurance Coverage 4. Employee Contributions PERS & TPAF = 5% PERS & TPAF = 5% PFRS = 8.5% PFRS = 8.5% SPRS = 7.5% SPRS = 7.5%

8 Retirement Benefits PERS & TPAF IRC 401(a) Defined Benefit Plan PERS Active – 322,985 Retired – 121,177 TPAF Active – 154,854 Retired – 65,401

9 Retirement Eligibility Service – Age 60 Service – Age 60 Early – 25 years service Early – 25 years service (Reduced Under 55) (Reduced Under 55) Deferred –10 years of service Deferred –10 years of service (Collect at age 60) (Collect at age 60) Veteran Veteran Disability Disability

10 Basic Benefit Formula (PERS & TPAF) Service Credit includes all service Service Credit includes all service Worked & Purchased Worked & Purchased FAS = Final Average Salary FAS = Final Average Salary Usually last 3 years Usually last 3 years Years/Months 55 XFAS = Gross Annual Pension

11 Special Benefit Formulas (PERS & TPAF) Veterans Retirements Veterans Retirements 54.5% or more X Highest Year Salary 54.5% or more X Highest Year Salary Disability Retirements Disability Retirements Ordinary = 43.6% FAS Ordinary = 43.6% FAS Accidental = 72.7% Salary at time of Accident Accidental = 72.7% Salary at time of Accident

12 Active Death Benefits Return of Contributions (plus interest) + Group Life Insurance Benefit

13 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

14 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

15 Retired Group Life Insurance PERS 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

16 Retirement Benefits PFRS & SPRS IRC 401(a) Defined Benefit Plan PFRS Active – 45,263 Retired – 29,192 SPRS Active – 2,950 Retired – 2,299

17 Retirement Eligibility Service – 3 types, usually age 55 Service – 3 types, usually age 55 Mandatory Mandatory PFRS at 65 PFRS at 65 SPRS at 55 SPRS at 55 Special – 25 years Service Credit Special – 25 years Service Credit Deferred –10 years of service Deferred –10 years of service (Collect at age 55) (Collect at age 55) Disability Disability

18 Retirement Benefits Service Retirement Service Retirement Usually 50%+ x Final Compensation Usually 50%+ x Final Compensation Special Retirement Special Retirement 65%+ x Final Compensation 65%+ x Final Compensation Deferred Retirement Deferred Retirement 2% Final Compensation x Years Service 2% Final Compensation x Years Service Disability Retirements Disability Retirements 40% - 67% x Final Compensation 40% - 67% x Final Compensation

19 Active 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

20 Active Death Benefits Accidental Death Survivor Pension (70% Final Comp)+ Group Life Insurance Benefit (3.5 x Final Comp)

21 Retired Survivor Benefits 50% Pension to Surviving Spouse + 50% Final Comp Life Insurance Benefit

22 Cost of Living Adjustments Two years after retirement Two years after retirement Yearly thereafter Yearly thereafter.60 x % change in CPI.60 x % change in CPI

23 Purchase of Service Credit Why? To reach threshold for 1. Retirement eligibility 2. Retired health benefit eligibility 3. Increase overall pension benefit

24 What Can You Purchase? Temporary Service Temporary Service Leave of Absence Leave of Absence Former Membership Former Membership Out-of-State Service Out-of-State Service Uncredited Service Uncredited Service Local or Municipal Service Local or Municipal Service U.S. Government Service U.S. Government Service U.S. Military Service U.S. Military Service

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

26 Terminating Membership If Terminate NJ Public Employment and Not Eligible for Retirement Allowance: 1.Account Expires After 2 Years, and 2.Must Withdraw Contributions from System

27 Post-Retirement Employment Cannot return to work under same NJ retirement system ( $ Thresholds) Still allows work in: 1. Private Industry 2. Federal Government 3. Other State Government 4. Position covered by different NJ Retirement system

28 Defined Contribution Plan Alternate Benefits Program IRC 403(b) Plan State College & University Faculty State College & University Faculty 16,920 members 16,920 members

29 ABP Eligibility Full-time faculty, officers, some administrators at NJ Community Colleges, State Colleges and Universities & HESAA

30 ABP Contribution Rate: Member = 5% (tax deferred) Member = 5% (tax deferred) Employer = 8% Employer = 8% Vested after 1 year Additional tax deferred contributions permitted

31 ABP 6 Approved Carriers for Investment 6 Approved Carriers for Investment Group Life Insurance – employer paid Group Life Insurance – employer paid Benefit = 3.5 x last 12 months salary Benefit = 3.5 x last 12 months salary Retired GLI benefit = 50% final salary Retired GLI benefit = 50% final salary Long Term Disability Benefit = 60% Long Term Disability Benefit = 60%

32 ABP Retirement Benefits Payable Earliest at 59-1/2 Earliest at 59-1/2 Lump Sum Distribution and/or Lump Sum Distribution and/or Life Annuity, or Life Annuity, or Fixed Annuity Fixed Annuity

33 Voluntary Benefits Plans Supplemental Retirement Savings Accts Supplemental Retirement Savings Accts Total 38,000+ members Total 38,000+ members NJSEDCP – 457 plan for State employees NJSEDCP – 457 plan for State employees SACT – Tax Sheltered – 403b for Educators SACT – Tax Sheltered – 403b for Educators SACT – Regular – all public employees SACT – Regular – all public employees ACTS – 403b for College/University faculty ACTS – 403b for College/University faculty

34 Supplemental Retirement Savings Accounts Deferred Compensation (§ 457) Deferred Compensation (§ 457) – State employees only Supplemental Annuity Collective Trust Supplemental Annuity Collective Trust Regular (post-tax) Regular (post-tax) Tax Sheltered (Education only) Tax Sheltered (Education only) Additional Contributions Tax Sheltered Additional Contributions Tax Sheltered Higher Education Higher Education

35 NJ State Employees Deferred Compensation Plan (§ 457) Open to all state employees Minimum: 1% of base salary Maximum: $15,000 for 2006 $20,000 if over 50

36 Supplemental Annuity Collective Trust - § 403(b) SACT Regular SACT Regular Open to all NJ public employees Open to all NJ public employees Post-tax contributions Post-tax contributions 1 – 10% of Base Salary up to $15,000 1 – 10% of Base Salary up to $15,000 Quarterly adjustments allowed Quarterly adjustments allowed Distribution at retirement, termination or death Distribution at retirement, termination or death

37 Supplemental Annuity Collective Trust - § 403(b) SACT Tax-Sheltered SACT Tax-Sheltered Open to all NJ public education employees Open to all NJ public education employees Pre-tax contributions Pre-tax contributions 1 – 10% of Base Salary up to $15,000 1 – 10% of Base Salary up to $15,000 Quarterly adjustments allowed Quarterly adjustments allowed Distribution at retirement, termination or death Distribution at retirement, termination or death

38 Additional Contributions Tax-Sheltered - § 403(b) Open to NJ Higher Education employees Open to NJ Higher Education employees Pre-tax contributions Pre-tax contributions 1 – 10% of Base Salary up to $15,000 1 – 10% of Base Salary up to $15,000 Quarterly adjustments allowed Quarterly adjustments allowed Investment Options: Same as ABP Investment Options: Same as ABP Distribution at retirement, termination or death Distribution at retirement, termination or death

39 NJ State Health Benefits Program 802,000 Covered Lives 7 Health Plans 7 Health Plans 11 Dental Plans 11 Dental Plans Rx Plan Rx Plan Active Group Active Group Retired Group Retired Group $3 Billion Program

40 NJ State Health Benefits Program State and Local Employer Groups 1. State Bi-weekly and Monthly 2. Local Education 3. Local Non-Education Active & Retired Group Coverage Active & Retired Group Coverage 7 Health Plans 7 Health Plans 11 Dental Plans 11 Dental Plans 2 Rx Plans 2 Rx Plans

41 NJ State Health Benefits Program State employee contracts Active Group Active Group 113,000 Medical & Rx 113,000 Medical & Rx 103,000 Dental 103,000 Dental Retired Group Retired Group 34,000 Medical & Rx 34,000 Medical & Rx 10,000 Dental (retiree pay) 10,000 Dental (retiree pay)

42 NJ SHBP Local Education & Municipal Contracts Local Education & Municipal Contracts 981 Participating Employers 981 Participating Employers Active Group Active Group 119,200 Medical 119,200 Medical 34,500 Rx 34,500 Rx 1,100 Dental 1,100 Dental Retired Group Retired Group 91,500 Medical 91,500 Medical 28,900 Dental 28,900 Dental

43 NJ SHBP Medical Plan Offerings (Active & Retired) Medical Plan Offerings (Active & Retired) Traditional (Indemnity) – 127,000 total contracts Traditional (Indemnity) – 127,000 total contracts NJ PLUS (POS) – 158,000 contracts NJ PLUS (POS) – 158,000 contracts HMOs – 75,000 Contracts HMOs – 75,000 Contracts Aetna Health Aetna Health Cigna HealthCare Cigna HealthCare Oxford Oxford AmeriHealth AmeriHealth Health Net Health Net

44 NJ SHBP Rx Coverage Rx Coverage Active Member Co-Pay Active Member Co-Pay 2 tier copay (generic, name brand) 2 tier copay (generic, name brand) Retail Pharmacy – 30 day supply Retail Pharmacy – 30 day supply Mail Order – 90 day supply Mail 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 supply Retail Pharmacy – 30 day supply Mail Order – 90 day supply Mail Order – 90 day supply

45 NJ SHBP Dental Coverage – Dental Coverage – Active Employee Active Employee Dental Expense Plan (Indemnity) Dental Expense Plan (Indemnity) 10 Dental Plan Organizations (DPO) 10 Dental Plan Organizations (DPO) BeneCare Community Dental CIGNA Dental Group Dental Health Flagship Dental Dental Group of NJ Horizon Dental Aetna DMO

46 NJ SHBP Retiree Dental Coverage – Retiree Dental Coverage – Dental Expense Plan (Indemnity) only Dental Expense Plan (Indemnity) only Member Pays Premium Member Pays Premium

47 Voluntary Benefit Plans Tax$ave – Medical Tax$ave – Medical 3 plans w/ 84,800 participants 3 plans w/ 84,800 participants Commuter Tax$ave Commuter Tax$ave 2 plans w/ 1,113 participants 2 plans w/ 1,113 participants Long-Term Care Long-Term Care Flexible savings plan with 3,000 participants Flexible savings plan with 3,000 participants

48 Tax$ave – Medical § 125 Plans for State Employees Premium Option Plan Premium Option Plan - Pre-tax medical premium payments Unreimbursed Medical Spending Account Unreimbursed Medical Spending Account - Pre-tax Medical Expense Reimbursement Dependent Care Spending Account Dependent Care Spending Account - Pre-tax dependent care reimbursement

49 Commuter Tax$ave § 132 Plan for State Employees Pre-tax dollars for commuter expenses 1. Mass Transit Expenses 2. Commuter Parking Expenses

50 Long-Term Care Insurance Open to State employees, dependents and retirees Pre-tax dollars accrue to defray long-term care costs

51 State Benefit Program Spending

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

53 Debt Service On Pension Bonds

54 Questions