Pension & Health Benefits

New Jersey's Pension Systems

There are currently seven pension funds administered by the State of New Jersey. Most are a defined contribution plan in which the employee contributes a fixed percentage of their salary while the employer contributions are based on actuary reports. 

The three main pension funds available to local municipal employees are Police and Fire Retirement System; Public Employee Retirement System and Defined Contribution Retirement Program.

Police & Firemen's Retirement System (PFRS)

All police officers and firefighters appointed after June, 1944, in municipalities where local police and fire pension funds existed, or where this system was adopted by referendum or resolution, are required to become members of the Police and Firemen's Retirement System. 

Certain State and County law enforcement job titles are also covered. For information on this pension system, including the current member handbook, information on their pension committees and a retirement calculator, visit the NJ Division of Pensions and Benefits. For listings of annual contribution rates visit the Employer Annual Pension Contribution Rates (Rounded).

Public Employee Retirement System (PERS)

All police officers and firefighters appointed after June, 1944, in municipalities where local police and fire pension funds existed, or where this system was adopted by referendum or resolution, are required to become members of the Police and Firemen's Retirement System. 

Certain State and County law enforcement job titles are also covered. For information on this pension system, including the current member handbook, information on their pension committees and a retirement calculator, visit the New Jersey Division of Pensions and Benefits. For listings of annual contribution rates visit the Employer Annual Pension Contribution Rates (Rounded).

Defined Contribution Retirement Program (DCRP)

The Defined Contribution Retirement Program (DCRP) provides eligible members with a tax-sheltered, defined contribution retirement benefit, along with life insurance and disability coverage.

Individuals eligible for membership in the DCRP include:

  • Employees enrolled in the Police and Firemen’s Retirement System (PFRS) or State Police Retirement System (SPRS) after May 21, 2010, who earn salary in excess of established “maximum compensation” limits ($128,400 for 2018)
  • Employees enrolled in the Public Employees Retirement System (PERS) or Teachers Pension and Annuity Fund (TPAF) on or after July 1, 2007, who earn salary in excess of established “maximum compensation” limits ($128,400 for 2018)
  • Employees otherwise eligible to enroll in the PERS or TPAF after May 21, 2010, who do not work the minimum number of hours per week required for PERS or TPAF Tier 4 or Tier 5 enrollment (35 hours per week for State employees or 32 hours per week for local government or local education employees) but who earn salary of at least $5,000 annually
  • Employees otherwise eligible to enroll in the PERS or TPAF on or after November 2, 2008, who do not earn the minimum annual salary for PERS or TPAF Tier 3 enrollment ($8,300 in 2018, subject to adjustment in future years) but who earn salary of at least $5,000 annually
  • State or Local Officials who are elected or appointed on or after July 1, 2007

Other Pension Plans

Teachers' Pension and Annuity Fund

Open to employees of boards of education and the State who must be certified or credentialed as a condition of employment.

The State Police Retirement System (SPRS)

The State Police Retirement System (SPRS) is a defined benefit pension fund established in 1965 as the successor of the State Police Retirement and Benevolent Fund. All full-time troopers or commissioned or noncommissioned officers of the New Jersey Division of State Police appointed after July 1, 1965, are members of this system. The SPRS is maintained on an actuarial reserve basis.

The Judicial Retirement System (JRS)

The Judicial Retirement System (JRS) is a defined benefit pension fund established in 1973 after the repeal of the laws that had provided pension benefits to members of the State Judiciary and their eligible survivors since 1948. All members of the State Judiciary are required to enroll in the JRS

The Alternate Benefit Program

The Alternate Benefit Program (ABP) is a tax-sheltered, defined contribution retirement program for higher education faculty and certain administrators. The ABP provides retirement benefits, life insurance, and disability coverage, which, when combined with Social Security and other tax-deferred plans, can provide security in retirement.

Property Tax Impact of Pension and Benefits Commission’s “Roadmap to Resolution”

In partnership with the New Jersey School Boards Association, New Jersey State League of Municipalities issued a report assessing the impact of the local boards of education assuming the cost of the local education retiree health benefits, which is currently a state obligation, as well as the new retirement plan for local (K-12) education employees as suggested by the Governor’s “Roadmap to Resolution” report.

Analysis

This policy neutral analysis, using information from the New Jersey Transparency website, was prepared by Raphael J. Caprio, Ph. D., Director of Bloustein Center for Local Government Research, Rutgers University to provide an informed answer to the potential (and estimated) impact on each municipality for each one percent “employer” contribution that would need to be raised on the local level should local boards of education be asked to fund part, or all, of the employer Teachers Pension Annuity Fund (TPAF) contribution.

Liability

Since the potential employer “pension match” is still a hypothetical, the 1% liability is used so the various scenarios or policy proposals can easily be calculated.

Supreme Court Case - Pension Funding (Chapter 78)

In June 2015 the New Jersey Supreme Court ruled that statutory language in PL 2011, C. 78 (“Chapter 78”) did not create an enforceable contract requiring constitutional protection. This decision is the result of multiple actions filed by individuals and unions on behalf of New Jersey State employees, after the fiscal year 2015 budget included contributions that were $1.57 billion less than what Chapter 78 required.

At the trial level, the law division accepted the argument that Chapter 78 created a contractual right and that the lack of funding was a violation of contract. It similarly rejected arguments that Chapter 78 mandated State pension contributions were not enforceable as a contractual right, despite the Debt Limitation Clause, Appropriations Clause and the governor’s line-item veto power.

Evidence

The plain language of Chapter 78 was evidence of the contract right to the State’s pension contributions, it specifically set forth the legal entitlement to particular rates as well as a clear statement that any failure to make those contributions results in a contractual impairment. Although the Court recognized the legislature’s good intentions in passing Chapter 78, the Court simultaneously rejected the Legislature’s authority to do so.

Debt Limitation

First, the Debt Limitation clause of the New Jersey Constitution prohibited such action. The intention of Chapter 78 could not set aside the broad, clear language contained in the Debt Limitation Clause. In sum, this provision limits the amount of debt or liability the Legislature may incur on a year to year basis without a vote of the State’s public.

State Contribution

Furthermore, the Court reasoned that the State pension contribution mandates of Chapter 78 failed to meet the requirements of the New Jersey Constitution’s Appropriations Clause. Indeed “where legislation sought to bind future Legislatures in a manner that implicated both the Debt Limitation and Appropriations Clause...the legislation survived those Clauses because the Legislature retained its constitutionally enshrined powers to annually appropriate funds as necessary for the fiscal health of the State.” This reservation of rights was wholly absent from Chapter 78.

Impact on Public Trust

Ultimately, the failure of Chapter 78 to meet the requirements of the Debt Limitation and Appropriations Clauses resulted in “no legally enforceable financial obligation imposed on the State.” In reaching its decision the Court recognized the impact it would have on the public trust given the resultant broken promises of Chapter 78. 

It similarly recognized that the pension system, as currently funded, is of significant concern, but that did not permit the Court to ignore its obligation to enforce the State’s constitution. Instead of acting for the other branches of government, the Court notes “it is the people’s responsibility to hold the elective branches of government responsible for their judgment and for their exercise of constitutional powers.”

Health Benefits

CHAPTER 78, P.L. 2011

Effective June 28, 2011, Chapter 78, P.L. 2011 changed the manner in which the State-administered retirement systems (in particular PERS, TPAF, PFRS, SPRS and JRS), and health benefits programs (SHBP and SEHBP) operate and the employee contribution and benefits provisions of these programs.

Percentage of Premium Calculators

Provided by the New Jersey Division of Pension and Health Benefits, calculators based on employer type that can be used to determine an individual's estimated Health Benefit Contribution.