Senate President Sweeney has introduced legislation (S-3522) that would divide the Public Employees’ Retirement System (PERS) into two parts. A State Part for State employees and a Local Part for all other employees. The Senate President has indicated that he is advancing this legislation as a mean of protecting the local part of the PERS from being co-mingled with the State.
This is the third of a four part blog series summarizing the Local Part PERS Board of Trustees responsibilities.
Requires all members of the Board and Investment Committee to participate in annual investment training as directed by the board’s executive director.
Board adopts a policy requiring 16 hours of continuing education in matters relating to the administration of defined benefit retirement systems for public employees and fiduciary duty the board and its employees have to the beneficiaries.
Board has the discretionary authority:
(1) Modify the member contribution rate; cap on creditable compensation; formula for calculation of final compensation; age at which a member may be eligible for and the benefits for service or special retirement; and standards for approval, medical review policies, and benefits provided for disability retirement; and
(2) Activate the application of the "Pension Adjustment Act," for retirees and modify the basis for the calculation of the adjustment and set the duration and extent of the activation.
(3) The board of trustees, after consultation with the actuary, may apply an adjustment to the monthly retirement allowance or pension originally granted to any member.
(4) Modify the conditions and standards for the purchase of service credit for death benefits, however the board does not have the authority to change the years of creditable service required for vesting.
At least 5 votes of authorized membership are required to approve any enhancement or reduction of member benefit, including COLAs, or approve any increase or decrease in employer or employee contribution rate that is more than the amount recommended by the actuary for annual funding. Final action of the board must be made by adoption of regulation that must identify the modification by statutory reference. Regulations are considered part of the plan document for the system.
Actuarial certification is required prior to the enhancement or reduction showing such change will note result in an increased employer contribution in the current year and will not impact the long-term viability of the fund.
Requires all trustees, officer and employees of the board to participate in annual ethics training on NJ Conflicts of Interest Law and other applicable laws and regulations.
Board has the authority to establish a process for the review, approval, and appeal of applications for retirement.
The Board must establish (1) Audit Committee; (2) Actuary Committee; and (3) Investment Committee.
The Audit Committee assists in the oversight of the financial reporting and audit process; and retaining an independent auditor to conduct an audit of the system. The 3 member committee is comprised of at least 2 Board members with at least 1 member of the committee having accounting or related financial expertise. The board may request the State Treasurer to recommend 1 or more qualified individuals to sit on the committee. The auditor process must be competitively bid and must take place no less than once every 5 years.
The Audit Committee will proactively assist the board of trustees in overseeing the integrity and quality of the retirement system’s finances and investments. The Audit Committee:
(i) Review and evaluate audit fees.
(ii) When the committee believes that the auditor's performance is not adequate in quality or independence, recommend such steps as may be necessary to elicit appropriate performance, including replacement of the auditor.
(iii) At least once every 3 years, obtain and review a report of the independent auditor describing for the preceding year. This includes the independent auditor's internal quality control procedures; any material issues raised by the most recent internal quality control peer review, or by reviews conducted by governmental or professional authorities; and steps taken by the auditor to address such issues.
(iv) Regularly review with the independent auditor any audit problems, any risks of material statements due to fraud, and any difficulties involving restrictions or attempts to restrict the auditor's activities and restrictions on access to information.
(v) Review the audited financial statements and interim statements and discuss them with the board of trustees. These discussions will include a review of particularly sensitive accounting estimates, reserves and accruals, judgmental areas, audit adjustments, whether recorded or not, and any other matters the Audit Committee or independent auditor deems appropriate.
(vi) Review internal control functions such as the planned scope of internal audit reviews, adequacy of staffing, actions to be taken as a result of internal audit findings, the effectiveness of electronic data processing procedures, and controls and related security programs.
(vii) Recommend policies with respect to risk assessment and risk management.
(viii) Establish a permanent position of internal auditor, supervised by executive director, but who may be discharged only by an affirmative vote of the majority of the board.
An Actuary Committee to review the performance of the actuary appointed by the board. If the performance of the actuary is not adequate in quality, the committee will recommend necessary steps to elicit appropriate performance, including replacement of the actuary. The committee is no less than 3 members, appointed by the board, who assist in the selection and oversight of the actuary.
An Investment Committee assists in the oversight of the investment policies selected by the board and make recommendations on investments to the Board. The committee is no less than 3 members, of which 2 members must be from the board and 1 member who shall be the chief investment officer of the board. A majority of the Investment Committee members must be qualified by training experience or long-term interest in the direct management, analysis, supervision or investment of assets. Can be supplemented by academic training in the fields of economics, business, law, finance or actuarial science or actual employment in those fields. The State Treasurer can recommend one or more qualified individuals to serve on the committee if Board doesn’t have sufficient qualified members.
Board must designate a medical board. The medical board:
- Minimum of 3 physicians, who are not members of Local Part PERS
- Must pass upon all medical examinations required by N.J.S.A. 43:15A-1 et seq.
- Investigate all essential statements and certifications by or on behalf of member in connection with disability retirement
- Provide Local Part PERS written report of conclusions and recommendations
At the end of 6 years, the board must conduct a review of its performance and funding levels of retirement system, as compared to available market data, including but not limited to, performance of State Investment Council & Division of Investment with regard to the investment of other State plans or other appropriate benchmarks.
Based on a majority vote, the board may petition the legislature to revert control back to the State Treasurer.
All of the present functions, powers, and duties relating for the Local Part of the Public Employees’ Retirement System in the Division of Pensions and Benefits are transferred to the Board of Trustees of the Local Part of the Public Employees’ Retirement System.
The Local Part PERS board of trustees may contract with the Division of Pensions and Benefits in the Department to effectuate the goals of this bill.
The Department of the Treasury and the Division of Investment will retain all functions, powers, duties, equipment and records relating to Common Pension Fund L assigned to Treasury and the Division of Investment by N.J.S.A. 5:9-22.5 et seq.
Copies of records relating to the Local Part PERS in the Division of Pensions and Benefits in Treasury and the Division of Investment must be made available to the board of trustees of the Local Part PERS upon request.
For the purposes of the group life insurance provided by N.J.S.A. 43:15A-1 et seq. for members and retirees of the Local Part PERS, the responsibilities of the State Treasurer specified in statute or regulation is transferred to and exercised by the Local Part PERS board of trustees.
Contact: Lori Buckelew, Assistant Executive Director, lbuckelew@njlm.org, 609-695-3481, x112.