Bill Text: NJ A4468 | 2018-2019 | Regular Session | Introduced
Bill Title: Requires PFRS to attain and maintain target funded ratio prior to enhancement of member benefits.
Spectrum: Partisan Bill (Republican 1-0)
Status: (Introduced - Dead) 2018-09-24 - Introduced, Referred to Assembly State and Local Government Committee [A4468 Detail]
Download: New_Jersey-2018-A4468-Introduced.html
Sponsored by:
Assemblyman EDWARD H. THOMSON
District 30 (Monmouth and Ocean)
SYNOPSIS
Requires PFRS to attain and maintain target funded ratio prior to enhancement of member benefits.
CURRENT VERSION OF TEXT
As introduced.
An Act concerning the management of the Police and Firemen's Retirement System and amending P.L.1944, c.255.
Be It Enacted by the Senate and General Assembly of the State of New Jersey:
1. Section 13 of P.L.1944, c.255 (C.43:16A-13) is amended to read as follows:
13. a. (1) Subject to the provisions of P.L.1955, c.70 (C.52:18A-95 et seq.), the general responsibility for the proper operation of the retirement system is hereby vested in a board of trustees, and, as specified, the committees established pursuant to subsection e. of this subsection. The board may with the approval of at least eight members of the board, in its discretion and at such time and in such manner as the board determines, enhance any benefit set forth in P.L.1944, c.255 (C.43:16A-1 et seq.) as the board determines to be reasonable and appropriate or modify any such benefit as an alternative to an increase in the member contribution rate, which increase the board determines to be reasonable, necessary, and appropriate, or reinstate, when appropriate, such reduced benefit to the statutory level without an additional contribution by the member, so long as an actuarial certification provided by the actuary demonstrates that such change will not result in an increased employer contribution in the current year and that [such change will not impact the long term viability of the fund] the system has attained the target funded ratio of at least 80 percent and shall maintain a funded ratio at or above 80 percent for five valuation periods. The board shall act exclusively on behalf of the contributing employers, active members of the retirement system, and retired members as the fiduciary of the system. The primary obligation of the board shall be to direct policies and investments to achieve and maintain the full funding and continuation of the retirement system for the exclusive benefit of its members.
(2) The board shall consist of 12 trustees as follows:
(a) (Deleted by amendment, P.L.2018, c.55)
(b) (Deleted by amendment, P.L.2018, c.55)
(c) Three active policemen and three active firemen as follows:
(i) Two policemen and two firemen who shall be active members of the system and who shall be appointed as follows:
one policeman shall be appointed by the President of the New Jersey State Policemen's Benevolent Association;
one policeman shall be appointed by the President of the New Jersey State Fraternal Order of Police;
one fireman shall be appointed by the President of the New Jersey State Firemen's Mutual Benevolent Association; and
one fireman shall be appointed by the President of the Professional Firefighters Association of New Jersey.
(ii) One policeman and one fireman who shall serve staggered terms and shall be active members of the system and who shall be elected by the active members of the system according to such rules and regulations as the board of trustees shall adopt to govern such election. The elected policeman shall serve for an initial term of two years and the elected fireman shall serve for an initial term of four years. Following their first term, all trustees elected pursuant to this subparagraph shall serve four-year terms. An election to select trustees, who are active members of the system, shall be held no later than the first day of the fifth month next following the date of enactment of P.L.2018, c.55.
(d) One retiree from the system who shall be elected by retirees from the system for a term of four years according to such rules and regulations as the board of trustees shall adopt to govern the election. An election to select a trustee, who is a retiree from the system, shall be held no later than the first day of the fifth month next following the date of enactment of P.L.2018, c.55.
(e) Four trustees, to be appointed by the Governor, who shall serve staggered terms and who either hold, or have held, an elective public office as a mayor, member of a municipal council, or member of a board of chosen freeholders or is employed, or has been employed, by a municipal or county government as an administrator, manager, or chief financial officer, to represent the interests of local government employers. The Governor shall appoint trustees pursuant to this subparagraph from among a list of names submitted by the New Jersey League of Municipalities and the New Jersey Association of Counties. Two trustees appointed by the Governor pursuant to this subparagraph shall serve for an initial term of two years and two trustees shall serve for an initial term of four years. Following their first term, all trustees appointed pursuant to this subparagraph shall serve four-year terms. The Governor shall appoint trustees representing the interest of local government employers pursuant to this subparagraph no later than the first day of the seventh month next following the date of enactment of P.L.2018, c.55.
(f) One trustee, to be appointed by the Governor, who holds or has held a management or supervisory position in the Executive Branch of State government at the level of division director or above to represent the interests of State government. The trustee appointed by the Governor pursuant to this subparagraph shall serve for an initial term of two years. Following the trustee's first term, the trustee appointed pursuant to this subparagraph shall serve four-year terms. The Governor shall appoint a trustee representing the interest of State government pursuant to this subparagraph no later than the first day of the seventh month next following the date of enactment of P.L.2018, c.55.
(3) Each trustee shall, after his appointment or election, take an oath of office that, so far as it devolves upon him he will diligently and honestly fulfill his duties as a board member, and that he will not knowingly violate or willingly permit to be violated any of the provisions of the law applicable to the retirement system. Such oath shall be subscribed by the member making it, and certified by the officer before whom it is taken, and immediately filed in the office of the Secretary of State. The board may remove a trustee, upon a majority vote of the trustees, for violating the trustee's oath of office. Any trustee who is absent, without an official excuse approved by a majority vote of the trustees, for more than three of the board's meetings in any calendar year shall be removed from the board and the trustee's position shall be filled in the same manner as the position was previously filled. The board shall adopt standards to define unexcused absences.
A member shall be permitted to participate in meetings of the board by teleconference.
(4) (a) If a vacancy occurs in the office of a trustee, the vacancy shall be filled in the same manner as the office was previously filled. A vacancy shall not last more than 60 days, unless the board is awaiting the certification of an election conducted pursuant to paragraph (2) of this subsection. If a vacancy lasts for more than 60 days, then the board shall appoint, upon a majority vote of the trustees then serving, a person qualified pursuant to subparagraph (e) or (f) of paragraph (2) of this subsection to fill the vacancy until a new trustee is appointed or elected in the manner set forth in paragraph (2) of this subsection.
(b) A trustee serving pursuant to subparagraph (c) of paragraph (2) of this subsection who retires from active service as policeman or fireman may remain a trustee until an election is held to replace the trustee. An election to replace a trustee serving pursuant to part (ii) of subparagraph (c) of paragraph (2) of this subsection who retires from active service shall be held no later than 30 days following the effective date of the trustee's retirement and the trustee shall relinquish the position on the board upon certification of the results of the election.
(c) Trustees appointed pursuant to part (i) of subparagraph (c) of paragraph (2) of this subsection shall serve at the pleasure of the official who appointed the trustee, but may be removed pursuant to paragraph (3) of this subsection.
(5) The trustees shall serve without compensation, but they shall be reimbursed for all necessary expenses that they may incur through service on the board.
(6) Each trustee shall be entitled to one vote in the board. Seven trustees shall be present at any meeting of said board for the transaction of its business.
(7) Subject to the limitations of this act, the board of trustees shall annually establish rules and regulations for the administration of the funds created by this act and for the transaction of the board's business.
(8) (a) The board of trustees shall elect from its membership a chair and vice chair. The chair, or vice chair in the chair's absence, shall serve as the primary contact with board staff, coordinate and approve meeting agendas, and shall have the power to authorize any special staff action necessary to execute any of the board's duties. The chair and vice chair shall not have the authority to discipline or discharge an employee of the board unless authorized to take such action by a majority of the trustees at a public meeting. The board shall appoint a secretary of the board. The administration of the program shall be performed by personnel selected by the board in accordance with this section. The board, reconstituted pursuant to P.L.2018, c.55, shall hold an initial meeting on the first business day of the seventh month following the date of enactment of P.L.2018, c.55. At the initial meeting of the board on the first business day of the seventh month next following the date of enactment of P.L.2018, c.55, the board shall contract with the Division of Pensions and Benefits for the division to perform the administrative tasks that the division performed prior to the enactment of P.L.2018, c.55 and such other tasks as the board may require. The division shall receive compensation from the board for the performance of the administrative tasks that the division performed prior to the enactment of P.L.2018, c.55 in an amount equal to the cost the division incurred for the performance of those administrative tasks prior to the enactment of that act. At the expiration of the term of the contract negotiated by the board with the division pursuant to this paragraph, the board may contract with the division or with a private entity, pursuant to the provisions of P.L.1954, c.48 (C.52:34-6 et seq.), to perform administrative tasks that the board determines to be necessary or convenient for its operation.
(b) A majority of the authorized membership of the board shall constitute a quorum for the transaction of business.
(9) The board of trustees shall keep a record of all of its proceedings which shall be open to public inspection. The retirement system shall publish annually a report showing the fiscal transactions of the retirement system for the preceding year, the amount of the accumulated cash and securities of the system, and the last balance sheet showing the financial condition of the system by means of an actuarial valuation of the assets and liabilities of the retirement system.
(10) The board of trustees may, in its discretion, select and employ, or contract with, legal counsel 1with demonstrated expertise in the law governing retirement systems for public or private sector employees1 to advise and represent the board. If the board does not select and employ, or contract with, legal counsel, the Attorney General of the State of New Jersey shall be the legal adviser of the retirement system, except if the Attorney General determines that a conflict of interest would affect the ability of the Attorney General to represent the board or the committees on a matter affecting the retirement system.
(11) The board of trustees shall designate a medical board. It shall be composed of a minimum of three physicians who are not eligible to participate in the retirement system. The medical board shall pass upon all medical examinations required under the provisions of this act, shall investigate all essential statements and certificates by or on behalf of a member in connection with an application for disability retirement, and shall report in writing to the retirement system its conclusions and recommendations upon all matters referred to it.
(12) The actuary of the system shall be selected by the board of trustees. The actuary shall be the technical adviser of the board of trustees on matters regarding the operation of the funds created by the provisions of this act, and shall perform such other duties as are required in connection therewith. The actuary shall be an independent contractor retained by the board. The actuary shall have demonstrated experience in providing actuarial services to defined benefit retirement systems for public employees and be a fellow with the Society of Actuaries and an active member of the American Academy of Actuaries.
(13) The board of trustees, in consultation with the actuary, shall establish actuarial funding policies for the system. At least once in each three-year period the actuary shall make an actuarial investigation into the mortality, service and compensation experience of the members and beneficiaries of the retirement system and, with the advice of the actuary, the board of trustees shall adopt for the retirement system such mortality, service and other tables as shall be deemed necessary and shall certify the rates of contribution payable under the provisions of this act. The board of trustees shall retain an independent actuary, as selected by the State Treasurer, with demonstrated experience in providing actuarial services to retirement systems for public or private sector employees to review prior investigations into the mortality, service, and compensation experience of the members and beneficiaries of the retirement system and to review the three prior actuarial valuations to certify that the actuary of the retirement system conducted the investigations and valuations in accordance with generally accepted actuarial standards.
(14) (Deleted by amendment, P.L.1970, c.57.)
(15) On the basis of such tables recommended by the actuary as the board of trustees shall adopt and regular interest, the actuary shall make an annual valuation of the assets and liability of the funds of the system created by this act.
(16) (Deleted by amendment, P.L.1987, c.330.)
(17) Each policeman or fireman member of the board of trustees or the committees shall be entitled to time off from his duty, with pay, during the periods of his attendance upon regular or special meetings of the board of trustees or the committees, and such time off shall include reasonable travel time required in connection therewith.
(18) The board of trustees shall have a minimum of one meeting each calendar month.
(19) The board of trustees shall have authority to formulate and establish, amend, modify or repeal such policies as it may deem necessary or proper, which shall govern the methods, practices or procedures for investment, reinvestment, purchase, sale or exchange transactions to be followed by the Division of Investment. The board may also review and approve agreements which may be necessary or convenient for the management of the investments of the retirement system. The board shall also have the authority to inspect and audit the respective accounts and funds administered by the Division of Investment, or a successor entity, and take appropriate action as necessary to effectuate the long term viability of the system. Notwithstanding this provision, Common Pension Fund L and the assets held by Common Pension Fund L as of the effective date of this Act and thereafter, including the interest of the Police and Firemen's Retirement System of New Jersey therein, shall remain within the Division of Investment. The Director of the Division of Investment and the State Investment Council shall retain all functions, powers, and duties relating to Common Pension Fund L assigned to the Division of Investment, the Director of the Division of Investment, and the State Investment Council by P.L. 2017, c. 98 (C.5:9-22.5 et seq.).
(20) (a) The board of trustees shall select and employ an executive director, who shall be responsible for recommending and implementing the strategic direction of the board from an operational perspective. The executive director shall provide strategic direction, planning, and leadership to the board; organize, develop, and supervise a management team to provide optimal results; maintain oversight of administrative operations conducted by the board; develop an annual budget and a salary and compensation guide for any managerial positions that are not subject to Title 11A, Civil Service, of the New Jersey Statutes, arrange board agendas with the approval of the board's chair; appoint administrative staff; execute contracts on behalf of the board; and perform any other responsibilities designated to the executive director by the board.
The person employed by the board to hold the position of executive director shall have, at a minimum upon commencement of employment, a bachelor's degree from an accredited institution of higher education, and at least five years of management experience in accounting, finance, public administration, government pension and retirement planning , investment banking, financial consulting, money management, or a similar field. The person shall meet all other requirements for employment as shall be set forth in a standard adopted by the board. No member, retiree, or other beneficiary of the system shall be eligible to hold the position of executive director.
The executive director shall serve without term but may be removed from office, upon notice and opportunity to be heard at a public hearing, subject to an affirmative vote of the majority of all authorized members of the board of trustees. Any vacancy occurring shall be filled in the same manner as the original appointment. The executive director shall devote his entire time and attention to the duties of the office and shall not be engaged in any other occupation or profession. The executive director shall act as a fiduciary to the retirement system and shall be under a duty to perform the obligations set forth herein according to the interest of the beneficiaries of the system.
(b) The board of trustees shall have the authority to retain other administrative and professional staff as required to implement the duties and responsibilities required to ensure the smooth transition of responsibilities and authority from the division to the board pursuant to P.L.2018, c.55. The board shall not employ a trustee and may employ a former trustee only if the former trustee has not held the position of trustee for more than two years.
(c) The board of trustees shall be authorized to access operating funds from the system necessary for the management of the fund and to employ staff immediately upon their election and appointment, provided that the qualified status of the retirement system under federal law is maintained.
(21) (a) The board of trustees shall select and employ a chief investment officer, who shall oversee the development of the methods, practices and procedures for investment, in coordination with the Investment Committee. Notwithstanding this provision, Common Pension Fund L and the assets held by Common Pension Fund L as of the effective date of this Act and thereafter, including the interest of the Police and Firemen's Retirement System of New Jersey therein shall remain within the Division of Investment. The Division of Investment and the Director of the Division of Investment and the State Investment Council shall retain all functions, powers, and duties relating to Common Pension Fund L assigned to the Division of Investment, the Director of the Division of Investment, and the State Investment Council by P.L. 2017, c. 98 (C.5:9-22.5 et seq.). The chief investment officer, in coordination with the Investment Committee, shall establish and maintain a policy to monitor and evaluate the effectiveness of investments made on behalf of the board. The chief investment officer shall report to the executive director.
The person employed by the board to hold the position of chief investment officer shall have, at a minimum upon commencement of employment, a bachelor's degree from an accredited institution of higher education, and at least five years of management experience, in addition to accounting, finance, public administration, government pension and retirement planning, investment banking, financial consulting, money management, or a similar field. The person shall also have experience in the direct management, analysis, supervision or investment of assets. The person shall meet all other requirements for employment as shall be set forth in a standard adopted by the board. No member, retiree, or other beneficiary of the system shall be eligible to hold the position of chief investment officer. The chief investment officer shall be precluded from outside employment or other occupation.
(b) The board of trustees may make and execute agreements pursuant to the provisions of P.L.1954, c.48 (C.52:34-6 et seq.), which may be necessary or convenient for the management of the investments of the retirement system. The board shall also have the authority to inspect and audit the respective accounts and funds administered by the Division of Investment, or a successor entity, and take appropriate action as necessary to effectuate the long term viability of the system.
(22) The board of trustees shall select and employ an ombudsman, who shall provide individual death and disability consultation and information to plan members and their dependents; answer questions from, and provide information to, members related to the process of applying for retirement and retirement benefits; coordinate with other State and local agencies on behalf of members; maintain federal, State, and local death and disability benefit resources; recommend policy changes to the board; conduct educational presentations for employers on death and disability benefit options for members; and publish information about the organization of the board for members, employers, and the public.
(23) All members of the board of trustees and of the Investment Committee shall participate in annual investment training as directed by the board's executive director. In addition to the ethics training required by paragraph (2) of subsection c. of this section, the board shall adopt a policy requiring annually not less than 16 hours of continuing education in matters relating to the administration of defined benefit retirement systems for public employees and the fiduciary duty the board and its employees have to the beneficiaries of the retirement system.
b. The board of trustees shall have the discretionary authority to:
(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) subject to the provisions of P.L.2018, c.55, activate the application of the "Pension Adjustment Act," P.L.1958, c.143 (C.43:3B-1 et seq.) for retirees and modify the basis for the calculation of the adjustment and set the duration and extent of the activation. 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.
The board of trustees shall have the discretionary authority to modify the conditions and standards for the purchase of service credit for death benefits. The board of trustees shall not have the authority to change the years of creditable service required for vesting.
At least eight votes of the authorized membership of the board shall be required to approve any enhancement or reduction of a member benefit, including the activation of the application of the "Pension Adjustment Act," P.L.1958, c.143 (C.43:3B-1 et seq.), for retirees, or to approve any increase or decrease in the employer contribution that is more than what is recommended by the actuary for the system for the purpose of the annual funding requirements of the system. An actuarial certification must be provided by the actuary prior to any enhancement or reduction of a member benefit, including the activation of the application of the "Pension Adjustment Act," P.L.1958, c.143 (C.43:3B et. seq.), showing that such change will not result in an increased employer contribution in the current year and that [such change will not impact the long term viability of the fund] the system has attained the target funded ratio of at least 80 percent and shall maintain a funded ratio at or above 80 percent for five valuation periods.
The board of trustees may consider a matter described in this subsection and render a decision notwithstanding that the provisions of the statutory law may set forth a specific requirement on that matter.
The board of trustees may consider a matter described in this subsection and render a decision notwithstanding that the provisions of the statutory law do not set forth a specific requirement on the considered aspect of that matter or address that matter at all.
A final action of the board of trustees under this subsection shall be made by the adoption of a regulation that shall identify the modifications to the system by reference to statutory section. The regulations shall also specify the effective date of the modification and the system members, including beneficiaries and retirees, to whom the modification applies. Regulations of the board of trustees are considered to be part of the plan document for the system. A regulation adopted by the board of trustees may be modified by regulation in order to comply with the requirements of this section.
c. (1) No member of the board or a committee of the board, employee of the board, or employee of the Division of Pensions and Benefits in the Department of the Treasury shall accept from any person, whether directly or indirectly and whether by himself or through his spouse or any member of his family, or through any partner or associate, any gift, favor, service, employment or offer of employment, or any other thing of value, including contributions to the campaign of a member or employee as a candidate for elective public office, which he knows or has reason to believe is offered to him with intent to influence him in the performance of his public duties and responsibilities. As used in this subsection, "person" means an (1) individual or business entity, or officer or employee of such an entity, who is seeking, or who holds, or who held within the prior three years, a contract with the board; (2) an active or retired member, or beneficiary, of the retirement system; or (3) an entity, or officer or employee of such an entity, in which the assets of the retirement system have been invested. A board or committee member or employee violating this prohibition shall be guilty of a crime of the third degree.
(2) The board shall adopt an ethics policy either identical to the provisions of the "New Jersey Conflicts of Interest Law," P.L.1971, c.182 (C.52:13D-12 et seq.) or more restrictive, but not less restrictive. All trustees, officers, and employees of the board shall participate in annual ethics training on the board's policy, the New Jersey Conflicts of Interest Law, and any other applicable law, rule, or standard of conduct relating to the area of ethics as directed by the board's executive director.
d. The board of trustees shall have the authority to establish a process for the review, approval, and appeal of applications for retirement.
e. The board of trustees shall establish three committees as follows:
(1) (a) An Audit Committee of no less than three members to assist in the oversight of the financial reporting and audit processes of the board of trustees. At least two of the members shall be members of the board of trustees. At least one of the Audit Committee members shall have accounting, governmental auditing, or related financial expertise. If the board of trustees does not have sufficient members qualified or available to serve on the Audit Committee, or wishes to broaden the expertise on the Audit Committee, the board of trustees may request that the State Treasurer recommend one or more qualified individuals to sit on the committee.
(b) The Audit Committee shall assist the board of trustees in retaining an independent auditor to conduct an audit of the retirement system's financial statements by making a recommendation to the board of trustees after engaging in an auditor selection process. The auditor selection process shall be based upon public, competitive bidding principles and shall take place no less than once every five years.
(c) In carrying out its duties, the Audit Committee shall proactively assist the board of trustees in overseeing the integrity and quality of the retirement system's finances and investments. The Audit Committee shall:
(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 three years, obtain and review a report of the independent auditor describing for the preceding year: 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 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 shall 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 shall deem 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; and
(viii) establish a permanent position of internal auditor, who shall be supervised by the executive director, but who may be discharged only by an affirmative vote of the majority of the board.
(2) An Actuary Committee of no less than three members to assist in the selection and oversight of the actuary appointed by the board of trustees. The Actuary Committee shall review the performance of the actuary appointed by the board of trustees. If the performance of the actuary is not adequate in quality, the committee shall recommend such steps as may be necessary to elicit appropriate performance, including replacement of the actuary.
(3) An Investment Committee of no less than three members to assist in the oversight of the investment policies selected by the board of trustees. The Investment Committee shall consist of two members of the board of trustees, and one member who shall be the chief investment officer of the board, and shall oversee investments and make recommendations on investments to the board of trustees. A majority of the Investment Committee members, one of which may be the Chief Investment Officer, shall be qualified by training, experience or long-term interest in the direct management, analysis, supervision or investment of assets and this training, experience or long-term interest shall have been supplemented by academic training in the fields of economics, business, law, finance or actuarial science or by actual employment in those fields. If the board of trustees does not have sufficient members qualified or available to serve on the Investment Committee, or determines to broaden the expertise of the Investment Committee, the board of trustees may request that the State Treasurer recommend one or more qualified individuals to sit on the committee.
f. At the end of six years following the enactment date of P.L.2018, c.55, the board of trustees shall conduct a review of the performance and funding levels of the retirement system, as compared to available market data including but, not limited to, the performance of the State Investment Council and Division of Investment with regard to the investment of other State-administered retirement systems or funds and other appropriate benchmarks, and may, based on a majority vote of the authorized membership of the board, petition the Legislature to consider legislation that reverts control of the system from the Board of Trustees to the State Investment Council and the Division of Investment.
(cf: P.L.2018, c.55, s.15)
2. Section 15 of P.L.1944, c.255 (C.43:16A-15) is amended to read as follows:
15. (1) The contributions required for the support of the retirement system shall be made by members and their employers.
(2) (a) The uniform percentage contribution rate for members shall be 8.5% of compensation. Members of the retirement system shall contribute 10% of compensation to the system on and after the effective date of P.L.2011, c.78.
(b) The board of trustees is authorized to make an adjustment to the uniform contribution rate of the members set forth in this subsection as the board deems reasonable, necessary, and appropriate with the approval of at least eight members of the board after consultation with, and the recommendation of, the actuary. Any adjustment to a contribution rate shall be made at such time and in such manner as the board shall determine upon certification by the actuary that such change will not result in an increased employer contribution in the current year and that [such change will not impact the long term viability of the fund] the system has attained the target funded ratio of at least 80 percent and shall maintain a funded ratio at or above 80 percent for five valuation periods.
(3) (Deleted by amendment, P.L.1989, c.204).
(4) Upon the basis of the tables recommended by the actuary which the board adopts and regular interest, the actuary shall compute annually, beginning as of June 30, 1991, the amount of contribution which shall be the normal cost as computed under the projected unit credit method attributable to service rendered under the retirement system for the year beginning on July 1 immediately succeeding the date of the computation. This shall be known as the "normal contribution."
(5) (Deleted by amendment, P.L.1989, c.204).
(6) (Deleted by amendment, P.L.1994, c.62.)
(7) Each employer shall cause to be deducted from the salary of each member the percentage of earnable compensation prescribed in subsection (2) of this section. To facilitate the making of deductions, the retirement system may modify the amount of deduction required of any member by an amount not to exceed 1/10 of 1% of the compensation upon which the deduction is based.
(8) The deductions provided for herein shall be made notwithstanding that the minimum salary provided for by law for any member shall be reduced thereby. Every member shall be deemed to consent and agree to the deductions made and provided for herein, and payment of salary or compensation less said deduction shall be a full and complete discharge and acquittance of all claims and demands whatsoever for the service rendered by such person during the period covered by such payment, except as to the benefits provided under this act. The chief fiscal officer of each employer shall certify to the retirement system in such manner as the board of trustees may prescribe, the amounts deducted; and when deducted shall be paid into said annuity savings fund, and shall be credited to the individual account of the member from whose salary said deduction was made.
(9) With respect to employers other than the State, upon the basis of the tables recommended by the actuary which the board adopts and regular interest, the actuary shall compute the amount of the accrued liability as of June 30, 1991 under the projected unit credit method, which is not already covered by the assets of the retirement system, valued in accordance with the asset valuation method established in this section. Using the total amount of this unfunded accrued liability, the actuary shall compute the initial amount of contribution which, if the contribution is paid annually in level dollars for a specific period of time, will amortize this liability. The board of trustees shall determine, upon the advice of the actuary, the time period for full funding of this liability, which shall not exceed 40 years on initial application of this section as amended by this act, P.L.1994, c.62. This shall be known as the "accrued liability contribution." Any increase or decrease in the unfunded accrued liability as a result of actuarial losses or gains for the 10 valuation years following valuation year 1991 shall serve to increase or decrease, respectively, the unfunded accrued liability contribution. Thereafter, any increase or decrease in the unfunded accrued liability as a result of actuarial losses or gains for subsequent valuation years shall serve to increase or decrease, respectively, the amortization period for the unfunded accrued liability, unless an increase in the amortization period will cause it to exceed 30 years. If an increase in the amortization period as a result of actuarial losses for a valuation year would exceed 30 years, the accrued liability contribution shall be computed for the valuation year in the same manner provided for the computation of the initial accrued liability contribution under this section. Beginning with the July 1, 2018 actuarial valuation, the accrued liability contribution shall be computed so that if the contribution is paid annually in level dollars, it will amortize this unfunded accrued liability over a closed 30-year period. Beginning with the July 1, 2028 actuarial valuation, when the remaining amortization period reaches 20 years, any increase or decrease in the unfunded accrued liability as a result of actuarial losses or gains for subsequent valuation years shall serve to increase or decrease, respectively, the amortization period for the unfunded accrued liability, unless an increase in the amortization period will cause it to exceed 20 years. If an increase in the amortization period as a result of actuarial losses for a valuation year would exceed 20 years, the accrued liability contribution shall be computed for the valuation year in the same manner provided for the computation of the initial accrued liability contribution under this section.
With respect to the State, upon the basis of the tables recommended by the actuary which the board adopts and regular interest, the actuary shall annually determine if there is an amount of the accrued liability, computed under the projected unit credit method, which is not already covered by the assets of the retirement system, valued in accordance with the asset valuation method established in this section. This shall be known as the "unfunded accrued liability." If there was no unfunded accrued liability for the valuation period immediately preceding the current valuation period, the actuary, using the total amount of this unfunded accrued liability, shall compute the initial amount of contribution which, if the contribution is paid annually in level dollars for a specific period of time, will amortize this liability. The board of trustees shall determine, upon the advice of the actuary, the time period for full funding of this liability, which shall not exceed 30 years. This shall be known as the "accrued liability contribution." Thereafter, any increase or decrease in the unfunded accrued liability as a result of actuarial losses or gains for subsequent valuation years shall serve to increase or decrease, respectively, the amortization period for the unfunded accrued liability, unless an increase in the amortization period will cause it to exceed 30 years. If an increase in the amortization period as a result of actuarial losses for a valuation year would exceed 30 years, the accrued liability contribution shall be computed for the valuation year in the same manner provided for the computation of the initial accrued liability contribution under this section. Beginning with the July 1, 2018 actuarial valuation, the accrued liability contribution shall be computed so that if the contribution is paid annually in level dollars, it will amortize this unfunded accrued liability over a closed 30-year period. Beginning with the July 1, 2028 actuarial valuation, when the remaining amortization period reaches 20 years, any increase or decrease in the unfunded accrued liability as a result of actuarial losses or gains for subsequent valuation years shall serve to increase or decrease, respectively, the amortization period for the unfunded accrued liability, unless an increase in the amortization period will cause it to exceed 20 years. If an increase in the amortization period as a result of actuarial losses for a valuation year would exceed 20 years, the accrued liability contribution shall be computed for the valuation year in the same manner provided for the computation of the initial accrued liability contribution under this section.
The State may pay all or any portion of its unfunded accrued liability under the retirement system from any source of funds legally available for the purpose, including, without limitation, the proceeds of bonds authorized by law for this purpose.
The value of the assets, excluding the special asset value set forth in section 38 of P.L.2010, c.1 (C.43:3C-14), to be used in the computation of the contributions provided for under this section for valuation periods shall be the value of the assets for the preceding valuation period increased by the regular interest rate, plus the net cash flow for the valuation period (the difference between the benefits and expenses paid by the system and the contributions to the system) increased by one half of the regular interest rate, plus 20% of the difference between this expected value and the full market value of the assets as of the end of the valuation period. This shall be known as the "valuation assets." Notwithstanding the first sentence of this paragraph, the valuation assets for the valuation period ending June 30, 1995 shall be the full market value of the assets as of that date and, with respect to the valuation assets allocated to the State, shall include the proceeds from the bonds issued pursuant to the "Pension Bond Financing Act of 1997," P.L.1997, c.114 (C.34:1B-7.45 et seq.), paid to the system by the New Jersey Economic Development Authority to fund the unfunded accrued liability of the system. Notwithstanding the first sentence of this paragraph, the percentage of the difference between the expected value and the full market value of the assets to be added to the expected value of the assets for the valuation period ending June 30, 1998 for the State shall be 100% and for other employers shall be 57% plus such additional percentage as is equivalent to $150,000,000. Notwithstanding the first sentence of this paragraph, the amount of the difference between the expected value and the full market value of the assets to be added to the expected value of the assets for the valuation period ending June 30, 1999 shall include an additional amount of the market value of the assets sufficient to fund (1) the unfunded accrued liability for the supplementary "special retirement" allowances provided under subsection b. of section 16 of P.L.1964, c.241 (C.43:16A-11.1) and (2) the unfunded accrued liability for the full credit toward benefits under the retirement system for service credited in the Public Employees' Retirement System and transferred pursuant to section 1 of P.L.1993, c.247 (C.43:16A-3.8) and the reimbursement of the cost of any credit purchase pursuant to section 3 of P.L.1993, c.247 (C.43:16A-3.10) provided under section 1 of P.L.2001, c.201 (C.43:16A-3.14).
"Excess valuation assets" means, with respect to the valuation assets allocated to the State, the valuation assets allocated to the State for a valuation period less the actuarial accrued liability of the State for the valuation period, and beginning with the valuation period ending June 30, 1998, less the present value of the expected additional normal cost contributions attributable to the amendatory provisions of P.L.1999, c.428 (C.43:16A-1 et al.) payable on behalf of the active members employed by the State as of the valuation period over the expected working lives of the active members in accordance with the tables of actuarial assumptions applicable to the valuation period, and less the present value of the expected additional normal cost contributions attributable to the provisions of P.L.2003, c.108 as amending section 16 of P.L.1964, c.241 (C.43:16A-11.1) payable on behalf of the active members employed by the State as of the valuation period over the expected working lives of the active members in accordance with the tables of actuarial assumptions applicable to the valuation period, if the sum is greater than zero. "Excess valuation assets" means, with respect to the valuation assets allocated to other employers, the valuation assets allocated to the other employers for a valuation period less the actuarial accrued liability of the other employers for the valuation period, excluding the unfunded accrued liability for early retirement incentive benefits pursuant to P.L.1993, c.99 for the other employers, and beginning with the valuation period ending June 30, 1998, less the present value of the expected additional normal cost contributions attributable to the amendatory provisions of P.L.1999, c.428 (C.43:16A-1 et al.) payable on behalf of the active members employed by other employers as of the valuation period over the expected working lives of the active members in accordance with the tables of actuarial assumptions applicable to the valuation period, and less the present value of the expected additional normal cost contributions attributable to the provisions of P.L.2003, c.108 as amending section 16 of P.L.1964, c.241 (C.43:16A-11.1) payable on behalf of the active members employed by other employers as of the valuation period over the expected working lives of the active members in accordance with the tables of actuarial assumptions applicable to the valuation period, if the sum is greater than zero.
If there are excess valuation assets allocated to the State or to the other employers for the valuation period ending June 30, 1995, the normal contributions payable by the State or by the other employers for the valuation periods ending June 30, 1995, and June 30, 1996 which have not yet been paid to the retirement system shall be reduced to the extent possible by the excess valuation assets allocated to the State or to the other employers, respectively, provided that with respect to the excess valuation assets allocated to the State, the General Fund balances that would have been paid to the retirement system except for this provision shall first be allocated as State aid to public schools to the extent that additional sums are required to comply with the May 14, 1997 decision of the New Jersey Supreme Court in Abbott v. Burke.
If there are excess valuation assets allocated to the other employers for the valuation period ending June 30, 1998, the accrued liability contributions payable by the other employers for the valuation period ending June 30, 1997 shall be reduced to the extent possible by the excess valuation assets allocated to the other employers.
If there are excess valuation assets allocated to the State or to the other employers for a valuation period ending after June 30, 1998, the State Treasurer may reduce the normal contribution payable by the State or by other employers for the next valuation period as follows:
(1) for valuation periods ending June 30, 1996 through June 30, 2000, to the extent possible by up to 100% of the excess valuation assets allocated to the State or to the other employers, respectively;
(2) for the valuation period ending June 30, 2001, to the extent possible by up to 84% of the excess valuation assets allocated to the State or to the other employers, respectively;
(3) for the valuation period ending June 30, 2002, to the extent possible by up to 68% of the excess valuation assets allocated to the State or to the other employers, respectively; and
(4) for valuation periods ending June 30, 2003 through June 30, 2007, to the extent possible by up to 50% of the excess valuation assets allocated to the State or to the other employers, respectively.
Notwithstanding the discretion provided to the State Treasurer in the previous paragraph to reduce the amount of the normal contribution payable by employers other than the State, the State Treasurer shall reduce the amount of the normal contribution payable by employers other than the State by $150,000,000 in the aggregate for the valuation period ending June 30, 1998, and then the State Treasurer may reduce further pursuant to the provisions of the previous paragraph the normal contribution payable by such employers for that valuation period.
The normal and accrued liability contributions shall be certified annually by the retirement system and shall be included in the budget of the employer and levied and collected in the same manner as any other taxes are levied and collected for the payment of the salaries of members.
Notwithstanding the preceding sentence, the normal and accrued liability contributions to be included in the budget of and paid by the employer other than the State shall be as follows: for the payment due in the State fiscal year ending on June 30, 2004, 20% of the amount certified by the retirement system; for the payment due in the State fiscal year ending on June 30, 2005, a percentage of the amount certified by the retirement system as the State Treasurer shall determine but not more than 40%; for the payment due in the State fiscal year ending on June 30, 2006, a percentage of the amount certified by the retirement system as the State Treasurer shall determine but not more than 60%; and for the payment due in the State fiscal year ending on June 30, 2007, a percentage of the amount certified by the retirement system as the State Treasurer shall determine but not more than 80%.
The State Treasurer shall reduce the normal and accrued liability contributions payable by employers other than the State to 50 percent of the amount certified annually by the retirement system for payments due in the State fiscal year ending June 30, 2009. An employer that elects to pay the reduced normal and accrued liability contribution shall adopt a resolution, separate and apart from other budget resolutions, stating that the employer needs to pay the reduced contribution and providing an explanation of that need which shall include (1) a description of its inability to meet the levy cap without jeopardizing public safety, health, and welfare or without jeopardizing the fiscal stability of the employer, or (2) a description of another condition that offsets the long term fiscal impact of the payment of the reduced contribution. An employer also shall document those actions it has taken to reduce its operating costs, or provide a description of relevant anticipated circumstances that could have an impact on revenues or expenditures. This resolution shall be submitted to and approved by the Local Finance Board after making a finding that these fiscal conditions are valid and affirming the findings contained in the employer resolution.
An employer that elects to pay 100 percent of the amount certified by the retirement system for the State fiscal year ending June 30, 2009 shall be credited with such payment and any such amounts shall not be included in the employer's unfunded liability.
The actuaries for the retirement system shall determine the unfunded liability of the retirement system, by employer, for the reduced normal and accrued liability contributions provided under P.L.2009, c.19. This unfunded liability shall be paid by the employer in level annual payments over a period of 15 years beginning with the payments due in the State fiscal year ending June 30, 2012 and shall be adjusted by the rate of return on the actuarial value of assets.
The retirement system shall annually certify to each employer the contributions due to the contingent reserve fund for the liability under P.L.2009, c.19. The contributions certified by the retirement system shall be paid by the employer to the retirement system on or before the date prescribed by law for payment of employer contributions for basic retirement benefits. If payment of the full amount of the contribution certified is not made within 30 days after the last date for payment of employer contributions for basic retirement benefits, interest at the rate of 10% per year shall be assessed against the unpaid balance on the first day after the thirtieth day.
(10) The treasurer or corresponding officer of the employer shall pay to the board of trustees no later than April 1 of the State's fiscal year in which payment is due the amount so certified as payable by the employer, and shall pay monthly to the board of trustees the amount of the deductions from the salary of the members in the employ of the employer, and the board of trustees shall credit such amount to the appropriate fund or funds, of the retirement system.
If payment of the required amount of the employer's obligation is not made within 30 days of the due dates established by this act, interest at the rate of 10% per annum shall commence to run against the unpaid balance thereof on the first day after such 30th day. Nothing in P.L.2018, c.55 shall relieve State or local government employers of any present or future obligations of their normal cost or unfunded liabilities required to be paid into the retirement system.
If payment in full, representing the monthly transmittal and report of salary deductions, is not made within 15 days of the due date established by the retirement system, interest at the rate of 10% per annum shall commence to run against the total transmittal of salary deductions for the period on the first day after such 15th day.
(11) The expenses of administration of the retirement system shall be paid by the State of New Jersey. Each employer shall reimburse the State for a proportionate share of the amount paid by the State for administrative expense. This proportion shall be computed as the number of members under the jurisdiction of such employer bears to the total number of members in the system. The pro rata share of the cost of administrative expense shall be included with the certification by the retirement system of the employer's contribution to the system.
(12) Notwithstanding anything to the contrary, the retirement system shall not be liable for the payment of any pension or other benefits on account of the employees or beneficiaries of any employer participating in the retirement system, for which reserves have not been previously created from funds, contributed by such employer or its employees for such benefits.
(13) (Deleted by amendment, P.L.1992, c.125.)
(14) Commencing with valuation year 1991, with payment to be made in Fiscal Year 1994, the Legislature shall annually appropriate and the State Treasurer shall pay into the pension accumulation fund of the retirement system an amount equal to 1.1% of the compensation of the members of the system for the valuation year to fund the benefits provided by section 16 of P.L.1964, c.241 (C.43:16A-11.1), as amended by P.L.1979, c.109.
(15) If the valuation assets are insufficient to fund the normal and accrued liability costs attributable to the amendatory provisions of P.L.1999, c.428 (C.43:16A-1 et al.) as provided hereinabove, the normal and unfunded accrued liability contributions required to fund these costs for the State and other employers shall be paid by the State.
(16) The savings realized as a result of the amendments to this section by P.L.2001, c.44 in the payment of normal contributions computed by the actuary for the valuation periods ending June 30, 1998 for employers other than the State shall be used solely and exclusively by a county or municipality for the purpose of reducing the amount that is required to be raised by the local property tax levy by the county for county purposes or by the municipality for municipal purposes, as appropriate. The Director of the Division of Local Government Services in the Department of Community Affairs shall certify for each year that each county or municipality has complied with the requirements set forth herein. If the director finds that a county or municipality has not used the savings solely and exclusively for the purpose of reducing the amount that is required to be raised by the local property tax levy by the county for county purposes or by the municipality for municipal purposes, as appropriate, the director shall direct the county or municipal governing body, as appropriate, to make corrections to its budget.
(cf: P.L.2018, c.55, s.17)
3. This act shall take effect immediately.
STATEMENT
This bill will require the Police and Firemen's Retirement System (PFRS) to attain a target funded ratio of at least 80 percent and be able to maintain that target funded ratio of 80 percent or above for five valuation periods, as certified by the actuary of the system, before the board of the PFRS is allowed to enhance or modify any benefit or make any adjustment to the uniform contribution rate of the members.
