Retirement Planning for PERS and TPAF Members Webinar Summary

There are many aspects of the retirement process, which could affect when you receive your pension, how much you receive, and whether you are eligible for any other benefits.  A summary of the Retirement Planning for PERS and TPAF Members webinar is below.  You can also download a copy of the Retirement Planning Guidebook for more information.

To see a full description of all topics, available seminar/webinar dates and/or locations, or to register, please visit their registration page at: www.nj.gov/treasury/pensions/member‐training.shtml.

If you have any questions regarding retirement or the information from the webinar, please contact the Division of Pensions and Benefits at pensions.nj@treas.nj.gov (please allow 10-14 business days for a response) or 609-292-7524.  You can also view their Guidebook series at https://www.state.nj.us/treasury/pensions/member-guidebooks.shtml.

  • Retirement basics
    • Your pension tier will determine your eligibility based on both years of service and your age
    • You can find a breakdown of the pension tiers at https://www.state.nj.us/treasury/pensions/retirement-estimate-calculators.shtml.
    • You must apply for retirement through MBOS
    • Your Retirement Date will always be the FIRST of the month
    • Your Termination Date MUST be before your Retirement Date
    • Recommended to file 4-6 moths before Retirement Date
  • Types and Eligibility
    • Service Retirement
      • Based on your age according to your tier
        • Tier 1 or 2 – 60 years
        • Tier 3 or 4 – 62 years
        • Tier 5 – 65 years
      • You do not need to meet any minimum years of service
      • For payment calculation, see the Retirement Estimate Calculator
    • Early Retirement
      • Based on years of service according to your Tier
      • A reduction will be applied based on your age and pension Tier
        • Tier 1 – 3% per year under age 55
        • Tier 2 – 3% per year under age 55 AND 1% per year under age 60
        • Tiers 3/4 – 3% per year under age 55 AND 1% per year under age 62
        • Tier 5 – 3% per year under age 65
      • Reductions will be calculated down to to the month
    • Deferred Retirement
      • You must be vested (minimum 10 years of service), but less than amount for early retirement according to your Tier
      • You must be younger than retirement age based on your Tier
      • No reduction based on age
      • Must file before you reach your Retirement Age according to your Tier
    • Veteran Retirement
      • Must have 25 years of service and be age 55 OR 20 years of service and age 60
      • If under 35 years of service, formula is 54.5% of the highest 12 consecutive months of base salary
        • must have contributed to pension in all 12 months
      • If 35 years of service or more, formula is Years of Service/55 X Highest 12 Consecutive Months of Salary
    • Disability Retirement
      • Only available for Tiers 1-3
      • Ordinary
        • 10 years of NJ service
        • totally and permanently disabled
        • Unable to carry out duties of your job
        • 43.6% X Final Average Salary
      • Accidental
        • Active member of the pension
        • Totally and permanently disabled
        • Must be as a result of performing job duties
        • Apply within 5 years of the accident
        • 72.7% X Base Salary at Time of Accident
  • Pension Options
    • General Information
      • Must select 1 Option when you submit Retirement Application
      • All options provide lifetime payment to member – 1 payment per month
      • Some options are irrevocable once pension is Due and Payable (30 days after Retirement Day or Pension Board approves retirement, whichever is longer)
      • Pension payment is 1 month behind
    • Maximum Option
      • Highest payable benefit only to member
        • Benefits payable upon death (Last Check Benefit)
          • your last month’s payment OR balance of unrecovered contributions
            • Takes 2-3 years to recover all of your contributions
          • Beneficiary can include individuals, charities, estate, or trust
          • Spouse/partner will be notified of no survivor benefit when you retire
          • Beneficiary WILL NOT receive any further payments
    • A, B, C, D Options
      • These options allow for some level of survivor benefits, but your monthly benefit is reduced
      • Reduction is based on the age difference between you and your beneficiary and the Option you select
        • A = 100% of your benefit, B = 75%, C = 5-%, D = 25%
      • Beneficiary cannot be changed after retirement date
      • If your beneficiary dies before you, your allowance will increase to your maximum amount
    • Option 1
      • A reserve amount is set aside for your beneficiary
      • Member receives a reduced payment amount for life, which is matched by beneficiary for duration of the reserve
      • Once reserve runs out (generally 8-11 years), beneficiary stops receiving any payment
      • If you die before reserve is depleted, beneficiary gets the balance
      • You can designate multiple beneficiaries and change them after you retire
    • Options 2 and 3
      • Choose 1 beneficiary for lifetime benefits
      • Option 2 = 100%, Option 3 = 5-%
      • Member receives a reduced payment that does not change if beneficiary dies
      • Reduction is based on age difference between member and beneficiary as well as Option choice
    • Option 4
      • Beneficiary receives a specified amount upon member’s death you designate on Retirement Application
      • Benefit cannot exceed member’s monthly benefit
      • Reduction is based on a calculation using member age and beneficiary(ies) age
  • Purchasing Service Credit
    • Members can purchase service credit in 2 categories
    • Shared credit, where member only pays for their half of the payment
      • Temporary/substitute service, former membership, leave of absence, uncredited service, out-of-state service
    • Full credit, where member pays their half and employers half of payment
      • Military service, U.S. Government including Postal Service, local retirement system
    • Payment is based on age and member’s highest salary
  • Life Insurance in Retirement
    • Must be qualified and covered by Group Life Insurance while active employee
    • Must have 10 years of service or less if disabled
    • No-cost benefit is paid to named beneficiary upon death
    • Restricted to Tier 1-3 only
      • For a chart of payments, see page 15 of Handout
    • Group Life Insurance Conversion
      • Can convert Group Life Insurance coverage of active employee when member retires, but member is responsible for paying all costs that were once covered by employer
    • You can have multiple beneficiaries as both a Primary and Contingent
      • Does not have to be an individual
      • If you want to list a minor:
        • nominate a Formal Trustee for the minor OR
        • payment will be withheld until minor is 18 or there is a court-ordered Guardian of Property assigned to the minor
  • Taxes and Deductions
    • Your pension is subject to Federal Income Tax for the duration of payments
    • Your pension is subject to NJ State Income Tax once the amount of employee contributions has been recovered
      • This only applies if you live in NJ after retirement
    • The NJ Division of Pensions and Benefits does not withhold state income state for other states; you are responsible for any tax payments
  • Possible Deductions on Pension
    • Federal Income Tax
    • NJ State Income Tax
    • Health Benefits
    • Dental
    • Pension Loan
      • You can take an existing Pension Loan into retirement, but you cannot borrow any more money against your pension
    • Tax Liens
    • Court-ordered Deductions
  • Health Benefits
    • You will receive a letter in the mail before your retirement, outlining your possible costs
    • If you wish to enroll, you must prove your age by sending acceptable original documents via the Postal Service
    • Eligible Dependents
      • Spouse/partner
      • Children until age 26
      • Overage dependents if they are disabled
    • 2 carriers – Aetna or Horizon
    • Prescription plan through Optum Rx
    • 6 Dental Plans
    • Costs depend on your employer (local government, state, or local education unit)
    • Medicare Parts A and B
      • If you are already on the state sponsored health plan in retirement, you must take Medicare once you are able – 65 years of age or receive Social Security Disability for 24 continuous months
      • Must provide a copy of your Medicare Card and call to enroll
      • Once Medicare enrollment has been proved, you will automatically be enrolled in Part D (prescription)
    • You can change your plan anytime as long as you have been with the same plan for 12 months
    • If you terminate your state sponsored health insurance in retirement at any time, you will not be re-instated.
    • If you decide to waive coverage at time of retirement, you can re-enroll within 60 days of losing your current coverage
  • Dental Benefits
    • Must be enrolled in the State Health Benefits Plan
    • One time enrollment
    • Does not cover orthodontics