Understanding Your Pension Benefits for State Employees Webinar Summary

Below is a summary of the Division of Pensions and Benefits webinar “Understanding Your Pension Benefits for State Employees”.  The presentation was not recorded and the slides have not be released for viewing.  If you have any specific questions about your account, or need further clarification on the information covered in the webinar, please contact the Division of Pension and Benefits at pensions.nj@treas.nj.gov (please allow 10-14 business days for a response) or 609-292-7524.

  • Pension Basics
    • Defined Benefit Plan (401a), which provides lifetime benefit
    • Combination of contributions and service credit based on time served in public sector
    •  Contributions
      • Member contributes 7.5% of base salary
      • Employer contributes unspecified amount into general pension fund, not your specific account
      • Investment returns
    • Pay periods equal the amount of service time
      • Bi-weekly paid employees – 261 pay periods = 10 years/651 pay periods = 25 years/782 pay periods = 30 years
      • Monthly paid employees – 120 pay periods = 10 years/300 pay periods = 25 years/360 pay periods = 30 years
    • Once you accrue 10 years of service, you are considered Vesting, which means you cannot collect your pension until you reach your minimum age – only if you leave/are terminated before your eligibility based on your tiers
    • If you decide to collect before your eligible, you will receive a reduced amount over your lifetime
  • Pension Tiers
    • Tier 1
      • Employment start before July 1, 2007
      • Must be age 60 or have 25 years of service to collect
    • Tier 2
      • Employment start July 1, 2007 – November 1, 2008
      • Must be age 60 or have 25 years of service to collect
    • Tier 3
      • Employment start November 2, 2008 – May 20, 2010
      • Must be age 62 or have 25 years of service to collect
    • Tier 4
      • Employment start May 21, 2010 – June 27, 2011
      • Must be age 62 and have 25 years of service to collect
    • Tier 5
      • Employment start June 28, 2011 or later
      • Must be age 65 and have 30 years of service to collect
  • Pension Calculation
    • Tier 1-3
      • Years of service/55 X (Last 3 years salary average OR Highest 3 years salary average) = Gross average payment
    • Tier 4-5
      • Years of service/60 X (Last 5 years salary average OR Highest 5 years salary average) = Gross average payment
  • Life Insurance
    • There are 2 different types of life insurance
    • Non-contributory
      • Paid by employer
      • Pays out 1.5x your base salary
    • Contributory
      • Paid by employee at 0.5% of your base salary
      • Pays out 1.5x your base salary
    • Designate beneficiaries through MBOS
      • Primary and Contingent beneficiaries
      • Contingent beneficiary only gets payout if all Primary are dead
      • Cannot pay out to minor unless:
        • Formal Trustee
        • Hold in escrow account until minor turns 18
  • Purchasing Service Credit
    • If you would like to purchase service credit, process takes 3-4 months
    • Shared Cost Time
      • You must pay for a portion of the costs
      • Includes temporary time off, leave of absence, and uncredited service
    • Full Cost Time
      • Member must pay for all of the costs
      • Includes military service, federal time
      • Will not count towards health benefits, but will for salary
    • Cost of Purchase
      • Highest salary X age factor = cost of one year
    • Payment Options
      • Lump sum
      • Payroll deductions
      • Rollover from another retirement plan
      • Combination
      • Must be paid in full by retirement date
  • Pension Loans
    • Must have 3 years of posted service
    • Borrow 2 times per calendar year
    • Borrow up to half of contribution, not to exceed $50,000
    • Interest rate is 7.75 % and there is a $15.00 administrative fee
    • Repayment
      • minimum payment is never less than your pension contribution
      • Cannot exceed 5 years
      • Payment through payroll deductions
      • Cannot exceed 25% of base salary – usually matters if multiple loans are out

About Andrew Dauphinee

Education and learning are passions of mine. Lifelong learning is a core part of who I am and I strive to pass that desire for information on to everyone I meet. As the Instruction and Outreach Librarian, it is my goal to provide quality, informative, and relevant programming to meet the diverse needs of our patrons. Please contact me regarding programming at adauphinee@njstatelib.org.