SENATE BUDGET AND APPROPRIATIONS COMMITTEE

STATEMENT TO

SENATE, No. 1913

STATE OF NEW JERSEY

DATED: JUNE 7, 2012

      The Senate Budget and Appropriations Committee reports favorably Senate Bill No. 1913

      This bill revises the application process and eligibility criteria for receipt of a disability retirement benefit under the State-administered defined benefit pension systems, the Teachers’ Pensions and Annuity Fund (TPAF), the Judicial Retirement System (JRS), the Public Employees’ Retirement System (PERS), the Police and Firemen’s Retirement System (PFRS), and the State Police Retirement System (SPRS).  For JRS, the bill establishes an ordinary disability retirement benefit at 1½% of final salary multiplied by years of service with a minimum of 40% of final salary, and retains for an accidental disability retirement the current disability benefit of three-fourths of final salary.

      Under the bill, applicants for ordinary disability and accidental disability retirement must be certified as not only incapacitated for the performance of former duty but also for any other available duty which the employer is willing to assign for the same amount of compensation.  For members of JRS, PFRS and SPRS, an ordinary disability retirement would not be available until the member has 10 years of service, instead of the current requirement of four years for PFRS and SPRS and nominal years for JRS.  Application for accidental disability retirement must be filed within two years, instead of the current five years, of the original traumatic event and must coincide with an application for workers’ compensation benefits or for federal Social Security disability benefits.  The results of those applications are to be reported to the Division of Pensions and Benefits.  Currently, a retirement system may require a disability beneficiary to undergo a medical examination for a period of 5 years following the disability retirement.  The bill provides for such an examination at the option of the system until the beneficiary achieves a certain age.

      The bill provides that if a JRS, PFRS or SPRS disability retiree is under normal retirement age and engaged in an occupation, then the amount of the pension the retiree receives will be reduced to an  amount which, when added to the amount then earned, will not exceed the amount of the salary now attributable to the retiree’s former position.  This earnings restriction already applies to TPAF and PERS disability retirees.  The bill requires the disability retirees to submit annually to the Division of Pensions and Benefits copies of the retiree’s federal Internal Revenue tax forms, W-2 forms, and any other proof of employment required by regulation, unless such submission is waived by the board of trustees of the pension fund of which the retiree is a member.

      The bill repeals the provisions of TPAF and PERS added in 2010 that provided disability insurance coverage, rather than a disability pension, for employees enrolled in the TPAF or PERS on or after the effective date of P.L.2010, c.3.

      In addition, the bill requires the Attorney General of the Department of Law and Public Safety to establish a fraud unit for the prevention and identification of fraudulent disability pension claims and payments, using procedures that include, but are not limited to, the systematic review of medical examination reports of physicians for patterns indicating possible fraud, use of a fully integrated data processing system within the Division of Pensions and Benefits to monitor post-retirement employment through review of the wage reporting records of the Department of Labor, State vendor files, State payrolls, and federal Internal Revenue tax forms, as well as a toll-free number for reports from the public.  The unit will also examine any denial of an application for workers’ compensation benefits or for federal Social Security disability benefits, whose submission and reported results are required of each accidental disability beneficiary, to confirm that a beneficiary is eligible for accidental disability benefits.  Whenever the fraud unit is satisfied that a material fraud, deceit, or intentional misrepresentation has been committed in a disability pension claim or payment or in a purported disability pension claim or payment, or a violation of other laws concerning pension disability fraud has occurred, it will refer the matter to the Division of Criminal Justice.

      The bill also permits a public employer to establish, in consultation with the appropriate officials of the Executive Branch of State government and representatives of any relevant collective bargaining units, an early intervention plan designed to limit liability for accidental disability retirement benefits by ensuring the continued employment of injured employees through medical and vocational rehabilitation, reasonable accommodation of injured workers, and a safer workplace.

      Finally, the bill creates a temporary Accidental Disability Pension Review Committee.  The 26-member committee will study the current requirement that a member of TPAF, JRS, PERS, PFRS and SPRS must be permanently and totally disabled as a direct result of a traumatic event to be deemed eligible for the receipt of an accidental disability benefit and develop a recommendation for specific criteria detailing what must be demonstrated by a member in order to meet the traumatic event eligibility standard of that requirement.  The committee will make only one recommendation in the form of proposed legislation.  The report containing the recommendation will be transmitted, within 15 days after its adoption, to the President of the Senate and the Speaker of the General Assembly, to the members of the Legislature, to the Governor, and to the boards of trustees of the TPAF, PERS, PFRS, and SPRS and the State House Commission, which oversees JRS.

      Within 90 days after receipt of the report, the Legislature must vote on legislation based on the recommendation of the committee.  If both Houses of the Legislature do not pass legislation within 90 days, or if both Houses do pass legislation but the Governor does not sign it within 30 days after passage by both Houses, each of the boards of trustees and commission will meet to discuss the recommendation in the report.  A vote will be taken at that meeting to adopt or reject the recommendation in its entirety without modification.  If a majority of the  membership votes in the affirmative, the criteria will be deemed adopted and will be implemented by the board or commission for all applicants who submit applications 30 days after the date of adoption.  If a majority of the membership votes to reject the recommendation, the criteria for all applicants will not be changed.  If the recommendation is rejected, the board or commission will meet again within the following 12-month period to discuss the recommendation and will take another vote to adopt or reject the recommendation.  The boards or commission cannot rescind the adoption of the recommendation and neither the committees of TPAF, PERS, PFRS and SPRS nor the commission can change the adopted criteria.

FISCAL IMPACT:

      This bill revises benefit factors, the application process, and eligibility criteria for receipt of a disability retirement benefit under the State-administered defined benefit pensions system.  It also establishes, through the Department of Law and Public Safety, a fraud unit for the prevention and identification of fraudulent disability pension claims and payment and creates a temporary Accidental Disability Pension Review Committee, in but not of, the Department of the Treasury.

      The Division of Pensions and Benefits estimates that the decreased State employer pension costs associated with this bill are $5.448 million in FY 2014, $2.896 million in FY 2015, and $4.160 million in FY 2016.  The division estimates that the decreased local employer pension costs associated with this bill are $21 million in FY 2014, $18 million in FY 2015, and $15 million in FY 2016.  The division also estimates total materials and data processing implementation costs to be $1 million.

      The administrative costs for the Department of Law and Public Safety to establish a fraud unit are not available at this time.