LEGISLATIVE FISCAL ESTIMATE

[First Reprint]

ASSEMBLY, No. 5576

STATE OF NEW JERSEY

219th LEGISLATURE

 

DATED: JANUARY 10, 2022

 

 

SUMMARY

 

Synopsis:

Permits teacher and professional staff member who provides special services retired from TPAF to return to employment for up to two years without reenrollment in TPAF if employment commences during 2021-2022 and 2022-2023 school years.

Type of Impact:

Potential annual expenditure impact for the State General Fund and school districts.

Agencies Affected:

School districts, Department of the Treasury.

 

 

Office of Legislative Services Estimate

Fiscal Impact

Year 1 

Year 2 

Year 3 

 

State Cost Impact

 

Indeterminate

 

 

Local Cost Impact

 

Indeterminate

 

 

 

 

 

·         The Office of Legislative Services (OLS) estimates that if a teacher or professional staff member who provides special services returns to employment shortly after retirement without reenrolling in the Teachers’ Pension and Annuity Fund (TPAF), the local school district may realize savings in health care costs for that employee because the employee may be receiving, if eligible, State-paid coverage under the School Employees’ Health Benefits Program (SEHBP) in retirement based on the former employment.  When a retiree is reenrolled in the TPAF as required by current law upon becoming employed again after retirement, the State avoids this expense because health care benefits then become the responsibility of the board of education until the person again retires.

 

Because each qualified retiree is not reenrolled in the TPAF and, thus, does not receive an increase in retirement benefits for the additional service, the TPAF does not incur additional costs. Consequently, the State does not have to make contributions to the TPAF, which it otherwise would have to make for an employee in a TPAF-covered position.

·         There is no information available to indicate the number of TPAF retirees who would be reemployed; thus, a specific estimate of the potential cost or savings for the State and local boards of education cannot be made at this time.

 

 

BILL DESCRIPTION

 

      This bill would permit a teacher or professional staff member who provides special services who retired from the TPAF to return to work full time with a board of education in a position of critical need, as determined by the State Commissioner of Education, without being reenrolled in the TPAF if reemployment commences during the remainder of the 2021-2022 school year and the entirety of the 2022-2023 school year.  A school district of a board of education in a position of critical need, as determined by the Commissioner of Education, seeking to reemploy a former member must demonstrate to the board of education the need for reemploying such members prior to reemployment by the board of education.

      If the retired teacher or professional staff member who provides special services returns to work with the former employer, it must occur more than 180 days after the retirement.  This bill will permit the teacher or professional staff member who provides special services to receive the TPAF retirement allowance as well as a salary.  The bill permits the return to work under a contract for one year, which may be renewed only for one additional year.  The total period of reemployment with any individual board of education must not exceed a two-year period, unless so approved by the Commissioner of Education as being in the best interests of the school district.  Under the bill, the former member’s retirement must have been a bona fide retirement and any employment or reemployment under the bill must not be prearranged before retirement.

      There may be additional requirements that would have to be met in certain circumstances for a return to work in order to comply with the laws and regulations of the federal Internal Revenue Code.

 

 

FISCAL ANALYSIS

 

EXECUTIVE BRANCH

 

      None received.

 

OFFICE OF LEGISLATIVE SERVICES

 

     The OLS estimates that if a teacher or professional staff member who provides special services returns to employment shortly after retirement without reenrolling in the TPAF, the local board of education may realize savings in health care costs for that employee because the retired teacher or professional staff member providing special services may be receiving, if eligible, State-paid coverage under the SEHBP in retirement based on the former employment.  Under current law, if a retired TPAF member becomes employed again in a TPAF-covered position, the retirement allowance and the right to any death benefit as a result of the prior TPAF membership is suspended and the reemployed retiree is reenrolled in TPAF and treated as an active member.  Upon subsequent retirement, the reemployed TPAF member receives the former retirement allowance based on the earlier membership, as well as an additional retirement allowance based upon the subsequent service during reemployment.  This bill creates an exception to reenrollment during the remainder of the 2021-2022 school year and the entirety of the 2022-2023 school year for a retired teacher or professional staff member who provides special services.

The OLS notes that there is a cost to the State if a TPAF retiree reenrolls in the TPAF because the State pays the local board of education’s share of required TPAF contributions.  Because this bill prevents reenrollment, the State would save on contributions in that regard.  Also, there will be no additional cost to the TPAF for a qualified retiree because, as a result of the bill, the retiree will not be eligible to receive an increased retirement benefit based upon service during reemployment with a local board of education.

Under current law, State payments for a qualified retiree’s post-retirement health care benefits provided through the SEHBP are suspended when the retiree is reenrolled in the TPAF.  In the case of reenrollment, health benefits are the responsibility of the employer until the employee again retires.  Under the provisions of this bill, the State would continue to pay for the post-retirement health care benefits for a retiree who accepts reemployment with a local board of education. 

The OLS notes that local boards of education would have the discretion to make such a reemployment decision.  The impact of this bill will be limited as it would apply only to a hiring decision made during the remainder of the 2021-2022 school year and the entirety of the 2022-2023 school year and as the employment would be for no more than two years.

      There is no information available to indicate the number of TPAF retirees who would be reemployed; thus, a specific estimate of the potential costs or savings for the State and local boards of education cannot be made at this time.

 

 

Section:

State Government

Analyst:

Nicolas Soto

Associate Research Analyst

Approved:

Thomas Koenig

Legislative Budget and Finance Officer

 

 

This legislative fiscal estimate has been produced by the Office of Legislative Services due to the failure of the Executive Branch to respond to our request for a fiscal note.

 

This fiscal estimate has been prepared pursuant to P.L.1980, c.67 (C.52:13B-6 et seq.).