The following is provided as a summary interpretation of the benefits and procedures under the Defined Contribution Retirement Program (DCRP). The DCRP is established under the provisions of Chapter 92, P.L. 2007, and Chapter 103, P.L. 2007 (N.J.S.A. 43:15C-1 et.seq.). All applicable provisions of the DCRP are contained within the enabling legislation; the plan document adopted July 2, 2007 and subsequently amended, Employee Term Life Coverage Policy and Long Term Disability Coverage Policy, whose provisions shall supersede those presented here in the event of any conflicting guidance between the documents.
General DCRP Enrollment Information
The Defined Contribution Retirement Program, or DCRP, established July 1, 2007, provides retirement benefits for eligible employees and their beneficiaries. The Retirement Plan is a tax-qualified defined contribution money purchase pension plan under Internal Revenue Code (IRC) § 401(a) et seq., and is a “governmental plan” within the meaning of IRC § 414(d). The Plan Administrator maintains the Retirement Plan as a plan that qualifies for favorable income tax treatment under IRC § 401(a). Assets of the Trust with respect to the Retirement Plan are used solely for the purpose of providing benefits under the Retirement Plan, and for paying the administrative expenses of the Retirement Plan.
In addition to a tax-deferred defined contribution retirement benefit, the DCRP provides eligible members with employer-provided group life insurance and group long-term disability benefits.
DCRP Administration and Oversight
The DCRP is presently administered for the Division of Pensions and Benefits by Prudential Financial. A Defined Contribution Retirement Program Board has also been established to oversee the program.
Administrative Services Provider Contact Information
Prudential Financial makes DCRP information, including information about distribution options, available on its New Jersey Defined Contribution Program Web site, at: www.prudential.com/njdcrp
DCRP employers should contact Prudential through the dedicated e-mail link for any questions they may have during the program's implementation. This will allow Prudential to monitor inquiries and responses more efficiently. The special email address established to respond to any employer questions and/or inquiries is DCRP@prudential.com Employers should include both telephone and e-mail contact information with their inquiry. Employers should expect a response to their e-mail within 2 business days of their inquiry.
Employers and members wishing to contact Prudential Financial by phone can use Prudential's Toll Free Phone Number: 1-866-653-2771.
DCRP Membership Eligibility
Employees who are eligible for membership in the DCRP include:
*Maximum Compensation is defined as the maximum Social Security earnings amount creditable in a calendar year — the maximum earnings amount creditable in any calendar year for the computation of a Social Security benefit.
Newly elected officials (those elected on or after July 1, 2007) are to be enrolled in the DCRP ONLY and cannot enroll in the PERS (including the PERS Legislative Retirement System, closed to new members as of July 1, 2007), see below.
Newly appointed officials (those appointed on or after July 1, 2007) having no existing PERS account will be enrolled in the DCRP ONLY and cannot enroll in the PERS, see below. This includes those employees appointed as Workers' Compensation Judges on or after July 1, 2007.
For additional enrollment/membership information specific to each employee group listed above, click on the applicable link above.
Employer Contribution Rate
The DCRP employer contribution rate has been set at three percent of base salary.*
- For State or local officials elected or appointed on or after July 1, 2007 who are eligible for membership in the DCRP, State and local government employers will contribute three percent of the employee’s base salary to the program. See elected and appointed officials below.
- For employees enrolled in the PERS and TPAF on or after July 1, 2007 who earn a salary in excess of established "maximum compensation" limits and do not waive enrollment in the DCRP, employers will contribute three percent of the amount of employee base salary over the maximum compensation to the program. See PERS and TPAF members below.
* Base salary means the annual compensation of a member, plus the value of maintenance, if applicable, in accordance with contracts, ordinances, resolutions or other established salary policies of the member's employer for all employees in the same position, or all employees covered by the same collective bargaining agreement, which is paid in regular, periodic installments in accordance with the payroll cycle of the employer. Overtime, bonuses, and lump sum payments for longevity, holiday pay, vacation, compensatory time, or accumulated sick leave are NOT included as base salary.
Member Contribution Rate
Each employer picks up employee contributions for all base salary paid with respect to enrolled participants. The employee contributions so picked up are treated as employer contributions pursuant to IRC § 414(h)(2).The employer pays the picked up contributions directly to the DCRP, instead of paying such amounts to the participants, and such contributions are paid from the same funds that are used in paying salaries to participants. Such contributions, although designated as employee contributions, are paid by the employer in lieu of contributions by participants. Participants may not elect to receive such contributions directly instead of having them paid by the employer to the DCRP. Employee contributions so picked up are treated for all purposes of the DCRP and State law, other than federal tax law, in the same manner as employer contributions made without a pick up.
By law (Chapter 103, P.L. 2007), the DCRP member contribution rate is set at 5.5 percent.
- State or local officials elected or appointed on or after July 1, 2007 who are eligible for membership in the DCRP will contribute 5.5 percent of their base salary to the program. See elected and appointed officials below.
- Employees enrolled in the PERS and TPAF on or after July 1, 2007 who earn a salary in excess of established "maximum compensation" limits and do not waive enrollment in the DCRP will contribute 5.5 percent of the amount of their salary over the maximum compensation to the program. See PERS and TPAF members below.
The employer deducts member contributions from the applicable salary (base salary for elected and appointed officials, amount of salary over the maximum allowable compensation for eligible PERS and TPAF members who do not waive enrollment in the DCRP). These contributions, along with the employer contributions, are put into the DCRP participant's tax-deferred investment account established with the DCRP's administrative services provider, Prudential Financial. Participants are allowed to allocate their contributions and the contributions of their employer into the investment choices determined by the DCRP Board.
Submitting Contributions Using the Online Retirement Center for Plan Sponsors
Employers must submit contributions using Prudential's Online Retirement Center for Plan Sponsors. The procedure for submitting contributions in this manner is outlined in the presentation available through this link:
Submitting Contributions Using the Online Retirement Center for Plan Sponsors.
Group Life Insurance
DCRP members are covered by employer-paid life insurance, payable to their designated beneficiaries in the amount of 1½ times the annual base salary on which DCRP contributions were based.
Example 1: For an appointed official earning an annual base salary of $60,000, the employer-paid group life insurance amount would be:
1.5 (1½) X $60,000 = $90,000
payable to the DCRP member's designated beneficiaries.
Example 2: If a PERS or TPAF member enrolled in the DCRP is earning an annual base salary of $110,000, and the maximum compensation for that year is $102,000 (2008), the employer-paid group life insurance benefit through the DCRP would be:
1.5 X ($110,000 - $102,000) = 1.5 X $8,000 = $12,000
payable to the DCRP member's designated beneficiaries.
The DCRP group life insurance coverage is available without a medical examination to members under the age of 60. Newly enrolled members 60 years of age or older must undergo a medical examination to qualify.
Group Life Insurance Coverage in Retirement
Group life insurance coverage under the DCRP reduces to 3/16 of the annual base salary on which DCRP contributions were based at retirement. Group life insurance in retirement is available to:
- Members age 60 or older who have completed 10 years of participation in the DCRP, and;
- Members of any age who have completed 25 years of DCRP participation,
AS LONG AS the member has been an active employee in the twelve months immediately preceding the initial receipt of a retirement annuity payment.
Group Life Insurance Coverage - Leave of Absence - Personal Illness
DCRP group life insurance coverage will continue for up to two years for a DCRP member on an approved leave of absence without pay for personal illness.
Waiving Noncontributory Group Life Insurance Coverage over $50,000
The Internal Revenue Service classifies all life insurance coverage over $50,000 as a fringe benefit subject to taxation. The amount of the life insurance coverage is not taxable, but the premium required to pay for the life insurance coverage is taxable. Members can elect to waive insurance coverage over $50,000 at any time. For more information on this topic, see Fact Sheet #22, Waiver of Noncontributory Group Life Insurance over $50,000.
Group Life Insurance Conversion (For Elected and Appointed Officials ONLY)
Other than the retired insurance benefit described above, life insurance coverage under the DCRP ceases 31 days after termination of employment. During the 31-day period following termination of employment, a member may convert existing group life insurance coverage (less any amount of coverage carried over into retirement) into an individual whole life policy, without medical examination. For more information, see Fact Sheet #13, Conversion of Life Insurance.
Long Term Disability Coverage
Members are eligible for employer-paid long-term disability insurance coverage after one year of participation in the DCRP.
Eligibility for the actual disability benefit begins after six consecutive months of total disability due to an occupational or nonoccupational condition.
The member must be unable to perform any and every duty pertaining to his or her occupation in order to be considered totally disabled due to sickness or accidental bodily injury. The member need not be confined to home, but must be under a doctor's regular care.
If totally disabled, the member is eligible to receive a regular monthly benefit up to 60 percent of the base salary on which DCRP contributions were based during the 12 months preceding the onset of the disability. While disabled, the member's and the employer's mandatory contributions are automatically credited to the member's retirement account.
This monthly benefit is offset by any other periodic benefit the member may be receiving, such as Workers' Compensation, short-term disability, or Social Security Disability.
Eighteen months after the onset of long-term disability eligibility, the member must be unable to engage in any gainful occupation for which he/she is reasonably suited by education, training, or experience. Total disability is not considered to exist if the member is gainfully employed, incarcerated, or if the disability resulted from an act of war, or was intentionally self-inflicted.
Long-term disability benefits will be paid as long as the member remains disabled or until the member attains age 70. Should the member begin receiving payments under the retirement annuity, these benefits terminate.
DCRP Enrollment Information for Elected and Appointed Officials
State or local officials who are elected or appointed on or after July 1, 2007 are eligible for enrollment in the DCRP as of the starting date in the elected or appointed office. Additional enrollment conditions apply, as outlined below: Elected Officials; Appointed Officials.
Enrolling Employees in the DCRP
It is the employer's responsibility to enroll employees who are eligible for DCRP membership as elected or appointed officials in a timely fashion. This task can be accomplished in one of two ways:
- By submitting a fully completed NJ DCRP Enrollment Application to the Division of Pensions and Benefits;
- By using the online "DCRP Enrollment" program application, available through the Employer Pensions and Benefits Information Connection, or EPIC.
To sign up for EPIC, follow the steps outlined on the "EPIC Registration Information" page of the Division of Pensions and Benefits Web site, at www.state.nj.us/treasury/pensions/epicintro.htm
For help with any of the EPIC applications available online, please refer to the "EPIC User's Guide" at www.state.nj.us/treasury/pensions/epickit.htm You may also call the EPIC Help Desk, at (609) 777-0534 or send an e-mail to: pensions.nj@treas.state.nj.us
Once enrollment occurs, member contributions are deducted from salary and put into the DCRP participant's tax-deferred investment account established with Prudential. Employer contributions are also made at the time salary is paid and are placed into the DCRP participant's tax-deferred investment account.
If you need help with the submittal of contributions to the tax-deferred investment accounts of the DCRP participants at your employing location, please refer to the PDF version of the presentation, Submitting Employer Contributions Using the Online Retirement Center for Plan Sponsors.
DCRP Enrollment Eligibility for Elected Officials
Newly elected officials1 (those elected on or after July 1, 2007) are to be enrolled in the DCRP ONLY and cannot enroll in the PERS, including the PERS Legislative Retirement System (PERS LRS).
Elected officials who are already enrolled in the PERS prior to July 1, 2007, based on an elected office (including PERS LRS members), will remain in PERS while serving in that elected office.
For a retired member of another State-administered retirement system who is elected to public office on or after July 1, 2007, enrollment in the DCRP is optional:
- If the newly elected official declines enrollment in the DCRP, he or she will continue to receive the retirement benefit from the former employment while drawing a salary from the elected official position; however, the elected official will not be eligible for the benefits associated with DCRP membership, either during or upon completion of service.
- If the newly elected official chooses to become a member of the DCRP, the retirement benefit from the former employment is suspended, and the official is enrolled in the DCRP. The employer would deduct member contributions from the elected official's salary, and make employer contributions, for the duration of the elected service. Upon termination of the elected service, the retirement benefit from the former employment would be reinstated, and the official would also be eligible for a retirement benefit through his or her DCRP membership.
1An elected official is any individual who holds a State or local (county, municipal, etc.) elected public office.
DCRP Enrollment Eligibility for Appointed Officials
An appointed State or local official2 with no existing PERS member account whose appointment occurs on or after July 1, 2007 will be enrolled in the DCRP ONLY, and may not enroll in the PERS.
However, an appointed State or local official who was enrolled in the PERS prior to July 1, 2007 will remain in the PERS while serving in the appointed position, regardless of the date of appointment.
Similarly, if an employee is enrolled in the PERS prior to July 1, 2007, and is appointed to a DCRP-eligible position on or after July 1, 2007, the newly appointed official will remain a PERS member while in the appointed position.
An appointed official serving in a position that is otherwise eligible for membership in the TPAF, PFRS, SPRS, or JRS will not be enrolled in the DCRP. In these instances application should be made to enroll in that other retirement system regardless of any former retirement system affiliations.
A Model Resolution or Ordinance for Determining Positions Eligible for the DCRP is provided at this link for governing bodies of counties, municipalities, and other local entities, to use in determining the eligibility of appointed positions for enrollment in the DCRP.
Note: Appointed titles that are ineligible for DCRP participation (see Chapter 92, P.L. 2007): Certified Health Officer, Tax Assessor, Tax Collector, Municipal Planner, Chief Financial Officer, Registered Municipal Clerk, Construction Code Official, Licensed Uniform Subcode Inspector, Qualified Purchasing Agent, or Principal Public Works Manager.
2A State appointee is any individual appointed by the Governor, including those requiring the advice and consent of the Senate. A local appointee is any individual appointed by the Governor, including those requiring the advice and consent of the Senate; or an individual appointed in a similar manner by the governing body of a local public entity (county, municipality, etc.).
Workers' Compensation Judges
Under Chapter 92, P.L. 2007, the Workers' Compensation Judges Part of the PERS (WCJ Part of the PERS) was closed to new members. As appointed officials, Workers' Compensation Judges whose appointment takes effect on or after July 1, 2007 must enroll in the Defined Contribution Retirement Program.
Workers' Compensation Judges appointed before July 1, 2007 will remain in the Workers' Compensation Judges Part of the PERS. To view the special retirement benefits for those who remain members of the WCJ Part of the PERS, click here.
Employer Contribution Rate: Elected and Appointed Officials
Under the DCRP, State and local government employers will contribute 3 percent of the employee’s base salary to to a tax-deferred investment account established with Prudential Financial, which jointly administers the DCRP with the Division of Pensions and Benefits.
Member Contribution Rate: Elected and Appointed Officials
When enrolled in the DCRP, the elected or appointed official contributes 5.5 percent of base salary to a tax-deferred investment account established with Prudential Financial, which jointly administers the DCRP with the Division of Pensions and Benefits.
Salary Requirements
Minimum Salary Requirement: A newly elected or appointed official must earn a minimum base salary of $1,500 to be eligible to participate in the DCRP.
If the DCRP eligible elected or appointed official will earn less than $5,000 annually, the official may choose to waive participation in the DCRP for that office or position by submitting a New Jersey DCRP Waiver of Retirement Program Participation for Elected or Appointed Officials to the Division of Pensions and Benefits. However, the decision to waive participation is irrevocable for that office or position, and an elected or appointed official who waives participation cannot later choose to enroll based on that same office or position.
Waiving Participation in the DCRP: Elected and Appointed Officials
An elected or appointed official who earns less than $5,000 annually but is otherwise eligible for DCRP membership may choose to waive participation in the DCRP.
The elected or appointed official must submit the form, New Jersey DCRP Waiver of Retirement Program Participation for Elected or Appointed Officials, within 30 days of becoming eligible for the DCRP, in order to complete the process of waiving his or her DCRP participation.
Once an elected or appointed official waives DCRP participation, the waiver is irrevocable with regard to that elective office or position.
Vesting, Elected and Appointed Officials
Vesting in the DCRP occurs immediately for any newly elected or appointed official with either:
- An existing DCRP account; or
- Active or vested membership in another State-administered retirement system.
A newly elected or appointed official who does not qualify for immediate vesting in the DCRP will have the member and employer contributions in their account held in a delayed vesting status for the first year of membership. Full vesting occurs at the start of their second year of membership.
If, however, the member is ineligible to continue membership for a second year (e.g., an appointed official serving a one-year term), he or she may apply for a refund of the employee contributions. Employer contributions already made, including any investment gain or loss, will revert back to the employer.
DCRP Enrollment for Eligible PERS or TPAF Members
Eligible employees who are enrolled in the PERS or TPAF on or after July 1, 2007* are also enrolled in the DCRP when their annual salary exceeds the maximum compensation limit for PERS or TPAF pension contributions (annual maximum wage contribution base for Social Security pursuant to the Federal Insurance Contributions Act).
This may occur either:
- Upon enrollment into the PERS or TPAF when an annual base salary that will exceed the maximum compensation is reported on the PERS or TPAF Enrollment Application; or
- When a PERS or TPAF member’s annual salary is increased to where it will exceed the maximum compensation and it is reported by the employer to the Division of Pensions and Benefits (either by directly contacting the Division, or when submitted on the Quarterly Report of Contributions).
*Those enrolled in the PERS or TPAF on or after July 1, 2007 are designated as having "Class D" membership. PERS or TPAF members enrolled prior to July 1, 2007 are designated as having "Class B" membership. A PERS or TPAF member with "Class B " membership is ineligible for enrollment in the DCRP.
PERS and TPAF members who are eligible for their DCRP membership though their enrollment date (Class D designation) and through their salary surpassing the maximum compensation limit), have the option of waiving participation in the DCRP, see below.
Transfers
An employee who transfers into the PERS or TPAF on or after July 1, 2007 will not be subject to the maximum compensation limits or DCRP enrollment if the employee was a member of the PERS or TPAF on or before June 30, 2007 and any of the following conditions apply:
- The member is transferring to a PERS or TPAF eligible position without a break in service; or
- Any break in service is 24 months or less from the date of the last PERS or TPAF pension contribution and the account has not been withdrawn; or
- Any break in service is 24 months or less from the end of an approved leave of absence; or
- The member is returning from a break in service that was the result of an involuntary layoff or reduction in force and the return is within 10 years of the date of the last PERS or TPAF pension contribution and the account has not been withdrawn.
If a member transfers into the PERS or TPAF on or after July 1, 2007 from another pension system (PFRS, SPRS, or JRS); or the transfer occurs after a break in service that falls beyond the 24-month or 10-year exceptions described above, the member will be subject to the maximum compensation rules and DCRP enrollment.
Employer Contribution Rate
Under the DCRP, State and local government employers will contribute 3 percent of the amount of employee salary over the maximum compensation limit to the DCRP.
Member Contribution Rate
Through payroll deductions made by the employer, the member will contribute 5.5 percent of his or her eligible compensation (the amount of the DCRP member's salary over the maximum compensation limit) to the DCRP.
Maximum Compensation Limits for PERS or TPAF Pension Contributions: DCRP Enrollment
For calendar year 2008, the annual maximum wage (maximum compensation limit for PERS or TPAF pension contributions) is $102,000. This limit is subject to change at the start of each calendar year. Employees who are enrolled in the PERS and TPAF on or after July 1, 2007 who earn salary in excess of the annual maximum wage will be enrolled in the DCRP — in addition to the PERS or TPAF — unless they waive enrollment in the DCRP.
The maximum compensation limit is based on the annual maximum wage for Social Security.
MAXIMUM COMPENSATION LIMITS |
2008 |
$102,000 |
2007 |
$97,500 |
PLEASE NOTE: The Social Security maximum wage DOES NOT apply to employees who were already members of the PERS or TPAF prior to July 1, 2007 (Class B Members); these members are also not eligible for enrollment in the DCRP.
IRS Limits on Annual Contributions for Retirement Plan Benefits
IRC Sec. 401(a)(17) limits the amount of annual contributions that may be used to determine retirement plan benefits. For calendar year 2008, the annual pensionable salary limit is $230,000. This is also subject to change each calendar year.
Thus, for PERS and TPAF members enrolled in the DCRP on or after July 1, 2007, the employee's eligible DCRP compensation is the amount of salary that exceeds the annual maximum wage for pension contributions, up to the IRC 401(a)(17) limit.
An employee contribution of 5.5 percent will be deducted from the employee's eligible compensation and invested in the DCRP. The employer contributes an additional 3 percent to the DCRP based on that employee's eligible DCRP compensation.
Example 1: A PERS employee earns an annual salary of $120,000 in 2008. His or her DCRP contributions will be based on the amount of salary in excess of $102,000:
$120,000 - $102,000 = $18,000 — Member's Eligible DCRP Compensation
Example 2: A TPAF employee earns an annual salary of $240,000 in 2008. His or her DCRP contributions will be based on the amount of salary in excess of $102,000, but under the maximum pensionable salary amount of $230,000:
$230,000 - $102,000 = $128,000 — Eligible DCRP Compensation
PERS or TPAF Service Credit
PERS or TPAF members who also participate in the DCRP will receive service credit in their corresponding PERS or TPAF account, and will be eligible to retire under the rules of the PERS or TPAF — with the final salary used to determine benefits at retirement limited to the maximum compensation amounts in effect when the salary is earned. At retirement, additional income will be available to the member based on the investment in the DCRP.
When a TPAF or PERS member also becomes a participant in the Defined Contribution Program, the group life insurance and long term disability benefit provisions of that program will be available to that participant.
Waiving DCRP Participation: PERS and TPAF Members - Required Form
PERS and TPAF members enrolled on or after July 1, 2007 who are eligible for DCRP participation upon reaching the annual maximum wage contribution base for Social Security pursuant to the Federal Insurance Contributions Act ($102,000 in 2008), may elect to waive participation in the DCRP.
A member who chooses to waive DCRP participation must complete and submit the form, New Jersey DCRP Waiver of Retirement Program Participation for Employees Enrolled in the PERS or TPAF within 30 days of the date the member becomes eligible for DCRP participation.
Electing to Participate in the DCRP after Waiver of Participation
If an eligible PERS or TPAF member waives DCRP participation and later wishes to participate, he or she can apply for DCRP enrollment by completing the form, New Jersey DCRP Election to Participate in the DCRP for PERS or TPAF Employees Who Previously Waived DCRP Enrollment, and submitting it to the Division of Pensions and Benefits. Membership will be effective January 1 following receipt of the participation request.
Vesting in the DCRP: Eligible PERS or TPAF Members Electing to Enroll in the DCRP
PERS or TPAF members who participate in the DCRP are immediately vested in the DCRP, with a right to a benefit at retirement based on both employee and employer contributions.
PERS or TPAF members who also participate in the DCRP will still receive service credit in their corresponding PERS or TPAF account, and will be eligible to retire under the rules of the PERS or TPAF — with the salary used to determine benefits at retirement limited tothe maximum compensation amounts in effect when the salary is earned. At retirement, additional income will be available to the member based on the DCRP investments.
Additional Defined Contribution Retirement Program Information
The Division of Pensions and Benefits provides information about the Defined Contribution Retirement Program, or DCRP, via the following fact sheets:
Both fact sheets are available to members on the Division's Web site, at www.state.nj.us/treasury/pensions
The following Certifying Officer Letters provide additional guidance for employers enrolling DCRP members:
The following Local Finance Notices from the Department of Community Affairs provide additional DCRP information.
