the fourth year of contributions was completed on June 30,
2014. PERC disagreed and held that the prior contractual pro-
vision would not automatically be reinstated once the fourth
year of Chapter 78 contributions was completed. Instead, PERC
concluded that the employee contributions must continue at
the maximum level in effect at the completion of the fourth year
unless, and until, the parties negotiated a lower contribution
rate.
PERC did not leave it at that and concluded that employees
would be required to continue to pay the maximum percentage
until the expiration of the next agreement if the parties negoti-
ated a multi-year contract after the existing agreement expired
on June 30, 2014. In other words, the parties could not negoti-
ate a lower contribution rate while the successor agreement was
in effect because the fourth year of contributions would not be
completed until June 30, 2015. PERC further noted that if the
parties agreed to a one-year contract, which would then expire
on June 30, 2015, they could then negotiate another agreement
that could include a lower contribution level because only then
would the fourth year of contributions have been completed.
The education association appealed the decision. However,
the parties settled their dispute before the appeal was heard.
To resolve the dispute, the parties took PERC’s suggestion and
agreed to a one-year contract during which employees would
pay the maximum contribution rate for the fourth year of con-
tributions. At the same time, the parties also negotiated a three-
year agreement to take effect on July 1, 2015 and dropped the
contribution levels by 25 percent or to Tier 3 levels. Because of
this settlement, the Appellate Division dismissed the appeal as
moot.
The Clementon decision is the current state of the law in New
Jersey. However, there is another appeal in the Appellate Divi-
sion involving the Ridgefield Park Board of Education in which
the same issues have been raised. We do not expect a decision
until sometime next year.
Considering this background, what is the status of Locals’
ability to negotiate lower contribution levels? If you have com-
pleted four full years of contributions and your contract has
expired or will expire, Locals have the right to negotiate lower
contribution levels. Like the agreement in the Clementon case,
many PBA agreements have better language on contributions
that pre-date Chapter 78. However, this language, which may
have established lower contribution levels, will not automati-
cally be reinstated once the Chapter 78 obligation has been
completed. Contributions will remain at the maximum level
unless, and until, the PBA negotiates lower rates. During ne-
gotiations, Locals should work with their attorneys to develop
proposals and strategies that may or may not involve the same
language pre-Chapter 78.
If your existing contract has not yet expired – and you will not
complete the fourth year of Chapter 78 contributions until af-
ter the expiration of an existing contract – you may not be able
to negotiate for lower contribution rates unless you follow the
example of the parties in the Clementon case. In other words,
a Local could negotiate a short-term contract during which the
maximum level of contributions under Chapter 78 will be com-
pleted and then negotiate a multi-year contract with lower con-
tribution rates.
As we noted earlier, there are PBA Locals, as well as other
unions, which have negotiated lower contribution rates. There
are a number of ways that lower contribution rates can be ne-
gotiated. The Local could negotiate for a percentage of pen-
sionable salary no less than 1.5 percent. Or the Local could ne-
gotiate for a reduction in the percentage based upon the cost
of coverage. This could be accomplished either by a reduced
percentage or reducing the contribution to a lower tier on the
Chapter 78 scale, i.e., to Tier 3, as was done in Clementon. In
the first two examples, contributions could increase each year
if either salaries or cost of coverage increase. Additionally, the
Local could base the contribution using a fixed cost of coverage
that would not increase from year to year using Chapter 78 con-
tributions (or some other rate), for example, based on 2015 pre-
mium costs. An advantage in basing it on a fixed premium cost
is that the premium will not increase from year, to year even if
the percentage remained at the highest level of 35 percent.
Based on our experience in representing many PBA Locals,
and with the information that has been provided to the State
PBA Labor Relations Consultant, few PBAs have been success-
ful in negotiating lower contribution levels. It would be an un-
derstatement to say that employers will not easily agree to a
reduction in what has amounted to a windfall for them during
the past eight years. In most cases where reductions have been
negotiated, those reductions have not come without a price. Be
prepared for employers to propose reductions in other benefits
if they have any interest in negotiating reductions in health in-
surance contributions.
These are issues that PBA Locals should discuss with their
attorneys when they are ready and able to negotiate for lower
contribution levels. There are many factors that must be consid-
ered when deciding if and how to present a proposal for lower
contribution levels. It is not a one-size-fits-all proposition. We
will continue to keep the State PBA and its members apprised
of any developments that affect this issue, which is of great im-
portance to members and their families.
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