PENSION BENEFITS REPORT
How the Defined Contribution
Retirement Plan affects PFRS Members
As many of you know, our retirement system
has three tiers to classify our members based on
when they were appointed or enrolled into the Po-
lice and Fire Retirement System (PFRS).
Tier 1 includes members who were enrolled
into the PFRS prior to May 21, 2010.
Tier 2 includes members enrolled between May
21, 2010 and on or before June 28, 2011.
Tier 3 members are those enrolled after June 28,
2011.
The Defined Contribution Retirement Plan
(DCRP) was established for PFRS members when
Gov. Christie signed Ch. 1 P.L. 2010 into law which created Tier 2 of
the PFRS, and it took effect on May 21, 2010. Tier 3 members were
created when Gov. Christie signed Ch. 78 P.L. 2011 into law, and it
took effect on June 28, 2011.
Under these laws, a new member for whom the annual maxi-
mum compensation will be reached in any year becomes a partici-
pant of the Defined Contribution Retirement Program (DCRP) with
regard to the remaining compensation, unless the member elects
to waive participation in the DCRP. If a member decides to waive
participation and wants to join at a later date, the member can ap-
ply to enroll at that time, and membership into the DCRP would go
into effect on Jan. 1 of the following calendar year.
For the calendar year of 2017, the compensation limit based
on social security maximum deductions is $127,200. The amount
earned in excess of $127,200 will have a 5.5-percent DCRP contri-
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bution. Employers will be responsible for a matching 3-percent
DCRP contribution. In other words, if a Tier 2 or Tier 3 member is
currently earning $132,200, the excess, which in this case is $5,000,
would be placed into the DCRP. Tier 2 and Tier 3 members would
then contribute 5.5 percent and the employer would make a 3-per-
cent contribution on the $5,000.
When a PFRS member also becomes a participant in the DCRP,
the member will be eligible for life insurance from the DCRP, as
well as from PFRS. While employed, a PFRS member enrolled in the
DCRP is covered by employer-paid life insurance, payable to des-
ignated beneficiaries in the amount of 1.5 times the annual base
salary on which DCRP contributions were based. This coverage is
available without a medical examination to members under age 60.
Newly enrolled members 60 years of age or older must undergo a
medical examination to qualify. DCRP members will continue to
be insured for up to two years if on an approved leave of absence
without pay for personal illness.
Upon retirement, life insurance under the DCRP is reduced to
3/16 of the annual base salary on which DCRP contributions were
based. This life insurance coverage is available in retirement to
PFRS members enrolled in the DCRP that are age 60 or older if the
member has completed 10 years of participation in the DCRP, or
PFRS members enrolled in the DCRP who are any age, as long as
the member has completed 25 years of participation in the pension
systems. The member must have been an active employee in the 12
months immediately preceding the initial receipt of a retirement
annuity payment. d