correct size blogOn June 25 the State Senate, by a 38-0 vote, and the General Assembly, by a 75-0 vote, gave final approval to A1627/S1873.    The League of Municipalities strongly supports A-1627, which would permit a person with a pre-existing volunteer relationship as a firefighter or first aid with their employer to retire from service covered by PERS or PFRS and continue to serve that employer as a volunteer.    This is an issue in many municipalities and have heard from local elected officials statewide about the difficulties in retaining qualified volunteers.

This bill previously passed both houses but was pocket vetoed by then Governor Christie.  We urge you to contact the Governor’s office and ask that he vote this important initiative into law.

This legislation stems from a League conference resolution in 2014 and we thank the sponsors, including Senators Sarlo and Kean, Assemblywoman Schepisi and Assemblyman Bucco for their efforts.    The text of the 2014 resolutions is below.

The resolution was advanced because in 2014, the Division of Pension and Benefits issued guidance on post retirement employment restrictions for public employees.  The guidance noted that there must be a “bona fide severance of employment”, a complete termination of the employee’s employment relationship with the employer for a period of at least 180 days, in order not to jeopardize the employee’s retirement benefits.  The Division considers re-employment by a different unit of the same public entity, whether the position is covered by the same retirement system or a different retirement system, to be employment by the same employer. If an employee holds more than one position with the employer they must separate from all employment in order to retire, even if the positions are covered by different retirement systems, or the second position is not subject to pension contributions.

If an individual returns to public employment with the former employer, even as a volunteer,  prior to satisfying the requirements of a bona fide severance from employment, the employee will be required to repay all retirement benefits received from the date of retirement and may be required to re-enroll in the same or different retirement system.  As a result, volunteer firefighters and first aid members, who are public employees, have been required to resign from their volunteer position in order to receive their retirement benefits.

Volunteers are the backbone of communities providing services to the residents at no cost to taxpayers while freely giving of their time and expertise.  Employees affected by the Division of Pensions ruling generally are at least 55 years of age. In their volunteer positions, they often serve as mentors to the new and younger members, typically providing guidance and direction.

While well intended the Division of Pensions has created an unintended consequence which, if not changed, will impact every public employee who volunteers in the state and will not only drive up property taxes, but would also reduce the quality and level of essential public services.

Contact: Michael F. Cerra, Asst. Executive Director,  mcerra@njslom.org or 609-695-3481 x120.

New Jersey State League of Municipalities Resolution No. 2014 – 05

 Approved at Annual League Business Meeting, November 20, 2014

Amended and Approved at League Resolutions Committee, November 18, 2014

 Resolution Calling upon the Federal and State Governments to Clarify Volunteer Position Do Not Impact Retirement Benefits for Public Employees

WHEREAS, the Division of Pension and Benefits recently issued a notice concerning bona fide severance of employment-post retirement employment restrictions for individuals covered by any New Jersey State administered retirement system; and

WHEREAS, the Division has issued this guidance and is implementing a new procedure to preserve the qualified Internal Revenue Service (IRS) status of PERS, TPAF, PFRS, SPRS and JRS plans and to protect retirees from a 10% excise tax penalty on their monthly retirement payments; and

WHEREASN.J.A.C. 17:1-17.14.2(a) defines a “bona fide severance from employment” as “the complete termination of the employee’s employment relationship with the employer for a period of at least 180 days; and

WHEREAS, re-employment by a different unit of the same public entity, whether the position is covered by the same retirement system or a different retirement system, is considered to be employment by the same employer; and

WHEREAS, if an employee holds more than one position with the employer they must separate from all employment in order to retire, even if the positions are covered by different retirement systems, or the second position is not subject to pension contributions; and

WHEREAS, the IRS does not consider a pre-arranged return to public employment to be a bona fide severance from employment no matter how long the break in employment; and

WHEREAS, if the employer and employee make an arrangement prior to employee’s retirement to return to the same employer in any capacity, including as a volunteer – at any future time, regardless whether the position is covered by the former retirement system – the employer/employee relationship is not completely severed and the retirement will be invalid; and

WHEREAS, if an individual returns to public employment, even as a volunteer, with the former employer prior to satisfying the requirements of a bona fide severance from employment, the employee will be required to repay all retirement benefits received from the date of retirement and may be required to re-enroll in the same or different retirement system; and

WHEREAS,  Division of Pensions and Benefits have advised employees that they must sever all relations with their employer, including volunteer positions, for 180 days or they risk losing their pensions; and

WHEREAS, public employees tend to volunteer in the communities they live and work in as volunteer fire fighters, First Aid responders, celebration committee members or PTA’s, to name a few; and

WHEREAS, Division of Pensions and Benefits has advised employees that they cannot go on a leave of absence to fulfill the 180 day requirement but that they must sever all ties to the volunteer position; and

WHEREAS, for volunteer firefighters and first aid responders they would have to reapply to the volunteer organization as a new member; and

WHEREAS, as a new member they would be required to take all necessary test and training including physicals and agility test; and

WHEREAS, employees affected by the Division of Pensions ruling are at least 55 years of age who in their volunteer positions tend to be mentors to the new and younger members typically providing guidance and direction; and

WHEREAS, volunteers are the backbone of communities providing services to the residents at no cost to taxpayers while freely giving of their time and expertise; and

WHEREAS, while well intended the Division of Pensions has created an unintended consequence which, if not changed impact every volunteer in the state and will   not only drive up property taxes but reduce the quality and level of essential public services;

NOW, THEREFORE, BE IT RESOLVED, that the New Jersey State League of Municipalities, in conference assembled, urges the State Division of Pensions and Benefits to revisit their procedure to permit retirees and local elected officials to continue as volunteers without impact to their retirement and not require the complete 180 day separation; and

BE IT FURTHER RESOLVED, that New Jersey’s US Senators and Congressional Delegation review the IRS ruling and advocate for all necessary changes to the IRS Code to permit retirees to continue as volunteers without impact to their retirement and not require the complete 180 day separation; and

BE IT FURTHER RESOLVED, that copies of this Resolution are forwarded to the Governor and Lieutenant Governor of New Jersey, the State Treasurer, the Director of the Division of Pensions and Benefits, the members of the New Jersey State Legislature, the Director of the Internal Revenues Service and the members of the New Jersey Congressional Delegation

 

 

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