N.J. Admin. Code § 17:4-6.19

Current through Register Vol. 56, No. 21, November 4, 2024

Section 17:4-6.19 - Retiree reemployment; compliance with Internal Revenue Code

(a) Definitions. As used in this section, the following words and terms shall have the following meanings:

1. "Defined benefit plans" means the following: The Police and Firemen's Retirement System of New Jersey.

2. "Bona fide severance from employment" means a complete termination of the employee's employment relationship with the employer for a period of at least 90 days after retirement. The following does not constitute a complete termination of the employee's relationship with the employer:

i. Employment or reemployment in a part-time position;

ii. Employment or reemployment in a position that is not covered by the defined benefit plan;

iii. A change in title;

iv. Employment or reemployment as a contract employee, a leased employee, or an independent contractor; or

v. Termination of employment with a pre-arranged agreement for reemployment.

Federal Internal Revenue Service factors shall be used as guidance in determining whether an employment relationship exists. A mandatory retirement shall be treated as a bona fide severance from employment.

(b) Qualified plan status. In accordance with N.J.S.A. 43:3C-18, the PFRS is a defined benefits plan established as a qualified governmental defined benefits plan in accordance with Internal Revenue Code sections 401(a) and 414(d), or such other provision of the Federal Internal Revenue Code, as applicable, regulations of the United States Department of the Treasury, and other guidance of the Federal Internal Revenue Service.

(c) Requirement for a bona fide severance from employment. In order to maintain qualified plan status, as set forth at (b) above, Federal law requires that a defined benefit plan pay retirement benefits to a member only when there is bona fide severance from employment, unless both of the following conditions are met:

1. The member has attained normal retirement age under the defined benefit plan; and

2. A defined benefit plan provides for the distribution without a bona fide severance from employment (also referred to as an "in-service distribution"). As of March 9, 2012, none of the defined benefit plans provide for an in-service distribution. The Federal law requirement does not apply to disability benefits.

(d) In order to demonstrate that there has been a bona fide severance from employment in compliance with Federal law, each member and the member's employer shall certify as part of the application for a retirement benefit that the member has had a bona fide severance from employment with the employer as of a specific date and that there is no pre-arranged agreement for that member to be reemployed by the employer as an employee, a contract employee, a leased employee, or an independent contractor. The certification shall be made under penalties of perjury.

(e) Investigation. In order to comply with Federal law, if an employee who has applied and commenced a retirement benefit is reemployed by the same employer (as used in this subsection, this term shall include the agencies of a single employer) within fewer than 90 days after the specified date of termination, the Division may, but is not required to, do the following:

1. Require the employee and employer to recertify that there was no prearranged agreement for the reemployment; and

2. Investigate the circumstances of the reemployment to determine if there was, in fact, a bona fide severance from employment.

(f) If after investigation at (e) above, the Board of Trustees of the Police and Firemen's Retirement System of New Jersey determines that there was not a bona fide severance from employment, the Board of Trustees shall revoke the retirement of the member and require the repayment of benefits in order to protect the qualified status of the defined benefit plans in accordance with (b) above.

(g) The PFRS shall ensure that, as required by Federal law, a Form 1099-R is issued with respect to any retired member who receives a taxable distribution from the defined benefit plan. To accomplish this requirement, the PFRS Board will contract with the Division of Pensions and Benefits to perform this tax-related function, and to undertake the steps required to ensure compliance. These required steps include the identification of those retired members who may be subject to a premature distribution penalty (10 percent of the taxable amount of the benefit). In the case of a retired member who returns to employment with the same employer (as defined at (e) above) within the 90-day period specified at (e) above, if the retired member has not attained age 59 1/2 during the time that some or all distributions were made from the defined benefit plans, the Division Pensions and Benefits shall code the Form 1099-R to indicate that the distribution is an "early distribution" and that no known exception from the penalty applies.

(h) Retirees who have not yet met the 90-day complete termination from employment and who did not retire on a disability retirement allowance may return to work for their former employer on a temporary basis, if the following conditions are met:

1. There must not be any pre-planning of this temporary return to employment. All employees who retire on or after April 1, 2020, will be presumed to have pre-planned their temporary return to employment;

2. The retiree must have met a 30-day separation from their former employer from the date of retirement or the date of Board approval, whichever is later, in order for their retirement benefit to be considered due and payable; and

3. The employer that seeks to reemploy a retiree, who has met the criteria at (h)1 and 2 above, shall provide a statement to the Division:

i. Substantiating that the person is returning for COVID-19 emergency duty;

ii. Detailing the job description for the retiree's temporary duties;

iii. Detailing the justification for the need for this retiree's reemployment, including the expertise that the retiree brings to the agency; and

iv. Indicating the length of time during the COVID-19 emergency that the retiree's expertise would be required.

(i) The provisions of this section shall be applied in place of the general administrative regulations for the Division of Pensions and Benefits, and where in conflict with N.J.A.C. 17:1-17.4, this section shall preempt the general regulation applicable to the Public Employee Retirement System (PERS), Judicial Retirement System (JRS), State Police Retirement System (SPRS), and Teacher's Pension and Annuity Fund (TPAF).

N.J. Admin. Code § 17:4-6.19

Adopted by 54 N.J.R. 495(a), effective 3/21/2022