A1130

ASSEMBLY, No. 1130

STATE OF NEW JERSEY

Introduced Pending Technical Review by Legislative Counsel

PRE-FILED FOR INTRODUCTION IN THE 1996 SESSION

By Assemblywoman MURPHY and Assemblyman DeCROCE

An Act concerning public employee benefits and supplementing Titles 18A and 40A of the New Jersey Statutes and Title 52 of the Revised Statutes.

Be It Enacted by the Senate and General Assembly of the State of New Jersey:

1. Notwithstanding the provisions of any other law to the contrary, a local board of education is authorized to establish a cafeteria plan for its employees pursuant to section 125 of the federal Internal Revenue Code, 26 U.S.C. §125. Any such plan shall enable an employee to make voluntary pre-tax contributions from salary to cover the cost of medical or dental expenses, not covered by a health benefits plan, and dependent care expenses as provided in section 129 of the federal Internal Revenue Code, 26 U.S.C. §129, and shall offer such other benefits as are consistent with section 125 and which the board shall deem appropriate.

Any amount deducted from an employee's salary for the purpose of contributing to the plan shall continue to be treated as regular compensation for all purposes, including the calculation of pension contributions and the amount of any retirement allowance but, to the extent permitted by the federal Internal Revenue Code, shall not be included in the computation of any federal taxes withheld from the employee's salary.

The establishment of a cafeteria plan pursuant to this section shall not reduce any other benefit to which an employee may otherwise be entitled by law or by virtue of a collective bargaining agreement. The establishment of a cafeteria plan, as well as the benefits to be offered in a plan which are in addition to the minimum benefits prescribed by this section, may be determined through the collective bargaining process.

2. Notwithstanding the provisions of any other law to the contrary, the governing body of a unit of local government, as well as any independent authority created by one or more local units, is authorized to establish a cafeteria plan for its employees pursuant to section 125 of the federal Internal Revenue Code, 26 U.S.C. §125. Any such plan shall enable an employee to make voluntary pre-tax contributions from salary to cover the cost of medical or dental expenses, not covered by a health benefits plan, and dependent care expenses as provided in section 129 of the federal Internal Revenue Code, 26 U.S.C. §129, and shall offer such other benefits as are consistent with section 125 and which the governing body of the local unit shall deem appropriate.

3. The State Treasurer is authorized to establish and administer a cafeteria plan for employees of the State government pursuant to section 125 of the federal Internal Revenue Code, 26 U.S.C. §125. Any such plan shall enable an employee to make voluntary pre-tax contributions from salary to cover the cost of medical or dental expenses, not covered by a health benefits plan, and dependent care expenses as provided in section 129 of the federal Internal Revenue Code, 26 U.S.C. §129, and shall offer such other benefits as are consistent with section 125 and which the Treasurer shall deem appropriate.

this section, may be determined through the collective bargaining process.

4. Notwithstanding the provisions of any other law to the contrary, an independent State authority is authorized to establish a cafeteria plan for its employees pursuant to section 125 of the federal Internal Revenue Code, 26 U.S.C. §125. Any such plan shall enable an employee to make voluntary pre-tax contributions from salary to cover the cost of medical or dental expenses, not covered by a health benefits plan, and dependent care expenses as provided in section 129 of the federal Internal Revenue Code, 26 U.S.C. §129, and shall offer such other benefits as are consistent with section 125 and which the authority deems appropriate.

5. Notwithstanding the provisions of any other law to the contrary, the State, or an employer as defined in section 4 of P.L.1964, c.125 (C.52:14-17.35) which participates in the State Health Benefits Program, may allow any employee who is covered under another health benefits plan to waive coverage under the State Health Benefits Program to which the employee is entitled by virtue of the employee's employment. The waiver shall be in such form as the Director of the Division of Pensions and Benefits shall prescribe and shall be filed with the division along with proof of coverage under that other person's plan. After such waiver has been filed and for so long as the waiver remains in effect, no premium or periodic charges shall be paid by the State or employer for the employee or the employee's dependents. Not later than the 180th day after the date on which the waiver is filed, the division shall refund to the State or employer the amount of any premium or periodic charges previously paid with respect to any period of coverage which followed the filing date. In consideration of filing such a waiver, the State or other employer may pay to the employee annually an amount which shall not exceed the amount saved because of the employee's waiver of coverage. An employee who waives coverage shall be permitted to resume coverage if the employee ceases to be covered through that other person for any reason, including, but not limited to, retirement or death of the other person or divorce. An employee who resumes coverage shall repay, on a pro rata basis, any amount received which represents an advance payment for a period of time during which coverage is resumed. An employee who wishes to resume coverage shall notify the division, in such form as the director of the division shall prescribe, that the waiver is revoked.

6. This act shall take effect immediately.

STATEMENT

This bill authorizes the State, independent State authorities, counties, municipalities and school districts to establish “cafeteria plans” pursuant to section 125 of the federal Internal Revenue Code, 26 U.S.C. §125. A cafeteria plan, also known as a flexible benefit plan, allows an employee to make individual choices among federally nontaxable employer provided benefits. A cafeteria plan also allows an employee to make voluntary pre-tax contributions from salary, through “flexible spending accounts,” to cover such expenses as group term life insurance, accident or health insurance coverage, or dependent care. A plan established pursuant to the bill would be required to enable an employee to set aside a pre-tax portion of salary to cover medical or dental expenses not covered by a health insurance plan, and the cost of dependent care. It would also provide such other benefits as the public employer may determine to offer under the plan.

Amounts deducted from an employee’s salary and paid to the plan would be treated as regular compensation for all purposes, including the calculation of pension contributions and the amount of any retirement allowance, but under federal law would not be subject to the withholding of federal taxes. The establishment of a cafeteria plan would not reduce any other benefit to which an employee may otherwise be entitled and would be in addition to any benefits determined through the collective bargaining process.

The bill also authorizes the State, or other public employer which participates in the State Health Benefits Plan (SHBP), to allow an employee who has health insurance coverage under another plan (for example: as a dependent of another person under that person’s plan) to waive coverage under the SHBP in return for cash compensation in an amount not to exceed the amount saved by the employer as a result of the waiver.

Provides for establishment of cafeteria plans for public employees; permits certain public employees to waive health insurance coverage under certain circumstances.