LEGISLATIVE FISCAL ESTIMATE TO

ASSEMBLY, No. 1249

STATE OF NEW JERSEY

DATED: May 1, 1996

      Assembly Bill No. 1249 of 1996 amends current law to allow certain retirees of the Teachers' Pension and Annuity Fund (TPAF) to receive an increased retirement allowance. Specifically, the bill permits a veteran member of the TPAF who is age 55 and has at least 30 years of aggregate service credit in the fund to receive a retirement allowance based on the formula of one-sixtieth of the compensation he or she received during the last year of employment for each year of creditable service.

      The Office of Legislative Services (OLS) notes that under current law, these individuals have the option of retiring under the provisions of Early Retirement, retiring under regular Veteran Retirement, or waiting until age 60 and the accrual of 35 years of service credit to retire under the provisions of special Veteran Retirement.

      Early retirement is available before age 60 to members who have 25 or more years of service. The retirement benefit formula is: years of service, divided by 60, times final average salary.

      Veteran retirement is available at age 55 with 25 years of service or at age 60 with 20 years of service. The annual retirement benefit is 50 percent of final salary. A special veterans allowance is available to qualified veterans age 60 or older with 35 years of service. That retirement benefit formula is: years of service, divided by 60, times final salary.

      The OLS notes that according to the most recent actuarial valuation of the retirement system, dated March 31, 1995, there are 4,144 veteran members in TPAF. No information is currently available to indicate the number of individuals who might qualify for this benefit. The OLS cannot estimate the additional pension cost of members retiring at age 55 with 30 or more years of service (the provisions of this bill) because it would depend on the member's unique age and service. It seems reasonable to assume that any individuals retiring under the provisions of this legislation have more than 30 years of service because they are already eligible to retire under the provisions of Veteran Retirement (age 55 with 25 or more years of service). Individuals retiring under the provisions of this bill will receive an additional pension benefit of one-sixtieth of final salary for each year of service over 30. Based on the average salary of members age 55 ($63,632), this would be $194 per year for one year of service over 30.

      It should be noted that this benefit is payable for life. Members

retiring at age 55 can expect to live to about 81. The lifetime benefit, including additional cost-of-living adjustments, is approximately $7,700 for one additional year of service more than 30. This cost will increase about 6 percent for each additional year of service.

      This legislative fiscal estimate has been produced by the Office of Legislative Services due to the failure of the Executive Branch to respond to our request for a fiscal note.

This fiscal estimate has been prepared pursuant to P.L.1980, c.67.