LEGISLATIVE FISCAL ESTIMATE TO

SENATE, No. 481

STATE OF NEW JERSEY

DATED: JUNE 25, 1996

      Senate Bill No. 481 of 1996 provides State-paid post-retirement medical benefits under the State Health Benefits Program (SHBP) to members of the State Police Retirement System (SPRS) who: (1) retired prior to the effective date of this act with more than 20 years of service credit in the SPRS; (2) were subsequently employed by the State in another position not covered by the SPRS; and (3) have, in the aggregate, at least 30 years of full-time employment with the State.

      The Office of Legislative Services (OLS) notes that according to the most recent actuarial valuation of the retirement system, dated July 1, 1995, approximately 14 percent of the members of the SPRS retire with between 20 and 24 years of service credit. The OLS notes, however, that there is no information available to indicate the number of former members of the SPRS who retire with more than 20 years of service but less than 25 years of service who subsequently are employed by the State in another position to accumulate, in the aggregate, 30 years of full-time service with the State.

      According to information provided by the Division of Pensions and Benefits, the annual premium for participation in the SHBP in FY 1996 was $5,960 for husband and wife coverage and $7,095 for family coverage under the Traditional Plan (Blue Cross/Blue Shield). The OLS notes that this is a lifetime cost payable over the remaining lifetime of the member.

      The OLS notes that because SPRS members can retire at any age after 20 years of service at 50 percent of final compensation, these individuals could qualify for employer-paid post-retirement medical (PRM) benefits as young as age 50. The present-value cost of providing lifetime PRM benefits to a SPRS member at age 50 is approximately $110,000 for husband and wife coverage and approximately $131,000 for family coverage.

      According to the last four valuations of the retirement system, an average of 57 members retire each year. Of this group, 14 percent, or 8 members, annually retire with between 20 and 25 years of service credit. If , for example, 10 members qualify for PRM benefits, the first-year, pay-as-you-go, cost would be between $59,600 and $70,950. The present-value lifetime cost for 10 members would be between $1.1 million and $1.3 million.

      The 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.