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In re Paterson Redevelopment Agency

Decided: May 4, 1976.


Carton, Crahay and Handler. The opinion of the court was delivered by Carton, P.J.A.D.


This case involves an appeal from a determination of the Board of Trustees of the Public Employees' Retirement System (PERS) directing the Paterson Redevelopment Agency to enroll its employees in PERS.

The Agency was established on February 13, 1969 by the Board of Finance of the City of Paterson by ordinance, pursuant to N.J.S.A. 40:55C-1 et seq. The ordinance noted that the Agency was created expressly to assume the powers and continue the urban renewal functions of the Housing Authority of the City of Paterson.

Following the Agency's creation, the Paterson Housing Authority transferred to the Redevelopment Agency the Authority's project contracts, federal redevelopment projects, and 13 of its redevelopment employees.

On July 30, 1974 the City of Paterson, by ordinance, dissolved the Redevelopment Agency. Specifically, the city rescinded the ordinance which had created the Agency, assumed the Agency's obligations and placed redevelopment responsibilities in the city's Department of Community Development. See N.J.S.A. 40:55C-1.

On June 26, 1969 the Redevelopment Agency, by resolution, directed its administrator to enter into a federally-approved retirement plan with the Mutual Life Insurance Company of New York; the effective date of the plan was

established as June 26, 1969. By terms of the private plan, all persons employed after June 26, 1969 were required to join the plan;*fn1 those employed before that date had the option of joining. Employees were enrolled only on June 26 of each year, and only employees with at least one year of service were eligible. Thus, depending on the date of initial employment, an employee might not be eligible for almost two years after starting work. The employer and employee each contributed 5% of salary for coverage.

Of the 13 initial Agency employees, eight elected to continue in PERS and five elected to be covered by the private plan. All of these five qualified on the basis of more than a year's service for the Housing Authority of the City of Paterson. By the time of the hearing in July 1974 there were 33 regular full-time employees of the Agency: 14 were covered by the private plan; 10 had less than one calendar year's service; 4 were overage and 3 or 5 of the remaining initial PERS members continued in PERS. No employees other than the original eight had enrolled in PERS.

At the administrative hearing it was explained that the Agency's function was performed through numerous specific federal project contracts; under such contracts the Federal Government approved a specific project, the timetable for completion of the project, and provided two-thirds to three-fourths of the project's funding. The remaining cost was provided locally. The Agency was also authorized to conduct projects without federal participation.

Resolution of the narrow issue posed on this appeal turns on the applicability of N.J.S.A. 43:15A-65(b), which makes PERS enrollment mandatory for municipal and county employees, but exempts from it those "eligible to become a member of any other retirement system * * *." More specifically, the question is whether the Redevelopment

Agency was a "public agency" as defined by the statute. See N.J.S.A. 43:15A-71. If the Authority was a public agency, it was required to enroll its employees in PERS. Conversely, if the Authority was a "subdivision of a municipality," its employees were not eligible for PERS membership. See N.J.S.A. 43:15A-71. A parallel question is whether the statutory exemption from mandatory enrollment which speaks of "another retirement system" should be read to apply only to employees eligible to enroll in other public retirement systems.

At the hearing there was evidence that the Division had interpreted the term "another retirement system" as meaning a governmental retirement system provided by a specific retirement system act. The Assistant Director of the Division of Pensions stated that this interpretation had been consistently employed since PERS' establishment in 1955 and prior to that time under the predecessor State Employees' Retirement Act. He also testified that the Division had consistently advised and responded to inquiries that the term did not encompass a private plan and that New Jersey governmental agencies were not authorized to establish private retirement systems.

In his report the hearing officer found that the Agency was a "public agency" within the meaning of N.J.S.A. 43:15A-65(b). The Board adopted the hearing officer's finding and also his conclusion that the ...

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