On appeal from State of New Jersey Department of the Treasury, Division of Pensions, State Health Benefits Commission.
Antell, Long and Baime. The opinion of the court was delivered by Baime, J.A.D.
This appeal presents questions of first impression under the New Jersey State Health Benefits Program Act (N.J.S.A. 52:14-17.25 through -17.45). Under the Act, public employers may purchase medical-hospitalization insurance coverage for their employees through the State Health Benefits Commission. N.J.S.A. 52:14-17.28; N.J.S.A. 52:14-17.37. Participating employers may choose to pay the premiums of eligible retired employees to the Division of Pensions. N.J.S.A. 52:14-17.38. In addition, public employers may, but need not, extend benefits to former employees who retired prior to the date that the public entity began participating in the state program. Ibid. If the public employer adopts this course, it is obliged to pay the premiums of the retired individuals. Ibid. Where the local governmental employer does not opt to extend benefits to prior retirees, these employees may nevertheless join the program, but apparently at their own expense.
The City of Plainfield (City) initially entered the program in 1974. However, in 1982, the City voluntarily terminated its participation. Between 1982 and 1987, retirees were covered under a locally-administered retirement program. In 1987, the City rejoined the state health program. In 1989, the City adopted a resolution under which it agreed to pay the premiums of all retirees who had left their employment after it rejoined the program. The City nevertheless opted not to extend benefits
to individuals who had retired in the interim period in which it had not participated in the program. The Division of Pensions directed the City to remit the premiums of those retirees, claiming that they were eligible and covered under the state plan. The City refused on the basis that it had chosen not to extend benefits to individuals who had retired prior to its reentry into the program. The dispute was referred to the Office of Administrative Law as a contested case. The administrative law Judge determined that N.J.S.A. 52:14-17.38 conferred discretion on participating public employers to decide whether to provide benefits to former employees who left service prior to their entry into the program. Since the City had exercised that power and had not extended benefits to this otherwise eligible class, the ALJ found that it was not obliged to contribute the disputed premiums. The Commission rejected the ALJ's recommendation. In its written findings and Conclusions, the Commission determined that individuals who had retired in the interim period when the City was not a participant in the state plan were nevertheless eligible and covered under the program. The City was directed to remit the premiums of those individuals. We reverse.
The legislative history sheds some light on this arcane subject. The State Health Benefits Program was adopted in 1961. N.J.S.A. 52:14-17.25. The enabling legislation created the Commission, which was charged with the responsibility of establishing a medical-hospitalization plan for employees of state agencies. N.J.S.A. 52:14-17.27. In order to accomplish this objective, the Commission was empowered to "establish rules and regulations . . . reasonable and necessary for the administration of [the Act]," ibid., and was authorized "to negotiate with and arrange for the purchase" of suitable coverage. N.J.S.A. 52:14-17.28.
In 1964, the Act was amended to permit local governmental agencies to voluntarily participate in the program. N.J.S.A. 52:14-17.34. An employer eligible for participation "may elect"
to enter the program by resolution, in which case it is "subject to . . . the rules and regulations of the [C]ommission." N.J.S.A. 52:14-17.37. The articulated objective of these provisions is to provide coverage to local government employees in a manner generally congruent with that of state employees. N.J.S.A. 52:14-17.36. Moreover, N.J.S.A. 52:14-17.28 states that the "[C]ommission shall not enter into a contract . . . unless coverage is available to all eligible employees" under the terms provided in other sections.
As we noted earlier, local governmental agencies may pay the premiums of retired employees and their dependents covered under the program. N.J.S.A. 52:14-17.38. The same section states that a public employer may include otherwise eligible employees who retired prior to the date the public entity became a participant in the program. Ibid. Because this provision is critical to resolution of the issue before us, we quote it verbatim.
"Retired employee and his dependents" may, upon adoption of an appropriate resolution therefor by the participating employer, also include otherwise eligible employees, and their dependents, who retired from a State or locally-administered retirement system prior to the date that the employer became a ...