On appeal from a Final Determination of the Board of Trustees of the Public Employees' Retirement System.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Before Judges Reisner and Yannotti.
Appellants challenge the March 19, 2008 determination of the Board of Trustees (Board) of the Public Employees' Retirement System (PERS) increasing the contribution rate of the members of the Prosecutors Part of the PERS from 7.5% to 8.5% of their compensation. For the reasons that follow, we remand the matter to the Board for further proceedings.
The Prosecutors Part was established in the PERS by the enactment of L. 2001, c. 366, which is codified as N.J.S.A. 43:15B-155 to -161. Among other things, the legislation provides enhanced pension benefits to county prosecutors, first assistant prosecutors, assistant prosecutors, the Director of the Division of Criminal Justice in the Department of Law and Public Safety (DCJ), along with assistant directors, deputy directors, assistant attorneys general, deputy attorneys general and certain investigators assigned to the DCJ. See N.J.S.A. 43:15A-155; N.J.S.A. 43:15A-158; N.J.S.A. 43:15A-159. Members of the Prosecutors Part are required to "contribute at a rate established by the [B]oard, which contribution shall be deducted from the salary at the time or times it is paid,..." N.J.S.A. 43:15A-157(b).
After enactment of the legislation, the Board turned to its actuary, Buck Consultants (Buck), for advice concerning the contribution rate for members of the Prosecutors Part. Buck issued a letter dated December 10, 2002, to the Division of Pensions and Benefits (Division), in which it noted that the benefits available to members of the Prosecutors Part were comparable to those available to members of the Police and Fire Retirement System (PFRS).
Buck also noted that there is a significant difference in the retirement rates for members of the PERS and PFRS. Buck explained:
For PERS, the retirement rates are age related and relatively small prior to age 55 because of the early retirement reduction.
For PFRS, the rates are based on service and are relatively large at the point where a member qualifies for the 65% of final pay benefit at 25 years of service (Special Retirement). Because of this, the actual accrued liability attributable to [the Prosecutors Part] would be much higher if the prosecutors' retirement pattern is more in line with PFRS than PERS. Unfortunately, this cannot be quantified until one, or possibly two, experience studies are completed.
Buck provided an analysis which indicated that there would be a roughly 32% increase in accrued liability and normal cost, as of June 30, 2002, if the PERS retirement experience is used. According to Buck, this would result in a 6.5% contribution rate for members of the Prosecutors Part. Using the PFRS retirement experience, the accrued liability and normal cost, as of June 30, 2002, would increase by 104%, resulting in an 8.5% contribution rate for the Prosecutors Part.
Buck recommended that the initial contribution rate for the Prosecutors Part be set at 7.5%, the average between the 6.5% rate determined using the PERS experience and the 8.5% rate determined using the PFRS experience. Buck "strongly suggest[ed]" that the contribution rate be re-examined once "sufficient plan experience has been gathered to determine if [the rate] accurately reflect[s] the true cost" of establishment of the Prosecutors Part. Buck commented that a study would be prepared as of June 30, 2005, and would reflect three years of experience with the Prosecutors Part. Buck stated that this study "should be sufficient to identify any retirement trend."
At its public meeting on December 18, 2002, the Board accepted Buck's recommendation and set the initial contribution rate for the Prosecutors Part at 7.5% of compensation. In May 2004, the Board adopted administrative regulations to implement the Prosecutors Part legislation, including N.J.A.C. 17:2-8.3, which provides that:
(a) The rate of contribution to the Prosecutors Part of the [PERS] shall be 7.5 percent as ...