NJASA

Payment of Retired Health Benefits; Who Pays? How is it Calculated?

For all potential retirees, Friday, July 1, 2016 was a day of particular significance. 

That is the dividing point between those who will receive retired health benefits without cost during their retirement years and those who will be required to pay a portion of these costs.

These distinctions result from the section of Chapter 78, P.L.2011 that stated that employees who had at least 20 years of credit on June 28, 2011 and who eventually retired with 25 or more years of credit would receive their retired health benefits without cost for life.

Those retirees who had fewer than 20 years of credit on that same date would be required to pay for all or a portion of their health insurance benefits during their retired years. 

The date of July 1, 2016 is the five-year anniversary of the legislation and the point at which those who had 20 years in 2011 reached the 25-year mark required by the law to qualify for health benefits without cost. Those in this group will receive their State-paid benefits when they eventually retire regardless of how long they continue to work after 2011. 

Those who did not have 20 years of credit on June 28, 2011 will fall into two categories when they eventually retire: (1) those with 25 or more years of pension credit and (2) those without 25 years of pension credit.  

Those who did not have the 20 years of credit in 2011 but eventually have 25 or more years of credit in the system at retirement will pay a portion of the full premium each year for their retired lifetimes. The amount of that premium will be based upon four factors: the amount of the pension, the health insurance premium, a percentage (based on the size of the pension) and the coverage category (single, etc.). As an example, if a retiree had a pension of $60,000 and family coverage, the retiree would pay 17% of the premium. This percentage is determined using the same chart that is used today to calculate the percent of health insurance contribution paid monthly by active educators. In this example, using 2016 State Health Benefit rates for a family with one over 65, the retiree would contribute $335 per month ($4,020 per year). The maximum percentage of premium for any retiree is 35% of the full rate.)

There is a third group of retirees - those who retire with fewer than 25 years of credit. These retirees will pay the full premium for health benefits.

In all circumstances, coverage is offered to a survivor(s) when the retiree dies. If the survivor(s) chooses to continue coverage, payment of the full premium becomes the responsibility of the survivor(s).