PENSION BENEFITS REPORT
Tier 2 and Tier 3 maximum wage limit
As you may be aware by now, the Police and Fire
Retirement System (PFRS) has three tiers of mem-
bership that affect us as a result of the implemen-
tation of Chapter 78 in 2011 and Chapter 2 in 2010.
Those members enrolled into the PFRS on or
before May 21, 2010, are Tier 1 members. You can
retire after 25 years of service, regardless of age,
and will receive 65 percent of your final compen-
sation. Tier 1 members’ final compensation is the
last 12 months of salary prior to retirement. Tier
1 members can ultimately get 70 percent of final
compensation after completing 30 years of service
in the PFRS.
For those of you reading this who are Tier 2 members (hired after
May 21, 2010, and on or before June 28, 2011) and Tier 3 members
(hired after June 28, 2011), you will want to know that the earnings
maximum for your pension benefit has been raised to $128,400.
The maximum compensation limit is based on Social Security’s
annual maximum wage limit and is subject to change at the start
of each year. If you earn more than the annual compensation lim-
it, you can enroll in the Defined Contribution Retirement Program
(DCRP). Enrollment in the DCRP is voluntary, but if you decide to
enroll, you will have a contribution rate of 5.5 percent, and your
employer will contribute 3 percent on the salary that is in excess of
the compensation limit.
For example, if you (as a Tier 2 or Tier 3 member) had a salary
that was $5,000 over the earnings cap of $128,400, you could enroll
into the DCRP. You then would be required to contribute 5.5 per-
cent of the $5,000 (or $275) to put your money into the DCRP. The
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NEW JERSEY COPS
■ FEBRUARY 2018
town would contribute 3 percent of the $5,000 (or pay $150) toward
your DCRP account. This is in addition to the 10 percent contribu-
tion rate of your salary for the Police and Fire Retirement System.
Members who participate in the DCRP will receive service credit
in their Police and Fire Retirement System account and will be el-
igible to retire under the rules of the PFRS. The final salary or final
compensation at retirement will be limited to the maximum com-
pensation amounts in effect when the salary was earned.
Members who participate in the DCRP because their salary ex-
ceeds the maximum pensionable compensation limit will receive
additional income above their pension amount, which is based on
the amount of money invested in the DCRP.
Tier 2 members can retire regardless of age with 25 years of ser-
vice in the PFRS and receive 65 percent of their final compensation
plus an additional 1 percent for each year of service over 25 years,
up to a maximum of 30 years. They will receive 70 percent of their
final compensation, based on average salary based on pension
contributions for any three fiscal years of membership before re-
tirement that provides the largest possible benefit.
Tier 3 members can retire regardless of age with 25 years of ser-
vice in the PFRS and receive 60 percent of their final compensa-
tion, plus an additional 1 percent for each year of service over 25
years, up to a maximum of 30 years. They will receive 65 percent of
their final compensation, which is based on average salary based
on pension contributions for any three fiscal years of membership
before retirement that provides the largest possible benefit.
If you have any questions regarding the PFRS pension tiers,
please contact me at the State PBA office. d