August 10, 2010

Dear UMDNJ Faculty

In response to the many questions you have asked relating to the legislated changes to your pension benefits, the following is intended to answer your questions and advise you on what you can do, what the AAUP is doing, and what UMDNJ can do.

WHAT IS THE IMPACT OF THIS LEGISLATED CHANGE ?

On July 1, 2010, with little advance notice and almost no opportunity for public debate, New Jersey enacted S-2094, which limited to $141,000 the pensionable salary upon which the 8% employer match is made under the Alternate Benefit Plan.

This legislation has a different impact on faculty hired prior to July 1, 1996 than those hired after July 1, 1996.

Faculty Hired Prior to July 1, 1996
Prior to the enactment of this legislation, faculty hired prior to July 1, 1996 had no cap upon which the 8% employer match was made under the Alternate Benefit Plan.  As of July 1, 2010, the impact on faculty hired prior to July 1, 1996 is the loss of 8% of the difference between their pensionable income prior to July 1, 2010 and $141,000. The loss amount varies by faculty member and is substantial for many.

Faculty Hired After July 1, 1996
Prior to the enactment of this legislation, faculty hired after July 1, 1996 had a $245,000 cap upon which the 8% employer match was made under the Alternate Benefit Plan. To mitigate against the discrepancy between the pension benefit under the Alternate Benefit Plan for faculty hired prior to July 1, 1996 (who had no cap) and those hired after July 1, 1996 (who had a cap of $245,000), the University established a separate plan under which Faculty hired after July 1, 1996 could contribute  post-tax dollars above the $245,000 cap and UMDNJ contributed 8% of these post-tax contributions above the $245,000.  As such, the impact on faculty hired after July 1, 1996 is the 8% contribution difference between $245,000 and $141,000 ( a “donut hole” of $8,320 in contributions per year). Faculty hired after July 1, 1996 can continue to contribute above $245,000 in post-tax dollars and receive the 8% contribution from UMDNJ under UMDNJ’s plan.

Can faculty hired prior July 1, 1996 access the UMDNJ plan to receive 8% on income above $245,000 ?
No.  The University does not deem faculty hired prior to July 1, 1996 as eligible. The rationale offered by UMDNJ is that prior to the enactment of the legislation that caps the 8% employer contribution to $141,000, there was no need to have faculty hired prior to July 1, 1996 in this UMDNJ plan because faculty hired prior to July 1, 1996 were able to contribute pre-tax dollars and receive the 8% match in the Alternate Benefit Plan on their entire pensionable salary.  The AAUP views this inequity as something the University must correct.

WHAT IS THE AAUP DOING ?

AAUP became aware of this proposed legislation shortly prior to its enactment. Nevertheless, through our lobbyist, we worked to delay or defeat it. Unfortunately, these efforts within this short time period were unsuccessful. Since it’s passage, the AAUP has taken the following actions:

1.      We are educating you on the impact of this legislation and providing you with guidance.

2.      We are advocating that the University extend the benefits of the UMDNJ plan offered to faculty hired after July 1, 1996 to those hired prior to July 1, 1996 so that everyone can receive 8% from UMDNJ on all post-tax contributions above $245,000. This will limit the pension contribution loss on monies to 8% of the difference between $245,000 and $141,000.  (See Attached Letter to President Owen)

3.      The AAUP is communicating with the Senate and Assembly Higher Education Committee members to request meetings and hearings to educate the legislature of the unintended impact of this legislation and to provide you with a forum to voice your concerns. (See attached Letter to Senate and Assembly Higher Education Committee Members)

WHAT CAN UMDNJ DO ?

1.    UMDNJ can work with the AAUP in its outreach to the Senate and Assembly Higher Education Committee Members.

2.    UMDNJ can create or modify its existing plan to provide you with the 8% contribution above the $141,000 legislated cap.

3.    UMDNJ can extend the benefits of the plan available to faculty hired after July 1, 1996 to faculty hired before July 1, 1996 so that everyone can get an 8% contribution on contributions above $245,000.

WHAT CAN YOU DO ?

1.    Write to President Owen requesting UMDNJ take the 3 Steps outlined above in “what can UMDNJ do?” See attached letter to Dr. Owen.

2.    Write to the Senate and Assembly Higher Education Committee members reiterating AAUP’s request for a meeting and a hearing on the legislation. Attached are the names and addresses of the Committee Members.

3.    Understand and explore all your options for retirement investment on a pre-tax basis. To do so, you should contact the UMDNJ Benefits Department at 973-972-5314 (Newark), 732-235-9417 (New Brunswick & Piscataway), and 856-566-6168 (Stratford & Camden).

If you have any questions, you may contact the AAUP at 732-235-4196 or 973-972-5875.