Working in higher education in the state of New Jersey is more than just a career choice; it’s an opportunity to mold the leaders of tomorrow. Your years of service as a higher education professional will impart not only a salary, but also the satisfaction that comes from helping students to learn, grow and realize their full potential.
You may be more concerned with the here and now when your time is spent shaping the future of your students, but you can’t afford to neglect your own future in the process. New Jersey’s Alternate Benefit Program (ABP) is the key to securing your own financial freedom after you retire.
Before you select the ABP as your preferred method of retirement planning, you may have many questions about what you stand to gain. Here are a few common questions answered.
1. Am I eligible?
There are certain requirements to be eligible to participate in New Jersey’s ABP. Those who work in public institutions of higher education are required to enroll in the ABP if they are full-time faculty, officers, visiting professors and certain professional administrative staff, with full-time defined as receiving 50% or more of base salary for a full-time position.
Part-time and adjunct faculty members hired after October 31, 2008 are also required to participate in the ABP. Those who do not fit into these categories may be eligible for the ABP or PERS, so it’s best to speak with your employer or personal benefits administrator about your options.
2. What are the requirements for contributions?
Participants in the ABP are required to contribute 5% of their base or contractual salary, provided they earn 50-100% of their base salary. Those earning less than 50% of base salary will not be required to make contributions. Employees may also choose to make additional contributions after completing a Salary Reduction Agreement.
3. Do contributions have tax benefits?
Employee contributions to ABP retirement accounts are made on a tax-deferred basis.
4. What is contributed by employers?
When you participate in the ABP, employers will contribute 8% of your base or contractual salary to your account, up to a maximum annual salary (currently $141,000).
5. When am I considered “vested”?
During the second year of ABP eligible employment, a member becomes vested. Participants in the ABP may become immediately vested upon joining in instances where there is an existing qualified retirement account from higher education employment, or if they transfer from an active or already-vested retirement system administered by the state of New Jersey.
6. When do I become eligible to collect retirement funds?
You may begin collecting retirement funds from the ABP at any age, provided you retire or terminate employment with an institution of higher education in New Jersey. If you decide to delay distribution of funds, you will be legally required to start receiving ABP benefits on or before April 1 of the year after you turn 70.
7. What happens if I go back to work after retirement?
If you have not yet elected to receive funds from your ABP retirement account, you may return to work in higher education and continue to participate in the ABP, making contributions to your account from earnings. If, however, you have received any distributions from your ABP account, you will no longer be eligible to participate or make contributions.
8. How are benefits distributed?
There are a couple of different ways to receive distributions from your ABP account following retirement. You could, for example, choose to receive a single cash distribution from your account, or you might select cash payments as an annuity (to reduce tax burden). Your decision may be based on age, life expectancy, need and other factors.
Before the age of 55, you can only draw funds that you contributed, as well as earnings on those contributions. After you turn 55, you also gain access to any funds (and related earnings) contributed by employers.
9. Can I take loans against my retirement savings?
Only vested members are eligible to take loans against the value of an ABP account. The terms and conditions of loan programs will vary from one ABP carrier to the next, so you will have to speak to your personal benefits administrator for further information on terms and conditions.
10. Are disability benefits and life insurance provided?
In both cases, the answer is yes. After a year of participation in the ABP, members are eligible for employer-paid, long-term disability coverage, which is triggered after 6 months of disability and pays 60% of the monthly base salary (with certain restrictions).
All eligible ABP members will also receive employer-paid group life insurance (with no medical examination required for members under the age of 60 prior to enrollment). The amount of life insurance coverage is set at 3.5 times base salary. Retirees may also be eligible for paid group life insurance at half of base salary if certain criteria are met.