The New Jersey Alternate Benefit Program (ABP)
A successful retirement for teachers is the result of decades worth of careful planning. If you want to get the most out of your retirement packages, you have to be informed about the ins-and-outs contained in each one. This can be an overwhelming task for busy professionals who already struggle to find enough time in the day.
The New Jersey Alternate Benefit Program (ABP) is a tax-sheltered, 401(a) defined contribution retirement plan designed specifically for higher education faculty members. The ABP provides retirement benefits, life insurance and disability coverage.
Eligibility is generally limited to all full-time and adjunct faculty, part-time instructors, officers, visiting professors and certain professional administrative staff who are required to possess a college degree or its equivalent. This plan is considered a mandatory plan if you meet the eligibility requirements.
If you meet the eligibility requirements, the plan requires the participant to contribute 5% of their base salary on a pre-tax basis. Contributions are made as salary reductions from payroll and deposited directly into your plan’s account. Your employer is required to contribute 8% of the participant’s base salary.
The Additional Contributions Tax-Sheltered Program (ACTS)
The Additional Contributions Tax Sheltered Program (ACTS) is a 403(b) defined contribution plan. Eligibility is limited to employees of county colleges, state universities and colleges. Unlike the ABP, this plan is voluntary where participants are able to contribute through pre-tax salary reduction.
Because this plan is voluntary, you choose how much you would like to contribute, subject to limits imposed by the IRS. The amount allowed to be contributed is based on IRS guidelines. The employer makes no matching contributions to this plan.
Your contributions for both the ABP and ACTS plans are deducted from your salary on a pre-tax basis and are not subject to federal income tax withholding. This means you are not required to pay federal income tax on the growth or earnings of the investments until you begin distributions from the plan. We recommend you consult with your tax advisor for details specific to your situation.
Meet With Us About Retirement
Proper preparation of retirement for teachers is absolutely critical to your long-term success, prosperity and legacy. Whether you have just joined the ABP plan or have been a member for many years, you can carefully review the following information about retirement to answer some of the questions or concerns you may have.
The Educator’s Educator
Who Are Our Clients?
Our clients are faculty, Deans, university presidents and other professionals. The higher education clients with whom we work tell us they are so busy that they do not have the time to properly focus on their retirement planning needs.
We offer our clients the opportunity to focus on what they do best and what is important in their lives, while we work with them to offer the advice and counsel necessary to help ensure they reach their retirement and legacy planning goals.
Our Client’s Goals
Our clients have diverse backgrounds, disciplines and financial situation. We do, however, see similarities in their retirement planning goals:
- Generating enough current income while still saving for retirement.
- Minimizing their risk.
- Incorporating effective tax strategies into their planning.
- Ensuring they have saved properly and will not outlive their retirement income.
- Planning to distribute their wealth to the people and charitable institutions they love, in the most efficient manner possible.
Why Educators Choose Gitterman Wealth Management
For more than a quarter century, the name Gitterman has resonated within the higher education and retirement planning landscape in New Jersey. Our advisors specialize in working with participants in the New Jersey Alternate Benefit Program (ABP) and the Public Employee Retirement System (PERS). Some years ago, a college professor referred to our firm as “The Educator’s Educator.”
As an independent and privately owned firm, we work with our clients to determine which strategies are best suited to their unique financial situations. Our independence allows us to be a resource and advocate for our clients seeking out the most appropriate solutions.
We are stewards of our clients’ wealth and we invest solely to meet our clients’ objectives. We pride ourselves on the integrity and the commitment we display when working with our clients.
An Enduring Presence
Since 1989, the professionals at Gitterman Wealth Management have provided financial guidance to college professionals. Since 1996, the firm has been approved by the state to provide retirement planning services to participants in the New Jersey Alternate Benefit Program (ABP) and the Public Employees Retirement System (PERS). These retirement programs, when combined with an employee’s Social Security and other savings, may provide retirement security.
Today’s Complex World
The financial landscape has become an intricate, multifaceted terrain of opportunities and corresponding risks associated with accumulating and preserving wealth. We work closely with our clients to provide the strategic planning and investment research necessary to make the most appropriate financial decisions.
More About The Programs
Top 33 Most Frequently Asked Questions of Participants within the ABP or ACTS Plans Preparing for Retirement.
1. What is the Alternate Benefits Program (ABP)?
The New Jersey Alternate Benefit Program (ABP) is a comprehensive retirement package for certain higher education employees that includes a variety of retirement annuities, benefits, non-contributory life insurance and long-term disability coverage for everybody who qualifies.
2. Who is eligible for ABP?
Eligibility is limited to full-time officers; full-time, part-time or adjunct faculty; and administrative personnel who are required to possess a bachelor’s degree at state or county colleges, as well as certain other state agencies involved with higher education. This includes visiting professors and faculty paid by federal grant. Note: A retiree from any New Jersey State-administered retirement system is ineligible to participate in the Alternate Benefit Program.
3. What is higher education?
The term used for describing the State and County colleges, universities, Higher Education Student Assistance Authority (HESAA) and Department Of Education (limited positions).
4. Is the ABP a state-administered retirement plan?
5. How is the retirement allowance calculated?
ABP retirement benefits are based on the value of the member and employer contributions plus any interest or accumulation on those contributions (not years of service and salary). Payout is made by various ABP-approved Designated Service Providers (DSP), which receive member and employer contributions monthly while the member is employed. There is no disability retirement, but there is long-term disability insurance.
6. How can an ABP member purchase service credit?
Since members are accumulating dollars, not service credit, there is no purchase permitted.
7. Can ABP members continue State Health Benefits coverage in retirement?
Yes. See Fact Sheet #11, “Enrolling in Health Benefits Coverage When You Retire.”
8. Does the ABP offer active life insurance coverage?
Yes. All ABP members are given life insurance coverage, paid for by the employer. Benefits will be payable to whatever beneficiaries you choose to designate. The amount collected by your beneficiaries will be three and a half times your annual base salary. While there is no ABP retirement age requirement for these life insurance benefits, you must undergo a thorough medical examination if you begin employment after 60 years of age or older.
9. Are contributions tax sheltered?
Employee contributions, employer contributions and investment income (if any) are tax sheltered.
10. How much does my employer contribute?
Your employer contributes 8% of the member’s contractual base salary up to a maximum salary of $141,000, as established by Chapter 31, P.L. 2010.
11. How much do I contribute?
You must contribute at least 5% of base salary.
12. May I contribute more?
Yes, up to the maximum amount allowable under the IRS rules.
13. May I take a loan?
Yes. Each DSP provides loans and can provide you with specific information on loan provisions. Please contact your DSP for more information.
14. When do I vest?
If you transfer from Public Employees’ Retirement System (PERS) or if you have an existing annuity contract with an authorized carrier, you are immediately vested. Participants not meeting these specific criteria vest after 12 months of continuous participation (adjunct faculty after 12 months of accumulated employment).
As vested members, the ABP Retirement Plan shall provide an option for cash surrender upon a participant’s severance from employment. The cash surrender shall be applicable only for employee contributions and accumulations prior to the participant’s 55th birthday. However, the cash surrender option shall be applicable to the full amount of all employee and employer contributions and accumulations after the participant’s 55th birthday. Contact the ABP Office at (609) 292-7524 for specific dates.
15. What investment choices do I have?
You may choose from seven different authorized DSPs that offer various annuity investments approved by the Division of Pensions and Benefits for ABP participants. Contact the DSP directly for more information.
16. Do I have income loss protection through a disability plan?
Yes, the ABP offers you employer-paid coverage through a group disability plan. You are eligible after 12 months of continuous ABP participation.
17. Is there a minimum retirement age with the ABP?
No. You may begin collecting your annuity any time after termination of employment. However, if you take any distribution amount, you will be considered retired regardless of your age, according to the ABP guidelines. You will also no longer be eligible for any state-administered retirement plan after you take a distribution.
Once you have reached age 59 ½, you can access some of your funds even if you are still employed. The 403(b) tax-deferred annuity plan allows you to withdraw an amount that is in accordance with your plan’s rules. These funds can be transferred from an approved financial institution to another approved financial institution and it is not considered a taxable distribution.
18. What if I want to return to employment after retirement from the ABP?
Employment after retirement from New Jersey public service is a possibility, however you must be aware of the laws and restrictions regarding working for a different/similar New Jersey public employer post-retirement.
There are certain restrictions for all retired members of the New Jersey State-administered retirement system. As a retiree of the Alternate Benefit Program (ABP) who is considering returning to work for a public employer in New Jersey, a bona fide severance of 180 days is a requirement.
There is an exception for the Transition to Retirement Programs. According to the New Jersey Division of Pensions, for ABP members a Transition to Retirement Program (TTRP) allows members to collect retirement benefits in conjunction with continued active employment without penalty.
To be in compliance with the Internal Revenue Code, the New Jersey Administrative Code adopted a special new rule, effective March 9, 2012, which clarifies criteria regarding retiree re-employment.
N.J.A.C. 17:1-17.14.2(a) states:
“‘Bona fide severance from employment’ means a complete termination of the employee’s employment relationship with the employer for a period of at least 180 days. The following does not constitute a complete termination of the employee’s relationship with the employer:
i. Employment or re-employment in a part-time position;
ii. Employment or re-employment in a position that is not covered by the Defined Benefit Plan;
iii. A change in title;
iv. Employment or re-employment as a contract employee, a leased employee or an independent contractor; or
v. Termination of employment with a pre-arranged agreement for re-employment. Federal Internal Revenue Service factors shall be used as guidance in determining whether an employment relationship exists. A mandatory retirement shall be treated as a ‘bona fide severance from employment.’”
19. What considerations should affect my decision?
See the “Considerations for Choosing Between PERS and ABP” booklet.
20. What are the names of the colleges and agencies that are eligible to participate in the ABP?
ATLANTIC CAPE Community College
BERGEN Community College
BROOKDALE Community College
BURLINGTON County College
CAMDEN County College
(The) COLLEGE of New Jersey Higher Education Student Assistance Authority
County College of MORRIS
CUMBERLAND County College
DEPARTMENT of Education (limited positions)
ESSEX County College
ROWAN College at Gloucester County
HUDSON County Community College
KEAN University of NJ
MERCER County Community College
MIDDLESEX County College
MONTCLAIR State University
New JERSEY CITY State University
NJ INSTITUTE OF TECHNOLOGY
OCEAN County College
PASSAIC County Community College
RAMAPO College of NJ
RARITAN Valley Community College
ROWAN University of NJ
RUTGERS, The State University
SALEM Community College
SUSSEX County Community College
THOMAS EDISON State University
UNION County College
WARREN County Community College
WILLIAM PATERSON University of NJ
21. Who are the current seven authorized carriers for the ABP?
AXA Financial (Equitable)
333 Thornall Street, 8th Floor
Edison, NJ 08837
MassMutual Retirement Services/Gitterman Wealth Management (formerly The Hartford)
379 Thornall Street,
Edison, NJ 08837
VOYA Financial Services
581 Main Street, 4th Floor
Woodbridge, NJ 07095
MetLife (formerly Travelers/CitiStreet)
581 Main Street, 6th Floor
Woodbridge, NJ 07095
1-800-545-0108 or (732) 602-0500
30 Scranton Office Park
Scranton, PA 18507
Teachers Insurance and Annuity Association/College Retirement Equities Fund (TIAA/CREF)
155 Village Blvd, Suite A
Princeton, NJ 08540
135 Route 202/206, Suite 13
Bedminster, NJ 07921
22. Are these loans available through the 401(a) and/or 403(b)?
Yes. However, there are separate applications and repayment guidelines for each plan.
23. What types of loans are available to employees (i.e. hardships, conventional, etc.)?
There is a loan option on the MassMutual platform that conforms to the State of NJ guidelines. The easiest way to review the loan option is to review a loan application. We have linked the two loan applications for both the 401(a) and 403(b) plans.
24. When is an employee eligible to borrow (i.e. immediately, after 1 year of employment, vested, etc.)?
The employee is eligible to request a loan as soon as the balance in the account reaches an appropriate value. Since the minimum loan amount for MassMutual is $1,000, an employee would have to have at least $2,000 in to request a loan.
There are other factors that go into the loan determination that are noted in the loan disclosure and it is important to review them. You can review them here: 401(a) and 403(b)
25. How many times can an employee take out a loan?
An employee can only have one loan at a time per plan.
26. What is the minimum/maximum dollar amount that can be borrowed?
The minimum is $1,000 and the maximum is the lesser of 50% of the vested account balance or $50,000 (reduced by the highest outstanding balance during the last twelve months of all loans made from this plan). It is important to read about this directly from the loan application: 401(a) or 403(b)
27. Is the request completed by paper or online?
Each request requires a completed digital application, which you can find here: 401(a) or 403(b)
28. How long does the process generally take?
Once MassMutual receives the completed application that has been reviewed and approved by the college and the forms are deemed in good order, the general timeframe is 3 to 5 business days. Every attempt is made to complete this process as quickly as possible. An employee can request expedited mailing of the check for an additional fee, which is noted on the application.
29. Are loan checks available for direct deposit or paper check?
A loan check can only be sent in paper form.
30. Is there a minimum/maximum time frame to pay back a loan?
Generally, one to five years unless the loan is to purchase a principal residence, then it can be extended.
31. Are there penalties assessed if a loan is paid off early?
No, however, there are specific guidelines governing how the early payment is made. Please review the loan documents – 401(a) or 403(b) – for repayment guidelines.
32. What does it mean to default on a loan?
If a participant defaults on a loan with MassMutual, they will not be able to take another loan out in that plan. If they defaulted on a loan at another provider, MassMutual would not be able to see that, but it is the responsibility of the authorized signer to verify that information prior to submitting the loan application. If a participant makes payments after the loan has defaulted, the payments would go into an after-tax bucket in the account as they will have already paid taxes and received a 1099 for the defaulted loan.
33. When the loan is defaulted are you still obligated to continue paying back the loan?
Can one still borrow after a previous loan has been defaulted?
Below are two “Event of Default” excerpts provided directly from the MassMutual loan applications that pertain to these two questions.
Event of Default (403(b)):
If any of the following events occur before this Loan, plus interest, is repaid in full, there shall be an event of default: (1) termination of my employment for any reason (including death); (2) a distribution is required to be made under a qualified domestic relations order affecting my Participant’s Account and the distribution would exceed my interest in the Contract less the amount of the Loan outstanding plus accrued interest; or (3) my failure to repay the loan when due. Upon the event of default, I acknowledge that the entire outstanding balance of the Loan plus any accrued interest shall be considered immediately due and payable and interest will continue to accrue until the earlier of the date I repay the Loan in full or the date on which foreclosure occurs. If payment is not made by the end of the calendar quarter following the calendar quarter in which the default event occurred, the Loan plus any accrued interest will be in default and will be reported as taxable to the extent permitted by law and will be foreclosed upon at such time as the law permits. An early withdrawal penalty may also be applicable.
Event of Default (401(a)):
If any of the following events occur before this Loan plus interest is repaid in full, there shall be an event of default: (1) termination of my employment for any reason (including death); (2) a distribution is required to be made under a qualified domestic relations order affecting my account and the distribution would exceed my interest in the Plan less the outstanding balance (principal and accrued interest); or (3) my failure to repay the Loan under the terms of the Plan. Upon the event of default, I acknowledge that the entire balance of the Loan plus any accrued but unpaid interest shall be considered immediately due and payable. I authorize the Plan Administrator to foreclose on the outstanding Loan by deducting the unpaid Loan balance plus accrued but unpaid interest from my account, to the extent permitted by law.
When contemplating retirement, contact your human resources representative, as well as your Gitterman Wealth Management advisor, to discuss the options that are available. Retirement can be an emotional process; we can offer the tools to help you evaluate your readiness.
If you are eligible but haven’t signed up for the New Jersey Alternate Benefit Program (401(a) mandatory plan) yet, you’ll be glad to know that it’s incredibly easy to get started.
First, you will need to complete the following required forms:
- State of New Jersey Enrollment Application
- State of New Jersey Provider Election and Allocation Form
- State of New Jersey Salary Reduction Agreement
If you are eligible but haven’t signed up for the New Jersey Additional Contributions Tax Sheltered Program (403(b) voluntary plan) yet, you’ll be glad to know that it’s incredibly easy to get started.
First, you will need to complete the following required forms:
- Additional Contributions Tax-Sheltered Program Salary Reduction Agreement
- Additional Contributions Tax-Sheltered Program Provider Election and Allocation Form
Once these are complete, they will need to be provided to your human resource representative, then make an appointment with your Gitterman Wealth Management advisor to review your investment options.
When planning a retirement for teachers, it is important to give yourself enough time to review your benefits and options. Without the right support system, you might miss out on some of the many joys of retirement. Having the right people in your corner is not only essential for your financial health, but your overall well-being, too.
Even if you have put off proper retirement planning for years, it’s never too late to get started in the right direction. Gitterman Wealth Management works with people in all different stages of the planning process and we strive to create completely customized plans for each client.
Your pre-tax salary reduction contributions to either the ABP or ACTS plans are always 100% vested, meaning you have full access to these funds.
Within the ABP plan (voluntary 401(a) plan), the employer’s mandatory contributions will become vested the start of your second year of service, provided you have been employed for at least 12 months and have been making your mandatory pre-tax salary reduction contributions.
Once you are enrolled, understanding the fundamentals of the ABP or ACTS plans is the first step towards creating a solid retirement plan. Through our partnership with MassMutual, we are able to offer an array of investment options within the ABP and ACTS plans, regardless of what stage of the planning process you are currently in.
We have created our process to accommodate planning a retirement for teachers (whether you are just starting to save for retirement or have been saving for years and are looking for advice).
Our retirement planning process begins with a detailed data-gathering meeting, which we generally complete in your home or at our offices. Your unique circumstances are analyzed and an individual retirement and investment analysis is prepared for your review. If there are any recommendations that our firm feels are appropriate, we will provide them to you in writing. If you choose to move forward with the recommendations, you may contact us and we will begin the implementation process. We will then begin to meet on a regular basis to track your progress toward reaching your goals.
At Gitterman Wealth Management, our goal is to develop a strategy to achieve your growth objectives. Through a disciplined approach and a long-term perspective, we help you avoid emotional investment decisions, while conscientiously preserving the capital you entrust to us. We leverage technology in a way that allows us to analyze financial intelligence and manage risk. These tools are also used to adjust your portfolio to reflect changes in your circumstances. In addition, you have easy and secure access to information about your investments.
Under IRC limitations, the maximum allowable outstanding loan balance is the lesser of 50% of your vested plan account balance or $50,000; however, if your vested account balance is less than $20,000, you may borrow the lesser of 100% of your vested account balance or $10,000.
Please note, these loan limits apply on a combined basis to the highest loan balance in the past year under all retirement plan accounts with the same employer. Your employer’s plan may have additional restrictions. If you have any questions, please contact your employer