Reinstates automatic COLAs for retirement benefits of certain PFRS members.

A1168

ASSEMBLY, No. 1168

STATE OF NEW JERSEY

222nd LEGISLATURE

�

PRE-FILED FOR INTRODUCTION IN THE 2026 SESSION

Sponsored by:

Assemblyman JOE DANIELSEN

District 17 (Middlesex and Somerset)

Assemblyman ALEX SAUICKIE

District 12 (Burlington, Middlesex, Monmouth and Ocean)

Assemblyman ROBERT D. CLIFTON

District 12 (Burlington, Middlesex, Monmouth and Ocean)

Co-Sponsored by:

Assemblyman Scharfenberger, Assemblywomen Flynn, Drulis,
Assemblymen Azzariti Jr., Simonsen, McClellan, DePhillips, Freiman, Miller,
S.Kean, Stanley, Karabinchak, Kanitra, Sampson, Barlas, Guardian, Assemblywoman
Katz, Assemblyman Spearman, Assemblywoman Lopez, Assemblyman Moen,
Assemblywoman Haider, Assemblyman Bailey, Assemblywomen Bagolie, Park,
Fantasia, Carter, Assemblyman Hutchison, Assemblywomen Murphy, Dunn,
Assemblyman Kennedy, Assemblywoman Collazos-Gill, Assemblyman DeAngelo,
Assemblywomen Donlon, Peterpaul, Reynolds-Jackson, Assemblymen Peterson,
McGuckin, Abdelaziz, Auth, Assemblywoman Simmons, Assemblyman G.Rodriguez,
Assemblywoman Swain and Assemblyman Tully

SYNOPSIS

���� Reinstates automatic COLAs for retirement benefits of
certain PFRS members.

CURRENT VERSION OF TEXT

���� Introduced Pending Technical Review by Legislative
Counsel.

��

An Act

concerning cost-of-living adjustments for
retirement benefits of certain members of the Police and Firemen�s Retirement
System, amending P.L.1958, c.143, and amending and supplementing P.L.1944,
c.255
.

����
Be It
Enacted
by the Senate and General Assembly of
the State of New Jersey:

����
1.� Section 13 of P.L.1944,
c.255 (C.43:16A-13) is amended to read as follows:

���� 13.� a.� (1) Subject to the provisions of
P.L.1955, c.70 (C.52:18A-95 et seq.), the general responsibility for the proper
operation of the retirement system is hereby vested in a board of trustees,
and, as specified, the committees established pursuant to subsection e. of this
section.� The board may with the approval of at least eight members of the
board, in its discretion and at such time and in such manner as the board
determines, enhance any benefit set forth in P.L.1944, c.255 (C.43:16A-1 et
seq.) as the board determines to be reasonable and appropriate or modify any
such benefit as an alternative to an increase in the member contribution rate,
which increase the board determines to be reasonable, necessary, and
appropriate, or reinstate, when appropriate, such reduced benefit to the
statutory level without an additional contribution by the member, so long as an
actuarial certification provided by the actuary demonstrates that such change
will not result in an increased employer contribution in the current year and
that such change will not impact the long term viability of the fund.� The
board shall act exclusively on behalf of the contributing employers, active
members of the retirement system, and retired members as the fiduciary of the
system.� The primary obligation of the board shall be to direct policies and
investments to achieve and maintain the full funding and continuation of the
retirement system for the exclusive benefit of its members.

���� (2)� The board shall consist of 12 trustees as
follows:

���� (a)�� (Deleted by amendment, P.L.2018, c.55)

���� (b)� (Deleted by amendment, P.L.2018, c.55)

���� (c)�� Three active policemen and three active
firemen as follows:

���� (i)�� Two policemen and two firemen who shall be
active members of the system and who shall be appointed as follows:

���� one policeman shall be appointed by the
President of the New Jersey State Policemen's Benevolent Association;

���� one policeman shall be appointed by the
President of the New Jersey State Fraternal Order of Police;

���� one fireman shall be appointed by the President
of the New Jersey State Firemen's Mutual Benevolent Association; and

���� one fireman shall be appointed by the President
of the Professional Firefighters Association of New Jersey.

���� (ii)� One policeman and one fireman who shall
serve staggered terms and shall be active members of the system and who shall
be elected by the active members of the system according to such rules and
regulations as the board of trustees shall adopt to govern such election.� The
elected policeman shall serve for an initial term of two years and the elected
fireman shall serve for an initial term of four years.� Following their first
term, all trustees elected pursuant to this subparagraph shall serve four-year terms.�
An election to select trustees, who are active members of the system, shall be
held no later than the first day of the fifth month next following the date of
enactment of P.L.2018, c.55.

���� (d)� One retiree from the
system who shall be elected by retirees from the system for a term of four
years according to such rules and regulations as the board of trustees shall
adopt to govern the election.� An election to select a trustee, who is a retiree
from the system, shall be held no later than the first day of the fifth month
next following the date of enactment of P.L.2018, c.55.

���� (e)�� Four trustees, to be
appointed by the Governor, who shall serve staggered terms and who either hold,
or have held, an elective public office as a mayor, member of a municipal
council, or member of a board of chosen freeholders or is employed, or has been
employed, by a municipal or county government as an administrator, manager, or
chief financial officer, to represent the interests of local government
employers.� The Governor shall appoint trustees pursuant to this subparagraph
from among a list of names submitted by the New Jersey League of Municipalities
and the New Jersey Association of Counties.� Two trustees appointed by the
Governor pursuant to this subparagraph shall serve for an initial term of two
years and two trustees shall serve for an initial term of four years.�
Following their first term, all trustees appointed pursuant to this
subparagraph shall serve four-year terms.� The Governor shall appoint trustees
representing the interest of local government employers pursuant to this
subparagraph no later than the first day of the seventh month next following
the date of enactment of P.L.2018, c.55.

���� (f)�� One trustee, to be
appointed by the Governor, who holds or has held a management or supervisory
position in the Executive Branch of State government at the level of division
director or above to represent the interests of State government.� The trustee
appointed by the Governor pursuant to this subparagraph shall serve for an
initial term of two years.� Following the trustee's first term, the trustee
appointed pursuant to this subparagraph shall serve four-year terms.� The
Governor shall appoint a trustee representing the interest of State government
pursuant to this subparagraph no later than the first day of the seventh month
next following the date of enactment of P.L.2018, c.55.

���� (3)� Each trustee shall, after
his appointment or election, take an oath of office that, so far as it devolves
upon him he will diligently and honestly fulfill his duties as a board member,
and that he will not knowingly violate or willingly permit to be violated any
of the provisions of the law applicable to the retirement system. Such oath
shall be subscribed by the member making it, and certified by the officer
before whom it is taken, and immediately filed in the office of the Secretary
of State.� The board may remove a trustee, upon a majority vote of the
trustees, for violating the trustee's oath of office.� Any trustee who is
absent, without an official excuse approved by a majority vote of the trustees,
for more than three of the board's meetings in any calendar year shall be
removed from the board and the trustee's position shall be filled in the same
manner as the position was previously filled. The board shall adopt standards
to define unexcused absences.�

���� A member shall be permitted to
participate in meetings of the board by teleconference.

���� (4) (a) If a vacancy occurs in
the office of a trustee, the vacancy shall be filled in the same manner as the
office was previously filled.� A vacancy shall not last more than 60 days,
unless the board is awaiting the certification of an election conducted
pursuant to paragraph (2) of this subsection.� If a vacancy lasts for more than
60 days, then the board shall appoint, upon a majority vote of the trustees
then serving, a person qualified pursuant to subparagraph (e) or (f) of
paragraph (2) of this subsection to fill the vacancy until a new trustee is
appointed or elected in the manner set forth in paragraph (2) of this
subsection.

���� (b)� A trustee serving
pursuant to subparagraph (c) of paragraph (2) of this subsection who retires
from active service as policeman or fireman may remain a trustee until an
election is held to replace the trustee.� An election to replace a trustee
serving pursuant to part (ii) of subparagraph (c) of paragraph (2) of this
subsection who retires from active service shall be held no later than 30 days
following the effective date of the trustee's retirement and the trustee shall
relinquish the position on the board upon certification of the results of the
election.

���� (c)�� Trustees appointed
pursuant to part (i) of subparagraph (c) of paragraph (2) of this subsection
shall serve at the pleasure of the official who appointed the trustee, but may
be removed pursuant to paragraph (3) of this subsection.

���� (5)� The trustees shall serve
without compensation, but they shall be reimbursed for all necessary expenses
that they may incur through service on the board.

���� (6)� Each trustee shall be
entitled to one vote in the board.� Seven trustees shall be present at any
meeting of said board for the transaction of its business.

���� (7)� Subject to the
limitations of this act, the board of trustees shall annually establish rules
and regulations for the administration of the funds created by this act and for
the transaction of the board's business.

���� (8)� (a)� The board of
trustees shall elect from its membership a chair and vice chair.� The chair, or
vice chair in the chair's absence, shall serve as the primary contact with
board staff, coordinate and approve meeting agendas, and shall have the power
to authorize any special staff action necessary to execute any of the board's
duties.� The chair and vice chair shall not have the authority to discipline or
discharge an employee of the board unless authorized to take such action by a
majority of the trustees at a public meeting.� The board shall appoint a
secretary of the board.� The administration of the program shall be performed
by personnel selected by the board in accordance with this section.� The board,
reconstituted pursuant to P.L.2018, c.55, shall hold an initial meeting on the
first business day of the seventh month following the date of enactment of
P.L.2018, c.55.� At the initial meeting of the board on the first business day
of the seventh month next following the date of enactment of P.L.2018, c.55,
the board shall contract with the Division of Pensions and Benefits for the
division to perform the administrative tasks that the division performed prior
to the enactment of P.L.2018, c.55 and such other tasks as the board may
require.� The division shall receive compensation from the board for the
performance of the administrative tasks that the division performed prior to
the enactment of P.L.2018, c.55 in an amount equal to the cost the division
incurred for the performance of those administrative tasks prior to the
enactment of that act.� At the expiration of the term of the contract
negotiated by the board with the division pursuant to this paragraph, the board
may contract with the division or with a private entity, pursuant to the
provisions of P.L.1954, c.48 (C.52:34-6 et seq.), to perform administrative
tasks that the board determines to be necessary or convenient for its
operation.

���� (b)� A majority of the
authorized membership of the board shall constitute a quorum for the
transaction of business.

���� (9)� The board of trustees
shall keep a record of all of its proceedings which shall be open to public
inspection.� The retirement system shall publish annually a report showing the
fiscal transactions of the retirement system for the preceding year, the amount
of the accumulated cash and securities of the system, and the last balance
sheet showing the financial condition of the system by means of an actuarial
valuation of the assets and liabilities of the retirement system.

���� (10)� The board of trustees
may, in its discretion, select and employ, or contract with, legal counsel with
demonstrated expertise in the law governing retirement systems for public or
private sector employees to advise and represent the board.� If the board does
not select and employ, or contract with, legal counsel, the Attorney General of
the State of New Jersey shall be the legal adviser of the retirement system,
except if the Attorney General determines that a conflict of interest would
affect the ability of the Attorney General to represent the board or the
committees on a matter affecting the retirement system.

���� (11)� The board of trustees
shall designate a medical board. It shall be composed of a minimum of three
physicians who are not eligible to participate in the retirement system. The
medical board shall pass upon all medical examinations required under the
provisions of this act, shall investigate all essential statements and
certificates by or on behalf of a member in connection with an application for
disability retirement, and shall report in writing to the retirement system its
conclusions and recommendations upon all matters referred to it.

���� (12)� The actuary of the
system shall be selected by the board of trustees.� The actuary shall be the
technical adviser of the board of trustees on matters regarding the operation
of the funds created by the provisions of this act, and shall perform such
other duties as are required in connection therewith.� The actuary shall be an
independent contractor retained by the board.� The actuary shall have
demonstrated experience in providing actuarial services to defined benefit
retirement systems for public employees and be a fellow with the Society of
Actuaries and an active member of the American Academy of Actuaries.

���� (13)� The board of trustees,
in consultation with the actuary, shall establish actuarial funding policies
for the system.� At least once in each three-year period the actuary shall make
an actuarial investigation into the mortality, service and compensation
experience of the members and beneficiaries of the retirement system and, with
the advice of the actuary, the board of trustees shall adopt for the retirement
system such mortality, service and other tables as shall be deemed necessary
and shall certify the rates of contribution payable under the provisions of
this act.� The board of trustees shall retain an independent actuary, as
selected by the State Treasurer, with demonstrated experience in providing
actuarial services to retirement systems for public or private sector employees
to review prior investigations into the mortality, service, and compensation
experience of the members and beneficiaries of the retirement system and to
review the three prior actuarial valuations to certify that the actuary of the
retirement system conducted the investigations and valuations in accordance
with generally accepted actuarial standards.

���� (14)� (Deleted by amendment,
P.L.1970, c.57.)

���� (15)� On the basis of such
tables recommended by the actuary as the board of trustees shall adopt and
regular interest, the actuary shall make an annual valuation of the assets and
liability of the funds of the system created by this act.

���� (16)� (Deleted by amendment,
P.L.1987, c.330.)

���� (17)� Each policeman or
fireman member of the board of trustees or the committees shall be entitled to
time off from his duty, with pay, during the periods of his attendance upon
regular or special meetings of the board of trustees or the committees, and
such time off shall include reasonable travel time required in connection
therewith.

���� (18)� The board of trustees
shall have a minimum of one meeting each calendar month.

���� (19)� The board of trustees
shall have authority to formulate and establish, amend, modify or repeal such
policies as it may deem necessary or proper, which shall govern the methods,
practices or procedures for investment, reinvestment, purchase, sale or
exchange transactions to be followed by the Division of Investment.� The board
may also review and approve agreements which may be necessary or convenient for
the management of the investments of the retirement system. The board shall
also have the authority to inspect and audit the respective accounts and funds
administered by the Division of Investment, or a successor entity, and take
appropriate action as necessary to effectuate the long term viability of the
system. Notwithstanding this provision, Common Pension Fund L and the assets
held by Common Pension Fund L as of the effective date of this Act and
thereafter, including the interest of the Police and Firemen's Retirement
System of New Jersey therein, shall remain within the Division of Investment. The
Director of the Division of Investment and the State Investment Council shall
retain all functions, powers, and duties relating to Common Pension Fund L
assigned to the Division of Investment, the Director of the Division of
Investment, and the State Investment Council by P.L. 2017, c. 98 (C.5:9-22.5 et
seq.).

���� (20) (a) The board of trustees
shall select and employ an executive director, who shall be responsible for
recommending and implementing the strategic direction of the board from an
operational perspective.� The executive director shall provide strategic
direction, planning, and leadership to the board; organize, develop, and
supervise a management team to provide optimal results; maintain oversight of
administrative operations conducted by the board; develop an annual budget and
a salary and compensation guide for any managerial positions that are not
subject to Title 11A, Civil Service, of the New Jersey Statutes, arrange board
agendas with the approval of the board's chair; appoint administrative staff;
execute contracts on behalf of the board; and perform any other
responsibilities designated to the executive director by the board.� The person
employed by the board to hold the position of executive director shall have, at
a minimum upon commencement of employment, a bachelor's degree from an accredited
institution of higher education, and at least five years of management
experience in accounting, finance, public administration, government pension
and retirement planning, investment banking, financial consulting, money
management, or a similar field.� The person shall meet all other requirements
for employment as shall be set forth in a standard adopted by the board.� No
member, retiree, or other beneficiary of the system shall be eligible to hold
the position of executive director.

���� The executive director shall
serve without term but may be removed from office, upon notice and opportunity
to be heard at a public hearing, subject to an affirmative vote of the majority
of all authorized members of the board of trustees. Any vacancy occurring shall
be filled in the same manner as the original appointment. The executive
director shall devote his entire time and attention to the duties of the office
and shall not be engaged in any other occupation or profession. The executive
director shall act as a fiduciary to the retirement system and shall be under a
duty to perform the obligations set forth herein according to the interest of
the beneficiaries of the system.

���� (b)� The board of trustees
shall have the authority to retain other administrative and professional staff
as required to implement the duties and responsibilities required to ensure the
smooth transition of responsibilities and authority from the division to the
board pursuant to P.L.2018, c.55.� The board shall not employ a trustee and may
employ a former trustee only if the former trustee has not held the position of
trustee for more than two years.

���� (c)�� The board of trustees
shall be authorized to access operating funds from the system necessary for the
management of the fund and to employ staff immediately upon their election and
appointment, provided that the qualified status of the retirement system under
federal law is maintained.

���� (21) (a) The board of trustees
shall select and employ a chief investment officer, who shall oversee the
development of the methods, practices and procedures for investment, in
coordination with the Investment Committee. Notwithstanding this provision, Common
Pension Fund L and the assets held by Common Pension Fund L as of the effective
date of this Act and thereafter, including the interest of the Police and
Firemen's Retirement System of New Jersey therein shall remain within the
Division of Investment. The Division of Investment and the Director of the
Division of Investment and the State Investment Council shall retain all
functions, powers, and duties relating to Common Pension Fund L assigned to the
Division of Investment, the Director of the Division of Investment, and the
State Investment Council by P.L. 2017, c. 98 (C.5:9-22.5 et seq.).� The chief
investment officer, in coordination with the Investment Committee, shall
establish and maintain a policy to monitor and evaluate the effectiveness of
investments made on behalf of the board.� The chief investment officer shall
report to the executive director.

���� The person employed by the
board to hold the position of chief investment officer shall have, at a minimum
upon commencement of employment, a bachelor's degree from an accredited
institution of higher education, and at least five years of management experience,
in addition to accounting, finance, public administration, government pension
and retirement planning, investment banking, financial consulting, money
management, or a similar field.� The person shall also have experience in the
direct management, analysis, supervision or investment of assets.� The person
shall meet all other requirements for employment as shall be set forth in a
standard adopted by the board.� No member, retiree, or other beneficiary of the
system shall be eligible to hold the position of chief investment officer.� The
chief investment officer shall be precluded from outside employment or other
occupation.

���� (b)� The board of trustees may
make and execute agreements pursuant to the provisions of P.L.1954, c.48
(C.52:34-6 et seq.), which may be necessary or convenient for the management of
the investments of the retirement system.� The board shall also have the authority
to inspect and audit the respective accounts and funds administered by the
Division of Investment, or a successor entity, and take appropriate action as
necessary to effectuate the long term viability of the system.

���� (22)� The board of trustees
shall select and employ an ombudsman, who shall provide individual death and
disability consultation and information to plan members and their dependents;
answer questions from, and provide information to, members related to the
process of applying for retirement and retirement benefits; coordinate with
other State and local agencies on behalf of members; maintain federal, State,
and local death and disability benefit resources; recommend policy changes to
the board; conduct educational presentations for employers on death and
disability benefit options for members; and publish information about the
organization of the board for members, employers, and the public.

���� (23)� All members of the board
of trustees and of the Investment Committee shall participate in annual
investment training as directed by the board's executive director.� In addition
to the ethics training required by paragraph (2) of subsection c. of this
section, the board shall adopt a policy requiring annually not less than 16
hours of continuing education in matters relating to the administration of
defined benefit retirement systems for public employees and the fiduciary duty
the board and its employees have to the beneficiaries of the retirement system.

���� b.���
[
The
]

Except as
provided in section 3 of P.L.��� , c.���
(C. ) (pending before the
Legislature as this bill), the
board of trustees shall have the
discretionary authority to: (1) modify the: member contribution rate; cap on
creditable compensation; formula for calculation of final compensation; age at
which a member may be eligible for and the benefits for service or special
retirement; and standards for approval, medical review policies, and benefits
provided for disability retirement; and

���� (2)� subject to the provisions
of P.L.2018, c.55, activate the application of the "Pension Adjustment
Act," P.L.1958, c.143 (C.43:3B-1 et seq.) for retirees and modify the
basis for the calculation of the adjustment and set the duration and extent of
the activation.� The board of trustees, after consultation with the actuary,
may apply an adjustment to the monthly retirement allowance or pension
originally granted to any member.

���� The board of trustees shall
have the discretionary authority to modify the conditions and standards for the
purchase of service credit for death benefits.� The board of trustees shall not
have the authority to change the years of creditable service required for
vesting.

���� At least eight votes of the
authorized membership of the board shall be required to approve any enhancement
or reduction of a member benefit, including the activation of the application
of the "Pension Adjustment Act," P.L.1958, c.143 (C.43:3B-1 et seq.),
for retirees, or to approve any increase or decrease in the employer
contribution that is more than what is recommended by the actuary for the
system for the purpose of the annual funding requirements of the system.� An
actuarial certification must be provided by the actuary prior to any
enhancement or reduction of a member benefit, including the activation of the
application of the "Pension Adjustment Act," P.L.1958, c.143
(C.43:3B-1 et seq.), showing that such change will not result in an increased
employer contribution in the current year and that such change will not impact
the long term viability of the fund.

���� The board of trustees may
consider a matter described in this subsection and render a decision
notwithstanding that the provisions of the statutory law may set forth a
specific requirement on that matter.�

���� The board of trustees may
consider a matter described in this subsection and render a decision
notwithstanding that the provisions of the statutory law do not set forth a
specific requirement on the considered aspect of that matter or address that
matter at all.

���� A final action of the board of
trustees under this subsection shall be made by the adoption of a regulation
that shall identify the modifications to the system by reference to statutory
section.� The regulations shall also specify the effective date of the
modification and the system members, including beneficiaries and retirees, to
whom the modification applies.� Regulations of the board of trustees are
considered to be part of the plan document for the system.� A regulation
adopted by the board of trustees may be modified by regulation in order to
comply with the requirements of this section.

���� c.� (1)� No member of the
board or a committee of the board, employee of the board, or employee of the
Division of Pensions and Benefits in the Department of the Treasury shall
accept from any person, whether directly or indirectly and whether by himself
or through his spouse or any member of his family, or through any partner or
associate, any gift, favor, service, employment or offer of employment, or any
other thing of value, including contributions to the campaign of a member or
employee as a candidate for elective public office, which he knows or has
reason to believe is offered to him with intent to influence him in the
performance of his public duties and responsibilities.� As used in this
subsection, "person" means an (1) individual or business entity, or
officer or employee of such an entity, who is seeking, or who holds, or who
held within the prior three years, a contract with the board; (2) an active or
retired member, or beneficiary, of the retirement system; or (3) an entity, or
officer or employee of such an entity, in which the assets of the retirement
system have been invested.� A board or committee member or employee violating
this prohibition shall be guilty of a crime of the third degree.

���� (2)� The board shall adopt an
ethics policy either identical to the provisions of the "New Jersey
Conflicts of Interest Law," P.L.1971, c.182 (C.52:13D-12 et seq.) or more
restrictive, but not less restrictive.� All trustees, officers, and employees
of the board shall participate in annual ethics training on the board's policy,
the New Jersey Conflicts of Interest Law, and any other applicable law, rule,
or standard of conduct relating to the area of ethics as directed by the
board's executive director.

���� d.��� The board of trustees
shall have the authority to establish a process for the review, approval, and
appeal of applications for retirement.

���� e.��� The board of trustees
shall establish three committees as follows:

���� (1)� (a)� An Audit Committee
of no less than three members to assist in the oversight of the financial
reporting and audit processes of the board of trustees. At least two of the
members shall be members of the board of trustees.� At least one of the Audit
Committee members shall have accounting, governmental auditing, or related
financial expertise.� If the board of trustees does not have sufficient members
qualified or available to serve on the Audit Committee, or wishes to broaden
the expertise on the Audit Committee, the board of trustees may request that
the State Treasurer recommend one or more qualified individuals to sit on the
committee.

���� (b)� The Audit Committee shall
assist the board of trustees in retaining an independent auditor to conduct an
audit of the retirement system's financial statements by making a
recommendation to the board of trustees after engaging in an auditor selection
process.� The auditor selection process shall be based upon public, competitive
bidding principles and shall take place no less than once every five years.

���� (c)� In carrying out its
duties, the Audit Committee shall proactively assist the board of trustees in
overseeing the integrity and quality of the retirement system's finances and
investments.� The Audit Committee shall:

���� (i)� review and evaluate audit
fees;

���� (ii)� when the committee
believes that the auditor's performance is not adequate in quality or
independence, recommend such steps as may be necessary to elicit appropriate
performance, including replacement of the auditor;

���� (iii)� at least once every
three years, obtain and review a report of the independent auditor describing
for the preceding year: the independent auditor's internal quality control
procedures; any material issues raised by the most recent internal quality
control peer review, or by reviews conducted by governmental or professional
authorities; and steps taken by the auditor to address such issues;

���� (iv)� regularly review with
the independent auditor any audit problems, any risks of material statements
due to fraud, and difficulties involving restrictions or attempts to restrict
the auditor's activities and restrictions on access to information;

���� (v)� review the audited
financial statements and interim statements and discuss them with the board of
trustees.� These discussions shall include a review of particularly sensitive
accounting estimates, reserves and accruals, judgmental areas, audit adjustments,
whether recorded or not, and any other matters the Audit Committee or
independent auditor shall deem appropriate;

���� (vi)� review internal control
functions such as the planned scope of internal audit reviews, adequacy of
staffing, actions to be taken as a result of internal audit findings, the
effectiveness of electronic data processing procedures, and controls and related
security programs;

���� (vii)� recommend policies with
respect to risk assessment and risk management; and

���� (viii)� establish a permanent
position of internal auditor, who shall be supervised by the executive
director, but who may be discharged only by an affirmative vote of the majority
of the board.

���� (2)� An Actuary Committee of
no less than three members to assist in the selection and oversight of the
actuary appointed by the board of trustees.� The Actuary Committee shall review
the performance of the actuary appointed by the board of trustees.� If the
performance of the actuary is not adequate in quality, the committee shall
recommend such steps as may be necessary to elicit appropriate performance,
including replacement of the actuary.

���� (3)� An Investment Committee
of no less than three members to assist in the oversight of the investment
policies selected by the board of trustees.� The Investment Committee shall
consist of two members of the board of trustees, and one member who shall be
the chief investment officer of the board, and shall oversee investments and
make recommendations on investments to the board of trustees.� A majority of
the Investment Committee members, one of which may be the Chief Investment
Officer, shall be qualified by training, experience or long-term interest in
the direct management, analysis, supervision or investment of assets and this
training, experience or long-term interest shall have been supplemented by
academic training in the fields of economics, business, law, finance or
actuarial science or by actual employment in those fields. If the board of
trustees does not have sufficient members qualified or available to serve on
the Investment Committee, or determines to broaden the expertise of the Investment
Committee, the board of trustees may request that the State Treasurer recommend
one or more qualified individuals to sit on the committee.

���� f.���� At the end of six years
following the enactment date of P.L.2018, c.55, the board of trustees shall
conduct a review of the performance and funding levels of the retirement
system, as compared to available market data including but, not limited to, the
performance of the State Investment Council and Division of Investment with
regard to the investment of other State-administered retirement systems or
funds and other appropriate benchmarks, and may, based on a majority vote of
the authorized membership of the board, petition the Legislature to consider
legislation that reverts control of the system from the Board of Trustees to
the State Investment Council and the Division of Investment.

(cf: P.L.2018, c.55, s.15)

���� 2.� Section 2 of P.L.1958,
c.143 (C.43:3B-2) is amended to read as follows:

���� 2.� The monthly retirement
allowance or pension originally granted to any retirant and the pension or
survivorship benefit originally granted to any beneficiary shall be adjusted in
accordance with the provisions of this act provided, however, that:

���� a.��� The maximum retirement
allowance, without option, shall be considered the retirement allowance
originally granted to any retirant who, at retirement, elected an Option I
allowance pursuant to the provisions of the statutes stipulated in subsection
b. of section 1 of this act (C.43:3B-1); and

���� b.��� the minimum pension
granted to any beneficiary stipulated in subsection d. (4) of section 1 of this
act (C.43:3B-1), shall be considered the pension originally granted to such
beneficiary.

���� Pension adjustments shall not
be paid to retirants or beneficiaries who are not receiving their regular,
full, monthly retirement allowances, pensions or survivorship benefits.� The
adjustment granted under the provisions of this act shall be effective only on
the first day of a month, shall be paid in monthly installments, and shall not
be decreased, increased, revoked or repealed except as otherwise provided in
this act.� No adjustment shall be due to a retirant or a beneficiary unless it
constitutes a payment for an entire month; provided, however, that an
adjustment shall be payable for the entire month in which the retirant or
beneficiary dies.

���� Commencing with the effective
date of P.L.2011, c.78 and thereafter, no further adjustments to the monthly
retirement allowance or pension originally granted to any retirant and the
pension or survivorship benefit granted to any beneficiary shall be made in
accordance with the provisions of P.L.1958, c.143 (C.43:3B-1 et seq.), unless
the adjustment is reactivated as permitted by law.� This provision shall not
reduce the monthly retirement benefit that a retirant or a beneficiary is
receiving on the effective date of P.L.2011, c.78 when the benefit includes an
adjustment granted prior to that effective date.�
[
The
]

Except as provided in section
3 of P.L.��� , c.���� (C.������� ) (pending before the Legislature as this
bill), the
Board of Trustees of the Police and Firemen's Retirement System
may adjust the monthly retirement allowance or pension of its retired members
in accordance with subsection b. of section 13 of P.L.1944, c.255 (C.43:16A-13).

(cf: P.L.2018, c.55, s.1)

���� 3.� (New Section)� a.�
Notwithstanding the provisions of any other law, rule, or regulation to the
contrary, the Board of Trustees of the Police and Firemen's Retirement System
shall implement automatic cost-of-living adjustments subject to the provisions
of this section for annual pension, ordinary disability pension, and accidental
disability pension benefits for members of the Police and Firemen�s Retirement
System.

���� Members of the Police and
Firemen�s Retirement System who have been retired and receiving retirement benefits
for a minimum of ten years shall be considered eligible to receive cost-of-living
adjustments under this section.� Members of the Police and Firemen�s Retirement
System who are hired more than 30 days following the effective date of this
act, P.L.��� , c.��� (pending before the Legislature as this bill), shall not
be considered eligible to receive cost-of-living adjustments under this
section.

���� Members of the Police and
Firemen�s Retirement System who are in deferred retirement shall not be
eligible to receive automatic cost-of-living adjustments under this section.�
Members of the Police and Firemen�s Retirement System who retired with 20 or more
years of service, but less than 25 years of service, shall not be eligible to
receive automatic cost-of-living adjustments under this section.

���� b.� The adjustment in members�
annual pension, ordinary disability pension, and accidental disability pension
benefits pursuant to this section shall be calculated based on an amount up to
$75,000 of a retiree�s annual pension benefit for the first calendar year
following the enactment of this act, P.L.��� , c.��� (pending before the
Legislature as this bill).� For every calendar year thereafter, the member�s
annual pension benefits shall be adjusted annually according to the increase in
the Consumer Price Index for Urban Wage Earners and Clerical Workers, All Items
Series A (1967=100), as published by the Bureau of Labor Statistics in the
United States Department of Labor.� The base calendar year utilized in
calculating the adjustment in members� benefits shall be the calendar year
prior to the calendar year of the effective date of this act, P.L.��� , c.���
(pending before the Legislature as this bill).� Any adjustment in a member�s
annual pension, ordinary disability pension, and accidental disability pension
benefits pursuant to this section shall be cumulative, meaning the adjustment
shall be applied to the benefit amount the member received in the previous
calendar year, including previous cost-of-living adjustments granted under this
section.

���� c.� The adjustment in a
member�s annual pension, ordinary disability pension, and accidental disability
pension benefits pursuant to this section shall not exceed one percent if the
member�s annual pension benefit exceeds $75,000 in the first calendar year
following the enactment of this act, P.L.��� , c.��� (pending before the
Legislature as this bill).� For every calendar year thereafter, the member�s
annual pension benefits shall be adjusted annually according to the increase in
the Consumer Price Index for Urban Wage Earners and Clerical Workers, All Items
Series A (1967=100), as published by the Bureau of Labor Statistics in the
United States Department of Labor, except that the adjustment shall be
calculated at a rate not to exceed one percent.� The base calendar year
utilized in calculating the adjustment in members� benefits shall be the
calendar year prior to the calendar year of the effective date of this act,
P.L.��� , c.��� (pending before the Legislature as this bill).� Any adjustment
in a member�s annual pension, ordinary disability pension, and accidental
disability pension benefits pursuant to this section shall be cumulative,
meaning the adjustment shall be applied to the benefit amount the member
received in the previous calendar year, including previous cost-of-living
adjustments granted under this section.

���� d.� After the first calendar
year following the enactment of this act, P.L.��� c.,��� (pending before the
Legislature as this bill), in every calendar year thereafter, the $75,000
threshold established in subsections b. and c. of this section shall be adjusted
annually according to the increase in the Consumer Price Index for Urban Wage
Earners and Clerical Workers, All Items Series A (1967=100), as published by
the Bureau of Labor Statistics in the United States Department of Labor, except
that the adjustment shall be calculated at a rate not to exceed three percent. �Any
adjustment in the $75,000 threshold established in subsections b. and c. of
this section shall be cumulative, meaning the adjustment shall be applied to the
threshold calculated in the previous calendar year, including previous
adjustments granted under this section.

���� e.� The adjustment in members�
pension benefits as provided pursuant to this section shall apply to such
benefit entitlements granted prior to and in effect on the effective date of
this act, but only for benefit payments made after that effective date.� No
member of the retirement system shall be granted a retroactive payment based
upon the difference between the benefit the member would have received if the
adjustment had been applicable at the date of entitlement and the benefit that
the member has received from the date of entitlement to that effective date.

���� f.� The cost-of-living
adjustments shall apply, in accordance with the provisions of this section, to
the monthly retirement allowance or pension of a retired member, and the
monthly pension or survivorship benefit of a surviving spouse, child, or beneficiary,
that is provided by the Police and Firemen's Retirement System established
pursuant to P.L.1944, c.255 (C.43:16A-2 et seq.).

���� g.� Notwithstanding the
provisions of this section, or any other law, rule, or regulation to the
contrary, if the Board of Trustees of the Police and Firemen�s Retirement
System fails to comply with the provisions of this section within six months
following the effective date of this act, P.L.��� , c.��� (pending before the
Legislature as this bill), the State Treasurer shall be responsible for
implementing the cost-of-living adjustments required by this section.

���� h.� The Legislature shall
appropriate such monies from the General Fund as necessary to effectuate the
provisions of this section that are sufficient to cover both State and local
expenses, and shall reimburse each local employer in the Police and Firemen�s
Retirement System for the full cost incurred.� The funding for the
cost-of-living adjustments outlined in this section shall take precedence over
any additional funding added to the annual State appropriations act by the
Legislature through non-emergency supplemental appropriations, resolutions, or
other changes to the Governor�s budget message.

���� 4.� This act shall take effect
immediately.

STATEMENT

���� This bill reinstates automatic
cost-of-living adjustments (COLAs) for annual pension, ordinary disability
pension, or accidental disability pension retirement benefits for certain
members of the Police and Firemen�s Retirement System (PFRS).� Provisions contained
in P.L.2011, c.78 (C.43:3C-16 et al.), signed into law on June 28, 2011, had
suspended the automatic annual adjustment for current and future retirees and
beneficiaries of PFRS and other State-administered retirement systems until
those systems reach a target funded ratio.� Decades of underfunding those
systems by the State had placed the systems in precarious financial conditions.

���� Although this bill does not
reinstate COLAs for other retirees, it serves as the first step in reinstating
COLAs for all retirees of the State-administered retirement systems.� Through
the prioritization of PFRS, the State will begin this process with retired
first responders, police and firefighters, to provide them greater financial
security and stability at a time when inflation has significantly eroded the
value of their retirement benefit payments, which are already based on the
lower salaries of years ago.� To that end, the bill includes restrictions
intended to limit costs and focus on segments among PFRS retirees expected to
be most in need of an immediate benefit.

���� Under the bill, members of
PFRS will receive automatic COLAs for annual pension, ordinary disability
pension, and accidental disability pension benefits if the member has been
retired and receiving retirement benefits for a minimum of ten years.� Longer-term
retirees generally will have lower pension benefits and be less able to obtain
employment to offset the erosion of their benefits.� Members of PFRS who are
hired more than 30 days following the effective date of this act will not be
considered eligible to receive these automatic COLAs.� Additionally, members
who are enrolled in deferred retirement will not be considered eligible for
these automatic COLAs, nor will members who retired with 20 or more years of
service but less than 25 years of service.� The COLAs will only apply to future
pension benefit payments.� The bill does not provide for retroactive COLAs.

���� The adjustment in eligible
members� pension benefits will be calculated based on an amount up to $75,000
of a retiree�s benefit for the first year following the enactment of this
bill.� Eligible members receiving up to $75,000 of pension benefits will receive
a COLA tied to the CPI for Urban Wage Earners and Clerical Workers.� This will
ensure that greater initial benefits will be provided to those likely to be
most in need.

���� The adjustment in eligible
member�s pension benefits will be limited to one percent if the member receives
more than $75,000 in benefits for the first year following the enactment of the
bill.�

���� After the first calendar year
following the enactment of the bill, the $75,000 threshold will be adjusted
annually according to the CPI for Urban Wage Earners and Clerical Workers,
except that the adjustment will be calculated at a rate not to exceed three
percent.

���� The bill also grants the
cost-of-living adjustment to the monthly pension or survivorship benefit of a
surviving spouse, child, or beneficiary that is provided by PFRS.

���� Under the bill, if the Board
of Trustees of PFRS fails to comply with the provisions of this bill within six
months following the effective date, then the State Treasurer will be
responsible for implementing the cost-of-living adjustments.

���� The bill requires the
Legislature to appropriate monies from the General Fund as necessary to
effectuate the cost-of-living adjustments established under the bill that are
sufficient to cover both State and local expenses, and to reimburse each PFRS
local employer for the full cost incurred.� The bill further provides that this
appropriation will take precedence over any additional funding added to the
annual State budget by the Legislature through non-emergency supplemental
appropriations, resolutions or other changes to the Governor�s budget message.