What is the Defined Contribution Retirement Plan?
Pension Benefits Report
For all of our Tier 2 and Tier 3 members, you are eligible to enroll in the Defined Contribution Retirement Plan (DCRP). The DCRP was established under the provisions of Chapter 92, P.L. 2007 and Chapter 103, P.L. 2007 and expanded to include members of the PFRS under provisions of Chapter 1, P.L. 2010. The DCRP provides PFRS members with a tax-sheltered defined contribution retirement benefit. Tier 2 members are those members who were enrolled in the PFRS between May 21, 2010, and June 28, 2011, and Tier 3 members are those who were enrolled after June 28, 2011, and who earn a salary in excess of the Social Security maximum wage compensation limit of $147,000 for 2022.
If you choose to enroll in the DCRP, members will contribute 5.5 percent of the excess salary into the DCRP, and the employer will contribute 3 percent toward your DCRP account.
Members who participate in the DCRP will receive additional income in retirement based on their contributions from excess salary above the maximum Social Security wage compensation
limit invested in the defined contribution retirement plan. In other words, you will receive a retirement benefit based on the contributions you make into your DCRP account.
Members can enroll in the DCRP when your annual salary exceeds the maximum compensation limit or when your salary is increased to where it will exceed the maximum compensation
and it is reported by the employer to the Division of Pensions directly or through the employer’s quarterly reports of contributions. In other words, you can enroll once you have reached top salary in your contract should it exceed the Social Security maximum wage compensation limit or once you get promoted during your career and the salary you receive in your capacity as a supervisor exceeds the Social Security maximum wage compensation limit. The Social Security maximum wage compensation can increase from year to year. For 2022, the Social Security maximum wage is $147,000.
Enrollment is voluntary, and if you choose to enroll, you may want to notify your employer so they can set up the account for you in advance of collection of your contributions. Your contributions are required from the date of DCRP eligibility, and if any back deductions are owed, the employers must schedule the deductions and then send them along with your regular deductions to the DCRP.
Once you are enrolled, you are immediately vested in the DCRP, and as a vested member, you have the right to your retirement benefit based on both the employee and employer contributions. Upon retirement, you can receive your retirement allowance from funds that have both the employee and employer contributions, along with interest. Once a retiree starts to receive these funds from the DCRP, they will be considered retired and thus ineligible to reenroll in the DCRP or participate in any other New Jersey State-administered retirement system.
