New Jersey public school teachers receive retirement benefits through the Teachers' Pension and Annuity Fund, a defined benefit pension fund that originated in 1919. Enrollment in the fund, which is also known as TPAF, is mandatory for eligible workers. TPAF members contribute 6.5 percent of their base salary to their defined retirement plan. The percentage contribution will gradually climb to 7.5 percent by 2018.
TPAF is open to state employees who are teachers or part of the professional staff at a school. Department of Education employees with unclassified titles also are eligible. To be eligible for TPAF, an employee must possess certification from the State Board of Examiners. Other eligibility requirements have changed over the years. As of the date of publication, new employees must work at least 32 hours per week to become enrolled. An employee must be a TPAF member for 10 years before becoming vested in the plan and eligible to receive the defined retirement benefit.
TPAF's central feature is a defined benefit plan that provides a lifetime retirement payment to members. The size of the benefit depends on a member's date of enrollment, years of service and final average salary. Members who enrolled on or before May 21, 2010, have their years of service divided by 55 and then multiplied by their average salary over their final three years of service. The total is their annual retirement allowance. Those who enrolled after May 21, 2010, have their service time divided by 60 and then multiplied by the average salary of their final five years of service to determine their annual allowance.
TPAF also offers additional retirement plans that are optional for members. They can choose to participate in a deferred compensation 457 plan, which enables them to contribute a percentage of their pay to an investment plan. Earnings in the plan are tax-deferred, meaning income taxes are not paid on the money until it's withdrawn from the plan. Similarly, members could choose an annuity savings 403(b) plan, which also provides for tax-deferred earnings. Contributions for both plan types are made on a pre-tax basis, meaning income is not taxed before being deferred into either a 457 or 403(b) plan.
TPAF members with at least 10 years of service time receive a free group life insurance policy payable upon their death to their beneficiaries. They also can choose to purchase an additional group life policy that costs 0.4 percent of their paycheck. The size of the benefits paid to beneficiaries depends on the employee's length of service, salary and age. For instance, a retiree who dies after the age of 60 with both types of life insurance would generate a total payment to beneficiaries that is 7/16 of his base salary during his highest-paid year.
Those who enrolled in TPAF by Nov. 1, 2008, are eligible for retirement with full pension benefits at age 60. Those who enrolled between Nov. 2, 2008, and June 27, 2011, are eligible at 62. Those who enrolled on June 28, 2011, or later are eligible at 65. Pension payments are reduced by a percentage that varies depending on enrollment date for every month a member retires before qualifying age. Early retirement is available for those who meet service requirements, varying from 25 to 30 years, depending on enrollment date. Members can buy service credits in some circumstances, such as for qualifying temporary work or an unpaid leave of absence.