NJ - DCRP Forfeiture Funds

NJ Division of Pension

Pension Reform in New Jersey has created multiple tiers, rules and classification periods with information contained on the State website that is akin to exploring a labyrinth or great maze.  The secret passages do in fact lead one to the correct information, but the challenge is can you find your way back to that same information and if so, will the information still be valid?  And let us not forget, as with all good adventures there are the torturous links to dead ends, stating, "This page has moved... and no longer exists" with out any grid coordinates or forwarding address!

While the challenge is real, so is the need for clear understanding of all aspects related to pension obligations from the employers perspective as well as employees.  The (DCRP) Defined Contribution Retirement Plan is one of those offshoots of TPAF (Teachers Pension Annuity Fund) and PERS (Public Employment Retirement System) that came into existence on July 1, 2007, under the provisions of Chapter 92, P.L. 2007 and Chapter 103, P.L. 2007 and expanded under the provisions of Chapter 89, P.L. 2008, and Chapter 1, P.L. 2010.  It can be found on the NJ Division of Pension website:  http://www.state.nj.us/treasury/pensions/dcrp1.

However, even Indiana Jones can not find the information regarding "Forfeiture of Funds" unless he were to stumble into the Fact Sheets #79 (March 2014) or #82 (July 2013) and make the connection between 'Withdrawal' and 'Forfeiture'.  While these fact sheets explain eligibility and the limits for maximum compensation, $117,000 for 2014 - they simply explain, "Only the member's contributions are available for withdrawal - employer contributions are forfeited."

https://ssologin.prudential.com/app/rsosponsor/Login.fcc

Ok, so what does that mean to the employer?  The explanation stops there as you are thrown into other challenging set of topics such as Life Insurance Coverage and Long-Term Disability Coverage.  Try exploring another cavern, Prudential's website: 

Once there, you can catapult to "Forfeitures and Plan Expenses" to find the FAQ regarding Forfeiture as defined:  "Amounts that are held by the Plan and are either allocated periodically to remaining participants or are used to offset future employer contribution requirements or plan expenses.


How are forfeited dollars handled?  Answer:  Upon payout of a participant's total account balance, if there are non-vested amounts (contributions less than 1 year from enrollment), the non-vested amounts are simply deducted from the payout amount and are deposited in a special reserve account not held by any individual participant, but the by the Plan itself. Translation... they are holding your share of the money - "Employer Contributions."


They can however; be used to reduce future employer contributions which offsets future payments and keeps these funds in your Plan... the district's budget.


According to the FAQ a Forfeiture Report is provided to plan sponsors on a quarterly basis for their review and consideration.  If you haven't seen this report or have questions with respect to any balance in the Reserve account, you should contact your Client Consultant.  Based on the number of employees you have enrolled and as more individuals move into the DCRP over time, the amounts could become substantial.