Appellate Division Finds c.78 Health Benefits Contributions Requirements Do Not Apply to Public Sector Disability Retirees

Last month, in Brick Twp. PBA Local 230 v. Twp. of Brick, the Appellate Division of the Superior Court of New Jersey confirmed that N.J.S.A. 40A:10-21.1, P.L. 2011, c. 78, § 42, more commonly known as Chapter 78, does not require ordinary disability or accidental disability retirees of public employers to make premium payments for health insurance benefits.

Chapter 78, concerning public employee pension and health care benefits, was passed in recognition of “serious fiscal issues” confronting the State and the underfunding of the pension system. It implemented various changes to pension and health care benefits such as increased required contributions from public employees and suspension of cost-of-living adjustments.  Among these reforms included requirements for certain retirees to pay contributions toward their health benefits in retirement.

In Brick, the Township had required a former police employee, who had retired due to a disability he had sustained while on duty in 2011, to continue making health insurance premium contributions in order to maintain his retiree health benefits coverage. The trial court concluded that Chapter 78 exempted only those employees with 20 or more years of service on its effective date from having to make contributions toward health benefits in retirement. Due to the fact that the employee had served only 19 years, the trial court believed that his obligation to make contributions was required by Chapter 78.

On appeal, the Appellate Division considered “whether Chapter 78 applies to government employees who receive disability retirement benefits.” The Appellate Division opined that the clear language of Chapter 78 does not require that contributions be made by those who retire on disability pensions even if they have less than 20 years of pensionable service. The Court found support for its conclusion based on the fact that the Legislature had designated different statutory sections for employees disabled while at work, which was further supported by the legislative history of Chapter 78. Thus, the Court reasoned that while ordinary retirement is linked to a member’s age or years of service, disability retirement is not predicated on length of service or age, but awarded because of an employee’s disability.

Thus, the opinion suggests that Chapter 78 contributions requirements apply with respect to active public employees and those who retire based on meeting the service requirements. In contrast, those who are forced to retire on an ordinary disability or accidental disability retirement are exempt from making premium payments for health insurance benefits.

If you have any questions or for more information regarding Chapter 78 health benefits or the impact of other laws affecting public employers, please contact Joseph M. Hannon, Esq., jhannon@genovaburns.com or Brett M. Pugach, Esq., bpugach@genovaburns.com in the Firm’s Labor Law Practice Group.