The Break in Service That Can Reset Your PERS or TPAF Tier

What happens to a PERS or TPAF tier when public employment stops, when a membership expires, and why a return to service can mean a later tier.

In New Jersey’s two largest retirement systems, the Public Employees’ Retirement System and the Teachers’ Pension and Annuity Fund, the single fact that sets your retirement age, your formula and the reduction for leaving early is your tier. And your tier was fixed on one day: the day you enrolled. The statutes that govern the two systems, N.J.S.A. 43:15A for PERS and N.J.S.A. 18A:66 for TPAF, tie the tier to the date membership began, not to your birth date, your title or your total years of work.

That is why a break in service matters more than most members expect. The tier does not travel with the person. It travels with the membership. If the membership ends, the tier ends with it, and a later return to public employment starts a new membership under whatever tier the law assigns to new enrollees on that date.

What keeps a membership alive, and what ends it

A membership stays active while contributions are coming in from a covered position. When contributions stop, because you resigned, were laid off, or moved to a job that is not covered, the account becomes inactive. It does not end on day one. But under the statutes and the Division of Pensions and Benefits’ member publications, an inactive account expires after a set period without contributions. The length of that period, and the exceptions for approved leaves, military service and certain other absences, are spelled out in the Division’s PERS member publications and the parallel TPAF materials. Do not rely on a figure you heard in the break room: ask the Division what your account’s status is and when, if ever, it expires.

Two actions end a membership faster than waiting. Withdrawing your contributions cancels the membership immediately, along with everything attached to it: the tier, the service credit and any right to a future benefit. Retiring, of course, also closes it. Of these, the withdrawal is the one that catches people, because a refund of contributions can look like free money during a career change and is in fact the sale of a tier.

What a reset actually costs

When someone whose membership has expired returns to covered employment, the statutes treat them as a new enrollee. They are placed in the tier in effect on the new enrollment date, which for anyone enrolling now is the most recent tier. The earlier tiers had earlier normal retirement ages, different formulas and gentler treatment in several respects; the exact differences between your old tier and the current one are laid out in the Division’s comparison publications, and you can see how the current tier’s formula works with the site’s Pension Estimator and Tier Finder.

A tier is not a status you earn back with service; it is set by the enrollment date of the membership you are contributing to.

A common hope is that buying back the old service undoes the reset. It generally does not. The Division’s publications on purchasing service credit explain that a purchase restores years of service toward the benefit calculation, and years are valuable. But the tier is generally set by the enrollment date of the current, living membership, not by the dates of the service you purchased. Because the treatment can depend on how and when the old membership ended, confirm with the Division in writing how a purchase would be applied to your account before you count on anything.

What does not break a membership

Not every move is a break. Moving directly from one covered employer to another within the same system generally continues the same membership and the same tier; this is common among county employees and school staff who change employers without leaving public service, a pattern the pages for North Jersey teachers and TPAF members describe in more detail. Transfers between systems, approved leaves of absence and certain military service have their own rules under the statutes, and whether they preserve the original enrollment date is exactly the kind of question to put to the Division rather than to assume.

There is also a path for members who leave public employment for good before retirement age. A member with enough service credit to be vested, a threshold the statutes set for each tier, can leave contributions in the system and file later for a deferred retirement, a benefit paid under the original tier’s terms. The member publications describe who qualifies and what a deferred retirement pays. The point is the same either way: the benefit survives only if the membership does, and the membership survives only if the contributions stay put.

Questions to ask before any gap

• Ask the Division, in writing, whether your account is active, inactive or expired, and on what date an inactive account would expire.
• Before withdrawing contributions, ask what the withdrawal ends: the service credit, the tier and any vested right all go with it.
• If you are vested, ask whether a deferred retirement preserves your current tier and what it would pay.
• If you have already returned after a gap, ask which enrollment date your tier is based on, and how a purchase of former service would be treated.

None of this is a reason to stay in a job. It is a reason to know, before a break begins, exactly which of these rules applies to your account, because the answer comes from the statute and the Division’s records, not from anyone’s memory.

Written by Matthew Hunkele.