Discover the key features of the New Jersey Alternate Benefit Program (NJ ABP) and Additional Contributions Tax Sheltered (ACTS) Program. Learn how these programs offer unique benefits and options tailored to meet the needs of higher education employees in New Jersey.
Alternate Benefit Program Overview:
Below are the important features if the Alternate Benefit Program (ABP). This website is intended to be a summary of the plan provisions. In the event that a conflict exists between the information contained within and the plan document, the plan document provisions prevail.
The ABP is a defined contribution retirement program that is offered to eligible employees of New Jersey's public institutions of higher education as an alternative to the State Defined Benefit Pension Plan. ABP provides retirement benefits and coverage which, when combined with Social Security and other tax-deferred plans, can help provide income in retirement.
With ABP, you contribute a percentage of your base or contractual salary as determined by state law to a variable annuity. Your contributions are then matched by an employer contribution. Contributions are made on a pre-tax basis, which means you defer paying taxes on the contributions and any earnings until the money is distributed from the account*.
Features:
- Asset building: A good way to invest for future needs and supplement your retirement income.
- Tax-deferred investing: Under the Internal Revenue Code, your ABP contributions and any earnings are taxed only when you begin to take distributions, which could be in retirement when you may be in a lower tax bracket.
- Various investment options: Choose how to allocate your contributions from the available investment options.
- Periodic payments for the future: Under the annuity provisions, you choose the payout option that best fits your future needs.
- Portability: Transfer your account to other eligible retirement plans.
Eligibility:
Eligibility is limited to state or county college and state university full-time officers, part-time or adjunct faculty, administrative personnel who are required to possess a bachelor’s degree or its equivalent as a condition of employment, and certain other state agencies involved with higher education. This includes visiting professors and faculty paid by federal grant. Eligible employees must elect to participate in the ABP instead of the Public Employees’ Retirement System (PERS). A retiree from any other system is ineligible to participate in the ABP.
Contributions:
Mandatory Pension Contribution: The employer contributes 8% of the participant’s contractual base salary. Participants contribute a mandatory 5% of base pay on a pre-tax basis. For purposes of ABP contributions, compensation taken into account is limited to a maximum annual salary dollar amount (currently $175,000) established under state law.
Contribution Limits: The maximum annual contribution limit to the ABP is set by IRS guidelines on a yearly basis. You may view the current limits here.
Withdrawals:
- No Deferred Sales Charge: Withdrawals may be subject to an IRS 10% premature distribution penalty tax, and certain distributions are also subject to a mandatory 20% federal withholding.
- Fixed Interest Option Restrictions: Withdrawals from the fixed interest option are subject to certain restrictions and may be subject to a Market Value Adjustment. Please refer to your plan document and your contract prospectus for details, or speak with your campus representative.
Payment Options:
- Lump-sum or Partial Withdrawal: May be subject to federal withholding and possible tax penalties.
- Systematic Payout Option: Specify a percentage, dollar amount, or a time period. Requires a $3,000 minimum account balance and a $250 minimum payment.
- Lifetime Payments: Payments guaranteed** for your lifetime or for as long as you and your beneficiary are alive (guarantees based on the claims-paying ability of Voya Retirement Insurance and Annuity Company).
* Distributions from traditional employer sponsored retirement plans are taxed as ordinary income and, if taken prior to reaching age 59 ½, may be subject to an additional 10% IRS tax penalty.
** Guarantees are based on the claims paying ability of the issuing insurance company.
Information on this page is sourced from the official Voya Services Company NJABP website: Alternate Benefit Program Overview
