The New Jersey School Boards Association commended a recent New Jersey Public Employment Relations Commission (PERC) decision on employee contributions to health benefit premiums under the 2011 pension and health benefit reform act (“Chapter 78”).

Provisions of Chapter 78 that require a certain level of employee health benefit contributions will “sunset” this year in approximately one-third of the state’s school districts. At issue have been two points, according to NJSBA: the status of those contribution levels in school districts with multi-year collective bargaining agreements that began prior to the sunset date for these provisions; and the negotiability of employee health benefit contributions in future contracts.

“By ensuring that public employees pay their fair share toward health benefits, Chapter 78 has saved boards of education millions of dollars, which can be applied toward educational programming and controlling property taxes,” explained Dr. Lawrence S. Feinsod, NJSBA executive director. “PERC has clarified the fact that these contribution levels are not automatically eliminated and must remain in effect for the duration of any contract that began prior to the sunset of Chapter 78.”

In its August 13 decision, In the Matter of Clementon Board of Education and Clementon Education Association, PERC held the following:

  • The maximum Chapter 78 contribution levels remain in effect for the duration of any collective bargaining agreement which begins prior to the sunset of Chapter 78—that is, reduced contributions cannot be negotiated for the second, the third, or subsequent years of a contract that began prior to sunset, and
  • In the negotiation of future contracts (those that begin after Chapter 78’s sunset), the fully phased-in Chapter 78 health benefit contributions are the status quo—that is, the Chapter 78 contribution levels remain in effect indefinitely unless the board of education agrees to a change.

According to NJSBA, Chapter 78 brought public employee health benefits contributions into line with practices in the private sector. The law phased in higher levels of contributions over a four-year period. Depending on the specific health plan and salary, the contribution ranges from 3 percent of the premium to 35 percent of the premium and is never less than 1.5 percent of the employee’s base salary.

Although the law’s health benefit provisions have begun to sunset for some public employees, NJSBA took the position that Chapter 78 also guarantees that the fully phased-in contribution levels stay in place for the remainder of any contract starting prior to a district’s Chapter 78 sunset date. In addition, NJSBA has held that the maximum contribution levels do not automatically disappear when those contracts expire.

PERC has validated NJSBA’s position on both points.

“Disagreement over the sunsetting of Chapter 78 caused issues at the bargaining table,” Feinsod explained. “The August 13 PERC decision will serve as a guide for local school boards in negotiations and in the administration of their labor contracts.”

Issues in the Clementon matter included “legacy” wording in the district’s contract, which referenced previous, lower levels of employee contributions. PERC held that the Chapter 78 contribution levels take precedence over any such legacy language.

“We thank the Public Employment Relations Commission for its much-needed guidance on a critical issue for local boards of education,” said Feinsod.

The chart below illustrates the employee health insurance contributions for an employee at the average teacher salary under Chapter 78 and under the earlier law, Chapter 2 (P.L. 2010).

Chapter 78 (P.L. 2011) Contributions
PlanAnnual Premium, 2015Average Teacher SalaryAnnual Employee Contribution
NJ Direct 10
(family with prescription coverage)
Chapter 2 (P.L. 2010) Contributions
1.5% of salary$68,238$1,023.60
Difference between Ch. 78 and Ch. 2 contribution$4,634.00
Prior to Chapter 2
As of April 2010, only 13% of school districts had employee contributions toward health insurance coverage.