43:16A-13 PFRS, trustees, committees.

13. a. (1) Subject to the provisions of P.L.1955, c.70 (C.52:18A-95 et seq.), the general responsibility for the proper operation of the retirement system is hereby vested in a board of trustees, and, as specified, the committees established pursuant to subsection e. of this section. The board may with the approval of at least eight members of the board, in its discretion and at such time and in such manner as the board determines, enhance any benefit set forth in P.L.1944, c.255 (C.43:16A-1 et seq.) as the board determines to be reasonable and appropriate or modify any such benefit as an alternative to an increase in the member contribution rate, which increase the board determines to be reasonable, necessary, and appropriate, or reinstate, when appropriate, such reduced benefit to the statutory level without an additional contribution by the member, so long as an actuarial certification provided by the actuary demonstrates that such change will not result in an increased employer contribution in the current year and that such change will not impact the long term viability of the fund. The board shall act exclusively on behalf of the contributing employers, active members of the retirement system, and retired members as the fiduciary of the system. The primary obligation of the board shall be to direct policies and investments to achieve and maintain the full funding and continuation of the retirement system for the exclusive benefit of its members.

(2) The board shall consist of 12 trustees as follows:

(a) (Deleted by amendment, P.L.2018, c.55)

(b) (Deleted by amendment, P.L.2018, c.55)

(c) Three active policemen and three active firemen as follows:

(i) Two policemen and two firemen who shall be active members of the system and who shall be appointed as follows:

one policeman shall be appointed by the President of the New Jersey State Policemen's Benevolent Association;

one policeman shall be appointed by the President of the New Jersey State Fraternal Order of Police;

one fireman shall be appointed by the President of the New Jersey State Firemen's Mutual Benevolent Association; and

one fireman shall be appointed by the President of the Professional Firefighters Association of New Jersey.

(ii) One policeman and one fireman who shall serve staggered terms and shall be active members of the system and who shall be elected by the active members of the system according to such rules and regulations as the board of trustees shall adopt to govern such election. The elected policeman shall serve for an initial term of two years and the elected fireman shall serve for an initial term of four years. Following their first term, all trustees elected pursuant to this subparagraph shall serve four-year terms. An election to select trustees, who are active members of the system, shall be held no later than the first day of the fifth month next following the date of enactment of P.L.2018, c.55.

(d) One retiree from the system who shall be elected by retirees from the system for a term of four years according to such rules and regulations as the board of trustees shall adopt to govern the election. An election to select a trustee, who is a retiree from the system, shall be held no later than the first day of the fifth month next following the date of enactment of P.L.2018, c.55.

(e) Four trustees, to be appointed by the Governor, who shall serve staggered terms and who either hold, or have held, an elective public office as a mayor, member of a municipal council, or member of a board of chosen freeholders or is employed, or has been employed, by a municipal or county government as an administrator, manager, or chief financial officer, to represent the interests of local government employers. The Governor shall appoint trustees pursuant to this subparagraph from among a list of names submitted by the New Jersey League of Municipalities and the New Jersey Association of Counties. Two trustees appointed by the Governor pursuant to this subparagraph shall serve for an initial term of two years and two trustees shall serve for an initial term of four years. Following their first term, all trustees appointed pursuant to this subparagraph shall serve four-year terms. The Governor shall appoint trustees representing the interest of local government employers pursuant to this subparagraph no later than the first day of the seventh month next following the date of enactment of P.L.2018, c.55.

(f) One trustee, to be appointed by the Governor, who holds or has held a management or supervisory position in the Executive Branch of State government at the level of division director or above to represent the interests of State government. The trustee appointed by the Governor pursuant to this subparagraph shall serve for an initial term of two years. Following the trustee's first term, the trustee appointed pursuant to this subparagraph shall serve four-year terms. The Governor shall appoint a trustee representing the interest of State government pursuant to this subparagraph no later than the first day of the seventh month next following the date of enactment of P.L.2018, c.55.

(3) Each trustee shall, after his appointment or election, take an oath of office that, so far as it devolves upon him he will diligently and honestly fulfill his duties as a board member, and that he will not knowingly violate or willingly permit to be violated any of the provisions of the law applicable to the retirement system. Such oath shall be subscribed by the member making it, and certified by the officer before whom it is taken, and immediately filed in the office of the Secretary of State. The board may remove a trustee, upon a majority vote of the trustees, for violating the trustee's oath of office. Any trustee who is absent, without an official excuse approved by a majority vote of the trustees, for more than three of the board's meetings in any calendar year shall be removed from the board and the trustee's position shall be filled in the same manner as the position was previously filled. The board shall adopt standards to define unexcused absences.

A member shall be permitted to participate in meetings of the board by teleconference.

(4) (a) If a vacancy occurs in the office of a trustee, the vacancy shall be filled in the same manner as the office was previously filled. A vacancy shall not last more than 60 days, unless the board is awaiting the certification of an election conducted pursuant to paragraph (2) of this subsection. If a vacancy lasts for more than 60 days, then the board shall appoint, upon a majority vote of the trustees then serving, a person qualified pursuant to subparagraph (e) or (f) of paragraph (2) of this subsection to fill the vacancy until a new trustee is appointed or elected in the manner set forth in paragraph (2) of this subsection.

(b) A trustee serving pursuant to subparagraph (c) of paragraph (2) of this subsection who retires from active service as policeman or fireman may remain a trustee until an election is held to replace the trustee. An election to replace a trustee serving pursuant to part (ii) of subparagraph (c) of paragraph (2) of this subsection who retires from active service shall be held no later than 30 days following the effective date of the trustee's retirement and the trustee shall relinquish the position on the board upon certification of the results of the election.

(c) Trustees appointed pursuant to part (i) of subparagraph (c) of paragraph (2) of this subsection shall serve at the pleasure of the official who appointed the trustee, but may be removed pursuant to paragraph (3) of this subsection.

(5) The trustees shall serve without compensation, but they shall be reimbursed for all necessary expenses that they may incur through service on the board.

(6) Each trustee shall be entitled to one vote in the board. Seven trustees shall be present at any meeting of said board for the transaction of its business.

(7) Subject to the limitations of this act, the board of trustees shall annually establish rules and regulations for the administration of the funds created by this act and for the transaction of the board's business.

(8) (a) The board of trustees shall elect from its membership a chair and vice chair. The chair, or vice chair in the chair's absence, shall serve as the primary contact with board staff, coordinate and approve meeting agendas, and shall have the power to authorize any special staff action necessary to execute any of the board's duties. The chair and vice chair shall not have the authority to discipline or discharge an employee of the board unless authorized to take such action by a majority of the trustees at a public meeting. The board shall appoint a secretary of the board. The administration of the program shall be performed by personnel selected by the board in accordance with this section. The board, reconstituted pursuant to P.L.2018, c.55, shall hold an initial meeting on the first business day of the seventh month following the date of enactment of P.L.2018, c.55. At the initial meeting of the board on the first business day of the seventh month next following the date of enactment of P.L.2018, c.55, the board shall contract with the Division of Pensions and Benefits for the division to perform the administrative tasks that the division performed prior to the enactment of P.L.2018, c.55 and such other tasks as the board may require. The division shall receive compensation from the board for the performance of the administrative tasks that the division performed prior to the enactment of P.L.2018, c.55 in an amount equal to the cost the division incurred for the performance of those administrative tasks prior to the enactment of that act. At the expiration of the term of the contract negotiated by the board with the division pursuant to this paragraph, the board may contract with the division or with a private entity, pursuant to the provisions of P.L.1954, c.48 (C.52:34-6 et seq.), to perform administrative tasks that the board determines to be necessary or convenient for its operation.

(b) A majority of the authorized membership of the board shall constitute a quorum for the transaction of business.

(9) The board of trustees shall keep a record of all of its proceedings which shall be open to public inspection. The retirement system shall publish annually a report showing the fiscal transactions of the retirement system for the preceding year, the amount of the accumulated cash and securities of the system, and the last balance sheet showing the financial condition of the system by means of an actuarial valuation of the assets and liabilities of the retirement system.

(10) The board of trustees may, in its discretion, select and employ, or contract with, legal counsel with demonstrated expertise in the law governing retirement systems for public or private sector employees to advise and represent the board. If the board does not select and employ, or contract with, legal counsel, the Attorney General of the State of New Jersey shall be the legal adviser of the retirement system, except if the Attorney General determines that a conflict of interest would affect the ability of the Attorney General to represent the board or the committees on a matter affecting the retirement system.

(11) The board of trustees shall designate a medical board. It shall be composed of a minimum of three physicians who are not eligible to participate in the retirement system. The medical board shall pass upon all medical examinations required under the provisions of this act, shall investigate all essential statements and certificates by or on behalf of a member in connection with an application for disability retirement, and shall report in writing to the retirement system its conclusions and recommendations upon all matters referred to it.

(12) The actuary of the system shall be selected by the board of trustees. The actuary shall be the technical adviser of the board of trustees on matters regarding the operation of the funds created by the provisions of this act, and shall perform such other duties as are required in connection therewith. The actuary shall be an independent contractor retained by the board. The actuary shall have demonstrated experience in providing actuarial services to defined benefit retirement systems for public employees and be a fellow with the Society of Actuaries and an active member of the American Academy of Actuaries.

(13) The board of trustees, in consultation with the actuary, shall establish actuarial funding policies for the system. At least once in each three-year period the actuary shall make an actuarial investigation into the mortality, service and compensation experience of the members and beneficiaries of the retirement system and, with the advice of the actuary, the board of trustees shall adopt for the retirement system such mortality, service and other tables as shall be deemed necessary and shall certify the rates of contribution payable under the provisions of this act. The board of trustees shall retain an independent actuary, as selected by the State Treasurer, with demonstrated experience in providing actuarial services to retirement systems for public or private sector employees to review prior investigations into the mortality, service, and compensation experience of the members and beneficiaries of the retirement system and to review the three prior actuarial valuations to certify that the actuary of the retirement system conducted the investigations and valuations in accordance with generally accepted actuarial standards.

(14) (Deleted by amendment, P.L.1970, c.57.)

(15) On the basis of such tables recommended by the actuary as the board of trustees shall adopt and regular interest, the actuary shall make an annual valuation of the assets and liability of the funds of the system created by this act.

(16) (Deleted by amendment, P.L.1987, c.330.)

(17) Each policeman or fireman member of the board of trustees or the committees shall be entitled to time off from his duty, with pay, during the periods of his attendance upon regular or special meetings of the board of trustees or the committees, and such time off shall include reasonable travel time required in connection therewith.

(18) The board of trustees shall have a minimum of one meeting each calendar month.

(19) The board of trustees shall have authority to formulate and establish, amend, modify or repeal such policies as it may deem necessary or proper, which shall govern the methods, practices or procedures for investment, reinvestment, purchase, sale or exchange transactions to be followed by the Division of Investment. The board may also review and approve agreements which may be necessary or convenient for the management of the investments of the retirement system. The board shall also have the authority to inspect and audit the respective accounts and funds administered by the Division of Investment, or a successor entity, and take appropriate action as necessary to effectuate the long term viability of the system. Notwithstanding this provision, Common Pension Fund L and the assets held by Common Pension Fund L as of the effective date of this Act and thereafter, including the interest of the Police and Firemen's Retirement System of New Jersey therein, shall remain within the Division of Investment. The Director of the Division of Investment and the State Investment Council shall retain all functions, powers, and duties relating to Common Pension Fund L assigned to the Division of Investment, the Director of the Division of Investment, and the State Investment Council by P.L. 2017, c. 98 (C.5:9-22.5 et seq.).

(20) (a) The board of trustees shall select and employ an executive director, who shall be responsible for recommending and implementing the strategic direction of the board from an operational perspective. The executive director shall provide strategic direction, planning, and leadership to the board; organize, develop, and supervise a management team to provide optimal results; maintain oversight of administrative operations conducted by the board; develop an annual budget and a salary and compensation guide for any managerial positions that are not subject to Title 11A, Civil Service, of the New Jersey Statutes, arrange board agendas with the approval of the board's chair; appoint administrative staff; execute contracts on behalf of the board; and perform any other responsibilities designated to the executive director by the board. The person employed by the board to hold the position of executive director shall have, at a minimum upon commencement of employment, a bachelor's degree from an accredited institution of higher education, and at least five years of management experience in accounting, finance, public administration, government pension and retirement planning, investment banking, financial consulting, money management, or a similar field. The person shall meet all other requirements for employment as shall be set forth in a standard adopted by the board. No member, retiree, or other beneficiary of the system shall be eligible to hold the position of executive director.

The executive director shall serve without term but may be removed from office, upon notice and opportunity to be heard at a public hearing, subject to an affirmative vote of the majority of all authorized members of the board of trustees. Any vacancy occurring shall be filled in the same manner as the original appointment. The executive director shall devote his entire time and attention to the duties of the office and shall not be engaged in any other occupation or profession. The executive director shall act as a fiduciary to the retirement system and shall be under a duty to perform the obligations set forth herein according to the interest of the beneficiaries of the system.

(b) The board of trustees shall have the authority to retain other administrative and professional staff as required to implement the duties and responsibilities required to ensure the smooth transition of responsibilities and authority from the division to the board pursuant to P.L.2018, c.55. The board shall not employ a trustee and may employ a former trustee only if the former trustee has not held the position of trustee for more than two years.

(c) The board of trustees shall be authorized to access operating funds from the system necessary for the management of the fund and to employ staff immediately upon their election and appointment, provided that the qualified status of the retirement system under federal law is maintained.

(21) (a) The board of trustees shall select and employ a chief investment officer, who shall oversee the development of the methods, practices and procedures for investment, in coordination with the Investment Committee. Notwithstanding this provision, Common Pension Fund L and the assets held by Common Pension Fund L as of the effective date of this Act and thereafter, including the interest of the Police and Firemen's Retirement System of New Jersey therein shall remain within the Division of Investment. The Division of Investment and the Director of the Division of Investment and the State Investment Council shall retain all functions, powers, and duties relating to Common Pension Fund L assigned to the Division of Investment, the Director of the Division of Investment, and the State Investment Council by P.L. 2017, c. 98 (C.5:9-22.5 et seq.). The chief investment officer, in coordination with the Investment Committee, shall establish and maintain a policy to monitor and evaluate the effectiveness of investments made on behalf of the board. The chief investment officer shall report to the executive director.

The person employed by the board to hold the position of chief investment officer shall have, at a minimum upon commencement of employment, a bachelor's degree from an accredited institution of higher education, and at least five years of management experience, in addition to accounting, finance, public administration, government pension and retirement planning, investment banking, financial consulting, money management, or a similar field. The person shall also have experience in the direct management, analysis, supervision or investment of assets. The person shall meet all other requirements for employment as shall be set forth in a standard adopted by the board. No member, retiree, or other beneficiary of the system shall be eligible to hold the position of chief investment officer. The chief investment officer shall be precluded from outside employment or other occupation.

(b) The board of trustees may make and execute agreements pursuant to the provisions of P.L.1954, c.48 (C.52:34-6 et seq.), which may be necessary or convenient for the management of the investments of the retirement system. The board shall also have the authority to inspect and audit the respective accounts and funds administered by the Division of Investment, or a successor entity, and take appropriate action as necessary to effectuate the long term viability of the system.

(22) The board of trustees shall select and employ an ombudsman, who shall provide individual death and disability consultation and information to plan members and their dependents; answer questions from, and provide information to, members related to the process of applying for retirement and retirement benefits; coordinate with other State and local agencies on behalf of members; maintain federal, State, and local death and disability benefit resources; recommend policy changes to the board; conduct educational presentations for employers on death and disability benefit options for members; and publish information about the organization of the board for members, employers, and the public.

(23) All members of the board of trustees and of the Investment Committee shall participate in annual investment training as directed by the board's executive director. In addition to the ethics training required by paragraph (2) of subsection c. of this section, the board shall adopt a policy requiring annually not less than 16 hours of continuing education in matters relating to the administration of defined benefit retirement systems for public employees and the fiduciary duty the board and its employees have to the beneficiaries of the retirement system.

b. The board of trustees shall have the discretionary authority to:

(1) modify the: member contribution rate; cap on creditable compensation; formula for calculation of final compensation; age at which a member may be eligible for and the benefits for service or special retirement; and standards for approval, medical review policies, and benefits provided for disability retirement; and

(2) subject to the provisions of P.L.2015, c.55, activate the application of the "Pension Adjustment Act," P.L.1958, c.143 (C.43:3B-1 et seq.) for retirees and modify the basis for the calculation of the adjustment and set the duration and extent of the activation. The board of trustees, after consultation with the actuary, may apply an adjustment to the monthly retirement allowance or pension originally granted to any member.

The board of trustees shall have the discretionary authority to modify the conditions and standards for the purchase of service credit for death benefits. The board of trustees shall not have the authority to change the years of creditable service required for vesting.

At least eight votes of the authorized membership of the board shall be required to approve any enhancement or reduction of a member benefit, including the activation of the application of the "Pension Adjustment Act," P.L.1958, c.143 (C.43:3B-1 et seq.), for retirees, or to approve any increase or decrease in the employer contribution that is more than what is recommended by the actuary for the system for the purpose of the annual funding requirements of the system. An actuarial certification must be provided by the actuary prior to any enhancement or reduction of a member benefit, including the activation of the application of the "Pension Adjustment Act," P.L.1958, c.143 (C.43:3B-1 et seq.), showing that such change will not result in an increased employer contribution in the current year and that such change will not impact the long term viability of the fund.

The board of trustees may consider a matter described in this subsection and render a decision notwithstanding that the provisions of the statutory law may set forth a specific requirement on that matter.

The board of trustees may consider a matter described in this subsection and render a decision notwithstanding that the provisions of the statutory law do not set forth a specific requirement on the considered aspect of that matter or address that matter at all.

A final action of the board of trustees under this subsection shall be made by the adoption of a regulation that shall identify the modifications to the system by reference to statutory section. The regulations shall also specify the effective date of the modification and the system members, including beneficiaries and retirees, to whom the modification applies. Regulations of the board of trustees are considered to be part of the plan document for the system. A regulation adopted by the board of trustees may be modified by regulation in order to comply with the requirements of this section.

c. (1) No member of the board or a committee of the board, employee of the board, or employee of the Division of Pensions and Benefits in the Department of the Treasury shall accept from any person, whether directly or indirectly and whether by himself or through his spouse or any member of his family, or through any partner or associate, any gift, favor, service, employment or offer of employment, or any other thing of value, including contributions to the campaign of a member or employee as a candidate for elective public office, which he knows or has reason to believe is offered to him with intent to influence him in the performance of his public duties and responsibilities. As used in this subsection, "person" means an (1) individual or business entity, or officer or employee of such an entity, who is seeking, or who holds, or who held within the prior three years, a contract with the board; (2) an active or retired member, or beneficiary, of the retirement system; or (3) an entity, or officer or employee of such an entity, in which the assets of the retirement system have been invested. A board or committee member or employee violating this prohibition shall be guilty of a crime of the third degree.

(2) The board shall adopt an ethics policy either identical to the provisions of the "New Jersey Conflicts of Interest Law," P.L.1971, c.182 (C.52:13D-12 et seq.) or more restrictive, but not less restrictive. All trustees, officers, and employees of the board shall participate in annual ethics training on the board's policy, the New Jersey Conflicts of Interest Law, and any other applicable law, rule, or standard of conduct relating to the area of ethics as directed by the board's executive director.

d. The board of trustees shall have the authority to establish a process for the review, approval, and appeal of applications for retirement.

e. The board of trustees shall establish three committees as follows:

(1) (a) An Audit Committee of no less than three members to assist in the oversight of the financial reporting and audit processes of the board of trustees. At least two of the members shall be members of the board of trustees. At least one of the Audit Committee members shall have accounting, governmental auditing, or related financial expertise. If the board of trustees does not have sufficient members qualified or available to serve on the Audit Committee, or wishes to broaden the expertise on the Audit Committee, the board of trustees may request that the State Treasurer recommend one or more qualified individuals to sit on the committee.

(b) The Audit Committee shall assist the board of trustees in retaining an independent auditor to conduct an audit of the retirement system's financial statements by making a recommendation to the board of trustees after engaging in an auditor selection process. The auditor selection process shall be based upon public, competitive bidding principles and shall take place no less than once every five years.

(c) In carrying out its duties, the Audit Committee shall proactively assist the board of trustees in overseeing the integrity and quality of the retirement system's finances and investments. The Audit Committee shall:

(i) review and evaluate audit fees;

(ii) when the committee believes that the auditor's performance is not adequate in quality or independence, recommend such steps as may be necessary to elicit appropriate performance, including replacement of the auditor;

(iii) at least once every three years, obtain and review a report of the independent auditor describing for the preceding year: the independent auditor's internal quality control procedures; any material issues raised by the most recent internal quality control peer review, or by reviews conducted by governmental or professional authorities; and steps taken by the auditor to address such issues;

(iv) regularly review with the independent auditor any audit problems, any risks of material statements due to fraud, and difficulties involving restrictions or attempts to restrict the auditor's activities and restrictions on access to information;

(v) review the audited financial statements and interim statements and discuss them with the board of trustees. These discussions shall include a review of particularly sensitive accounting estimates, reserves and accruals, judgmental areas, audit adjustments, whether recorded or not, and any other matters the Audit Committee or independent auditor shall deem appropriate;

(vi) review internal control functions such as the planned scope of internal audit reviews, adequacy of staffing, actions to be taken as a result of internal audit findings, the effectiveness of electronic data processing procedures, and controls and related security programs;

(vii) recommend policies with respect to risk assessment and risk management; and

(viii) establish a permanent position of internal auditor, who shall be supervised by the executive director, but who may be discharged only by an affirmative vote of the majority of the board.

(2) An Actuary Committee of no less than three members to assist in the selection and oversight of the actuary appointed by the board of trustees. The Actuary Committee shall review the performance of the actuary appointed by the board of trustees. If the performance of the actuary is not adequate in quality, the committee shall recommend such steps as may be necessary to elicit appropriate performance, including replacement of the actuary.

(3) An Investment Committee of no less than three members to assist in the oversight of the investment policies selected by the board of trustees. The Investment Committee shall consist of two members of the board of trustees, and one member who shall be the chief investment officer of the board, and shall oversee investments and make recommendations on investments to the board of trustees. A majority of the Investment Committee members, one of which may be the Chief Investment Officer, shall be qualified by training, experience or long-term interest in the direct management, analysis, supervision or investment of assets and this training, experience or long-term interest shall have been supplemented by academic training in the fields of economics, business, law, finance or actuarial science or by actual employment in those fields. If the board of trustees does not have sufficient members qualified or available to serve on the Investment Committee, or determines to broaden the expertise of the Investment Committee, the board of trustees may request that the State Treasurer recommend one or more qualified individuals to sit on the committee.

f. At the end of six years following the enactment date of P.L.2018, c.55, the board of trustees shall conduct a review of the performance and funding levels of the retirement system, as compared to available market data including but, not limited to, the performance of the State Investment Council and Division of Investment with regard to the investment of other State-administered retirement systems or funds and other appropriate benchmarks, and may, based on a majority vote of the authorized membership of the board, petition the Legislature to consider legislation that reverts control of the system from the Board of Trustees to the State Investment Council and the Division of Investment.

L.1944, c.255, s.13; amended 1955, c.212; 1964, c.241, s.9; 1967, c.250, s.12; 1970, c.57, s.10; 1971, c.175, s.7; 1972, c.157, s.3; 1973, c.156, s.2; 1987, c.330, s.1; 1992, s.41, s.24; 1992, c.125, s.14; 1995, c.238; 2011, c.78, s.4; 2018, c.55, s.15.