The Township offers it employees a Deferred Compensation Plan in accordance with Internal Revenue Code Section 457, which has been approved by the Director of Local Government Services. The Plan, available to all full time employees at their option, permits employees to defer a portion of their salary to future years. The deferred compensation is not available to participants until termination, retirement, death or unforeseeable emergency.

Amounts deferred under Section 457 plans must be held in trust for the exclusive benefit of participating employees and not be accessible by the Township or its creditors.

As discussed in Note 1 and in accordance with accounting principles prescribed by the State of New Jersey, the cash basis of accounting is followed for recording the Township’s liability related to unused vacation, sick pay and compensation time. The Township permits certain employees within limits to accumulate unused vacation, sick pay and compensation time, which may be taken as time off or paid at a later date at an agreed upon rate.

The accumulated cost of unused sick and vacation time has not been recorded in the financial statements as presented, however at December 31, 2014 it is calculated that accrued unused sick and vacation time payable are valued at $2,376,943. The likelihood that this liability would be due and payable all at once is remote since the Township’s employees’ ages and anticipated retirement dates vary.

The Township has established a Compensated Absences Trust Fund to set aside funds for future payments of compensated absences. At December 31, 2014, the balance of the fund was $264,089.

Effective January 1, 1978, most municipal employees were eligible for unemployment compensation insurance (N.J.S.A.43:21-3 et. seq.). The Township has elected to provide a self-insured plan whereby the municipal cost and employee contributions are deposited in a trust fund from which claims, if any, will be paid. The reserve for unemployment compensation insurance at December 31, 2014 was $2,050.

The Township is involved in legal and administrative proceedings and claims of various types. While any litigation contains an element of uncertainty, Township Officials, based upon the opinion of the Township’s Counsel, presently believe that the outcome of each such proceeding or claim which is pending or know to be threatened, or all of them combined, will not have a material adverse effect on the

Township’s financial position or adversely affect the Township’s ability to levy, collect and enforce the collection of taxes or other revenue for the payment of its bonds or other obligations.

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