Retirement Monitor - LGERS Special Edition - August 2016

<p>In this issue:</p> <p>Digest of Legislative Action Affecting Members of the Local Governmental Employees&#39; Retirement System</p>






Table of Contents

  • Digest of 2016 Legislative Action Affecting Members of the Local Governmental Employees' Retirement System


Qualified Excess Benefit Arrangement (QEBA) Sunset and Reimbursement Changes
Included in Section 36.23.(b) and (d) of the 2016 Appropriations Act - House Bill 1030 (Session Law 2016-94)

Changes, effective July 1, 2016, the sunset for QEBA participation to allow an employee to participate in QEBA who became an LGERS member before January 1, 2015. An employee who became an LGERS member on or after January 1, 2015, will not be eligible to participate in QEBA, and will not be paid more retirement benefits than allowed under section 415(b) of the Internal Revenue Code. QEBA was created effective January 1, 2014, to pay the part of a highly compensated retiree’s retirement allowance that would otherwise be payable except for the limitation under section 415(b) of the Internal Revenue Code.

Requires, effective July 1, 2016, the last LGERS employer to reimburse QEBA for the amount paid to a retiree from QEBA for any LGERS member who retires on or after August 1, 2016. The reimbursement amount will be calculated on an annual basis every calendar year. The employer will have 60 calendar days from the date of notification of the reimbursement amount owed to pay the amount in full or the employer will be assessed a penalty, in lieu of interest, of 1% per month, or fraction thereof, if the payment is made beyond the due date.

Retirement System Technical Corrections Bill
Included in House Bill 1011 (Session Law 2016-56)

Section 3 – Clarifies, effective January 1, 2017, that an LGERS employer is required to pay employer and employee contributions to LGERS for the full period that a member was in active military duty if the employee was an LGERS member immediately prior to the active duty military service and returns to employment under LGERS with the same LGERS employer within two years after the military duty.
Section 4.(b) – Clarifies, effective June 30, 2016, that if a member who has completed a retirement application (Form 6) but has not submitted his or her properly acknowledged payment option form (Form 6E) to LGERS, dies after his or her retirement date, and has designated more than one beneficiary or no beneficiary for the return of contributions, the administrator or executor of the member’s estate may select the option and name the beneficiary(ies).

Section 5.(b) – Clarifies, effective June 30, 2016, that choosing the Transfer Benefit is an irrevocable option. Transfer Benefit recipients are LGERS retirees who transferred NC 401(k) or NC 457 balances at or after retirement to LGERS to receive an additional monthly lifetime benefit.

Section 6.(b) – Changes, effective January 1, 2017, LGERS educational leave purchase requirements to specify that a leave of absence or interrupted service may be approved for purchase for a period of employment as a teacher in a charter school. Any other leave of absence or interrupted service will qualify for educational leave purchase only if (i) during the time of the leave or interrupted service the member is enrolled and participates in a full-time degree program at an accredited institution of higher education, (ii) the member is not paid for the activity in which he or she is acquiring knowledge, talents, or abilities, and (iii) the service is not purchased for any month in which the member performed any services for the following organizations or their successors: State Employees Association of North Carolina, North Carolina Association of Educators, North Carolina State Firemen's Association, North Carolina Highway Employees’ Association, North Carolina Teachers' Association, State Employees' Credit Union, alumni associations of state-supported universities and colleges, local professional associations of teachers and State employees, and North Carolina School Boards Association.

Other Legislation Affecting Retirement System Members

Treasurer’s Investment and Administrative Changes
Included in House Bill 1137 (Session Law 2016-55)

Provides, effective January 31, 2017, updates and clarifications to investment statutes, including third-party audits of investments and detailed fee and performance reporting, to ensure that the State Treasurer's investment programs operate under a strong governance framework with rigorous internal controls and a high degree of operational transparency and are managed with the highest ethical and professional standards and in the most efficient and effective manner possible.

Other Action Affecting LGERS Retirees

Cost-of-Living Increases for Retirees

Increased, effective July 1, 2016, the retirement allowance by 0.105% for LGERS retirees whose retirement began on or before July 1, 2015. Members with retirement effective dates between August 1, 2015, and June 1, 2016, received a prorated amount. During its January meeting, the LGERS Board of Trustees granted this 0.105% cost-of-living adjustment (COLA) effective July 2016. This is the maximum COLA that the LGERS Board is authorized to grant for local government retirees under state law.


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