Table of Contents
- Digest of 2016 Legislative Action Affecting Members of the Teachers’ and State Employees’ Retirement System
Contributions to the Retirement System for the 2016-2017 Fiscal Year
Included in Section 36.20.(a) and (b) of the 2016 Appropriations Act - House Bill 1030 (Session Law 2016-94)
Employer Contribution Rates from July 1, 2016, to December 31, 2016
State employer contribution rate for Teachers and State Employees from July 1, 2016, to December 31, 2016 = 16.12%
| Retirement System Pension Fund | 9.98% |
| Death Benefit Trust Fund | 0.16% |
| Retiree Health Benefit Fund | 5.60% |
| Disability Income Plan | 0.38% |
| 16.12% from July 1, 2016, to December 31, 2016 |
An additional 5% employer contribution for State-employed law enforcement officers is required in the NC 401(k) Plan. Therefore, the total budgeted employer contribution for law enforcement officers is 21.12% effective July 1, 2016. Of this 21.12%, 5% is payable to Prudential Retirement (the NC 401(k) Plan administrator), and 16.12% is payable to the Retirement Systems Division from July 1, 2016, to December 31, 2016.
State employer contribution rate for University and Community College Optional Retirement Program members from July 1, 2016, to December 31, 2016 = 12.82%; of this amount, the following is paid to the Retirement Systems Division:
| Retiree Health Benefit Fund | 5.60% |
| Disability Income Plan | 0.38% |
| 5.98% from July 1, 2016, to December 31, 2016 |
Employer Contribution Rates from January 1, 2017, to June 30, 2017
State employer contribution rate for Teachers and State Employees from January 1, 2017, to June 30, 2017 = 16.54%
| Retirement System Pension Fund | 9.98% |
| Death Benefit Trust Fund | .16% |
| Retiree Health Benefit Fund | 6.02% |
| Disability Income Plan | 0.38% |
| 16.54% from January 1, 2017, to June 30, 2017 |
An additional 5% employer contribution for State-employed law enforcement officers is required in the NC 401(k) Plan. Therefore, the total budgeted employer contribution for law enforcement officers is 21.54% effective January 1, 2017. Of this 21.54%, 5% is payable to Prudential Retirement (the NC 401(k) Plan administrator), and 16.54% is payable to the Retirement Systems Division from January 1, 2017, to June 30, 2017.
State employer contribution rate for University and Community College Optional Retirement Program members from January 1, 2017, to June 30, 2017 = 13.24%; of this amount, the following is paid to the Retirement Systems Division:
| Retiree Health Benefit Fund | 6.02% |
| Disability Income Plan | 0.38% |
| 6.40% from January 1, 2017, to June 30, 2017 |
One-Time Pension Supplement Payment for TSERS Benefit Recipients
Included in Section 36.21.(a) of the 2016 Appropriations Act - House Bill 1030 (Session Law 2016-94)
Provides, on or before October 31, 2016, a one-time pension supplement payment to TSERS benefit recipients whose retirement began on or before September 1, 2016, equal to 1.6% of the recipient’s annual retirement allowance as of September 1, 2016. To determine the amount of the one-time supplement, the benefit recipient’s September 2016 regular monthly benefit amount will be multiplied times 12 to determine the annual retirement allowance, and then multiplied times 1.6%. This one-time, non-recurring pension supplement will be included in the October 2016 retirement benefit payment.
Compensation Bonus Not Subject to Retirement Contributions
Included in Section 36.16.(b) of the 2016 Appropriations Act - House Bill 1030 (Session Law 2016-94)
Most employees employed in State-funded positions on September 1, 2016, will be paid a one-time “compensation bonus” of 0.50% during the month of October 2016. This “compensation bonus” is not subject to employee and employer retirement contributions and will not be included in the calculation of a TSERS member’s average final compensation at retirement.
Compensation Bonus Payable to Certain Disability Income Plan of North Carolina (DIPNC) Recipients Who Have Not Terminated Employment
Included in Section 36.16.(d) of the 2016 Appropriations Act - House Bill 1030 (Session Law 2016-94)
DIPNC short-term and extended short-term recipients who have not terminated employment and who meet all of the conditions in Section 36.16.(a) of House Bill 1030 (Session Law 2016-94) will receive the one-time 0.50% bonus granted to most State employees. The bonus will be paid by the employer and will not be reimbursed by DIPNC. Long-term DIPNC recipients are not eligible for the bonus.
DIPNC Benefit Increase
Allowed by increase included in Section 36.15.(b) of the 2016 Appropriations Act - House Bill 1030 (Session Law 2016-94)
The Department of State Treasurer and the Board of Trustees of TSERS have increased the compensation upon which DIPNC short-term and long-term benefits are calculated by 1.5% effective July 1, 2016. This action is: (i) allowed under the provisions of G.S. § 135-108, (ii) based on the 1.5% increase granted by the General Assembly to active State employees effective July 1, 2016, and (iii) in keeping with the purpose of the Plan to provide replacement income for disabled participants. This increase is effective on and after July 1, 2016 for all disabled participants receiving DIPNC benefits on June 30, 2016.
Note to employers paying DIPNC short-term benefits: Employers paying short-term benefits to disabled participants on June 30, 2016, shall, effective on and after July 1, 2016, increase the compensation upon which benefits are calculated by 1.5%. This 1.5% increase in compensation for purposes of benefits under the Plan applies uniformly to all employers, including local boards of education and educational institutions where employees may receive a different percentage compensation increase. If the member is receiving the monthly maximum short-term benefit of $3,000, the member will not receive an increase.
Qualified Excess Benefit Arrangement (QEBA) Sunset and Reimbursement Changes
Included in Section 36.23.(a) and (c) 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 a TSERS member before January 1, 2015. An employee who became a TSERS 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 TSERS employer to reimburse QEBA for the amount paid to a retiree from QEBA for any TSERS 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 4.(a) – 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 TSERS, 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.(a) – Clarifies, effective June 30, 2016, that choosing the Transfer Benefit is an irrevocable option. Transfer Benefit recipients are TSERS retirees who transferred NC 401(k) or NC 457 balances at or after retirement to TSERS to receive an additional monthly lifetime benefit.
Changes to Charter School Service Purchase Requirements
Included in House Bill 960 (Session Law 2016-82)
Section 1 – Allows, effective June 30, 2016, members to purchase eligible charter school service credit who have completed 5 years of TSERS membership service before or after the eligible charter school service, and limits this purchase to a total of 5 years in order to align state law with the federal law purchase provisions under Internal Revenue Code section 415(n)(3)(B).
Changes to DIPNC Annual Statement of Income Requirements
Included in Senate Bill 886 (Session Law 2016-108)
Section 8 – Provides, effective July 22, 2016, that if a DIPNC statement of income is requested by the Retirement Systems Division and the DIPNC recipient does not provide the information within 120 days of the request, the recipient’s DIPNC benefit may be suspended until the information is provided, and if the requested information is not provided after an additional 180 days, the recipient’s DIPNC benefit may be terminated.
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.