Retirement Monitor - June 2019

<p>In this issue:</p> <p>Amended short-term disability employer reimbursement policy; new legislation in effect for short-term disability filing period; employer contribution rates for LGERS increasing; Understanding the definition of compensation; State Health Plan Clear Pricing Project Update; Kudos!</p>

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Amended Short-term Disability Employer Reimbursement PolicyPerson with broken arm filling out paperwork

In 2018, the General Assembly amended the state law regarding short-term disability employer reimbursement. Currently, employers are responsible for administering and paying for disability income payments and health insurance premiums and are then reimbursed those costs for eligible employees during the second six months of the short-term disability benefit period. These costs are paid out of the Disability Income Plan of North Carolina (DIPNC) trust fund. Employers continue to be responsible for administering and paying for short-term disability benefits and health insurance premiums, but based on this legislative change, employers cannot be reimbursed for any short-term disability benefits that begin on or after July 1, 2019.

Please see this DIPNC Employer Reimbursements page for an analysis of the DIPNC employer reimbursements for costs incurred during the second six months of the short-term disability benefit period as provided for in G.S. 135-105(d). This analysis is unaudited and provided for informational and budget planning purposes only and is based solely on data transmitted by employing agencies to the Retirement Systems Division during fiscal years 2014 through 2018.

Short-term Disability Filing Period

Members wishing to file an application for short-term disability through DIPNC must do so no later than 365 days following the first day of the 60-day waiting period.
 
To avoid missing the short-term filing period, employees should apply for short-term disability as soon as possible, even if they are receiving Worker’s Compensation benefits, taking a Family Medical Leave of Absence, receiving salary continuation payments or exhausting leave.

Did you know...

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    Training for You, Conferences for Your Employees

      The North Carolina Retirement Systems offers Employer Training for state and local government employers. Upcoming employer training provides information about law enforcement and emergency personnel eligility requirements, long term disability, and how the State Health Plan is improving the lives of its members. Click here for more information.

      Do you have employees that are nearing retirement? Maybe they would benefit from a Retirement Planning Conference or Webinar. Click here for a full list of upcoming events.

      Employer Contribution Rates for LGERS

      Effective July 1, 2019, the “base” employer contribution rate will change:

      • Law enforcement officers (LEOs) rate will increase from 8.50 to 9.70 percent of reported compensation.
      • Rate for all other employees will increase from 7.75 to 8.95 percent of reported compensation.

      Additional rates, such as rates associated with death benefits or past service liabilities, will be added to the base rate to determine the actual contribution percentage for each employer.

      The LGERS Board of Trustee’s policy now anticipates further increases in the “base” rates effective July 1, 2020, and July 1, 2021, equal to 1.20 percent of reported compensation each year, as follows:

      Effective Date Non-LEO "Base Rate" LEO "BaseRate"
      July 1, 2019 8.95% 9.70%
      July 1, 2020 10.15% 10.90%
      July 1, 2021 11.25% 12.10%

      Retirement Systems Division staff are available to answer any questions from employers about this Board action.

      Understanding the Definition of Compensationlogo for the Total Retirement Plans

      As a participating employer in the North Carolina Total Retirement Plans, you’re responsible for using the correct measure of compensation to calculate employer contributions and employee deferrals for the NC 401(k) Plan and NC 457 Plan. The definition of compensation varies between the NC 401(k) Plan versus the NC 457 Plan; therefore, we’re helping you with a quick guide. One of the main differences is the inclusion of payment for unused sick leave upon an employee’s termination of employment. Unused sick leave is included in the definition of compensation in the NC 457 Plan but not in the NC 401(k) Plan. 

      Please review the summary definitions of compensation below and the complete definitions in the plan documents, which are posted on the Department of State Treasurer’s website, in the FAQs section.

      Compensation in the NC 401(k) Plan
      Compensation in the NC 401(k) Plan generally includes all salaries and wages prior to any reduction for certain qualified pre-tax benefits, deferrals to 401(k), 457, or 403(b) plans, parking benefits, and employer “pick-up” contributions. Differential military pay under the HEART Act is also covered. However, one important exclusion from the definition of compensation in the NC 401(k) Plan is payment for unused sick leave upon an employee’s termination. In addition, compensation generally does not include payments for:

      • Reimbursement of expenses;
      • Housing; or
      • Other allowances

      Compensation in the NC 457 Plan
      Compensation in the NC 457 Plan generally includes the information required to be reported under Internal Revenue Code Sections 6041, 6042 and 6052 (i.e., the “Wages, tips and other compensation” box on the W-2 Form). Unlike the NC 401(k) Plan, unused sick leave is generally counted as compensation in the NC 457 Plan if it is part of Form W-2 “wages, tips, and other compensation.” Differential military pay under the HEART Act is also treated as compensation.

      Limits for Supplemental Retirement Plans
      Under Internal Revenue Code section 415, annual employee deferral limits for defined contribution plans in 2019 are $19,000 for the 401(k), 457 and 403(b) plans, subject to certain catch-up and/or additional contributions that may apply to certain employees. Employer contributions count against the employee deferral limit in 457 plans, but employers in 401(k) and 403(b) plans may contribute to an employee’s account in addition to the employee’s deferral, up to a total contribution limit – employee deferrals plus employer contributions – of $56,000 in 2019 under the Internal Revenue Code.

      The annual compensation limit is defined as the maximum amount of annual compensation that may be taken into consideration to calculate employer contributions and employee deferrals under defined contribution plans. For 2019, the annual compensation limit is $280,000.

      Where You Can Get More Information
      We’re here to help with any questions you have about the North Carolina Total Retirement Plans! You can find the complete definitions of compensation in the plan documents, which are posted on the Department of State Treasurer’s website, in the FAQs section. Also, you can contact your Retirement Education Counselor for help understanding compensation rules.

      You can help us to keep the plans in compliance by using the correct measure of compensation to calculate employer contributions and employee deferrals.

      State Health Plan Clear Pricing Project UpdatePhoto of doctor holding a stethoscope

      Employers who work with the State Health Plan: Medical providers have less than 30 days to sign a contract and become partners with the State Health Plan on the Clear Pricing Project!

      If providers do not sign a contract by July 1, 2019, they will be considered out-of-network for State Health Plan members beginning January 1, 2020. 

      As a reminder, this only affects State Health Plan members on the 80/20 Plan, the 70/30 Plan and the High Deductible Health Plan and only includes medical providers in North Carolina.

      If you have State Health Plan member employees, here’s how they can help the Clear Pricing Project initiative:

      • Ask their provider if they plan on signing a contract by July 1, 2019, to keep them in-network by joining the new North Carolina State Health Plan Network.
      • If they say no, ask them why they are against transparency and lowering the cost of health care. 
      • Encourage co-workers or friends who are Plan members to join in the effort!

      You and your employees can find the latest details, videos, FAQs and news on the Plan’s Clear Pricing Project page. You will find out more about the new network during the State Health Plan’s Open Enrollment, which will take place October 1-31, 2019.

      Here’s a message from State Treasurer Dale R. Folwell on the Clear Pricing Project.

       

      Kudos!

      Kudos to town of Carolina Shores, Roanoke Rapids City Schools and Mocksville-Cooleemee ABC Board

       

       

       

       

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