Table of Contents
- Timely and Accurate Employer Reporting
- Local Government 1,000 Rule Reminder
- Importance of Timely Completion of Form 6C
- Return-to-Work Earnable Allowance
- Pension Spiking Salary Threshold Increase
- Opt-in To Go Paperless
- IRS Contribution Increases for 2023
- Employer & Member Webinars
Timely and Accurate Employer Reporting
Employee and Employer contributions are due via the monthly Contribution Summary Instructions (CSI) by 5:00 p.m. on the 5th business day of the month along with the Monthly ORBIT payroll report. If the 5th falls on a weekend, contributions are due the following business day by 5 p.m. This schedule has been updated to include 2023 dates and is located on our website.
myNCRetirement Tip: Create a calendar reminder so you meet the required deadlines.
Reminder: MARS (Member Annual Retirement Statement) is available for active employees who contributed for at least 12 months ending on December 31. We need your help to make sure all eligible members receive this important resource. We ask that you check and correct monthly ORBIT errors as soon as your monthly report posts and take action now to correct any recent error.
Local Government 1,000 Hour Rule Reminder
North Carolina Retirement Systems law requires an employee to become a contributing member of the Local Governmental Employees’ Retirement System (LGERS), if the employee is employed by a participating LGERS employer in a regular position that requires at least 1,000 hours of work in a calendar year. The employee will not be a contributing member of LGERS if his or her work is considered “temporary employment,” meaning employment for a limited term which does not exceed 12 consecutive months on a non-recurring basis for an LGERS employer, or “statutorily required interim employment,” meaning employment as an interim city or county manager for a period that does not exceed 12 months on a non-recurring basis.
To determine if an employee is required to be an LGERS member and if contributions must be submitted to LGERS on his or her behalf, examine the requirements of the position. The hours required of the position determine membership in LGERS, not the actual number of hours an LGERS employee works in a calendar year.
As a part of the retirement process, we require reporting an employee’s work record. Timely completion of this information allows the Retirement Systems to proceed to the next step in the retirement process where the member chooses their option/estimated benefit payment.
Paper Application: If a member uses a paper application to apply for retirement, the second page of the form acts as the Form 6C and requires certification of the employee’s work record with the employer signature.
Retirement Online: If a member applies for retirement online through ORBIT, a Form 6C is emailed to the employer and the member is cc’d on that communication so they are aware of where they are in the retirement process. This digital form requires certification of the employee’s work record with the employer’s signature.
As we enter the close of 2022, it’s important to check in on the earnable allowance permitted for a retiree that has returned to work. The calculation of earnings limitations is unique and based on a retiree’s pay history leading up to employment. For 2022, a retiree can earn whichever is greater:
- 50% of gross pre-retirement salary (excluding termination payments), or
A retiree who has returned to work can log in to ORBIT, click on View Earnable Allowance in the left navigation and see their earnable allowance for re-employment purposes.
There are both federal and state requirements that govern the effect on retirement benefits, if any, when a retiree returns to public employment. When there is an effect on benefits, even if it was inadvertent, the consequences can be devastating to retirees and their families. The consequences could include the loss of all retirement benefits and health insurance premiums (including retroactively) and the prospective loss of health coverage. These situations are among the most difficult that we encounter in administering retirement benefits.
Click here for a summary of all the return-to-work requirements. The requirements seem to be generally well-understood by employees, retirees, and employers. However, in rare situations we observe that retirees misunderstood certain requirements that were critical to their situation. These could include the conditions that must be met in order to begin receiving retirement benefits in the first place under TSERS or LGERS:
- No Pre-Arrangement: To be eligible for retirement benefits, an active employee cannot establish an agreement to work after retirement for an employer in the same Retirement System. This is known as a “pre-arrangement.” The IRS has described this as meaning that the employee must make “an independent personal decision to permanently sever the employer/employee relationship without any re-employment pre-arrangements.”
- Termination Required: To be eligible for retirement benefits, an employee must terminate employment, with the “no pre-arrangement” condition described above.
- Perform No Work: To be eligible for retirement benefits, an employee must perform no work for an employer in the same Retirement System for the statutory period:
- One month after retirement for LGERS,
- Six months for TSERS.
The type of work that is performed typically does not matter in this situation. It could be part-time or full-time, temporary, or permanent, W-2 (on payroll) or 1099 (contracted). It still has the potential to invalidate the employee’s entire retirement, even if it is discovered after the fact.
Often employers find themselves in the position of sharing information to help their employees plan for retirement. We urge you to understand these requirements about retirement eligibility and, if there are any questions, direct your employees to counselors on the Retirement System staff.
The four-year average final compensation (“AFC”) threshold for potential contribution-based benefit cap (“pension spiking”) situations will be increasing from $116,366.68 per year (for retirements effective in 2022) to $126,956.05 per year (for retirements effective in 2023). This is a statutorily required increase due to inflation. If a retiree’s AFC is less than the threshold, the pension spiking provisions do not apply. If the retiree’s AFC is at least equal to the threshold, the pension spiking provisions may apply, depending on other details.
In addition, each month the Retirement Systems Division sends employers a report listing employees for whom it is estimated that the pension spiking provisions may apply if they retire in the next year. This report uses a salary-based cutoff (currently $100,000 per year), so that employees do not appear on the list if their salary is below the cutoff. Effective in or around December 2022, our office will be updating the salary-based cutoff to $115,000 per year. The overall effect on the monthly reports will be that some employees will drop off the list or will not appear on the list when they otherwise would have. For some employers, this change may have no effect on who appears on the list.
Retirees and benefit recipients can now opt-in to Go Paperless for year-end tax documents. Eligible members will see an alert when logged in to ORBIT with a link to update their delivery preference.
Why Go Paperless and select e-Delivery?
- View tax documents quickly and easily
- Convenient access 24/7
- Get email notifications when your documents are ready to view
- More secure than regular U.S. Mail
- Sustainability! Go Paperless = Go Green
The Internal Revenue Service (IRS) recently announced increases to the amount individuals can contribute to their defined contribution plans in 2023. Highlights include:
- For 2023, the standard contribution limit for the NC 401(k) Plan and NC 457 Plans (the Plans) is $22,500, up from $20,500.
- The catch-up contribution limit for each Plan (for those who are 50+ years of age by December 31, 2023) is $7,500. Therefore, participants in the NC 401(k) Plan and NC 457 Plan who are 50 and older can contribute up to $30,000 in each Plan, starting in 2023.
- The increase in the standard contribution limit for the NC 457 Plan also means the special catch-up contribution limit increases to $22,500 for employees in the NC 457 Plan who are within three years of their normal retirement age. Therefore, eligible employees can contribute up to $45,000.
Full details around the new contribution limits for 2023 can be found here on the IRS website. If you have specific questions about implementing these contribution increases for your employees, please reach out to the NC Plans Service Team by calling 866 NCPlans (866-627-5267), or by email at NCPlans@empower.com. You can also reach out to your dedicated Empower Retirement Education Counselor; click here to find your counselor and their contact information.
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