H.B. 160
GENERAL ASSEMBLY OF NORTH CAROLINA
Feb 25, 2021
SESSION 2021 HOUSE PRINCIPAL CLERK
H D
HOUSE BILL DRH40117-MGp-17B
Short Title: Retirement Service Purchase Rewrite Part II.-AB (Public)
Sponsors: Representatives McNeill and C. Smith (Primary Sponsors).
Referred to:
1 A BILL TO BE ENTITLED
2 AN ACT MAKING TECHNICAL, CLARIFYING, AND ADMINISTRATIVE CHANGES TO
3 LAWS RELATING TO CREDITABLE SERVICE PURCHASES UNDER THE
4 TEACHERS' AND STATE EMPLOYEES' RETIREMENT SYSTEM, THE LOCAL
5 GOVERNMENTAL EMPLOYEES' RETIREMENT SYSTEM, AND THE
6 CONSOLIDATED JUDICIAL RETIREMENT SYSTEM.
7 The General Assembly of North Carolina enacts:
8
9 PART I. CHANGES RELATED TO CREDITABLE SERVICE PURCHASES UNDER
10 THE TEACHERS' AND STATE EMPLOYEES' RETIREMENT SYSTEM
11 SECTION 1.1. Subdivision (f)(7) and subsections (j1), (k1), (l2), (p), (p2), (r), (s),
12 (w), (z), (aa), (bb1), (cc), and (hh) of G.S. 135-4 are recodified as subdivisions (1), (2), (4)
13 through (13), and (15), respectively, of G.S. 135-4.5(b), and read as rewritten:
14 "§ 135-4.5. Creditable service purchases.
15 (a) Notwithstanding any other provision of this Chapter to the contrary, any member who
16 meets the eligibility requirements specified in subsection (b) of this section may purchase
17 creditable service authorized under subsection (b) of this section by paying a lump sum amount
18 to the annuity savings fund equal to the full liability increase due to the additional service credits
19 on the basis of the assumptions used for the purposes of the actuarial valuation of the liabilities
20 of the Retirement System, except for the following assumptions specific to this calculation: (i)
21 the allowance shall be assumed to commence at the earliest age at which the member could retire
22 on an unreduced retirement allowance and (ii) assumed annual postretirement allowance
23 increases as set by the Board of Trustees upon the advice of the consulting actuary. The
24 calculation of the amount payable shall also include an administrative fee to be set by the Board.
25 Subject to the requirements of subsection (b), an employer may pay all or part of the cost of a
26 service purchase of a member in service. To the extent that the purchase is paid by the employer,
27 the cost paid by the employer shall be credited to the pension accumulation fund. To the extent
28 that the purchase is paid by the member, the cost paid by the member shall be credited to the
29 member's annuity savings account. In the event of a conflict between the provisions of this
30 subsection and the provisions of subsection (b) of this section, the provisions of subsection (b)
31 of this section control.
32 (b) The following purchases of creditable service are authorized under this section:
33 (1) Purchase of Armed Service Credit. – Notwithstanding any other provision of
34 this Chapter, any member and any retired member as herein described may
35 purchase creditable service in the Armed Forces of the United States, not
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 General Assembly Of North Carolina Session 2021
1 otherwise allowed, by paying a total lump sum payment determined as
2 follows:
3 a. For members who completed 10 years of membership service, and
4 retired members who completed 10 years of membership service prior
5 to retirement, whose membership began on or prior to July 1, 1981,
6 and who make this purchase within three years after first becoming
7 eligible, the cost shall be an amount equal to the monthly
8 compensation the member earned when the member first entered
9 membership service times the employee contribution rate at that time
10 times the months of service to be purchased, multiplied by a factor
11 equivalent to the investment return assumptions determined by the
12 Board of Trustees, compounded annually, from the initial year of
13 membership to the year of payment so as to equal one-half of the cost
14 of allowing this service, plus an administrative fee to be set by the
15 Board of Trustees.
16 b. For members who complete five years of membership service, and
17 retired members who complete five years of membership service prior
18 to retirement, and eligible members and retired members covered by
19 paragraph a. of this subdivision, whose membership began on or
20 before July 1, 1981, but who did not or do not make this purchase
21 within three years after first becoming eligible, the cost shall be an
22 amount equal to the full liability of the service credits calculated on
23 the basis of the assumptions used for the purposes of the actuarial
24 valuation of the System's liabilities and shall take into account the
25 retirement allowance arising on account of the additional service
26 credits commencing at the earliest age at which the member could
27 retire on an unreduced allowance, as determined by the Board of
28 Trustees upon the advice of the consulting actuary, plus an
29 administrative fee to be set by the Board of Trustees. Notwithstanding
30 the foregoing provisions of this subsection that provide for the
31 purchase of service credits, the term "full liability" includes assumed
32 post-retirement allowance increases, as determined by the Board of
33 Trustees, from the earliest age at which a member could retire on an
34 unreduced service retirement allowance.as provided in subsection (a)
35 of this section.
36 Creditable service allowed under this subdivision shall be only for the
37 initial period of "active duty", as defined in 38 U.S. Code Section 101(21), in
38 the Armed Forces of the United States up to the date the member was first
39 eligible to be separated and released and for subsequent periods of "active
40 duty", as defined in 38 U.S. Code Section 101(21), as required by the Armed
41 Forces of the United States up to the date of first eligibility for separation or
42 release, but shall not include periods of active duty in the Armed Forces of the
43 United States creditable in any other retirement system except the National
44 Guard or any reserve component of the Armed Forces of the United States,
45 and shall not include periods of "active duty for training", as defined in 38
46 U.S. Code Section 101(22), or periods of "inactive duty training", as defined
47 in 38 U.S. Code Section 101(23), rendered in any reserve component of the
48 Armed Forces of the United States. Provided, creditable service may be
49 allowed only for active duty in the Armed Forces of the United States of a
50 member that resulted in a general or honorable discharge from duty. The
51 member shall submit satisfactory evidence of the service claimed. For
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1 purposes of this subsection, subdivision, membership service may include any
2 membership or prior service credits transferred to this Retirement System
3 pursuant to G.S. 135-18.1.
4 (2) Any Purchase of General Assembly Service by Members. – Prior to January
5 1, 2023, any member may purchase creditable service for service as a member
6 of the General Assembly not otherwise creditable under this section, provided
7 the service is not credited in the Legislative Retirement Fund nor the
8 Legislative Retirement System, and further provided the member pays a lump
9 sum amount equal to the full cost of the additional service credits calculated
10 on the basis of the assumptions used for the purposes of the actuarial valuation
11 of the System's liabilities, taking into account the additional retirement
12 allowance arising on account of the additional service credits commencing at
13 the earliest age at which a member could retire on an unreduced retirement
14 allowance as determined by the Board of Trustees upon the advice of the
15 consulting actuary, plus an administrative fee to be set by the Board of
16 Trustees. Notwithstanding the foregoing provisions of this subsection that
17 provide for the purchase of service credits, the terms "full cost", "full
18 liability", and "full actuarial cost" include assumed annual post-retirement
19 allowance increases, as determined by the Board of Trustees, from the earliest
20 age at which a member could retire on an unreduced service
21 allowance.System.
22 (3) On and after January 1, 2023, any member in service with five or more years
23 of membership service may purchase creditable service for service as a
24 member of the General Assembly not otherwise creditable under this section,
25 provided that the service is not credited in the Legislative Retirement Fund or
26 the Legislative Retirement System. The amount of creditable service
27 purchased under this subdivision may not exceed a total of five years.
28 (4) North Carolina Withdrawn Service Purchased On and After January 1, 2022.
29 – Notwithstanding any other provision of this Chapter to the contrary, on and
30 after January 1, 2022, any member who withdrew his or her contributions in
31 accordance with the provisions of G.S. 127-27(f) or G.S. 135-5(f) or the rules
32 and regulations of the Law Enforcement Officers' Retirement System, and
33 who subsequently returns to service and completes five years of membership
34 service upon that return, while in service may purchase an amount of
35 creditable service totaling the amount of the membership service associated
36 with the withdrawn contributions, provided that the total of the creditable
37 service purchased under this subsection subdivision may not exceed five
38 years. The member shall purchase this service by paying a lump sum amount
39 to the Annuity Savings Fund equal to the full liability increase due to the
40 additional service credits on the basis of the assumptions used for the purposes
41 of the actuarial valuation of the liabilities of the Retirement System, except
42 for the following assumptions specific to this calculation: (i) the allowance
43 shall be assumed to commence at the earliest age at which the member could
44 retire on an unreduced retirement allowance and (ii) assumed annual
45 postretirement allowance increases as set by the Board of Trustees upon the
46 advice of the consulting actuary. The calculation of the amount payable shall
47 also include an administrative fee to be set by the Board.
48 Subject to the requirements of this subsection, an employer may pay all or
49 part of the cost of a service purchase of a member in service. To the extent
50 that the purchase is paid by the employer, the cost paid by the employer shall
51 be credited to the pension accumulation fund. To the extent that the purchase
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1 is paid by the member, the cost paid by the member shall be credited to the
2 member's annuity savings account.
3 (5) Previous Federal, State, or Local Government Service. – Notwithstanding any
4 provision of this Chapter to the contrary, on and after January 1, 2021, any
5 member in service with five or more years of membership service may
6 purchase creditable service previously rendered to the federal government or
7 to any state, territory, or other governmental subdivision of the United States
8 other than this State by paying a total lump sum payment. The amount of
9 creditable service purchased under this subsection subdivision may not exceed
10 a total of five years. The member shall purchase this service by paying a lump
11 sum amount to the Annuity Savings Fund equal to the full liability increase
12 due to the additional service credits on the basis of the assumptions used for
13 the purposes of the actuarial valuation of the liabilities of the Retirement
14 System, except for the following assumptions specific to this calculation: (i)
15 the allowance shall be assumed to commence at the earliest age at which the
16 member could retire on an unreduced retirement allowance and (ii) assumed
17 annual postretirement allowance increases as set by the Board of Trustees
18 upon the advice of the consulting actuary. The calculation of the amount
19 payable shall also include an administrative fee to be set by the Board.
20 Creditable service under this subsection subdivision shall be allowed only
21 at the rate of one year of out-of-state service for each year of membership
22 service in this State, with a maximum allowable of five years of out-of-state
23 service. Such service is limited to full-time service that would be allowable
24 under the laws governing this Retirement System. Credit will be allowed only
25 if no benefit is allowable in another public retirement system as a result of the
26 service.
27 Subject to the requirements of this subsection, an employer may pay all or
28 part of the cost of a service purchase of a member in service. To the extent
29 that the purchase is paid by the employer, the cost paid by the employer shall
30 be credited to the pension accumulation fund. To the extent that the purchase
31 is paid by the member, the cost paid by the member shall be credited to the
32 member's annuity savings account.
33 (6) Credit for prior temporary Prior Temporary State employment. –
34 Notwithstanding any other provision of this Chapter, on or before December
35 31, 2021, a member may purchase service credit for temporary State
36 employment upon completion of 10 years of membership service and subject
37 to the condition that the member had been classified as a temporary employee
38 for more than three years. Each employer shall certify to the Board of Trustees
39 that an employee is eligible to purchase this service credit prior to the member
40 making payment. Payment for the service credit shall be in a single lump sum
41 based upon the amount the member would have contributed if he the member
42 had been properly classified as a permanent employee and been a member of
43 this retirement system.Retirement System.
44 Notwithstanding any provision of this subdivision or any other provision
45 of this Article to the contrary, any inchoate or accrued rights of such a member
46 to purchase creditable service that existed prior to December 31, 2021, may
47 not be diminished and may be purchased as creditable service with this
48 Retirement System under the same conditions that would have otherwise
49 applied.
50 (7) Part-Time Service Credit. – Notwithstanding any other provision of this
51 Chapter to the contrary, any member in service with five or more years of
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1 membership service may purchase service previously rendered as a part-time
2 teacher or employee of an employer, as defined in G.S. 135-1(11) or
3 G.S. 128-21(11), except the fol