Bill Summary – FastDemocracy

H.B. 392
                           GENERAL ASSEMBLY OF NORTH CAROLINA
                                                                                               Mar 24, 2021
                                       SESSION 2021                                       HOUSE PRINCIPAL CLERK
     H                                                                                                   D
                                    HOUSE BILL DRH10166-MGp-83
     Short Title:    Ret. Svc. Purchase/Omitted Membership Service.                                (Public)
     Sponsors:       Representative Belk.
     Referred to:
                                      A BILL TO BE ENTITLED
 AN ACT TO ALLOW FOR THE PURCHASE OF CREDITABLE SERVICE IN THE
     TEACHERS' AND STATE EMPLOYEES' RETIREMENT SYSTEM AND THE LOCAL
     GOVERNMENTAL EMPLOYEES' RETIREMENT SYSTEM FOR SERVICE IN A
     PRIOR YEAR WHEN THAT SERVICE WAS ASSUMED TO BE PART-TIME BUT WAS
     ACTUALLY FULL-TIME SERVICE.
 The General Assembly of North Carolina enacts:
             SECTION 1. G.S. 135-4(v) reads as rewritten:
     "(v) Omitted Membership Service. – A member who had service as an employee as
 defined in G.S. 135-1(10) and G.S. 128-21(10) or as a teacher as defined in G.S. 135-1(25) and
 who was omitted from contributing membership through error may be allowed membership
 service, after submitting clear and convincing evidence of the error, as follows:
             (1)     Within 90 days of the omission, by the payment of employee and employer
                     contributions that would have been paid; or
             (2)     After 90 days and prior to three years of the omission, by the payment of the
                     employee and employer contributions that would have been paid plus interest
                     compounded annually at a rate equal to the greater of the average yield on the
                     pension accumulation fund for the preceding calendar year or the actuarial
                     investment rate-of-return assumption, as adopted by the Board of Trustees; or
             (3)     After three years of the omission, by the payment of an amount equal to the
                     full cost of the service credits calculated on the basis of the assumptions used
                     for the purposes of the actuarial valuation of the system's liabilities, and shall
                     take into account the additional retirement allowance arising on account of
                     such additional service credit commencing at the earliest age at which a
                     member could retire on an unreduced retirement allowance, as determined by
                     the Board of Trustees upon the advice of the consulting actuary, plus an
                     administrative fee to be set by the Board of Trustees. Notwithstanding the
                     foregoing provisions of this subdivision that provide for the purchase of
                     service credits, the terms "full cost", "full liability", and "full actuarial cost"
                     include assumed annual post-retirement allowance increases, as determined
                     by the Board of Trustees, from the earliest age at which a member could retire
                     on an unreduced service allowance.
     Nothing contained in this subsection shall prevent an employer or member from paying all
 or a part of the cost of the omitted membership service; and to the extent paid by the employer,
 the cost paid by the employer shall be credited to the pension accumulation fund; and to the
 extent paid by the member, the cost paid by the members shall be credited to the member's
                                    *DRH10166-MGp-83*
     General Assembly Of North Carolina                                                      Session 2021
 annuity savings account; provided, however, an employer does not discriminate against any
 member or group of members in his employ in paying all or any part of the cost of the omitted
 membership service. Upon request from an employee, an employer shall provide written
 notification of the total hours worked in the preceding 12 months to an employee in a position
 classified as part-time. An employer shall provide a copy of the notification to the Retirement
 Systems Division upon request. In the event that an employee was classified as part-time in error
 and was not eligible to earn membership service due to that error, and the employee has paid a
 lump sum equal to the applicable employee contributions as set forth in subdivision (2) of this
 subsection within one year after the omission, the employer shall be required to pay the applicable
 employer contributions as set forth in subdivision (2) of this subsection."
              SECTION 2. G.S. 128-26(m) reads as rewritten:
     "(m) Omitted Membership Service. – A member who had service as an employee as
 defined in G.S. 135-1(10) and G.S. 128-21(10) or as a teacher as defined in G.S. 135-1(25) and
 who was omitted from contributing membership through error may be allowed membership
 service, after submitting clear and convincing evidence of the error, as follows:
              (1)    within 90 days of the omission, by the payment of employee and employer
                     contributions that would have been paid; or
              (2)    after 90 days and prior to three years of the omission, by the payment of the
                     employee and employer contributions that would have been paid plus interest
                     compounded annually at a rate equal to the greater of the average yield on the
                     pension accumulation fund for the preceding calendar year or the actuarial
                     investment rate-of-return assumption, as adopted by the Board of Trustees; or
              (3)    after three years of the omission, by the payment of an amount equal to the
                     full cost of the service credits calculated on the basis of the assumptions used
                     for the purposes of the actuarial valuation of the System's liabilities, and shall
                     take into account the additional retirement allowance arising on account of
                     such additional service credit commencing at the earliest age at which a
                     member could retire on an unreduced retirement allowance, as determined by
                     the Board of Trustees upon the advice of the consulting actuary, plus an
                     administrative fee to be set by the Board of Trustees. Notwithstanding the
                     foregoing provisions of this subdivision that provide for the purchase of
                     service credits, the terms "full cost", "full liability", and "full actuarial cost"
                     include assumed annual post-retirement allowance increases, as determined
                     by the Board of Trustees, from the earliest age at which a member could retire
                     on an unreduced service allowance.
     Nothing contained in this subsection shall prevent an employer or member from paying all
 or a part of the cost of the omitted membership service; and to the extent paid by the employer,
 the cost paid by the employer shall be credited to the pension accumulation fund; and to the
 extent paid by the member, the cost paid by the members shall be credited to the member's
 annuity savings account; provided, however, an employer does not discriminate against any
 member or group of members in his employ in paying all or any part of the cost of the omitted
 membership service. In the event an employer pays all or a part of the full actuarial cost as
 determined in subdivision (3) of this subsection, the employer may, at its option, pay such amount
 either in a lump sum or by increasing its "accrued liability contribution" for the remainder of its
 accrued liability period. In the event an employer has satisfied its accrued liability contribution,
 the employer may amortize its portion of the full actuarial cost over a period not to exceed ten
 years. The expense of making an actuarial valuation to determine the accrued liability
 contribution or the additional accrued liability contribution, required to amortize the portion of
 the full actuarial cost paid by the employer, shall be paid by the employer in a lump sum at the
 time of the actuarial valuation. Upon request from an employee, an employer shall provide
 written notification of the total hours worked in the preceding 12 months to an employee in a
     Page 2                                                                          DRH10166-MGp-83
    General Assembly Of North Carolina                                              Session 2021
 position classified as part-time. An employer shall provide a copy of the notification to the
 Retirement Systems Division upon request. In the event that an employee was classified as
 part-time in error and was not eligible to earn membership service due to that error, and the
 employee has paid a lump sum equal to the applicable employee contributions as set forth in
 subdivision (2) of this subsection within one year after the omission, the employer shall be
 required to pay the applicable employer contributions as set forth in subdivision (2) of this
 subsection."
             SECTION 3. This act becomes effective January 1, 2022, and applies to the purchase
 of service for work performed on or after January 1, 2021.
    DRH10166-MGp-83                                                                        Page 3
Statutes affected: 
Filed: 135-4, 128-26
Edition 1: 135-4, 128-26