YOUR 2014 LEGISLATIVE SESSION RESOURCE
Legislation potentially undoing a court ruling last week holding that state pension authorities could not demand extra payments by school boards in Johnston, Wilkes, Union and Cabarrus counties to cover pension boosts of up to $495,000, gained approval in the House Pensions and Retirement Committee this morning. Senate Bill 117 would exempt the the Teachers and State Employees Retirement Systems from going through a rulemaking process when making changes or setting the anti-pension spiking contribution-based benefit cap.
This legislation providentially makes moot a lawsuit over a law requiring LEAs to repay a retiree's "pension spike" as the court held in its decision week that state pension authorities did not properly develop rules in response to the law. The legislation makes the exemption from rule-making retroactive to 2015, potentially removing the basis of the current lawsuit.
The bill could be heard by the House and sent back to the Senate for a concurrence vote as early as Monday.
Legislation eliminating the current defined benefit retirement system (pension plan), as well as retiree health benefits, was discussed by the Senate Pensions and Retirement Committee on Wednesday afternoon. The bill, Senate Bill 467, would make these changes effective for new hires on or after July 1, 2018, and does not impact current state employees or retirees.
The bill closes the Teachers’ and State Employees’ Retirement System (TSERS) to new hires as of July 1, 2018 and enrolls new hires in the NC 401(k) and/or NC 457 plan. The plans feature auto-enrollment, auto-resetting of contributions to a level projected to provide adequate retirement income, target-date investment including an inflation-indexed bond option, and auto-commencement of distributions in the amount of potential annuity payments. Under the legislation, the State would match up to 6% of compensation contributed by the new hires. Additionally, the bill creates a one-time option for a current TSERS member to elect out of the pension plan and into the 401(k) or NC 457 plan.
The bill also eliminates retiree health care coverage as a benefit for new hires on or after July 1, 2018. This does not impact current employees, retirees or anyone earning contributory retirement service in TSERS prior to July 1, 2018.
Bill sponsor, Sen. Andy Wells (R-Catawba), noted the legislation was necessary to address a $60 billion unfunded liability facing North Carolina due to the pension and retiree health systems (roughly $17.5 billion attributed to the pension system and $32.5 billion attributed to the retiree health fund). However, some members of the Committee questioned if the measures taken under the bill were the right approach in battling the $60 billion unfunded liability currently facing the state, noting the legislation was simply a transfer of risk from the State to the employees. Some Committee members, along with various state-employee associations, cautioned against acting too soon and urged the body to give newly elected State Treasurer Dale Folwell an opportunity to present his idea(s) on how to best address the situation. It is unclear where the Treasurer stands on the proposed legislation.
Legislation, House Bill 24, establishing a Joint Legislative Committee charged with studying options for reducing the unfunded liability of the retiree health benefit fund has already passed the House this legislative session but has not been heard in a Senate committee.
Senate Bill 467, the retirement reform bill, was for discussion only with Committee chairman and co-sponsor of the bill, Sen. Ronald Rabon (R-Harnett), noting to the Committee that he did not expect the bill as presented to the Committee to be the bill’s final form. However, the future of the bill is unclear as the bill could be voted upon by the Committee as earlyas next week, or simply rolled into the proposed Senate 2017-2019 budget which is also expected to emerge next week.
To read more about this meeting, please click here for an article written by Raleigh’s News &Observer.
Legislation granting a 2% Cost-Of-Living-Adjustment (COLA) to retirees gained approval in the House Pensions and Retirement Committee this week. House Bill 497 would appropriate $88 million dollars for the COLA to members of the Teachers' and State Employees' Retirement System, as well as the Consolidated Judicial Retirement System and Legislative Retirement System.
The bill now heads to the House Appropriations Committee. It is unclear if that Committee will take action on the bill as stand-alone legislation, or simply add the 2% COLA as part of the House's budget plan later this spring.
Adam Pridemore | NCASA – This week, the House approved legislation aimed at addressing the state’s $25.5 billion unfunded liability in North Carolina’s Retiree Health Benefit Fund. The House passed House Bill 24, which establishes a Joint House and Senate Study Committee to study the unfunded liability of the Retiree Health Benefit Fund. The legislation directs the Study Committee to examine the following options for reducing the unfunded liability of the Fund:
(1) Increasing the assets in the Retiree Health Benefit Fund through appropriation by the General Assembly.
(2) Increasing the costs of retiree benefits borne by the federal government, by means such as the automatic enrollment of Medicare-eligible retirees in
Medicare Advantage or the offering of financial incentives to early retirees to obtain insurance through the health insurance exchange created under the
Affordable Care Act.
(3) Reducing the State's future liability by transitioning the State's retiree health benefit from a defined benefit approach to a defined contribution model.
(4) Reducing the number of persons eligible for retiree benefits by increasing the service time requirements for the benefit or by eliminating the benefit for
(5) Requiring employees to contribute to the Retiree Health Benefit Fund, as they do to the Teachers' and State Employees' Retirement System.
(6) Increasing the amount that retirees pay for their health benefits by means such as increasing premiums or out-of-pocket costs.
(7) Any other proposals for reducing the unfunded liability of the Fund identifiedby the Committee.
The Committee would consist of 13 members, appointed in the following manner:
The bill requires the Committee to issue a final report of findings and recommendations, including legislation, to the 2018 Regular Session of the General Assembly upon its convening. The legislation is a recommendation from the Joint Legislative Program Evaluation Oversight Committee. Report 2015-05 is the final report on the unfunded actuarial liability for retiree health benefits