Overview of H.4967 As Passed by S.C. General Assembly 2012

Introduction to H Passed by General Assembly on June 21, 2012 Must be signed by Governor before it becomes law Most of the provisions are effective either July 1, 2012, or January 2, The disability provisions are effective January 1, Creates a Class Three tier of membership in SCRS and PORS –Class Three members are those whose membership began on or after July 1, 2012

Employee Contributions SCRS & PORS Class Two and Three Members –7.0 percent effective July 1, 2012 –7.5 percent effective July 1, 2013 –8.0 percent effective July 1, 2014

Employer Contributions For SCRS Members –10.6 percent effective July 1, 2012 –10.6 percent effective July 1, 2013 –10.9 percent effective July 1, 2014 For PORS Members –12.3 percent effective July 1, 2012 –12.5 percent effective July 1, 2013 –13.0 percent effective July 1, 2014

Contribution Rates If additional contribution increases are required, both employee and employer contribution rates are increased to maintain a 2.90 differential (SCRS) or 5.0 differential (PORS) between the rates If contribution increases are required before the 2.90 differential (SCRS) or 5.0 differential (PORS) is reached, the increase will maintain whatever differential is in place at the time No decrease in contribution rates may be made until the system is at least 90 percent funded

Benefit Adjustments Effective July 1, 2012 For SCRS and PORS Members: –Each July 1, eligible retirees should receive a benefit adjustment, formerly referred to as cost- of-living adjustment or COLA, of 1 percent of their annual annuity up to a maximum of $500

SCRS Retirement Eligibility Effective July 1, 2012 Class Two Members: –28 years of service on the date of retirement, five years of which must be earned; or –Age 60 or older on the date of retirement with five years of earned service (5% reduction for each year member retires before age 65). Class Three Members: –Meet rule of 90 requirement. This means that your age and years of service must add up to 90. For example, a member who is 56 years old and has at least 34 years of service, eight years of which must be earned, would be eligible for normal retirement ( = 90). –Age 60 or older on the date of retirement with eight years of earned service (5% reduction for each year member retires before age 65).

PORS Retirement Eligibility Effective July 1, 2012 Class Two Members: –25 years of service on the date of retirement, five years of which must be earned; or –Age 55 or older on the date of retirement with five years of earned service. Class Three Members: –27 years of service on the date of retirement, eight years of which must be earned; or –Age 55 or older on the date of retirement with eight years of earned service.

Average Final Compensation (AFC) Effective July 1, 2012 SCRS and PORS Class Two Members: –Three highest years of earnable compensation SCRS and PORS Class Three Members: –Five highest years of earnable compensation SCRS Class Two and Three Members: –After December 30, 2012, earnable compensation does not include pay for overtime not mandated by the employer

Unused Leave at Retirement Effective July 1, 2012 Class Two members: –An amount up to and including 45 days’ pay for unused annual leave from your last termination payment included in AFC –Service credit for up to 90 days of unused sick leave from last employer Class Three members: –Unused leave is not included in AFC –No service credit for unused sick leave

TERI Program Effective July 1, 2012 Not available to Class Three members Closes effective June 30, 2018, for Class Two members Program to be phased out –Members who enter the TERI program after July 1, 2013, will not be eligible to participate in TERI for the full five years. Instead, their TERI participation will end on June 30, 2018, regardless of when they entered the program.

TERI Program Effective July 1, 2012 Examples of phasing out TERI program: –A member who begins his TERI participation on July 1, 2013, will be eligible to participate in the TERI program for five full years before the program is closed on June 30, –A member who enters the TERI program on July 1, 2014, will only be able to participate in the program for four years before the program is closed. –A member who decides to enter the TERI program on June 1, 2018, will be eligible to participate for 30 days before the program is closed on June 30, 2018.

GARS Effective July 1, 2012 Increases member contribution rate from 10 percent to 11 percent Closes system to newly elected officials –Newly elected officials will participate in either SCRS or State ORP Service purchase costs are same as SCRS and PORS (actuarially neutral)

Service Purchase Cost Effective January 2, 2013 For SCRS and PORS Members –Actuarially neutral cost based on member’s age, service credit, and current or career highest fiscal year salary –Cost would not be less than 35 percent per year for nonqualified service –Cost would not be less than 16 percent per year for all other types of service –Would not apply to re-establishment of withdrawn service, transfers or supplementals

Return to Work Provisions Effective January 2, 2013 SCRS & PORS Class Two and Three members: –$10,000 per year earnings limitation Earnings limitation does not apply to those members who retire after age 62 (SCRS) or age 57 (PORS) –30 day break in service requirement

Public Employee Benefit Authority (PEBA) Effective July 1, member board, four of whom are current employees or retirees PEBA will administer day-to-day operations of both the Retirement Systems and Employee Insurance Program (EIP) The Retirement Systems and EIP will be separate divisions within PEBA

Public Employee Benefit Authority (PEBA) Effective July 1, 2012 PEBA members receive $12,000 per year Initial executive director of PEBA will be appointed jointly by the Governor, Chairman of House Ways and Means Committee and Chairman of Senate Finance Committee PEBA will replace the Deferred Compensation Commission PEBA will make recommendations of any required policy changes to the Budget and Control Board. The Board can only vote yes or no on recommendations. The Board cannot create their own policy.

Disability Provisions Effective January 1, 2014 SCRS: –disability retirement eligibility based upon approval for Social Security disability benefits PORS: –initial approval for disability retirement benefits based upon current, job-specific standard; –continued receipt of disability retirement benefits after three years based upon approval for Social Security disability benefits

Other Provisions Effective July 1, 2012 Inactive accounts will no longer accrue interest Provides $20,000 annual salary for Investment Commission commissioners and alters qualifications to serve on Commission Current magistrates who retire, then return to work as a magistrate do not have to meet the new qualifications for magistrates Clarifies that if a member dies prior to retirement, but was eligible to retire at the time of death, the member’s beneficiary may elect a retirement allowance in lieu of a lump-sum return of contributions