Enacts new GS 135-5(a3) and GS 128-27(a3), instituting an anti-pension-spiking contribution-based benefit-cap. This provision requires the Boards of Trustees of  state and local systems to establish a contribution-based benefit cap. The cap will be established for employees hired on or after Janaury 1, 2015, with average final compensation of more than $100,000.

The cap will be established every five years based on findings from the actuarial experience study and would cap no more than 0.75 percent of members. The minimum average final compensation necessary for a retirement allowance to be subject to the cap will be increased on January 1 of each year. Any increase will be based on the difference between the December Consumer Price Index in the year prior to retirement and the December Consumer Price Index for the year most recently ended. Exempts those who were members before January 1, 2015, or those that have not earned five years of membership service in the system after January 1, 2015, from the cap. 

Enacts new subsections GS 135-4(jj) and 128-26(y), providing  for a benefit cap purchase provision, where after a member has been notified that their retirement allowance has been capped the system must notify the member and employer of the total additional amount that would need to be contributed in order to make the member not subject to the benefit cap. Sets out formula for determining that additional amount. Member has 90 days from notification of the additional amount or 90 days after the effective date of retirement, whichever is later, to submit a lump-sum payment. Provides that employers are not preempted from contributing or paying this amount.

Enacts new subsections GS 135-8(f)(2) and 128-30(g)(2), requiring employers to make the lump-sum payment necessary to restore the member's retirement allowance to the pre-cap amount and pay for the impact of pension spiking for members who retire on or after January 1, 2015. Payment is not required by the employer for a retiree who became a member on or after January 1, 2015, and earned at least five years of membership service after that date.

Amends GS 135-5(f), 120-4.25, and 135-62(a), allowing state and local government employees who leave employment before achieving five yeas of service to receive their retirement contributions with accumulated interest at the current approved rate (currently, employees only receive interest on their contributions after five years of service with employees who were involuntarily terminated to receive interest before five years).  

All of the above effective January 1, 2015.

Amends various provisions of GS Chapter 135, concerning the retirement system for teachers and state employees, and the Judicial Retirement System, specifically GS 135-3(8), 135-5(a), 135-5(b19), 135-5(m), 135-57, and 135-106(b), deleting language that previously required a 10-year vesting period for those that became members after August 1, 2011, and returning to a five-year vesting period for all members.

Repeals GS 135-5(a2), 135-5(b20), and 135-5(m3), all subsections dealing with retirement benefits specific to those that became members after August 1, 2011.

Amends GS 143-166.41, making conforming changes to the law enforcement officer special separation allowance, reflecting the reversion to a five-year vesting period for members hired on or after August 1, 2011.