Bill Summary for S 668 (2021)

Summary date: 

May 6 2021

Bill Information:

View NCGA Bill Details2021
Senate Bill 668 (Public) Filed Wednesday, April 7, 2021
AN ACT TO AUTHORIZE THE COLLECTION OF ADDITIONAL CONTRIBUTIONS FROM EMPLOYING UNITS; TO ADDRESS RESPONSIBILITIES FOR CONTRIBUTION-BASED BENEFIT CAP LIABILITIES WHEN THE FINAL EMPLOYER OF A MEMBER IS NOT THE MEMBER'S EMPLOYER FOR AVERAGE FINAL COMPENSATION CALCULATIONS AND TO ADJUST THE FORMULA FOR REDUCED RETIREMENTS WITH CONTRIBUTION-BASED BENEFIT CAP LIABILITIES UNDER THE TEACHERS' AND STATE EMPLOYEES' RETIREMENT SYSTEM AND THE LOCAL GOVERNMENTAL EMPLOYEES' RETIREMENT SYSTEM; TO PUT A LITIGATION PAUSE IN PLACE AND ESTABLISH A WORKGROUP THAT MAY REPORT TO THE GENERAL ASSEMBLY; AND TO PROVIDE EARLY NOTIFICATION TO THE LOCAL GOVERNMENT COMMISSION 13 OF PROPOSED FINANCING ARRANGEMENTS.
Intro. by Burgin.

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Bill summary

Senate committee substitute to the 1st edition makes the following changes.

Adds the following content, organized into Parts, and amends content of the previous edition as provided. 

Part I.

Amends GS 128-30, applicable to the Local Governmental Employees' Retirement System (LGERS), and GS 135-8, applicable to the Teachers' and State Employees' Retirement System (TSERS), enacting identical provisions to require adjustment of employer contribution rates as of the beginning of the fiscal year following 90 days after the assessment of a contribution-based benefit cap liability not paid as a lump sum payment, to include an additional contribution amount equal to a rate percent that is estimated to extinguish the contribution-based benefit cap liability on an amortization schedule selected by the respective System's Board of Trustees that has been applied to unfunded liabilities in the most recent actuarial valuation, notwithstanding the Administrative Procedure Act's provisions set forth in GS Chapter 150B. Makes changes to GS 128-26(y) and GS 135-4(jj) to provide for this adjustment required of an employer contribution rate under new GS 128-30(d)(4a) and GS 135-8(f)(5) as a third option for the employer of a member who became a member of the respective System before January 1, 2015, or has not earned at least five years of membership service after January 1, 2015, to pay the required contribution-based benefit cap purchase. Deems an employer's continuing compliance with a payment option selected from the three options payment of the employer's additional contribution required by each respective subsection for purposes of GS 128-30(b)(3) and GS 135-8(f)(3).

Part II.

Places the previous content of Sections 1 and 2 of the act into new Section 2.1 of Part II and revises that content as follows. Revises the proposed changes to GS 135-5(a3), regarding the anti-pension-spiking contribution-based benefit cap, to refer to a member's average final compensation consistent with current law (was final average compensation). Changes the effective date of the provisions now organized as Section 2.1 to the date the act becomes law (was retroactively effective to January 1, 2019, and applies to members of the Teachers' and State Employees' Retirement System who retire on or after that date). Adds that the provisions of Section 2.1 expire July 1, 2022.

In addition to the content of the previous edition, as amended above, provides the following new content.

Further amends GS 128-26(y), regarding contribution-based benefit cap purchases for LGERS members. Adds that if the member's employer did not report to the System any compensation paid to the member during the period used to compute the member's average final compensation, the System is required to notify the employer(s) who reported compensation during the member's average final compensation period, specifying that employer's share of the amount that would have had to have been purchased to increase the member's benefit to the pre-cap level, allocated proportionally to each employer based on the total amount of compensation to the member that each employer reported during the period used to compute the member's average final compensation. Specifies that a former employer is not prohibited from paying all or part of the cost of the amount necessary to restore the member's retirement allowance to the pre-cap amount, as provided for employers. Amends the provisions regarding payment of the additional amount required by the employer selecting one of the three payment options to include former employers. 

Amends GS 128-27(a3), regarding the determination of a member's retirement allowance who retires on or after January 1, 2015, specifying that the calculation provided determines the retirement allowance to which the member would be entitled but for the adjustment now required as follows. Requires the applicable percentage of the member's average final compensation to be multiplied by the number of years of membership service, rather than the number of years of creditable service, and include the effect of any percentage reduction that applies to the member's service retirement allowance by virtue of the member's age or amount of creditable service as of the retirement date. Prohibits adjusting the amount for an optional allowance elected under subsection (g). Regarding members who became members before January 1, 2015, or who had not earned at least five years of membership service in the System after January 1, 2015, requires that if the member's last employer did not report to the System any compensation paid to the member during the period used to compute the member's average final compensation, the member's employer(s) who reported compensation to the member during such period must make an additional contribution as specified in GS 128-30(g)(2)b., as amended below, if applicable (currently limited to the member's last employer). 

Amends GS 128-30(g)(2)b., regarding the collection of employers' contributions. Provides that if the employer associated with the member's last month of membership service did not report to the retirement system any compensation paid to the member during the period used to compute the member's average final compensation, the employer is prohibited from transmitting the lump sum payment required of employers under the subdivision, and instead requires the employer(s) who reported compensation during that member's average final compensation period to transmit a lump sum payment equal to the employer's share of the total required lump sum payment, allocated proportionally to each employer based on the total amount of compensation to the member that each employer reported during such period. 

Makes identical changes to the following provisions governing TSERS as those made to LGERS, above, with changes made to cross-references comparable GS Chapter 135 statutes: GS 135-4(jj), as amended [mirroring the changes made to GS 128-26(y)], GS 135-5(a3) [mirroring the changes made to GS 128-27(a3)], and GS 135-8(f)(2)f. [mirroring the changes made to GS 128-30(g)(2)b].

Part III.

Maintains the previously proposed provision barring local boards of education from filing any legal actions against the State regarding the anti-pension spiking contribution-based benefit cap established in GS 135-5(a3), as amended, but changes the moratorium period to beginning on the date the act becomes law and ending on June 30, 2022 (was ending on June 30, 2026). Adds the following. Tolls any applicable statute of limitations from the period beginning on the effective date of this act and ending on June 30, 2022. Provides that during the one-year litigation pause, TSERS is prohibited from requesting an interception of State appropriations pursuant to GS 135-8(f)(3) or for unpaid contributions attributable to an assessment for a contribution-based benefit cap liability that occurs more than 14 months after the effective retirement date of the member. 

Eliminates the provisions of previous Section 4, which established an annual reporting requirement for the Board of Trustees of TSERS (Board), beginning January 31, 2022, and ending in 2027, to report to the NCGA regarding all legal actions filed by local boards of education, including contested cases, regarding the anti-pension spiking contribution-based benefit cap of GS 135-5(a3), as amended. 

Directs the Department of State Treasurer and the NC School Boards Association to convene a working group to review the anti-pension-spiking contribution-based benefit cap established, with findings and recommendations restricted to three specified areas, including assessing the feasibility of using informal proceedings to settle disputes with local board of education or other entities, and any other issues the working group wishes to address. Allows the working group to report to the specified NCGA committee by April 1, 2022.

Part IV.

Amends GS 143-64.17A, adding a new requirement for a local school administrative unit or community college to give the Local Government Commission 15 days' notice of its intent to issue a request for proposal for a guaranteed energy savings contract that would involve a financing agreement permitted under GS 160A-20. 

Part VI includes a severability clause.

Part VII provides a standard effective date provision.

Makes conforming changes to the act's long title. 

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