Updated June 21,2012
After nearly a year of intense debate and negotiations, the General Assembly has finally passed legislation that will overhaul the South Carolina Retirement Systems. To be clear, we did not support or agree to everything in the final retirement product. There were a few items that were simply unacceptable and we voiced our disapproval. Ultimately, the House and Senate were forced to compromise and generate a product that restored the system’s health and long-term stability. At the end of this debate, we consider ourselves to be fortunate that a bill has passed that we can live with considering the recent assault on government pensions across the country.
Except for a few items, the final product strongly resembles the original Senate plan. Here is a quick overview on the retirement changes:
- A cost of living adjustment of 1% up to $500 will be guaranteed each year for retirees.
- Individuals hired in the PORS system after June 30, 2012 will have to complete 27 years of service before being eligible to retire with full benefits. The Average Final Compensation (AFC) for new hires will be based on the individual’s highest 5 years of salary instead of the highest 3 years. Furthermore, new hires will not be able to include annual leave or sick leave in their AFC calculation.
- PORS members hired before July 1, 2012 will continue to be able to retire after 25 years of service, with a 3 year AFC, and including any unused annual leave and sick leave in their AFC.
- Effective January 2, 2013, PORS members who wish to retire and return to work will have to wait 30 days (instead of 15) before returning to work. They will also be subject to a $10,000 salary cap unless the PORS member works straight through to age 57, is appointed to his/her position by the Senate, is elected to his position, or retired before January 2, 2013.
- The cost to purchase service time will become actuarially neutral starting January 2, 2013.
- There will be slight increases in both the employee and employer contributions over the next few years.
PLEASE SEE THE LINK BELOW FOR A MORE COMPREHENSIVE LIST OF CHANGES.
One change from the original Senate plan revolves around the ability to draw disability retirement through the state. Under the House plan, PORS members who are disabled while on the job can still apply for and receive disability retirement through the state. However, in order to continue receiving disability from the state, the member will have to be approved for disability benefits by the Social Security Administration within thirty days of the third anniversary of receiving state disability benefits. This is an issue that we could not agree to. Consequently, the House and Senate have agreed to implement this change on January 1, 2014, which will allow time for a Study Committee to be formed and recommend a change that will please all parties involved. Both the House and Senate have pledged to work with us to resolve this issue in the next legislative session. Once an agreement is reached, the new law can replace the disability language set forth in this bill.
The legislative process is not a pretty one. It is a process that is entirely dependent upon compromise. Very rarely does anyone walk away with a product they are completely happy with. With that being said, we hope you know that your concerns were voiced and argued extensively. On some items, your concerns were heard and addressed. On others, they were not. In the end, we have a final product that leaves current employees with the ability to retire with 25 years of service. They also get to keep a 3 year AFC calculation, which will also include any unused Annual Leave and Sick Leave credit. Best of all, we now have a healthy retirement system that will be able to provide for our retirees, current employees, and many generations to come.
We will continue to monitor the legislation with regard to disability and any other issue that may arise. If you have any questions, please do not hesitate to call us at (803) 781-5913 or email us at email@example.com.
Updated Retirement Matrix