North Carolina
Retirement Benefits
North Carolina has four retirement plans to cover public employees in the state: Teachers and State Employees, State Law Enforcement Officers, Local Government Employees and Local Law Enforcement Officers. According to the North Carolina Department of State Treasurer, in 2006, 191,054 residents of North Carolina received a total of $3.18 billion in pension benefits from state and local pension plans, with $2.97 billion paid from plans within the state and the remainder originating from plans in other states.
Who Is Eligible?
Teachers and state employees represent the largest retirement group covered by state benefits. All permanent, full-time public Pre K-12 education employees, full-time employees of a community college or state employees are considered members of this retirement plan. Other employee groups that are covered in other plans are employees of a participating local government who work at least 1,000 hours a year, legislators and judges who have been sworn into office. Firefighters and rescue workers who are in a department rated by the Fire Insurance Rating Bureau and certified by the Department of Insurance as not less than a Class "9S", meet the minimum equipment requirements, a roster annually with the state firemen's association and hold at least four hours of dress a month.
How Its Funded
The benefits in the North Carolina retirement system are paid for by contributions from the state, personal contributions and investment returns. Most members of the state retirement system have 6 percent of their paychecks deducted pre-tax (legislators have 7 percent). The state then makes a contribution based on actuarial contributions (8.75 percent in 2010). The money then grows in an investment account. Firefighters and rescue workers are members of a pension program rather than a retirement plan. Members of this plan pay $10 a month for 20 years up to a maximum of $2,400 to receive a monthly benefits check.
Tax-Deferred Savings
Member contributions to their state retirement accounts are made pre-tax. This lowers the member's taxable income and the amount of income tax that is owed on the income. This means that you'll have greater take-home pay during the year. You will need to pay taxes on your retirement when you begin collecting benefits.
Becoming Vested
You need to work a minimum amount to become fully vested, or eligible for your full retirement benefits. State employees, law enforcement officers, local government employees and teachers must work at least 5 years. Legislators become fully vested at age 65 with 5 years of creditable service and judges become fully vested at age 65 with 24 years of creditable service. Being vested means you are eligible for lifetime monthly benefits at retirement.
Benefit Calculations
Retirement benefits are calculated based on a percentage of your average final compensation multiplied by your creditable service. The percentage can vary from plan to plan. The average final compensation is the average annual salary of your four highest-earning years. This may include unused vacation leave or final payment compensation. Creditable service is the total amount of time that you paid into the system. Special rules apply to factor in unused sick leave, military service or out-of-state related government work.
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