Vesting
Retirement benefits are fully vested after you complete five years of membership service. If you leave State employment before completing five years of creditable service, you may:
- request a refund of only your contributions, with such amount subject to any income taxes and early withdrawal penalties, unless you request a trustee-to-trustee transfer (direct rollover) of your refund to an IRA or another qualified retirement plan that will accept your transfer, or
- leave your contributions in LEORS in anticipation of a return to State service in the future.
Upon receipt of a refund of contributions, you waive any rights to the employer contributions or any other benefit from TSERS and the North Carolina Disability Income Plan.
A vested employee who terminates employment may elect to leave his or her contributions with TSERS and receive a retirement benefit starting at age 50 with at least 20 years of creditable service or, otherwise, at age 60.
LEORS - Death Benefit
If you die while still in active service (while being paid salary) after one year as a contributing member, your beneficiary will receive a single lump sum payment. The payment equals the highest 12 months of salary in a row during the 24 months before you die, but no less than $25,000 and no more than $50,000. This benefit is also paid if you die within 180 days of the last day for which you were paid salary. It is in addition to any other benefits to which you may be entitled.
LEORS - Survivor Benefit
If you die while in active service, your beneficiary will receive a refund of contributions and interest provided that you meet one of the following conditions:
- You have completed 20 or more years of creditable service (not including credit for unused sick leave) regardless of age,
- Reaching age 50 with 15 years of creditable service as an officer, or
- Reaching age 55 with five years of creditable service as an officer
LEORS - Designating a Beneficiary
There are two beneficiary designations with TSERS:
- One to receive the refund of your contributions plus interest in the event of your death
- One to receive the death benefit
You can name the same beneficiaries for both or you can name different beneficiaries.
If you name more than one principal beneficiary, the refund of your contributions plus interest will be divided between the beneficiaries listed for a lump sum payment; there will be no option for lifetime payments. If you name more than one principal beneficiary, you cannot name a contingent beneficiary.
Additional Benefits
Eligibility to LEORS provides automatic membership into the Supplemental Retirement Income Plan (401k). The University pays an amount equal to 5 percent of the employee's salary into an account in the Plan, and the employee may elect to make additional contributions on a tax-deferred basis. Employees decide how the contributions in the account are invested and also how they want to receive the contributions when they separate from employment.
The plan also provides
- A death benefit after one year of contributing membership service and two additional line of duty death benefits
- Certain temporary disability and death benefits to qualified active and retired participants provided by the Separate Insurance Benefits Plan
- Participation in the Disability Income Plan of North Carolina
An employee who retires under a service retirement under this Plan may also be eligible to receive a Special Separation Allowance.
Retirement Benefits
TSERS is a Defined Benefit Plan, which means retirement benefits are based on salary, years of service and a retirement factor. The formula for TSERS is:
- Average salary based on the four highest consecutive years of earnings
- Multiplied by a Retirement Factor of 1.82 percent (set by state statute)
- Multiplied by your creditable years of service
LEORS- Unreduced & Reduced Benefits
You qualify for full (or unreduced) retirement benefits at:
- Age 55 and complete five years of creditable service as an officer or
- 30 years of service, at any age
You qualify for a reduced retirement benefit at:
- Age 50 and complete 15 years of creditable service as an officer
For a detailed discussion of full (or unreduced) and reduced retirement benefits, please see the State Law Enforcement Officer's Handbook.
Retiree Health Insurance
When you retire and begin receiving benefits from TSERS, you may also eligible to enroll in the State Health Plan with the cost determined by when your employment started with the State.
If you were first hired prior to October 1, 2006, and retire with five or more years of State System membership service, the State will pay either all or most of the cost if you select one of the Preferred Provider Organization (PPO) plans, depending on the plan chosen. If you were first hired on or after October 1, 2006, in order to receive individual coverage at no cost, you must retire with 20 or more years of retirement service credit; if you have 10 but less than 20 years of retirement service credit, you will have to pay 50 percent of the cost for your coverage, and with five but less than 10 years, you will have to pay the full cost for your coverage. In all cases, the full cost of dependent coverage, if elected, must be paid by you.
As a retiree, when you or covered dependents become eligible for Medicare, both Parts A (Hospital) and B (Medical) must be elected in order to maintain the same level of coverage provided before retirement.
Re-employment After Retirement
LEORS requires a six-month break in service during which no work is performed for any state agency. A return to work earlier than six months will revoke your retirement benefits retroactive to your retirement date and all benefits paid to you must be repaid to the Retirement System.
If you are reemployed on a part-time, interim, temporary or contractual basis, or are otherwise engaged to perform services on any basis that does not require membership in the Retirement System, your retirement payment will be stopped if your earnings during the 12-month period immediately following the effective date of retirement or during any calendar year exceed your earnings limitation, which is calculated as the greater of the following:
- $28,060, or
- 50 percent of your compensation, excluding termination payments, reported to the Retirement System during the 12 months of service preceding the effective date of your retirement.
These limits are indexed annually by TSERS.
Income Tax
Federal Tax
When you begin receiving a retirement benefit, any pre-tax contributions made by you and the University, as well as any investment earnings on these contributions, are taxed as ordinary income. If any of your contributions were made on an after-tax basis, the portion of the retirement benefit attributable to these after-tax contributions will not be taxed. (Note: LEORS employee contributions made prior to July 1, 1982, and any service purchases whenever made, are after-tax contributions.)
State Tax
The amount subject to State income tax is the same amount on which federal income tax must be paid, less an exclusion as large, in some cases, as $4,000. If the pre-tax portion of your annual retirement benefit is $4,000 or less, you will not owe any State income tax on your retirement benefits.
[Exception: If you were vested in LEORS on or before August 12, 1989, your LEORS retirement benefits, no matter what amount, are exempt from State income tax.]
