Teachers & State Employees (TSERS) Retirement Program
This program is sponsored by the State of North Carolina and governed by the Department of the State Treasurer.
TSERS is as a defined benefit plan and the benefit you receive at retirement is based on a formula. This formula considers your years and months of creditable service, your age, and your “average final compensation,” which is the average of your salary during your four highest paid consecutive years. Neither the investment experience of the plan assets nor the amount contributed by you and the University, on your behalf, directly determines the amount of the guaranteed benefit you will receive at retirement.
All permanent SHRA or EHRA full-time employees who work 30 or more hours per week will have the option to choose between TSERS or the Optional Retirement Program (ORP).
You are required to contribute 6% of your salary on a pre-tax basis (before State and Federal taxes)-no more, no less. The plan is also funded by University contributions those this money goes into the general pension fund. Contributions begin on day one of eligibility and retroactive contributions are deducted in one lump sum.
All permanent full-time employees who work 30 or more hours per week have the option to choose between TSERS or the Optional Retirement Program (ORP). Employees have 60 calendar days from their date of employment to complete the online retirement enrollment found at ConnectCarolina>Self Service>My Benfeits>Benefits Enrollment (on left)>Mandatory Retirement Plans. If an employee does not complete the online enrollment for a mandatory retirement plan within 60 calendar days of their hire date/eligibility date, they will automatically be defaulted into TSERS. Once enrolled or defaulted into a retirement plan, this is irrevocable.
If you enroll in TSERS, you will receive notification of your enrollment directly from the North Carolina Retirement System. This notification will include instructions for completing your beneficiary designations through the Retirement System’s online portal ORBIT. If you do not make a beneficiary designation, the Retirement System will default your beneficiary to your estate.
Retirement benefits in TSERS 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 TSERS 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. Membership service credit is also forfeited.
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.
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.
If you die while in active service, your beneficiary will receive a refund of contributions and interest. If you have 20 or more years of service (or you are at least age 60 with at least 5 years of service) at the time of your death, your beneficiary can choose between receiving a refund of contributions plus interest or receiving a life-time benefit.
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 48 highest consecutive months of earnings
- Multiplied by a Retirement Factor of 1.82% (set by state statute)
- Multiplied by your creditable years of service
Unreduced & Reduced Benefits
You qualify for full (or unreduced) retirement benefits with:
- 30 years of service, or
- 25 years of service and age 60, or
- 5 years of service and age 65
You qualify for a reduced retirement benefit with:
- 20 years of service and age 50, or
- 5 years of service and age 60
You can complete an application for retirement up to 120 days before your planned retirement date. The application must be signed and filed with the Retirement System at least one and not more than 120 days before your planned retirement date. You should contact UNC Benefits to schedule an appointment to complete the required documents to start your retirement benefits prior to your 120 day window. Retirement can also be done online through the State Retirement System’s online portal, ORBIT.
For a detailed discussion of retirement benefits, please refer to the TSERS Handbook.
When you retire and begin receiving benefits from TSERS, you may also be 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% 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.
Retiring Medicare Eligible Members
- As a reminder for active members nearing retirement, Medicare becomes primary the last month that a retiring active member is covered by his or her agency and the Medicare reduced rate applies. Members should be aware of the Medicare primacy change and the need to elect Medicare Part B to be effective the date of their retirement.
- In order for a retiree to be eligible for the Group Medicare Advantage Plans under the Retirement System, the retiree must be enrolled in Part A and B and they must have enrolled in their retirement benefit more than sixty days in advance of their coverage effective date.
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: TSERS employee contributions made prior to July 1, 1982, and any service purchases whenever made, are after-tax contributions.)
The amount subject to State income tax is the same amount on which federal income tax must be paid.
Exception: If you were vested in TSERS on or before August 12, 1989, your TSERS retirement benefits, no matter what amount, are exempt from State income tax.
TSERS 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.
After the required six-month break, if 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:
- $33,560 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. If re-employing as a TSERS retiree, employment should be 29 hours or less per week. Working more than 30 hours per week will create issues for the retiree health insurance.