A BILL TO BE ENTITLED
AN ACT to establish a retention incentive program for members of the teachers' and state employees' retirement system.
The General Assembly of North Carolina enacts:
SECTION 1.  Article 1 of Chapter 135 of the General Statutes is amended by adding a new section to read:
"§ 135-18.9. Retention Incentive Program.
(a)	A member who is eligible for service retirement under this Chapter and complies with the requirements of this section may elect to participate in the Teachers' and State Employees' Retention Incentive Program. A member electing to participate in the program retires for purposes of the System, and the member's normal retirement benefit is calculated on the basis of the member's average final compensation and service credit at the time the program period begins. The program participant shall agree to continue employment with an employer participating in the System for a program period, not to exceed five years. The member shall notify the System before the beginning of the program period. Participation in the program does not guarantee employment for the specified program period.
(b)	During the specified program period, receipt of the member's normal retirement benefit is deferred. The member's deferred monthly payment shall be placed in the System's trust fund on behalf of the member. No interest shall be paid on the member's deferred monthly benefit placed in the trust fund during the specified program period.
(c)	During the specified program period, the employer shall pay to the System the employer contribution for active members prescribed by law with respect to any program participant it employs, regardless of whether the program participant is a part‑time employee, a temporary employee, or a full-time employee. If an employer who is obligated to the System pursuant to this subsection fails to pay the amount due, as determined by the System, the amount shall be deducted from any funds payable to the employer by the State.
(d)	A program participant is retired from the System as of the beginning of the program period. A program participant makes no further employee contributions to the System, accrues no service credit during the program period, and is not eligible to receive group life insurance benefits or disability retirement benefits. Accrued annual leave and sick leave used in any manner in the calculation of the program participant's retirement benefits is deducted from the amount of that leave accrued by the participant.
(e)	A program participant is retired for retirement purposes only. For employment purposes, a program participant is considered to be an active employee, retaining all other rights and benefits of an active employee and is not subject to the earnings limitation of G.S. 135-3(8)c. during the program period.
(f)	Upon termination of employment either during or at the end of the program period, the member shall receive the balance in the member's program account by electing one of the following distribution alternatives:
(1)	A lump-sum distribution, paying appropriate taxes; or
(2)	To the extent permitted by law, a tax-sheltered rollover into an eligible plan.
The member also shall receive the previously determined normal retirement benefits based upon the member's average final compensation and service credit at the time the program period began, plus any applicable cost-of-living increases declared during the program period. The program participant is thereafter subject to the earning limitation of G.S. 135-3(8)c.
(g)	If a program participant dies during the specified program period, the member's designated beneficiary shall receive the balance in the member's program account by electing one of the distribution alternatives set forth in subsection (f) of this section. In accordance with the form of System benefit selected by the member at the time the program commenced, the member's designated beneficiary shall receive either a survivor benefit or a refund of contributions from the member's System account.
(h)	If a program participant fails to terminate employment with an employer participating in the System within one month after the end of the specified program period, the member shall receive the previously determined normal retirement benefits based upon the member's average final compensation and service credit at the time the program began, plus any applicable cost-of-living increases declared during the program period. The program participant is thereafter subject to the earning limitation of G.S. 135-3(8)c. The program participant also shall receive the balance in the member's program account by selecting one of the distribution alternatives set forth in subsection (f) of this section.
(i)	A member is not eligible to participate in the program if the member has participated previously in and received a benefit under this program or any other state retirement system."
SECTION 2.  G.S. 135‑3(8)c. reads as rewritten:
c.	(Effective until June 30, 2004 – See note) Should a beneficiary who retired on an early or service retirement allowance under this Chapter be reemployed, or otherwise engaged to perform services, by an employer participating in the Retirement System on a part‑time, temporary, interim, or on a fee‑for‑service basis, whether contractual or otherwise, and if such beneficiary earns an amount during the 12‑month period immediately following the effective date of retirement or in any calendar year which exceeds fifty percent (50%) of the reported compensation, excluding terminal payments, during the 12 months of service preceding the effective date of retirement, or twenty thousand dollars ($20,000), whichever is greater, as hereinafter indexed, then the retirement allowance shall be suspended as of the first day of the month following the month in which the reemployment earnings exceed the amount above, for the balance of the calendar year. The retirement allowance of the beneficiary shall be reinstated as of January 1 of each year following suspension. The amount that may be earned before suspension shall be increased on January 1 of each year by the ratio of the Consumer Price Index to the Index one year earlier, calculated to the nearest tenth of a percent (1/10 of 1%).
"
SECTION 3.  G.S. 115C‑325(a)(5a) is repealed.
SECTION 4.  This act becomes effective January 1, 2004, and applies to persons eligible to retire from the Teachers' and State Employees' Retirement System on or after that date.