A BILL TO BE ENTITLED
AN ACT to provide for the fiscal integrity of the teachers' and state employees' retirement system, the local governmental employees' retirement system, and the consolidated judicial retirement system, to direct the department of state treasurer to propose a Teachers' and State Employees' Optional Retirement System, and to appropriate funds for that system.
The General Assembly of North Carolina enacts:
SECTION 1.(a)  G.S. 135‑1(7a) reads as rewritten:
"(7a)	a.	"Compensation" shall mean all salaries and wages prior to any reduction pursuant to sections 125, 401(k), 403(b), 414(h)(2), and 457 of the Internal Revenue Code, not including any terminal payments for unused sick leave, derived from public funds which are earned by a member of the Retirement System for service as an employee or teacher in the unit of the Retirement System for which he is performing full‑time work. In addition to the foregoing, "compensation" shall include:
1.	Performance‑based compensation (regardless of whether paid in a lump sum, in periodic installments, or on a monthly basis);
2.	Conversion of additional benefits to salary (additional benefits such as health, life, or disability plans), so long as the benefits are other than mandated by State law or regulation;
3.	Payment of tax consequences for benefits provided by the employer, so long as they constitute an adjustment or increase in salary and not a "reimbursement of expenses";
4.	Payout of vacation leave so long as such payouts are permitted by applicable law and regulation;
5.	Employee contributions to eligible deferred compensation plans; and
6.	Effective July 1, 2009, payment of military differential wages.
b.	"Compensation" shall not include any payment, as determined by the Board of Trustees, for the reimbursement of expenses or payments for housing or any other allowances whether or not classified as salary and wages. "Compensation" includes all special pay contribution of annual leave made to a 401(a) Special Pay Plan for the benefit of an employee. Notwithstanding any other provision of this Chapter, "compensation" shall not include:
1.	Supplement/allowance provided to employee to purchase additional benefits such as health, life, or disability plans;
2.	Travel supplement/allowance (nonaccountable allowance plans);
3.	Employer contributions to eligible deferred compensation plans;
4.	Employer‑provided fringe benefits (additional benefits such as health, life, or disability plans);
5.	Reimbursement of uninsured medical expenses;
6.	Reimbursement of business expenses;
7.	Reimbursement of moving expenses;
8.	Reimbursement/payment of personal expenses;
9.	Incentive payments for early retirement;
10.	Bonuses paid incident to retirement;
10a.	Local supplementation as authorized under G.S. 7A‑300.1 for Judicial Department employees;
11.	Contract buyout/severance payments; and
12.	Payouts for unused sick leave.
c.	In the event an employer reports as "compensation" payments not specifically included or excluded as "compensation", such payments shall be "compensation" for retirement purposes only if the employer pays the Retirement System the additional actuarial liability created by such payments. However, any salary or other remuneration determined by Retirement Systems Division staff, upon conducting a fraud investigation within the meaning of G.S. 135‑1(11b), to have been paid for the principal purpose of enhancing a member's benefits under the plan shall be presumed not to be compensation. A presumption by administrative staff that salary or other remuneration was paid for the principal purpose of enhancing the member's benefits under the plan may be rebutted by the member or by the employer on behalf of the member. Upon receipt of sufficient evidence to the contrary, the presumption that salary or other remuneration was paid for the principal purpose of enhancing the member's benefits under the plan may be reversed. In all such cases, the decision as to whether the presumption by administrative staff has been rebutted by sufficient evidence shall lie solely within the discretion of the Board of Trustees. The Retirement Systems Division staff may use statistical analyses to identify anomalous patterns of compensation that require investigation under this provision."
SECTION 1.(b)  G.S. 128‑21(7a) reads as rewritten:
"(7a)	a.	"Compensation" shall mean all salaries and wages prior to any reduction pursuant to sections 125, 401(k), 403(b), 414(h)(2), and 457 of the Internal Revenue Code, not including any terminal payments for unused sick leave, derived from public funds which are earned by a member of the Retirement System for service as an employee in the unit of the Retirement System for which he is performing full‑time work. In addition to the foregoing, "compensation" shall include:
1.	Performance‑based compensation (regardless of whether paid in a lump sum, periodic installments, or on a monthly basis);
2.	Conversion of additional benefits to salary (additional benefits such as health, life, or disability plans), so long as the benefits are other than mandated by State law or regulation;
3.	Payment of tax consequences for benefits provided by the employer so long as they constitute an adjustment or increase in salary and not a "reimbursement of expenses";
4.	Payout of vacation leave so long as such payouts are permitted by applicable law and regulation;
5.	Employee contributions to eligible deferred compensation plans; and
6.	Effective July 1, 2009, payment of military differential wages.
b.	"Compensation" shall not include any payment, as determined by the Board of Trustees, for the reimbursement of expenses or payments for housing or any other allowances whether or not classified as salary and wages. Notwithstanding any other provision of this Chapter, "compensation" shall not include:
1.	Supplement/allowance provided to employee to purchase additional benefits such as health, life, or disability plans;
2.	Travel supplement/allowance (nonaccountable allowance plans);
3.	Employer contributions to eligible deferred compensation plans;
4.	Employer‑provided fringe benefits (additional benefits such as health, life, or disability plans);
5.	Reimbursement of uninsured medical expenses;
6.	Reimbursement of business expenses;
7.	Reimbursement of moving expenses;
8.	Reimbursement/payment of personal expenses;
9.	Incentive payments for early retirement;
10.	Bonuses paid incident to retirement;
11.	Contract buyout/severance payments; and
12.	Payouts for unused sick leave.
c.	In the event an employer reports as "compensation" payments not specifically included or excluded as "compensation", such payments shall be "compensation" for retirement purposes only if the employer pays the Retirement System the additional actuarial liability created by such payments. However, any salary or other remuneration determined by Retirement Systems Division staff, upon conducting a fraud investigation within the meaning of G.S. 128‑1(11c), to have been paid for the principal purpose of enhancing a member's benefits under the plan shall be presumed not to be compensation. A presumption by administrative staff that salary or other remuneration was paid for the principal purpose of enhancing the member's benefits under the plan may be rebutted by the member or by the employer on behalf of the member. Upon receipt of sufficient evidence to the contrary, the presumption that salary or other remuneration was paid for the principal purpose of enhancing the member's benefits under the plan may be reversed. In all such cases, the decision as to whether the presumption by administrative staff  has been rebutted by sufficient evidence shall lie solely within the discretion of the Board of Trustees. The Retirement Systems Division staff may use statistical analyses to identify anomalous patterns of compensation that require investigation under this provision."
SECTION 2.(a)  G.S. 135‑5 is amended by adding a new subsection to read:
"(a3)	Notwithstanding any other provision of this section, every service retirement allowance provided under this section for members who became members on or after July 1, 2013, is subject to adjustment pursuant to a contribution‑based benefit cap under this subsection. A contribution‑based benefit cap factor shall be established by the Board of Trustees upon the advice of the consulting actuary. Prior to establishing a service allowance under this section, the Board shall:
(1)	Determine an amount equal to the member's contributions plus interest.
(2)	Determine the amount of a single life annuity that is the actuarial equivalent of the amount determined under subdivision (1) of this subsection, adjusted for the age of the member at the time of retirement or, when appropriate, the age at the time of the member's death.
(3)	Multiply the annuity amount determined under subdivision (2) of this subsection by the contribution‑based benefit cap factor.
The product of the multiplication in subdivision (3) of this subsection is the member's contribution‑based benefit cap. If the retirement allowance that the member would receive under this section exceeds the member's contribution‑based benefit cap, the member's retirement allowance shall be reduced to an amount equal to that benefit cap."
SECTION 2.(b)  G.S. 128‑27 is amended by adding a new section to read:
"(a3)	Notwithstanding any other provision of this section, every service retirement allowance provided under this section for members who became members on or after July 1, 2013, is subject to adjustment pursuant to a contribution‑based benefit cap under this subsection. A contribution‑based benefit cap factor shall be established by the Board of Trustees upon the advice of the consulting actuary. Prior to establishing a service allowance under this section, the Board shall:
(1)	Determine an amount equal to the member's contributions plus interest.
(2)	Determine the amount of a single life annuity that is the actuarial equivalent of the amount determined under subdivision (1) of this subsection, adjusted for the age of the member at the time of retirement or, when appropriate, the age at the time of the member's death.
(3)	Multiply the annuity amount determined under subdivision (2) of this subsection by the contribution‑based benefit cap factor.
The product of the multiplication in subdivision (3) of this subsection is the member's contribution‑based benefit cap. If the retirement allowance that the member would receive under this section exceeds the member's contribution‑based benefit cap, the member's retirement allowance shall be reduced to an amount equal to that benefit cap."
SECTION 3.(a)  G.S. 135‑4 reads as rewritten:
"(ff)	Retroactive Membership Service. – A member who is reinstated to service as an employee as defined in G.S. 135‑1(10) or as a teacher as defined in G.S. 135‑1(25) retroactively to the date of prior involuntary termination  may be allowed membership service, after submitting clear and convincing evidence of the reinstatement, and certification that any arrangements regarding backpay and benefits have been agreed to by the employee and employer, as follows:
(1)	Within 90 days of the involuntary termination, by the payment of employee and employer contributions that would have been paid; or
(2)	After 90 days of the involuntary termination, by the payment of the employee and employer contributions that would have been paid plus interest compounded annually at a rate equal to the greater of the average yield on the pension accumulation fund for the preceding calendar year or the actuarial investment rate‑of‑return assumption, as adopted by the Board of Trustees.
Nothing contained in this subsection shall prevent an employer or member from paying all or a part of the cost of the retroactive membership service; and to the extent paid by the employer, the cost paid by the employer shall be credited to the pension accumulation fund; and to the extent paid by the member, the cost paid by the member shall be credited to the member's annuity savings account; provided, however, an employer does not discriminate against any member or group of members in his employ in paying all or any part of the cost of the retroactive membership service.
In the event a member received a return of accumulated contributions subsequent to an involuntary termination as provided in G.S. 135‑5(f), the member may redeposit, within 90 days of reinstatement retroactive to the date of prior involuntary termination, in the annuity savings fund by single payment an amount equal to the total amount he previously withdrew plus regular interest and restore the creditable service forfeited upon receiving his return of accumulated contributions.
In the event that this service purchase provision is invoked in a settlement of a dispute between and employee and an employer, the average final compensation used for any recalculation of a retirement benefit shall not be based on hypothetical compensation for any months subsequent to the date of the prior involuntary termination triggering the use of this provision."
SECTION 3.(b)  G.S. 128‑26(v) reads as rewritten:
"(v)	Retroactive Membership Service. – A member who is reinstated to service as an employee as defined in G.S. 128‑21(10) retroactively to the date of prior involuntary termination (with backpay and benefits) may be allowed membership service, after submitting clear and convincing evidence of the reinstatement, and certification that any arrangements regarding backpay and benefits have been agreed to by the employee and employer, as follows:
(1)	Within 90 days of the involuntary termination, by the payment of employee and employer contributions that would have been paid; or
(2)	After 90 days of the involuntary termination, by the payment of the employee and employer contributions that would have been paid plus interest compounded annually at a rate equal to the greater of the average yield on the pension accumulation fund for the preceding calendar year or the actuarial investment rate‑of‑return assumption, as adopted by the Board of Trustees.
Nothing contained in this subsection shall prevent an employer or member from paying all or a part of the cost of the retroactive membership service; and to the extent paid by the employer, the cost paid by the employer shall be credited to the pension accumulation fund; and to the extent paid by the member, the cost paid by the member shall be credited to the member's annuity savings account; provided, however, an employer does not discriminate against any member or group of members in his employ in paying all or any part of the cost of the retroactive membership service.
In the event a member received a return of accumulated contributions subsequent to an involuntary termination as provided in G.S. 128‑27(f), the member may redeposit, within 90 days of reinstatement retroactive to the date of prior involuntary termination, in the annuity savings fund by single payment, an amount equal to the total amount he previously withdrew plus regular interest and restore the creditable service forfeited upon receiving his return of accumulated contributions.
In the event that this service purchase provision is invoked in a settlement of a dispute between and employee and an employer, the average final compensation used for any recalculation of a retirement benefit shall not be based on hypothetical compensation for any months subsequent to the date of the prior involuntary termination triggering the use of this provision."
SECTION 4.(a)  G.S. 135‑3(8) reads as rewritten:
"(8)	The provisions of this subsection (8) shall apply to any member whose membership is terminated on or after July 1, 1963 and who becomes entitled to benefits hereunder in accordance with the provisions hereof.
a.	Notwithstanding any other provision of this Chapter, any member who separates from service prior to the attainment of the age of 60 years for any reason other than death or retirement for disability as provided in G.S. 135‑5(c), after completing 15 or more years of creditable service, and who leaves his total accumulated contributions in said System shall have the right to retire on a deferred retirement allowance upon attaining the age of 60 years; provided that such member may retire only upon electronic submission or written application to the Board of Trustees setting forth at what time, not less than one day nor more than 90 days subsequent to the execution and filing thereof, he desires to be retired; and further provided that in the case of a member who so separates from service on or after July 1, 1967, or whose account is active on July 1, 1967, or has not withdrawn his contributions, the aforestated requirement of 15 or more years of creditable service shall be reduced to 12 or more years of creditable service; and further provided that in the case of a member who so separates from service on or after July 1, 1971, or whose account is active on July 1, 1971, the aforestated requirement of 12 or more years of creditable service shall be reduced to five or more years of creditable service. Such deferred retirement allowance shall be computed in accordance with the service retirement provisions of this Article pertaining to a member who is not a law enforcement officer or an eligible former law enforcement officer. Notwithstanding the foregoing, any member whose services as a teacher or employee are terminated for any reason other than retirement, who becomes employed by a nonprofit, nonsectarian private school in North Carolina below the college level within one year after such teacher or employee has ceased to be a teacher or employee, may elect to leave his total accumulated contributions in the Teachers' and State Employees' Retirement System during the period he is in the employment of such employer; provided that he files notice thereof in writing with the Board of Trustees of the Retirement System within five years after separation from service as a public school teacher or State employee; such member shall be deemed to have met the requirements of the above provisions of this subdivision upon attainment of age 60 while in such employment provided that he is otherwise vested.
b.	In lieu of the benefits provided in paragraph a of this subdivision (8), any member who separates from service prior to the attainment of the age of 60 years, for any reason other than death or retirement for disability as provided in G.S. 135‑5(c), after completing 20 or more years of creditable service, and who leaves his total accumulated contributions in said System, may elect to retire on an early retirement allowance upon attaining the age of 50 years or at any time thereafter; provided that such member may so retire only upon electronic submission or written application to the Board of Trustees setting forth at what time, not less than one day nor more than 90 days subsequent to the execution and filing thereof, he desires to be retired. Such early retirement allowance so elected shall be equal to the deferred retirement allowance otherwise payable at the attainment of the age of 60 years reduced by the percentage thereof indicated below.
Age at	Percentage
Retirement	Reduction
59	7
58	14
57	20
56	25
55	30
54	35
53	39
52	43
51	46
50	50
b1.	In lieu of the benefits provided in paragraphs a and b of this subdivision, any member who is a law‑enforcement officer at the time of separation from service prior to the attainment of the age of 50 years, for any reason other than death or disability as provided in this Article, after completing 15 or more years of creditable service in this capacity immediately prior to separation from service, and who leaves his total accumulated contributions in this System may elect to retire on a deferred early retirement allowance upon attaining the age of 50 years or at any time thereafter; provided, that the member may commence retirement only upon electronic submission or written application to the Board of Trustees setting forth at what time, as of the first day of a calendar month, not less than one day nor more than 90 days subsequent to the execution and filing thereof, he desires to commence retirement. The deferred early retirement allowance shall be computed in accordance with the service retirement provisions of this Article pertaining to law‑enforcement officers.
b2.	In lieu of the benefits provided in paragraphs a and b of this subdivision, any member who is a law‑enforcement officer at the time of separation from service prior to the attainment of the age of 55 years, for any reason other than death or disability as provided in this Article, after completing five or more years of creditable service in this capacity immediately prior to separation from service, and who leaves his total accumulated contributions in this System may elect to retire on a deferred early retirement allowance upon attaining the age of 55 years or at any time thereafter; provided, that the member may commence retirement only upon electronic submission or written application to the Board of Trustees setting forth at what time, as of the first day of a calendar month not less than one day nor more than 90 days subsequent to the execution and filing thereof, he desires to commence retirement. The deferred early retirement allowance shall be computed in accordance with the service retirement provisions of this Article pertaining to law‑enforcement officers.
b3.	Vested deferred retirement allowance of members retiring on or after July 1, 1994. – In lieu of the benefits provided in paragraphs a. and b. of this subdivision, any member who separates from service prior to attainment of age 60 years, after completing 20 or more years of creditable service, and who leaves his total accumulated contributions in said System, may elect to retire on a deferred retirement allowance upon attaining the age of 50 years or any time thereafter; provided that such member may so retire only upon electronic submission or written application to the Board of Trustees setting forth at what time, not less than one day nor more than 90 days subsequent to the execution and filing thereof, he desires to be retired. Such deferred retirement allowance shall be computed in accordance with the service retirement provisions of this Article pertaining to a member who is not a law enforcement officer or an eligible former law enforcement officer.
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SECTION 4.(b)  G.S. 135‑5 reads as rewritten:
"§ 135‑5.  Benefits.
(a)	Service Retirement Benefits.
(1)	Any member may retire upon electronic submission or written application to the Board of Trustees setting forth at what time, as of the first day of a calendar month, not less than one day nor more than 120 days subsequent to the execution of and filing thereof, he desires to be retired: Provided, that the said member at the time so specified for his retirement shall have attained the age of 60 years and have at least five years of membership service or shall have completed 30 years of creditable service.
	(2)	Repealed by Session Laws 1983 (Regular Session, 1984), c. 1019, s. 1.
(3)	Any member who was in service October 8, 1981, who had attained 60 years of age, may retire upon electronic submission or written application to the Board of Trustees setting forth at what time, as of the first day of a calendar month, not less than one day nor more than 120 days subsequent to the execution and filing thereof, he desires to be retired.
(4)	Any member who is a law‑enforcement officer and who attains age 50 and completes 15 or more years of creditable service in this capacity or who attains age 55 and completes five or more years of creditable service in this capacity, may retire upon electronic submission or written application to the Board of Trustees setting forth at what time, as of the first day of a calendar month, not less than one day nor more than 120 days subsequent to the execution and filing thereof, he desires to be retired; Provided, also, any member who has met the conditions herein required but does not retire, and later becomes a teacher or an employee other than as a law‑enforcement officer shall continue to have the right to commence retirement.
	(5)	Any member who is eligible for and is being paid a benefit under the Disability Income Plan as provided in G.S. 135‑105 or G.S. 135‑106 shall be deemed a member in service and may not retire under the provisions of this section. Any member who has made electronic submission or written application for long‑term or extended short‑term benefits under the Disability Income Plan as provided in G.S. 135‑105 or G.S. 135‑106, and who has been rejected by the Plan's Medical Board for a long‑term or extended short‑term benefit shall have 90 days from the date of notification of the rejection to convert his application to an early or service retirement application, provided that the member meets the eligibility requirements, effective the first day of the month following the month in which short‑term disability benefits ended or the first day of the month following the month in which any salary continuation as may be provided in G.S. 135‑104 ended, whichever is later.
(a1)	Early Service Retirement Benefits. – Any member may retire and receive a reduced retirement allowance upon electronic submission or written application to the Board of Trustees setting forth at what time, as of the first day of a calendar month, not less than one day nor more than 120 days subsequent to the execution of and filing thereof, he desires to be retired: Provided, that the said member at the time so specified for his retirement shall have attained the age of 50 years and have at least 20 years of creditable service.
	…
(b19)	Service Retirement Allowance of Members Retiring on or After July 1, 2002. – Upon retirement from service in accordance with subsection (a) or (a1) of this section, on or after July 1, 2002, a member shall receive the following service retirement allowance:
(1)	A member who is a law enforcement officer or an eligible former law enforcement officer shall receive a service retirement allowance computed as follows:
a.	If the member's service retirement date occurs on or after his 55th birthday, and completion of five years of creditable service as a law enforcement officer, or after the completion of 30 years of creditable service, the allowance shall be equal to one and eighty‑two hundredths percent (1.82%) of his average final compensation, multiplied by the number of years of his creditable service.
b.	If the member's service retirement date occurs on or after his 50th birthday and before his 55th birthday with 15 or more years of creditable service as a law enforcement officer and prior to the completion of 30 years of creditable service, his retirement allowance shall be equal to the greater of:
1.	The service retirement allowance payable under G.S. 135‑5(b19)(1)a. reduced by one‑third of one percent (1/3 of 1%) thereof for each month by which his retirement date precedes the first day of the month coincident with or next following the month the member would have attained his 55th birthday; or
2.	The service retirement allowance as computed under G.S. 135‑5(b19)(1)a. reduced by five percent (5%) times the difference between 30 years and his creditable service at retirement.
(2)	A member who is not a law enforcement officer or an eligible former law enforcement officer shall receive a service retirement allowance computed as follows:
a.	If the member's service retirement date occurs on or after his 65th birthday upon the completion of five years of membership service or after the completion of 30 years of creditable service or on or after his 60th birthday upon the completion of 25 years of creditable service, the allowance shall be equal to one and eighty‑two hundredths percent (1.82%) of his average final compensation, multiplied by the number of years of creditable service.
b.	If the member's service retirement date occurs after his 60th birthday and before his 65th birthday and prior to his completion of 25 years or more of creditable service, his retirement allowance shall be computed as in G.S. 135‑5(b19)(2)a. but shall be reduced by one‑quarter of one percent (¼ of 1%) thereof for each month by which his retirement date precedes the first day of the month coincident with or next following his 65th birthday.
c.	If the member's early service retirement date occurs on or after his 50th birthday and before his 60th birthday and after completion of 20 years of creditable service but prior to the completion of 30 years of creditable service, his early service retirement allowance shall be equal to the greater of:
1.	The service retirement allowance as computed under G.S. 135‑5(b19)(2)a. but reduced by the sum of five‑twelfths of one percent (5/12 of 1%) thereof for each month by which his retirement date precedes the first day of the month coincident with or next following the month the member would have attained his 60th birthday, plus one‑quarter of one percent (¼ of 1%) thereof for each month by which his 60th birthday precedes the first day of the month coincident with or next following his 65th birthday; or
2.	The service retirement allowance as computed under G.S. 135‑5(b19)(2)a. reduced by five percent (5%) times the difference between 30 years and his creditable service at retirement; or
3.	If the member's creditable service commenced prior to July 1, 1994, the service retirement allowance equal to the actuarial equivalent of the allowance payable at the age of 60 years as computed in G.S. 135‑5(b19)(2)b.
d.	Notwithstanding the foregoing provisions, any member whose creditable service commenced prior to July 1, 1963, shall not receive less than the benefit provided by G.S. 135‑5(b).
												…
(m)	Survivor's Alternate Benefit. – Upon the death of a member in service, the beneficiary designated to receive a return of accumulated contributions shall have the right to elect to receive in lieu thereof the reduced retirement allowance provided by Option 2 of subsection (g) above computed by assuming that the member had retired on the first day of the month following the date of his death, provided that all four of the following conditions apply:
(1)	a.	The member had attained such age and/or creditable service to be eligible to commence retirement with an early or service retirement allowance, or
b.	The member had obtained 20 years of creditable service in which case the retirement allowance shall be computed in accordance with G.S. 135‑5(b19)(1)b. or G.S. 135‑5(b19)(2)c., notwithstanding the requirement of obtaining age 50, or
b1.	The member was a law enforcement officer who had obtained 15 years of service as a law enforcement officer and was killed in the line of duty, in which case the retirement allowance shall be computed in accordance with G.S. 135‑5(b19)(1)b., notwithstanding the requirement of obtaining age 50.
c.	Repealed by Session Laws 2010‑72, s. 2(a), effective July 1, 2010.
(2)	At the time of the member's death, one and only one beneficiary is eligible to receive a return of his accumulated contributions.
(3)	The member had not instructed the Board of Trustees in writing that he did not wish the provisions of this subsection to apply.
(4)	The member had not commenced to receive a retirement allowance as provided under this Chapter.
For the purpose of this benefit, a member is considered to be in service at the date of his death if his death occurs within 180 days from the last day of his actual service. The last day of actual service shall be determined as provided in subsection (l) of this section. Upon the death of a member in service, the surviving spouse may make all purchases for creditable service as provided for under this Chapter for which the member had made application in writing prior to the date of death, provided that the date of death occurred prior to or within 60 days after notification of the cost to make the purchase. The term "in service" as used in this subsection includes a member in receipt of a benefit under the Disability Income Plan as provided in Article 6 of this Chapter.
Notwithstanding the foregoing, a member who is in receipt of Workers' Compensation during the period for which the member would have otherwise been eligible to receive short‑term benefits, as provided in G.S. 135‑105, and who dies on or after 181 days from the last day of the member's actual service but on or before the date the benefits as provided in G.S. 135‑105 would have ended, shall be considered in service at the time of the member's death for the purpose of this benefit.
For the purpose of calculating this benefit any terminal payouts made after the date of death that meet the definition of compensation shall be credited to the month prior to the month of death. These terminal payouts do not include salary or wages paid for work performed during the month of death.
…
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SECTION 4.(c)  G.S. 135‑57 reads as rewritten:
"§ 135‑57.  Service retirement.
(a)	Any member on or after January 1, 1974, and who has attained his fiftieth birthday and five years of membership service may retire upon electronic submission or written application to the board of trustees setting forth at what time, as of the first day of a calendar month, not less than one day nor more than 120 days subsequent to the execution and filing thereof, he desires to be retired.
	(b)	Any member who is a justice or judge of the General Court of Justice shall be automatically retired as of the first day of the calendar month coinciding with or next following the later of January 1, 1974, or his attainment of his seventy‑second birthday; provided, however, that no judge who is a member on January 1, 1974, shall be forced to retire under the provisions of this subsection at an earlier date than the last day that he is permitted to remain in office under the provisions of G.S. 7A‑4.20.
(c)	Any member who terminates service on or after January 1, 1974, having accumulated five or more years of creditable service may retire under the provisions of subsection (a) above, provided that he shall not have withdrawn his accumulated contributions prior to the effective date of his retirement, and the requirement of subsection (a) that the member be in service shall not apply.
	(d)	Any member who was in service October 8, 1981, who had attained 50 years of age, may retire upon electronic submission or written application to the board of trustees setting forth at what time, as of the first day of a calendar month, not less than one day nor more than 120 days subsequent to the execution and filing thereof, he desires to be retired."
SECTION 4.(d)  G.S. 143‑166.41 reads as rewritten:
"§ 143‑166.41.  Special separation allowance.
(a)	Notwithstanding any other provision of law, every sworn law‑enforcement officer as defined by G.S. 135‑1(11c) or G.S. 143‑166.30(a)(4) employed by a State department, agency, or institution and who qualifies under this section shall receive, beginning in the month in which he retires on a basic service retirement under the provisions of  G.S. 135‑5(a) or G.S. 143‑166.30, an annual separation allowance equal to eighty‑five hundredths percent (0.85%) of the annual equivalent of the base rate of compensation most recently applicable to him for each year of creditable service. The allowance shall be paid in equal installments on the payroll frequency used by the employer. To qualify for the allowance the officer shall:
(1)	Have (i) completed 30 or more years of creditable service or, (ii) have attained 55 years of age and completed five or more years of creditable service; and
(2)	Not have attained 62 years of age; and
(3)	Have completed at least five years of continuous service as a law enforcement officer as herein defined immediately preceding a service retirement. Any break in the continuous service required by this subsection because of disability retirement or disability salary continuation benefits shall not adversely affect an officer's qualification to receive the allowance, provided the officer returns to service within 45 days after the disability benefits cease and is otherwise qualified to receive the allowance.
				.…"
SECTION 5.  The Department of State Treasurer shall, by May 1, 2014, propose a legal and administrative framework to the General Assembly for an optional retirement plan that may be elected in lieu of participation in the Teachers' and State Employees' Retirement System established in Chapter 135 of the General Statutes. This framework shall be designed to comply with the requirements of the Internal Revenue Code of 1986, as amended, and shall identify the persons or entities that shall serve as fiduciaries under the plan. The plan established for this purpose shall be known as the "Teachers' and State Employees' Optional Retirement System of North Carolina." The plan shall be the sole alternative plan available to employees eligible for participation in the Retirement System for Teachers and State Employees established in Chapter 135 of the General Statutes.
SECTION 6. There is appropriated from the General Fund to the Department of State Treasurer the sum of one million dollars ($1,000,000) for the 2013‑2014 fiscal year and the sum of three million dollars ($3,000,000) for the 2014‑2015 fiscal year to provide the start‑up costs for establishment of the Teachers' and State Employees' Optional Retirement System. These funds shall not revert at the end of the fiscal year but shall remain available to the Department to provide these start‑up costs. The funds shall be held in an account by the Department of State Treasurer until such time as the funds are expended for the exclusive benefit of future participants in the Teachers' and State Employees' Optional Retirement System.
SECTION 7.  There is appropriated from the General Fund to the Department of State Treasurer the sum of three hundred ten thousand dollars ($310,000) for the 2013‑2014 fiscal year and the sum of six hundred fifteen thousand dollars ($615,000) for the 2014‑2015 fiscal year to establish seven positions to staff the start‑up of the Teachers' and State Employees' Optional Retirement System.
SECTION 8.  This act becomes effective July 1, 2013.