A BILL TO BE ENTITLED
AN ACT making technical, clarifying, and administrative changes to laws relating to creditable service purchases under the teachers' and state employees' retirement system, the local governmental employees' retirement system, and the consolidated judicial retirement system.
The General Assembly of North Carolina enacts:

part i. changes related to creditable service purchases under the teachers' and state employees' retirement system
SECTION 1.1.  Subdivision (f)(7) and subsections (j1), (k1), (l2), (p), (p2), (r), (s), (w), (z), (aa), (bb1), (cc), and (hh) of G.S. 135‑4 are recodified as subdivisions (1), (2), (4) through (13), and (15), respectively, of G.S. 135‑4.5(b), and read as rewritten:
"§ 135‑4.5.  Creditable service purchases.
(a)	Notwithstanding any other provision of this Chapter to the contrary, any member who meets the eligibility requirements specified in subsection (b) of this section may purchase creditable service authorized under subsection (b) of this section by paying a lump sum amount to the annuity savings fund equal to the full liability increase due to the additional service credits on the basis of the assumptions used for the purposes of the actuarial valuation of the liabilities of the Retirement System, except for the following assumptions specific to this calculation: (i) the allowance shall be assumed to commence at the earliest age at which the member could retire on an unreduced retirement allowance and (ii) assumed annual postretirement allowance increases as set by the Board of Trustees upon the advice of the consulting actuary. The calculation of the amount payable shall also include an administrative fee to be set by the Board. Subject to the requirements of subsection (b), an employer may pay all or part of the cost of a service purchase of a member in service. To the extent that the purchase is paid by the employer, the cost paid by the employer shall be credited to the pension accumulation fund. To the extent that the purchase is paid by the member, the cost paid by the member shall be credited to the member's annuity savings account. In the event of a conflict between the provisions of this subsection and the provisions of subsection (b) of this section, the provisions of subsection (b) of this section control.
(b)	The following purchases of creditable service are authorized under this section:
(1)	Purchase of Armed Service Credit. – Notwithstanding any other provision of this Chapter, any member and any retired member as herein described may purchase creditable service in the Armed Forces of the United States, not otherwise allowed, by paying a total lump sum payment determined as follows:
a.	For members who completed 10 years of membership service, and retired members who completed 10 years of membership service prior to retirement, whose membership began on or prior to July 1, 1981, and who make this purchase within three years after first becoming eligible, the cost shall be an amount equal to the monthly compensation the member earned when the member first entered membership service times the employee contribution rate at that time times the months of service to be purchased, multiplied by a factor equivalent to the investment return assumptions determined by the Board of Trustees, compounded annually, from the initial year of membership to the year of payment so as to equal one‑half of the cost of allowing this service, plus an administrative fee to be set by the Board of Trustees.
b.	For members who complete five years of membership service, and retired members who complete five years of membership service prior to retirement, and eligible members and retired members covered by paragraph a. of this subdivision, whose membership began on or before July 1, 1981, but who did not or do not make this purchase within three years after first becoming eligible, the cost shall be as provided in subsection (a) of this section.
Creditable service allowed under this subdivision shall be only for the initial period of "active duty", as defined in 38 U.S. Code Section 101(21), in the Armed Forces of the United States up to the date the member was first eligible to be separated and released and for subsequent periods of "active duty", as defined in 38 U.S. Code Section 101(21), as required by the Armed Forces of the United States up to the date of first eligibility for separation or release, but shall not include periods of active duty in the Armed Forces of the United States creditable in any other retirement system except the National Guard or any reserve component of the Armed Forces of the United States, and shall not include periods of "active duty for training", as defined in 38 U.S. Code Section 101(22), or periods of "inactive duty training", as defined in 38 U.S. Code Section 101(23), rendered in any reserve component of the Armed Forces of the United States. Provided, creditable service may be allowed only for active duty in the Armed Forces of the United States of a member that resulted in a general or honorable discharge from duty. The member shall submit satisfactory evidence of the service claimed. For purposes of this subdivision, membership service may include any membership or prior service credits transferred to this Retirement System pursuant to G.S. 135‑18.1.
(2)	Purchase of General Assembly Service by Members. – Prior to January 1, 2023, any member may purchase creditable service for service as a member of the General Assembly not otherwise creditable under this section, provided the service is not credited in the Legislative Retirement Fund nor the Legislative Retirement System.
(3)	On and after January 1, 2023, any member in service with five or more years of membership service may purchase creditable service for service as a member of the General Assembly not otherwise creditable under this section, provided that the service is not credited in the Legislative Retirement Fund or the Legislative Retirement System. The amount of creditable service purchased under this subdivision may not exceed a total of five years.
(4)	North Carolina Withdrawn Service Purchased On and After January 1, 2022. – Notwithstanding any other provision of this Chapter to the contrary, on and after January 1, 2022, any member who withdrew contributions in accordance with the provisions of G.S. 127‑27(f) or G.S. 135‑5(f) or the rules and regulations of the Law Enforcement Officers' Retirement System, and who subsequently returns to service and completes five years of membership service upon that return, while in service may purchase an amount of creditable service totaling the amount of the membership service associated with the withdrawn contributions, provided that the total of the creditable service purchased under this subdivision may not exceed five years.

(5)	Previous Federal, State, or Local Government Service. – Notwithstanding any provision of this Chapter to the contrary, on and after January 1, 2021, any member in service with five or more years of membership service may purchase creditable service previously rendered to the federal government or to any state, territory, or other governmental subdivision of the United States other than this State by paying a total lump sum payment. The amount of creditable service purchased under this subdivision may not exceed a total of five years.
Creditable service under this subdivision shall be allowed only at the rate of one year of out‑of‑state service for each year of membership service in this State, with a maximum allowable of five years of out‑of‑state service. Such service is limited to full‑time service that would be allowable under the laws governing this Retirement System. Credit will be allowed only if no benefit is allowable in another public retirement system as a result of the service.

(6)	Credit for Prior Temporary State employment. – Notwithstanding any other provision of this Chapter, on or before December 31, 2021, a member may purchase service credit for temporary State employment upon completion of 10 years of membership service and subject to the condition that the member had been classified as a temporary employee for more than three years. Each employer shall certify to the Board of Trustees that an employee is eligible to purchase this service credit prior to the member making payment. Payment for the service credit shall be in a single lump sum based upon the amount the member would have contributed if the member had been properly classified as a permanent employee and been a member of this Retirement System.
Notwithstanding any provision of this subdivision or any other provision of this Article to the contrary, any inchoate or accrued rights of such a member to purchase creditable service that existed prior to December 31, 2021, may not be diminished and may be purchased as creditable service with this Retirement System under the same conditions that would have otherwise applied.
(7)	Part‑Time Service Credit. – Notwithstanding any other provision of this Chapter to the contrary, any member in service with five or more years of membership service may purchase service previously rendered as a part‑time teacher or employee of an employer, as defined in G.S. 135‑1(11) or G.S. 128‑21(11), except the following service may not be purchased:
a.	Part‑time service rendered as a bus driver to a public school while a full‑time high school student.
b.	Temporary or part‑time service rendered while a full‑time student in pursuit of a degree or diploma in a degree‑granting program, unless that service was rendered on a permanent part‑time basis and required at least 20 hours of service per week.

The Board of Trustees shall adopt rules regarding how much service in any year, as based on compensation, is equivalent to one year of service in proportion to earnable compensation, but in no case shall more than one year of service be creditable for all service in one year. Service rendered for the regular school year in any district shall be equivalent to one year of service.

(8)	Credit at Full Cost for Temporary Employment. – Any member in service with five or more years of membership service may purchase creditable service for State employment when classified as a temporary teacher or employee subject to all of the following conditions:
a.	The member was employed by an employer as defined in G.S. 135‑1(11) or G.S. 128‑21(11).
b.	The member's temporary employment met all other requirements of G.S. 135‑1(10) or (25), or G.S. 128‑21(10).
c.	The member has completed five years or more of membership service.
d.	The member has acquired from the employer such certifications of temporary employment as are required by the Board of Trustees.
The amount of creditable service purchased under this subdivision may not exceed a total of five years.

(9)	Credit at Full Cost for Federal Employment. – Notwithstanding any other provisions of this Chapter, a member in service with five or more years of membership service may purchase creditable service for periods of federal employment, provided that the member is not receiving any retirement benefits resulting from this federal employment, and provided that the member is not vested in the particular federal retirement system to which the member may have belonged while a federal employee. The amount of creditable service purchased under this subdivision may not exceed a total of five years.

(10)	Credit at Full Cost for Leave Due to Extended Illness. – Any member in service with five or more years of membership service may purchase creditable service for periods of interrupted service while on leave without pay status due to the member's illness or injury, excluding leave due to maternity, provided that any single such interrupted service shall have included such period of time during which the member failed to earn at least two months membership service.

(11)	Credit at Full Cost for Parental Leave, Pregnancy or Childbirth‑Related Leave, or Certain Involuntary Furloughs. – Notwithstanding other provisions of this Chapter, any member in service with five or more years of credited membership service may purchase creditable service for periods of service which were interrupted due to parental leave, pregnancy or childbirth, or involuntary administrative furlough due to a lack of funds to support the position. The amount of creditable service purchased under this subdivision may not exceed a total of five years.

(12)	Credit at Full Cost for Probationary Local Government Employment Purchased On and After January 1, 2022. – Notwithstanding any other provision of this Chapter, on and after January 1, 2022, a member may purchase creditable service, prior to retirement, for employment with any local employer as defined in G.S. 128‑21(11) when considered to be in a probationary or employer‑imposed waiting period status, between the date of employment and the date of membership service with the Local Governmental Employees' Retirement System.

(13)	Credit for Employment in a Charter School Operated by a Private Nonprofit Corporation or a Charter School Operated by a Municipality. – Prior to January 1, 2023, any member may purchase creditable service for any employment as an employee of a charter school operated by a private nonprofit corporation or a charter school operated by a municipality whose board of directors did not elect to participate in the Retirement System under G.S. 135‑5.3 upon completion of five years of membership service. Creditable service purchased under this subdivision shall not exceed a total of five years.
(14)	Credit for Employment in a Charter School Operated by a Private Nonprofit Corporation or a Charter School Operated by a Municipality. – Notwithstanding any provision of this Chapter to the contrary, on and after January 1, 2023, any member in service with five or more years of membership service may purchase creditable service for any employment as an employee of a charter school operated by a private nonprofit corporation or a charter school operated by a municipality whose board of directors did not elect to participate in the Retirement System under G.S. 135‑5.3. The amount of creditable service purchased under this subdivision may not exceed a total of five years.
(15)	Credit at Full Cost for Service With The University of North Carolina During Which a Member Participated in the Optional Retirement Program. – Notwithstanding any other provisions of this Chapter to the contrary, any member in service with five or more years of membership service may purchase creditable service for periods of employment with The University of North Carolina during which the member participated in the Optional Retirement Program as provided for in G.S. 135‑5.1, provided that the member is not receiving, and is not entitled to receive, any retirement benefits resulting from this employment. The amount of creditable service purchased under this subdivision may not exceed a total of five years.
"
SECTION 1.2.  G.S. 135‑4(ff) 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 with back pay, as defined by the State Human Resources Commission, and associated benefits may be allowed membership service, after submitting clear and convincing evidence of the reinstatement, payment of back pay, and restoration of associated benefits, as follows:
(1)	When the reinstatement to service is by court order, final decision of an Administrative Law Judge, or with the approval of the Office of State Human Resources Director, and is:
a.	Within 90 days of the involuntary termination, by the payment of employee and employer contributions that would have been paid; or
b.	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.
(2)	When the reinstatement to service is by settlement agreement voluntarily entered into by the affected parties, by the payment of a lump‑sum 
amount. The member shall purchase this service by paying a lump‑sum amount to the annuity savings fund equal to the full liability increase due to the additional service credits on the basis of the assumptions used for the purposes of the actuarial valuation of the liabilities of the Retirement System, except for the following assumptions specific to this calculation: (i) the allowance shall be assumed to commence at the earliest age at which the member could retire on an unreduced retirement allowance and (ii) assumed annual postretirement allowance increases as set by the Board of Trustees upon the advice of the consulting actuary. The calculation of the amount payable shall also include an administrative fee to be set by the Board.
Subject to the requirements of this subsection, an employer may pay all or part of the cost of a service purchase of a member in service. To the extent that the purchase is paid by the employer, the cost paid by the employer shall be credited to the pension accumulation fund. To the extent the purchase is paid by the member, the cost paid by the member shall be credited to the member's annuity savings account; provided, however, that an employer does not discriminate against any employed member or group of employed members 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 after reinstatement retroactive to the date of prior involuntary termination, in the annuity savings fund by single payment an amount equal to the total amount the member previously withdrew plus regular interest and restore the creditable service forfeited upon receiving the return of accumulated contributions."
SECTION 1.3.  Subsections (j), (k), (l1), and (bb) of G.S. 135‑4 are repealed.

part II. changes related to creditable service purchases UNDER THE local governmental employees' retirement system
SECTION 2.1.  G.S. 128‑24(2) reads as rewritten:
"(2)	All persons who are employees of a participating county, city, or town except those who shall notify the Board of Trustees in writing, on or before 30 days following the date of participation in the Retirement System by such county, city or town: Provided, further, that employees of county social services and health departments whose compensation is derived from federal, State, and local funds may be members of the North Carolina Local Governmental Employees' Retirement System to the full extent of their compensation. Any member on or after July 1, 1969, and prior to January 1, 2023, may deposit in the annuity savings fund by a single payment the contributions plus interest which would have been credited to his account had he not signed a nonelection blank, and be entitled to such membership service credits and any prior service credits which became void upon execution of such nonelection blank; provided that the employer will pay the appropriate matching contributions.
On and after January 1, 2023, the member shall purchase this service by paying a lump‑sum amount to the annuity savings fund equal to the full liability increase due to the additional service credits on the basis of the assumptions used for the purposes of the actuarial valuation of the liabilities of the Retirement System, except for the following assumptions specific to this calculation: (i) the allowance shall be assumed to commence at the earliest age at which the member could retire on an unreduced retirement allowance and (ii) assumed annual postretirement allowance increases as set by the Board of Trustees upon the advice of the consulting actuary. Subject to the requirements of this subsection, an employer may pay all or part of the cost of a service purchase of a member in service. To the extent that the purchase is paid by the employer, the cost paid by the employer shall be credited to the pension accumulation fund. To the extent that the purchase is paid by the member, the cost paid by the member shall be credited to the member's annuity savings account provided, however, that an employer does not discriminate against any employed member or group of employed members in paying all or any part of the cost of the membership service."
SECTION 2.2.  G.S. 128‑26(h1) reads as rewritten:
"(h1)	Prior to January 1, 2023, any member may purchase creditable service for service as a member of the General Assembly not otherwise creditable under this section, provided the service is not credited in the Legislative Retirement Fund nor the Legislative Retirement System, and further provided the member pays a lump sum amount equal to the full cost of the additional service credits calculated on the basis of the assumptions used for the purposes of the actuarial valuation of the System's liabilities, taking into account the additional retirement allowance arising on account of the additional service credits commencing at the earliest age at which a member could retire on an unreduced retirement allowance as determined by the Board of Trustees upon the advice of the consulting actuary, plus an administrative fee to be set by the Board of Trustees. Notwithstanding the foregoing provisions of this subsection that provide for the purchase of service credits, the terms "full cost", "full liability", and "full actuarial cost" include assumed annual post‑retirement allowance increases, as determined by the Board of Trustees, from the earliest age at which a member could retire on an unreduced service allowance."
SECTION 2.3.  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 back pay and associated benefits may be allowed membership service, after submitting clear and convincing evidence of the reinstatement, payment of back pay, and restoration of associated benefits, as follows:
(1)	When the reinstatement to service is by court order and is:
a.	Within 90 days of the involuntary termination, by the payment of employee and employer contributions that would have been paid; or
b.	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.
(2)	When the reinstatement to service is by settlement agreement voluntarily entered into by the affected parties, by the payment of a lump‑sum 
amount. The member shall purchase this service by paying a lump‑sum amount to the annuity savings fund equal to the full liability increase due to the additional service credits on the basis of the assumptions used for the purposes of the actuarial valuation of the liabilities of the Retirement System, except for the following assumptions specific to this calculation: (i) the allowance shall be assumed to commence at the earliest age at which the member could retire on an unreduced retirement allowance and (ii) assumed annual postretirement allowance increases as set by the Board of Trustees upon the advice of the consulting actuary. The calculation of the amount payable shall also include an administrative fee to be set by the Board.
Subject to the requirements of this subsection, an employer may pay all or part of the cost of a service purchase of a member in service. To the extent that the purchase is paid by the employer, the cost paid by the employer shall be credited to the pension accumulation fund. To the extent the purchase is paid by the member, the cost paid by the member shall be credited to the member's annuity savings account; provided, however, that an employer does not discriminate against any employed member or group of employed members 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 after reinstatement retroactive to the date of prior involuntary termination, in the annuity savings fund by single payment, an amount equal to the total amount the member previously withdrew plus regular interest and restore the creditable service forfeited upon receiving the return of accumulated contributions."
SECTION 2.4.  G.S. 128‑26(h) is repealed.

part III. changes related to creditable service purchases under the consolidated judicial retirement system
SECTION 3.1.  G.S. 135‑56 reads as rewritten:
"§ 135‑56.  Creditable service.
…
(d)	Prior to January 1, 2023, any member may purchase creditable service for service as a judge, district attorney, or clerk of superior court, when not otherwise provided for in this section, and as a judge of any lawfully constituted court of this State inferior to the superior court, not to include service as a magistrate, justice of the peace or mayor's court judge. The member, after the transfer of any accumulated contributions from the Teachers' and State Employees' Retirement System or Local Governmental Employees' Retirement System, shall pay an amount equal to the full cost of the service credits calculated on the basis of the assumptions used for purposes of the actuarial valuation of the System's liabilities, taking into account the additional retirement allowance arising on account of the additional service credit commencing at the earliest age at which the member could retire with an unreduced retirement allowance as determined by the Board of Trustees upon the advice of the consulting actuary. Notwithstanding the foregoing provisions of this subsection that provide for the purchase of service credits, the terms "full cost", "full liability", and "full actuarial cost" include assumed annual post‑retirement allowance increases, as determined by the Board of Trustees, from the earliest age at which a member could retire on an unreduced service allowance.
(d1)	Notwithstanding any provision of this Chapter to the contrary, on and after January 1, 2023, any member may purchase creditable service for service as a judge, district attorney, or clerk of superior court, when not otherwise provided for in this section, and as a judge of any lawfully constituted court of this State inferior to the superior court, not to include service as a magistrate, justice of the peace, or mayor's court judge. The member, after the transfer of any accumulated contributions from the Teachers' and State Employees' Retirement System or Local Governmental Employees' Retirement System, shall pay an amount equal to the full cost of the additional service credits calculated on the basis of the assumptions used for purposes of the actuarial valuation of the System's liabilities, taking into account the additional retirement allowance arising on account of the additional service credit commencing at the earliest age at which the member could retire with an unreduced retirement allowance as determined by the Board of Trustees upon the advice of the consulting actuary, plus an administrative fee to be set by the Board of Trustees. Notwithstanding the foregoing provisions of this subsection that provide for the purchase of service credits, the terms "full cost", "full liability", and "full actuarial cost" include assumed annual postretirement allowance increases, as determined by the Board of Trustees, from the earliest age at which a member could retire on an unreduced service allowance.
(e)	Prior to January 1, 2023, any member may purchase creditable service for service as a member of the General Assembly not otherwise creditable under this section, provided the service is not credited in the Legislative Retirement Fund nor the Legislative Retirement System, and further provided the member pays a lump sum amount equal to the full cost of the additional service credits calculated on the basis of the assumptions used for the purposes of the actuarial valuation of the System's liabilities, taking into account the additional retirement allowance arising on account of the additional service credits commencing at the earliest age at which a member could retire on an unreduced retirement allowance as determined by the Board of Trustees upon the advice of the consulting actuary, plus an administrative fee to be set by the Board of Trustees. Notwithstanding the foregoing provisions of this subsection that provide for the purchase of service credits, the terms "full cost", "full liability", and "full actuarial cost" include assumed annual post‑retirement allowance increases, as determined by the Board of Trustees, from the earliest age at which a member could retire on an unreduced service allowance.
…."
SECTION 3.2.  G.S. 135‑56.2 reads as rewritten:
"§ 135‑56.2.  Creditable service for other employment.
Any member may purchase creditable service for service as a State teacher or employee, as defined under G.S. 135‑1(10) and (25), and for service as an employee of local government, as defined under G.S. 128‑21(10). A member, upon the completion of 10 years of membership service, may also purchase creditable service for periods of federal employment, provided that the member is not receiving any retirement benefits resulting from this federal employment, and provided that the member is not vested in the particular federal retirement system to which the member may have belonged while a federal employee. The member, after the transfer of any accumulated contributions from the Teachers' and State Employees' Retirement System or Local Governmental Employees' Retirement System, shall purchase this service by paying a lump sum amount to the annuity savings fund equal to the full liability increase due to the additional service credits on the basis of the assumptions used for the purposes of the actuarial valuation of the liabilities of the Retirement System, except for the following assumptions specific to this calculation: (i) the allowance shall be assumed to commence at the earliest age at which the member could retire on an unreduced retirement allowance and (ii) assumed annual postretirement allowance increases as set by the Board of Trustees upon the advice of the consulting actuary. Subject to the requirements of this subsection, an employer may pay all or part of the cost of a service purchase of a member in service. To the extent that the purchase is paid by the employer, the cost paid by the employer shall be credited to the pension accumulation fund. As an alternative to transferring any accumulated contributions from the Teachers' and State Employees' Retirement System or the Local Governmental Employees' Retirement System to the Consolidated Judicial Retirement System, a member may irrevocably elect to transfer these contributions to the Supplemental Retirement Income Plan of North Carolina as determined by the Plan's Board of Trustees and the Department of State Treasurer in accordance with the provisions of G.S. 135‑94(a)(4). Notwithstanding the foregoing provisions of this section that provide for the purchase of service credits, the terms "full cost", "full liability", and "full actuarial cost" include assumed annual post‑retirement allowance increases, as determined by the Board of Trustees, from the earliest age at which a member could retire on an unreduced service allowance."

PART iv. EFFECTIVE DATE
SECTION 4.1.  This act becomes effective January 1, 2022, and applies to purchases of creditable service occurring on or after that date.