The following words and phrases as used in this Article, unless a different meaning is plainly required by the context, shall have the following meanings:
(1) "Accumulated contribution" shall mean the sum of all amounts deducted from the compensation of a member and credited to his individual account in the annuity savings fund, together with regular interest thereon, as provided in G.S. 128-30, subsection (b).
(2) "Actuarial equivalent" shall mean a benefit of equal value when computed at regular interest upon the basis of such mortality tables as shall be adopted by the Board of Trustees.
(3) "Annuity" shall mean payments for life derived from the accumulated contribution of a member. All annuities shall be payable in equal monthly installments.
(4) "Annuity reserve" shall mean the present value of all payments to be made on account of any annuity or benefit in lieu of any annuity computed at regular interest upon the basis of such mortality tables as shall be adopted by the Board of Trustees.
(5) "Average final compensation" shall mean the average annual compensation, not including any terminal payments for unused sick leave, of a member during the four consecutive calendar years of creditable service producing the highest such average; but shall not include any compensation, 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.
(6) "Beneficiary" shall mean any person in receipt of a pension, an annuity, a retirement allowance or other benefit as provided by this Article.
(7) "Board of Trustees" shall mean the Board provided for in G.S. 128-28 to administer the Retirement System.
(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; and
5. Employee contributions to eligible deferred compensation plans.
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.
(8) "Creditable service" shall mean the total of "prior service" plus "membership service" plus service, both noncontributory and purchased, for which credit is allowable as provided in G.S. 128-26. In no event, however, shall "creditable service" be deemed "membership service" for the purpose of determining eligibility for benefits accruing under this Chapter.
(9) "Earnable compensation" shall mean the full rate of the compensation that would be payable to an employee if he worked the full normal working time, including any allowance of maintenance or in lieu thereof received by the member.
(10) "Employee" shall mean any person who is regularly employed in the service of and whose salary or compensation is paid by the employer as defined in subdivision (11) of this section, whether employed or appointed for stated terms or otherwise, except teachers in the public schools and except such employees who hold office by popular election as are not required to devote a major portion of their time to the duties of their office. "Employee" also means all full-time, paid firemen who are employed by any fire department that serves a city or county or any part of a city or county and that is supported in whole or in part by municipal or county funds. In all cases of doubt the Board of Trustees shall decide who is an employee. On and after August 1, 2001, a person who is a nonimmigrant alien and who otherwise meets the requirements of this subdivision shall not be excluded from the definition of "employee" solely because the person holds a temporary or time-limited visa.
(11) "Employer" shall mean any county, incorporated city or town, the board of alcoholic control of any county or incorporated city or town, the North Carolina League of Municipalities, and the State Association of County Commissioners. "Employer" shall also mean any separate, juristic political subdivision of the State as may be approved by the Board of Trustees upon the advice of the Attorney General. "Employer" also means any fire department that serves a city or county or any part of a city or county and that is supported in whole or in part by municipal or county funds.
(11a) "Filing" when used in reference to an application for retirement shall mean the receipt of an acceptable application on a form provided by the Retirement System.
(11b) "Law Enforcement Officer" means a full-time paid employee of an employer, who possesses the power of arrest, who has taken the law enforcement oath administered under the authority of the State as prescribed by G.S. 11-11, and who is certified as a law enforcement officer under the provisions of Chapter 17C of the General Statutes or certified as a deputy sheriff under the provisions of Chapter 17E of the General Statutes. "Law enforcement officer" also means the sheriff of the county. The number of paid personnel employed as law enforcement officers by a law enforcement agency may not exceed the number of law enforcement positions approved by the applicable local governing board.
(12) "Medical board" shall mean the board of physicians provided for in G.S. 128-28, subsection (l).
(13) "Member" shall mean any person included in the membership of the Retirement System as provided in G.S. 128-24.
(14) "Membership service" shall mean service as an employee rendered while a member of the Retirement System.
(15) "Pension" shall mean payments for life derived from money provided by the employer. All pensions shall be payable in equal monthly installments.
(16) "Pension reserve" shall mean the present value of all payments to be made on account of any pension or benefit in lieu of any pension computed at regular interest upon the basis of such mortality tables as shall be adopted by the Board of Trustees.
(17) "Prior service" shall mean the service of a member rendered before the date he becomes a member of the System, certified on his prior service certificate and allowable as provided by G.S. 128-26.
(18) "Regular interest" shall mean interest compounded annually at such rate as shall be determined by the Board of Trustees in accordance with G.S. 128-29, subsection (b).
(19) "Retirement" shall mean withdrawal from active service with a retirement allowance granted under the provisions of this Article. In order for a member's retirement to become effective in any month, the member must render no service at any time during that month.
(20) "Retirement allowance" shall mean the sum of the annuity and the pension, or any optional benefit payable in lieu thereof.
(21) "Retirement System" shall mean the North Carolina Local Governmental Employees' Retirement System as defined in this Article.
(22) "Service" shall mean service as an employee as described in subdivision (10) of this section and paid for by the employer as described in subdivision (11) of this section.
(23) "Year" shall mean the regular fiscal year beginning July 1, and ending June 30; in the following calendar year unless otherwise defined by regulation of the Board of Trustees.
(1939, c. 390, s. 1; 1941, c. 357, s. 1; 1943, c. 535; 1945, c. 526, s. 1; 1947, c. 833, ss. 1, 2; 1949, c. 231, ss. 1, 2; 1949, c. 1015; 1959, c. 491, ss. 1, 2; 1961, c. 515, s. 5; 1965, c. 781; 1971, c. 325, ss. 1-4; 1975, 2nd Sess., c. 983, s. 125; 1977, c. 316, ss. 1, 2; 1981, c. 557, ss. 1, 2; 1985, c. 479, s. 196(b); c. 649, s. 3; 1991, c. 51, s. 1; 1991 (Reg. Sess., 1992), c. 762, ss. 1, 2; 1997-144, s. 1; 1999-167, ss. 1, 2; 1999-456, s. 37; 2001-426, s. 1; 2003-359, ss. 13, 14.)
Local Modification. - Catawba: 1995, c. 306, s. 1; 1995 (Reg. Sess., 1996), c. 693, s. 2; Mecklenburg: 1995, c. 532, s. 1; 1995 (Reg. Sess., 1996), c. 693, s. 1; city of Asheville: 1981, c. 737; city of Charlotte: 1947, c. 926, amended by Session Laws 1949, c. 734; 1951, c. 387; 1965, c. 575; 1969, c. 132; 1971, c. 860; c. 903, s. 2; 1973, c. 267; 1983, c. 506; (as to Art. 3) 1985, c. 185; 1987, c. 506; 1987 (Reg. Sess., 1988), c. 1033; 1989, c. 248; c. 770, s. 45; 1991 (Reg. Sess., 1992), c. 830; c. 1030, s. 51.6; 1993 (Reg. Sess., 1994), c. 640, s.1; 1995, c. 171, s. 1; 1999-100, s. 1; 2001-22, 2002-43, ss. 1-5; 2006-117, s. 1, 2; (as to Article 3) city of Fayetteville: 1998-61; city of High Point: 1987, c. 327.
Open Enrollment - Contributory Death Benefit. - Session Laws 2007-388, s. 1, provides: "Notwithstanding any section of law or any rules and regulations adopted by the Boards of Trustees to the contrary, the Retirement Systems Division of the Department of State Treasurer shall allow for an open enrollment period in the Contributory Death Benefit for Retired Members of the Teachers' and State Employees' Retirement System, the Local Governmental Employees' Retirement System, the Consolidated Judicial Retirement System, and the Legislative Retirement System. This open enrollment period shall begin February 1, 2008, and end May 31, 2008. The Retirement Systems Division shall send notice by U.S. mail of the open enrollment period to all retirees who elected not to be covered under this benefit or who failed to make any election at the time of their retirement and shall send a second notice by U.S. mail to any such retiree who fails to make an election within 60 days of the notification of the open enrollment period. Notice, at minimum, shall consist of notification of the open enrollment period and the consequences of failure to respond within the specified time frames, informational materials explaining the benefit program and the associated costs, and a preprinted personalized enrollment application to facilitate the enrollment process indicating each individual retiree's contribution rate. The contribution rate for retirees electing coverage during the open enrollment period shall be increased by eleven and one-tenth percent (11.1%) the rate established for retirees who elected coverage when first eligible, at retirement. For retirees electing coverage during this open enrollment period, coverage shall become effective the first of the month following the month in which the election of coverage is received by the Retirement Systems Division but not before February 1, 2008. Contribution rates for coverage shall be based upon the retiree's nearest age as of the effective date of coverage and shall begin by deduction from the retiree's net monthly retirement allowance in the month in which coverage becomes effective. Coverage elected by retirees during this open enrollment period shall be subject to all other laws and rules and regulations adopted by the Board of Trustees governing the Contributory Death Benefit for Retired Members."
Editor's Note. - Subdivision (7a)a, (7a)b, and (7a)c designations were added by the Revisor of Statutes.
Session Laws 1999-167, which in ss. 1 and 2 added the second sentence of subsection (10), deleted the second sentence of subdivision (11) (which was subsequently reinserted by Session Laws 1999-456, s. 37), and added the last sentence of subdivision (11), provided in s. 3 that the Board of Trustees of the North Carolina Local Governmental Employees' Retirement System through the Office of the Attorney General was to request a letter of determination or ruling from the Internal Revenue Service as to whether the status of the North Carolina Local Governmental Employees' Retirement System as a governmental plan would be adversely affected by the participation of employees affected by this legislation. The request was to be made no later than 30 days after the effective date of the act, June 8, 1999, and fire departments affected by this legislation were to be eligible for participation in the North Carolina Local Governmental Employees' Retirement System upon the first day of the calendar quarter following receipt of a favorable letter of determination or ruling. An unfavorable determination was received.
Legal Periodicals. - For comment on the 1939 enactment, see 17 N.C.L. Rev. 369 (1939).
For comment on the 1941 amendment, see 19 N.C.L. Rev. 510 (1941).
CASE NOTES
This Article creates contractual rights and obligations. Simpson v. North Carolina Local Gov't Employees' Retirement Sys., 88 N.C. App. 218, 363 S.E.2d 90 (1987), aff'd, 323 N.C. 362, 372 S.E.2d 559 (1988).
Any cessation of employment, including retirement, constitutes a termination from service as an employee. Walker v. Board of Trustees, 348 N.C. 63, 499 S.E.2d 429 (1998).
Discretionary Power to Participate in Retirement System. - Where a city has become an employer participating in the State Retirement System under authority conferred by this Article and by an act amending its charter, the repeal of the charter provision leaves its governing authorities with discretionary power to participate in the Retirement System under authority conferred by this Article, and mandamus will not lie to compel it to withdraw from the State Retirement System. Laughinghouse v. City of New Bern, 232 N.C. 596, 61 S.E.2d 802 (1950).
Credit Denied to a Self-Insured City for Disability Retirement Payments. - North Carolina Industrial Commission's decision to deny a city credit for disability retirement payments that were made to an injured city employee from a public employee benefits program was not an abuse of discretion under G.S. 97-42 because the city and the employee jointly contributed to the plan, and competent evidence, in the form of testimony as to the funding of the disability benefits plan, existed to support the Commission's findings of fact and conclusions of law. Cox v. City of Winston-Salem, 171 N.C. App. 112, 613 S.E.2d 746 (2005).
Interest Accrual and Compounding. - Consistent with the purposes of G.S. 135-1(19) and subdivision (18) of this section, underpayments were found to accrue interest from the date they became due. Furthermore, court found that statutes entitled beneficiaries to interest, not only on the principle due, but also on the accrued or earned interest. Faulkenbury v. Teachers' & State Employees' Ret. Sys., 133 N.C. App. 587, 515 S.E.2d 743 (1999), cert. denied, 351 N.C. 102, 540 S.E.2d 358 (1999).
Actuarial Equivalent to Include Interest. - The actuarial value includes interest and there was no double recovery where the court was following the definition of actuarial equivalent as prescribed by this section and included interest in the underpayment award. Faulkenbury v. Teachers' & State Emps. Retirement Sys., 345 N.C. 683, 483 S.E.2d 422 (1997).
Postjudgment Interest Not Awardable Against State. - Retirees under the state and local government retirement system were not entitled to post-judgment interest on retroactive disability benefits, because the state retirement statutes contain no provision for the allowance of such interest. Faulkenbury v. Teachers' & State Employees' Ret. Sys., 132 N.C. App. 137, 510 S.E.2d 675 (1999), cert. denied, 350 N.C. 379, 536 S.E.2d 620 (1999).
Retirement Is Withdrawal Not Termination. - This statute explicitly defines retirement as a withdrawal from active service not as termination of employment. Walker v. Board of Trustees, 127 N.C. App. 156, 487 S.E.2d 839 (1997), aff'd, 348 N.C. 63, 499 S.E.2d 429 (1998).
Applied in Pritchett v. Clapp, 288 N.C. 329, 218 S.E.2d 406 (1975); Campbell v. City of Laurinburg, 168 N.C. App. 566, 608 S.E.2d 98 (2005).
Cited in Wallace v. Board of Trustees, 145 N.C. App. 264, 550 S.E.2d 552 (2001), cert. denied, 354 N.C. 580, 559 S.E.2d 553 (2001).