Frequently Asked Questions

Terminations and Refunds

I am leaving my job. Should I withdraw my retirement contributions or leave them in?

The correct answer to this question is usually dependent on three things: (i) whether you anticipate a return to employment covered by either the State or Local Governmental Retirement System; (ii) whether you have accumulated five years of retirement service credit; and (iii) your age. The best way to give a general answer is as follows: If you are reasonably sure that it is unlikely you will ever accumulate five years of service credit, you may be better served by withdrawing your contributions due to the fact that, with less than five years of service credit, you do not qualify for a monthly benefit, nor will you be paid any interest on your refund. If you have accumulated five years of service or anticipate accumulating five years, you should consider how long it will be before you will be eligible to receive a monthly benefit (and possible free individual health insurance if retiring from the Teachers’ and State Employees’ Retirement System). If you are close to meeting the eligibility requirements for retirement, you may wish to consider leaving your contributions in the Retirement System so that you may receive a monthly benefit when you become eligible.

Why must I wait sixty days in order to receive a refund of MY contributions from the Retirement System?

The sixty-day period is required by state law and generally provides the Retirement System with sufficient time to receive and process your individual contribution (payroll) information provided to us by your former employer. This period of time insures that you are paid all of your contributions. It also gives you time to consider your decision.

I am terminating my employment. When should I apply for my monthly retirement benefits?

If you are no longer working in a position covered by the Retirement System, as a general rule you should apply for your monthly benefit as soon as you become eligible, whether you will be in receipt of an unreduced service retirement allowance or early, reduced benefits. Historically, post-retirement benefit increases have significantly reduced, or completely eliminated the difference between the amount of your benefit should you begin reduced benefits as soon as possible as opposed to delaying the payment of your benefits until a later date. Also, when you begin receiving a monthly benefit from the Teachers’ and State Employees’ Retirement System, you will be eligible to enroll in the State Health Plan if you have contributed to the Teachers’ and State Employees’ Retirement System for at least five years while employed as a teacher or State employee. If you are a local governmental employee or retiree, you should consult your employer for information about possible health insurance coverage as a retiree.

Why doesn’t the Retirement System credit my account with a higher rate of interest?

The basic purpose of the Retirement System is to provide monthly retirement benefits to career employees. The Retirement System is a “defined benefit plan” which means that the benefit you receive at retirement is based on a defined formula. The formula is (i) the average of your highest consecutive four years of salary (average final compensation), times (ii) an accrual rate established by the North Carolina General Assembly, times (iii) your years of creditable service. The contributions and interest accumulated in your account have no direct relationship to the basic benefit you will receive at retirement. Higher interest rates on contributions would benefit only those employees who terminate employment and withdraw their contributions. In order to pay a higher interest rate on member contributions, the Retirement System would have to use funds which would otherwise be used to enhance retirement benefits for career employees.

Why does the Retirement System not pay interest on my refund of contributions if I have less than 5 years of creditable service?

In 1981, the North Carolina General Assembly amended the general statutes to eliminate the payment of interest to persons withdrawing their contributions with less than five years of membership service. (Refer to question above for further explanation.)

If I elect to receive a refund of my contributions, will I receive the matching contributions paid by my employer to the Retirement System?

No. Employer contributions remain in the Retirement System for payment of future retirement benefits for career employees. Since employee and employer accounts are maintained separately, you will not reap the benefit of monies paid to the Retirement System by your employer until you begin receiving a monthly retirement allowance. The employer rate of contribution to the Retirement System is adjusted periodically to reflect the necessary funding to provide future benefits.