As a Tar Heel teacher who's spent years toiling in front of chalkboards or today's interactive whiteboards, you can cite 1941 as a key year. That's the year that North Carolina created its Teachers’ and State Employees’ Retirement System. These days the system has more than 600,000 members and provides teachers and administrators across the state retirement, health and death benefits. How is it all paid for? As a teacher, you put 6 percent of every paycheck into the system. The state also kicks in; in 2012, North Carolina added the equivalent of 13 percent of all members' salaries to the system. But, in fact, most of the money in the system — around 80 percent — comes from the system's investments in stocks, bonds and real estate.
Who's a Member?
You're in the system if you're a permanent full-time teacher or if you work for a state-supported board of education or community college. You're also in if you're a permanent employee of a charter school whose board has decided to be in the retirement system and you work at least 30 hours a week for nine months a year. If you fit those descriptions, you're essentially stuck, for better or worse, because you can't opt out or choose another program. But, if you're a faculty member, administrator, community college president or other eligible employee at one of the state's institutions of higher education, you are allowed to join another retirement program.
Your Retirement Benefits
If you're 65 and have five years of membership under your belt, or 10 years if you became a member on or after Aug. 1, 2011, congratulations — you may retire. You may also retire if you've reached 60 and have been paying into the system for 25 years or if you've been paying into the system for 30 years, no matter your age. But how much will you get? The average public pension in North Carolina hovers around $22,000 per year. This formula determines your monthly retirement payment: 1.82 percent of average final compensation times years and months of paying into the system, so-called "creditable service." Your creditable service may go up or down depending on whether you've withdrawn contributions or come in and out of the system, served in the military, worked for another state or the federal government or have unused sick leave. In some of these cases, you can buy creditable service. You can also buy creditable service for educational and personal leaves, in some cases. You can choose from six payments plans that vary depending on how much your beneficiary would get after your death and whether you want inflated payments until your Social Security kicks in. Early retirement sounds nice, but it will reduce your benefit. The state uses the same formula above multiplied by a reduction percentage based on your age and years of service at early retirement.
Disability, Health and Death Benefits
The retirement system offers get short-term disability, long-term disability benefits, death benefits and health care, depending on your situation and the choices you make along the way. The Medical Review Board will decide if you're eligible for disability benefits. The death benefit may be a monthly payment, a return of your contributions to a beneficiary or a lump sum, depending on years of service and options you choose. You make your contributions to the retirement system on a before-tax basis, which lowers your taxable income.
Apply for your Benefits
The state Treasurer Department runs the huge program and puts out a handbook each year that gives you examples of how the system figures the monthly benefits. It also details the benefit payment plans, the short- and long-term disability benefits, how you'll be paid if you work as a teacher after retirement, how to buy service credit and other aspects of the program. You must apply for retirement benefits; they don't kick in automatically. Around 90 to 120 days before your planned retirement date, fill out a Form 6, titled Claiming Your Monthly Retirement Benefit.
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