South Carolina lawmakers have agreed to end the controversial TERI program in an attempt to save taxpayers billions of dollars in running the state retirement system.
TERI -- which stands for Teacher and Employee Retention Incentive -- allows state workers to retire and return to work for up to five years, earning a salary and a retirement check at the same time.
Lawmakers have agreed to end the TERI program by 2018 as part of a broader bill designed to encourage employees to work longer before retiring. By working longer, state workers would withdraw less from the state's $25 billion pension fund -- which accountants estimate will run out of money sometime over the next 30 years, falling about $15 billion short.
The House approved the bill 88-9, and the Senate approved the bill 43-0. It now goes to Gov. Nikki Haley, who can sign it into law, veto it or allow it to become law without her signature.
The bill means state workers will pay more, but it should save taxpayers money. The bill requires state workers to match any taxpayer increases to the system, meaning taxpayers and state workers would share in any increases. Right now, taxpayers have to pay for any required increases.
The bill also guarantees an annual 1 percent cost-of-living-adjustment for retirees, capped at $500.
Rep. Jim Merrill, R-Berkeley, who lead the negotiations for the House, called it "a wonderful bill both Democrats and Republicans can feel good about."
However, Merrill was not pleased with all aspects of the bill.
The bill also creates an 11-member Public Employee Benefits Authority that would govern the retirement system. Four of the members would be either retirees or state workers, and all of the members would earn $20,000 annual salaries.
The authority would also make decisions about the employee health insurance plan. Merrill warned that, because the board would make decisions about non-retirement issues, the state Supreme Court could rule the bill unconstitutional under the "one subject" rule.
"It endangers this bill, in our opinion," he said.
But Merrill said the Senate and Gov. Nikki Haley insisted on the authority, and the bill would not have passed without it.
The states retirement fund has $25 billion in it. The state uses it to pay monthly retirement checks to retired state workers, teachers, police officers, firefighters and lawmakers. The money in the fund comes from employee contributions, taxpayer contributions and investment returns.
However, over the last decade, the retirement fund has not been able to keep up with the benefits it owes retired state workers for a variety of reasons, including huge investment losses the system sustained during the Great Recession.
Accountants predict that sometime over the next 30 years the retirement fund will run out of money, falling about $15 billion short. To avoid this, state taxpayers would have to pay billions of dollars to make up that shortfall. Thats why lawmakers want to change the law to make state workers contribute more to the system and work longer before they retire.
State workers and retirees are anxious to get a bill passed this year because next year the shortfall will grow, which could result in more drastic changes to fix the system.
You could almost guarantee that folks who are not supportive of state employees and retirees would push the panic button and consequently any legislation would reflect that, said Carlton Washington, executive director of the S.C. State Employees Association.
If the bill passes, South Carolina would become the 44th state since 2009 to pass major retirement reform, according to Ron Snell, who tracks state retirement systems for the National Conference on State Legislatures.
Reach Beam at (803) 386-7038.