North Carolina teachers’, public safety officers’, and public workers’ pension benefits are entitled to certain protections under state law and affirmed by court rulings. At the same time, the state does have some legal precedent that allows them to change particular aspects of retirement benefits.
In other words, there are parts of public pension benefits that can be changed by future state laws, but only certain parts of those benefits.
Equable Institute partnered with Columbia Law School’s Center for Public Research and Leadership to create infographics that map states’ pension governance. Understanding the legal environment for pension policies can be confusing for both lawmakers and public workers, but illuminating legally permissible policy pathways to improve funding sustainability and ensure adequate retirement income security for states’ workforces is essential.
In the case of North Carolina, state law allows the legislature to change vesting periods and benefit calculations for active employees who have not yet met the years of service requirement. In 2014, the North Carolina legislature did just that. For active TSERS members and new hires, the Legislature decreased vesting periods from 10 years to 5 years. They also established a “contribution-based” cap on benefits based on final average salaries above $100,000. The cap requires government employers to pay certain benefits earned above the cap or to require that members hired after 2014 self-fund such benefits.
The legal environment is favorable for these shifts – meaning that state law and legal precedent allows for changes to these aspects of pension policy.
North Carolina can likely shift active workers’ employee contribution and cost-of-living adjustments, because there is no existing law explicitly prohibiting this change and this issue has not been brought to court.
It is important to note that current retirees’ benefits have greater legal protection than those of active employees. Apart from reduced or eliminated COLAs, current retirees’ benefits cannot be taken away or reduced.
Disclaimer: The information here doesn’t constitute legal advice or representation. Equable is not necessarily recommending any of the policies discussed in the infographic. Some may not work for certain states, others may not be desirable policy. Ultimately, any pension policy change should honor promises made to public workers and put them on a path to retirement security, while ensuring sustainable funding measures.