Under the Dome
Retirement fund extension helps high-earning government workers
The state budget passed and signed last week should have some high earners in state and local governments who are close to retirement breathing easier.
It includes an extension of a temporary special retirement fund — created to keep the state from running afoul of federal pension limits — to July 31, 2016. That fund had been closed for enrollment at the end of last year.
State Sen. Tom Apodaca, a Hendersonville Republican, had added the extension to the budget at the request of the UNC system, which is home to top-paid doctors, administrators and athletic officials. He said he extended the special fund to give agencies and the State Treasurer’s Department more time to work out a solution to the issue.
Known as “qualified excess benefit arrangements,” they are common in many public pension systems. They stemmed from Congress’ efforts 40 years ago to make sure corporations did not use their pension programs to shield executive income.
But as some public employees began hitting those pension limits, Congress created the benefit arrangements to give public systems the leeway to continue paying full pensions to top-paid employees. Those employees had been contributing to the system what was required under state laws.
These special funds can become a sticky issue in two ways. They are supported by a contribution amounting to one-hundredth of one percent of the regular pension payments from all employees in the system, and in some cases the recipients’ high pensions were the result of questionable pay hikes.
In 2014, the fund spent $480,000 on 17 retirees.
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