Carolina Alliance

        For Fair Employment

           (C.A.F.E.)

Retirees and Teachers Getting the Shaft

"Changes in the South Carolina Retirement System"

   Senate Bill 618 (S.618), passed by the South Carolina General Assembly on June 2, 2005, made significant revisions in the South Carolina Retirement System (SCRS), regarding primarily the contributions of employees and employers into the SCRS.  The first important changes in the system are the increases in SCRS employee and employer contributions.  The employer contribution increases to 8.55% whereas the employee contribution increases 6.5% over two years.  However, the other important change in contribution to the system is even more daunting.  Retired members of the SCRS and the Police Officers Retirement System (PORS) (including Teacher and Employee Retention Incentive (TERI) participants) must now make active employee contributions for the duration of his/her covered employment and/or TERI period, whereas under the former statute these individuals did not have to pay active employee contributions.  This new development in the SCRS affects more than 13,600 individuals.

    Why did the State Legislature pass this piece of legislation?  The State Budget and Control Board approved a 3.4% cost-of-living adjustment (COLA) for eligible retirees and beneficiaries of SCRS members.  Contingent on the Consumer Price Index (CPI), this guarantees up to 1% COLA for eligible retired SCRS members.  Previously, a COLA could only be granted if it was determined that the system could afford it.  Therefore, in order to afford the COlA, the Legislature and the Governor felt it necessary to recant on its previous deal with SCRS, PORS, and TERI retirees and make them pay into the system when they had never had to before.   Many of these individuals feel as if the State could have found alternatives to pay for a COLA than to break their commitment to them.  Some alternatives proposed to impact the funding of the pension plan included reducing benefits, increasing contributions, increasing investment returns, and achieving other actuarial gains.  However, what the Legislature saw as most fair and equitable was the method contained with S.618.

    Public Hearings were scheduled and held through which interested parties presented arguments as to what action should be taken and why.  The consensus, however, of those testifying was that the proposed changes were fair and equitable.  The State did know that everyone would not be happy or agree with their opinion on the issue, but did nothing to really acquiesce to the concerns.

    Hoyt Wheeler, a professor at the University of South Carolina (USC), within the Moore School of Business, presented CAFE with this information and the issue at the June 28, 2005, staff meeting.  As an educator and a member of TERI, he is particularly concerned with the change in the system, for when he signed onto the program, he was contractually obligated to no longer make contributions to SCRS.  However, all that has changed with the passage of  S.618; the State has breached the agreement and now, he as well as 13,600 other individuals, have to contribute to a system in which the were guaranteed an out.

   More on this issue as the story develops!