North Carolina § 128-21 - Definitions.

§ 128-21. Definitions.

The following words and phrases as used in this Article, unless a different meaning is plainly required by the context, shall have the following meanings: "Accumulated contribution" shall mean the sum of all amounts deducted from the compensation of a member and credited to his individual account in the annuity savings fund, together with regular interest thereon, as provided in G.S. 128-30, subsection (b). "Actuarial equivalent" shall mean a benefit of equal value when computed upon the basis of actuarial assumptions as shall be adopted by the Board of Trustees. "Annuity" shall mean payments for life derived from the accumulated contribution of a member. All annuities shall be payable in equal monthly installments. "Annuity reserve" shall mean the present value of all payments to be made on account of any annuity or benefit in lieu of any annuity computed at regular interest upon the basis of such mortality tables as shall be adopted by the Board of Trustees. "Authorized representatives who are assisting the Retirement Systems Division staff" means only other staff of the Department of State Treasurer, staff of the Department of Justice, or persons providing internal auditing assistance required under G.S. 143-746(b). "Average final compensation" shall mean the average annual compensation, not including any terminal payments for unused sick leave, of a member during the four consecutive calendar years of creditable service producing the highest such average; but shall not include any compensation, as determined by the Board of Trustees, for the reimbursement of expenses or payments for housing or any other allowances whether or not classified as salary and wages. Payout of vacation leave shall be included in "average final compensation" only if the payout is received by the member during the four consecutive calendar years of membership service producing the highest average annual compensation of the member. "Beneficiary" shall mean any person in receipt of a pension, an annuity, a retirement allowance or other benefit as provided by this Article. "Board of Trustees" shall mean the Board provided for in G.S. 128-28 to administer the Retirement System. "Compensation" shall mean all salaries and wages prior to any reduction pursuant to sections 125, 401(k), 403(b), 414(h)(2), and 457 of the Internal Revenue Code, not including any terminal payments for unused sick leave, derived from public funds which are earned by a member of the Retirement System for service as an employee in the unit of the Retirement System for which he is performing full-time work. In addition to the foregoing, "compensation" shall include: (7a) a. "Compensation" shall mean all salaries and wages prior to any reduction pursuant to sections 125, 401(k), 403(b), 414(h)(2), and 457 of the Internal Revenue Code, not including any terminal payments for unused sick leave, derived from public funds which are earned by a member of the Retirement System for service as an employee in the unit of the Retirement System for which he is performing full-time work. In addition to the foregoing, "compensation" shall include: Performance-based compensation (regardless of whether paid in a lump sum, periodic installments, or on a monthly basis); Conversion of additional benefits to salary (additional benefits such as health, life, or disability plans), so long as the benefits are other than mandated by State law or regulation; Payment of tax consequences for benefits provided by the employer so long as they constitute an adjustment or increase in salary and not a "reimbursement of expenses"; Payout of vacation leave so long as such payouts are permitted by applicable law and regulation; Employee contributions to eligible deferred compensation plans; and Effective July 1, 2009, payment of military differential wages. "Compensation" shall not include any payment, as determined by the Board of Trustees, for the reimbursement of expenses or payments for housing or any other allowances whether or not classified as salary and wages. Notwithstanding any other provision of this Chapter, "compensation" shall not include: Supplement/allowance provided to employee to purchase additional benefits such as health, life, or disability plans; Travel supplement/allowance (nonaccountable allowance plans); Employer contributions to eligible deferred compensation plans; Employer-provided fringe benefits (additional benefits such as health, life, or disability plans); Reimbursement of uninsured medical expenses; Reimbursement of business expenses; Reimbursement of moving expenses; Reimbursement/payment of personal expenses; Incentive payments for early retirement; Bonuses paid incident to retirement; Contract buyout/severance payments; and Payouts for unused sick leave. In the event an employer reports as "compensation" payments not specifically included or excluded as "compensation", such payments shall be "compensation" for retirement purposes only if the employer pays the Retirement System the additional actuarial liability created by such payments. "Compliance investigation" means an independent review or examination by Retirement Systems Division staff or authorized representatives who are assisting the Retirement Systems Division staff of records, activities, actions, or decisions by employers or other affiliated or associated entities having an impact on a Retirement System or benefits administered by the Board of Trustees. The purpose of a compliance investigation is to help detect errors and ensure compliance and full accountability in the use of pension funds. "Consumer Price Index" shall mean the Consumer Price Index for All Urban Consumers (CPI-U), U.S. City Average, all items, not seasonally adjusted, standard reference base, as published by the Bureau of Labor Statistics of the U.S. Department of Labor. "Creditable service" shall mean the total of "prior service" plus "membership service" plus service, both noncontributory and purchased, for which credit is allowable as provided in G.S. 128-26. In no event, however, shall "creditable service" be deemed "membership service" for the purpose of determining eligibility for benefits accruing under this Chapter. "Duly acknowledged" means notarized, including electronic notarization, or verified through an identity authentication service approved by the Department of State Treasurer. "Earnable compensation" shall mean the full rate of the compensation that would be payable to an employee if he worked the full normal working time, including any allowance of maintenance or in lieu thereof received by the member. "Employee" shall mean any person who is regularly employed in the service of and whose salary or compensation is paid by the employer as defined in subdivision (11) of this section, whether employed or appointed for stated terms or otherwise, except teachers in the public schools and except such employees who hold office by popular election as are not required to devote a major portion of their time to the duties of their office. "Employee" also means all full-time, paid firemen who are employed by any fire department that serves a city or county or any part of a city or county and that is supported in whole or in part by municipal or county funds. "Employee" also includes any participant whose employment is interrupted by reason of service in the Uniformed Services, as that term is defined in section 4303(16) of the Uniformed Services Employment and Reemployment Rights Act, Public Law 103-353, if that participant was an employee at the time of the interruption; if the participant does not return immediately after that service to employment with a covered employer in this System, then the participant shall be deemed "in service" until the date on which the participant was first eligible to be separated or released from his or her involuntary military service. In all cases of doubt the Board of Trustees shall decide who is an employee. On and after August 1, 2001, a person who is a nonimmigrant alien and who otherwise meets the requirements of this subdivision shall not be excluded from the definition of "employee" solely because the person holds a temporary or time-limited visa. "Employer" shall mean any county, incorporated city or town, the board of alcoholic control of any county or incorporated city or town, the North Carolina League of Municipalities, and the State Association of County Commissioners. "Employer" shall also mean any separate, juristic political subdivision of the State as may be approved by the Board of Trustees upon the advice of the Attorney General. "Filing" when used in reference to an application for retirement shall mean the receipt of an acceptable application on a form provided by the Retirement System. "Firefighter" means a person (i) who is a full-time paid employee of an employer that participates in the Local Governmental Employees' Retirement System and maintains a fire department certified by the North Carolina Department of Insurance and (ii) who is actively serving in a position with assigned primary duties and responsibilities for the prevention, detection, and suppression of fire. "Fraud investigation" means an independent review or examination by Retirement Systems Division staff or authorized representatives who are assisting the Retirement Systems Division staff of records, activities, actions, or decisions by employers or other affiliated or associated entities having an impact on the Retirement System. The purpose of a fraud investigation is to help detect and prevent fraud and to ensure full accountability in the use of pension funds. "Law Enforcement Officer" means a full-time paid employee of an employer, who possesses the power of arrest, who has taken the law enforcement oath administered under the authority of the State as prescribed by G.S. 11-11, and who is certified as a law enforcement officer under the provisions of Article 1 of Chapter 17C of the General Statutes or certified as a deputy sheriff under the provisions of Chapter 17E of the General Statutes. "Law enforcement officer" also means the sheriff of the county. The number of paid personnel employed as law enforcement officers by a law enforcement agency may not exceed the number of law enforcement positions approved by the applicable local governing board. "Medical board" shall mean the board of physicians provided for in G.S. 128-28, subsection (l). "Member" shall mean any person included in the membership of the Retirement System as provided in G.S. 128-24. "Membership service" shall mean service as an employee rendered while a member of the Retirement System or membership service in a North Carolina Retirement System that has been transferred into this system. "Pension" shall mean payments for life derived from money provided by the employer. All pensions shall be payable in equal monthly installments. "Pension reserve" shall mean the present value of all payments to be made on account of any pension or benefit in lieu of any pension computed at regular interest upon the basis of such mortality tables as shall be adopted by the Board of Trustees. "Prior service" shall mean the service of a member rendered before the date he becomes a member of the System, certified on his prior service certificate and allowable as provided by G.S. 128-26. No prior service shall be allowed at any employer for which participation is adopted and approved by the Board of Trustees in this Retirement System on or after August 1, 2015. "Regular interest" shall mean interest compounded annually at such rate as shall be determined by the Board of Trustees in accordance with G.S. 128-29, subsection (b). "Regularly employed" shall mean employment in a position for which the duties require not less than 1,000 hours of work in a calendar year, provided that the term shall not include any individuals whose employment is considered "temporary employment" as defined in subdivision (22b) of this section or "statutorily-required interim employment" as defined in subdivision (22a) of this section. "Rescue squad worker" means a person (i) who is a full-time paid employee of an employer that participates in the Local Governmental Employees' Retirement System and maintains a rescue squad or emergency medical services team certified by the North Carolina Department of Insurance or the Department of Health and Human Services and (ii) who is actively serving in a position with assigned primary duties and responsibilities for the alleviation of human suffering and assistance to persons who are in difficulty, who are injured, or who become suddenly ill, by providing proper and efficient care or emergency medical services. "Retirement" under this Article shall mean the commencement of monthly retirement benefits, along with the termination of employment and the complete separation from active service with no intent or agreement, expressed or implied, to return to service. A retirement allowance under the provisions of this Article may only be granted upon retirement of a member. In order for a member's retirement to become effective in any month, the member must perform no work for a participating employer, including part-time, temporary, substitute, or contractor work, at any time during the same month immediately following the effective first day of retirement. "Retirement allowance" shall mean the sum of the annuity and the pension, or any optional benefit payable in lieu thereof. "Retirement System" shall mean the North Carolina Local Governmental Employees' Retirement System as defined in this Article. "Service" shall mean service as an employee as described in subdivision (10) of this section and paid for by the employer as described in subdivision (11) of this section. "Statutorily-required interim employment" shall mean individuals whose employment for an employer as defined in subdivision (11) of this section occurs as a result of the individual's designation by the city council as an interim city manager, as provided in G.S. 160A-150 for a period not to exceed 12 months on a nonrecurring basis, or as a result of the individual's designation by the board of commissioners as an interim county manager, as provided in G.S. 153A-84 for a period not to exceed 12 months on a nonrecurring basis. "Temporary employment" shall mean employment for a limited term, in no case to exceed 12 consecutive months on a nonrecurring basis, for an employer as defined in subdivision (11) of this section. "Year" shall mean the regular fiscal year beginning July 1, and ending June 30; in the following calendar year unless otherwise defined by regulation of the Board of Trustees. History (1939, c. 390, s. 1; 1941, c. 357, s. 1; 1943, c. 535; 1945, c. 526, s. 1; 1947, c. 833, ss. 1, 2; 1949, c. 231, ss. 1, 2; 1949, c. 1015; 1959, c. 491, ss. 1, 2; 1961, c. 515, s. 5; 1965, c. 781; 1971, c. 325, ss. 1-4; 1975, 2nd Sess., c. 983, s. 125; 1977, c. 316, ss. 1, 2; 1981, c. 557, ss. 1, 2; 1985, c. 479, s. 196(b); c. 649, s. 3; 1991, c. 51, s. 1; 1991 (Reg. Sess., 1992), c. 762, ss. 1, 2; 1997-144, s. 1; 1999-167, ss. 1, 2; 1999-456, s. 37; 2001-426, s. 1; 2003-359, ss. 13, 14; 2009-66, ss. 2(a), 6(f), (j); 2011-92, s. 1; 2011-294, s. 4; 2012-185, s. 2(a); 2013-288, ss. 3(b), 4(b); 2014-97, s. 4(b); 2015-164, s. 8; 2015-168, s. 5; 2017-125, s. 1(b); 2017-128, s. 1(e), (f), (g); 2020-48, s. 1.1(a); 2021-75, s. 3.1(a).) Local Modification. - Catawba: 1995, c. 306, s. 1; 1995 (Reg. Sess., 1996), c. 693, s. 2; Mecklenburg: 1995, c. 532, s. 1; 1995 (Reg. Sess., 1996), c. 693, s. 1; city of Asheville: 1981, c. 737; city of Charlotte: 1947, c. 926, amended by Session Laws 1949, c. 734; 1951, c. 387; 1965, c. 575; 1969, c. 132; 1971, c. 860; c. 903, s. 2; 1973, c. 267; 1983, c. 506; (as to Art. 3) 1985, c. 185; 1987, c. 506; 1987 (Reg. Sess., 1988), c. 1033; 1989, c. 248; c. 770, s. 45; 1991 (Reg. Sess., 1992), c. 830; c. 1030, s. 51.6; 1993 (Reg. Sess., 1994), c. 640, s.1; 1995, c. 171, s. 1; 1999-100, s. 1; 2001-22, 2002-43, ss. 1-5; 2006-117, s. 1, 2; 2010-7, s. 1; 2017-71, s. 1; (as to Article 3) city of Fayetteville: 1998-61; city of High Point: 1987, c. 327; town of Stovall: 2008-52, s. 1 (as to prior service credits). Open Enrollment - Contributory Death Benefit. - Session Laws 2007-388, s. 1, provides: "Notwithstanding any section of law or any rules and regulations adopted by the Boards of Trustees to the contrary, the Retirement Systems Division of the Department of State Treasurer shall allow for an open enrollment period in the Contributory Death Benefit for Retired Members of the Teachers' and State Employees' Retirement System, the Local Governmental Employees' Retirement System, the Consolidated Judicial Retirement System, and the Legislative Retirement System. This open enrollment period shall begin February 1, 2008, and end May 31, 2008. The Retirement Systems Division shall send notice by U.S. mail of the open enrollment period to all retirees who elected not to be covered under this benefit or who failed to make any election at the time of their retirement and shall send a second notice by U.S. mail to any such retiree who fails to make an election within 60 days of the notification of the open enrollment period. Notice, at minimum, shall consist of notification of the open enrollment period and the consequences of failure to respond within the specified time frames, informational materials explaining the benefit program and the associated costs, and a preprinted personalized enrollment application to facilitate the enrollment process indicating each individual retiree's contribution rate. The contribution rate for retirees electing coverage during the open enrollment period shall be increased by eleven and one-tenth percent (11.1%) the rate established for retirees who elected coverage when first eligible, at retirement. For retirees electing coverage during this open enrollment period, coverage shall become effective the first of the month following the month in which the election of coverage is received by the Retirement Systems Division but not before February 1, 2008. Contribution rates for coverage shall be based upon the retiree's nearest age as of the effective date of coverage and shall begin by deduction from the retiree's net monthly retirement allowance in the month in which coverage becomes effective. Coverage elected by retirees during this open enrollment period shall be subject to all other laws and rules and regulations adopted by the Board of Trustees governing the Contributory Death Benefit for Retired Members." Editor's Note. - Subdivision (7a)a, (7a)b, and (7a)c designations were added by the Revisor of Statutes. At the direction of the Revisor of Statutes, subdivisions (7b) and (7c), as enacted by Session Laws 2011-92, s. 1, were redesignated as subdivisions (11b) and (18a), respectively, and former subdivision (11b) was redesignated as subdivision (11c). Session Laws 1999-167, which in ss. 1 and 2 added the second sentence of subsection (10), deleted the second sentence of subdivision (11) (which was subsequently reinserted by Session Laws 1999-456, s. 37), and added the last sentence of subdivision (11), provided in s. 3 that the Board of Trustees of the North Carolina Local Governmental Employees' Retirement System through the Office of the Attorney General was to request a letter of determination or ruling from the Internal Revenue Service as to whether the status of the North Carolina Local Governmental Employees' Retirement System as a governmental plan would be adversely affected by the participation of employees affected by this legislation. The request was to be made no later than 30 days after the effective date of the act, June 8, 1999, and fire departments affected by this legislation were to be eligible for participation in the North Carolina Local Governmental Employees' Retirement System upon the first day of the calendar quarter following receipt of a favorable letter of determination or ruling. An unfavorable determination was received. Session Laws 2009-378, s. 2, applicable to local government furloughs on and after January 1, 2009, and before July 1, 2010, provides: "Notwithstanding any other provision of law and upon the one-time irrevocable election of the employer as defined in G.S. 128-21(11) , a public employee on a furlough who is a member of the Local Governmental Employees' Retirement System administered by the Retirement Systems Division of the Department of State Treasurer shall be considered in active service during any period of furlough and shall be entitled to all of the same benefits to which the employee was entitled on the workday immediately preceding the furlough. The member shall suffer no diminution of retirement average final compensation based on being on furlough, and the retirement average final compensation shall be calculated based on the undiminished compensation. During a furlough period, the employer who opts for this provision shall pay both employee and employer contributions to the Retirement Systems Division on behalf of the furloughed employee as though the employee were in active service. Notwithstanding the definition of 'compensation' in G.S. 128-21 (7a), any employer who elects to cover its furloughed employees through this provision shall be entitled to include earnings lost due to furloughs taken after January 1, 2009, and before July 1, 2009, in the reported compensation and contributions for either July or August, 2009. Any compensation and contributions lost due to furloughs must be reported to the Retirement Systems Division within 90 days of the beginning of the period in which the compensation and contributions will be included." Session Laws 2011-92, s. 1, which added subdivisions (11b) and (18a), is applicable to beneficiaries of firefighters and rescue squad workers killed in the line of duty on or after July 1, 2011. Session Laws 2011-144, s. 1, provides: "Johnston Memorial Hospital Authority may elect to discontinue its participation as an employer in the Local Governmental Employees' Retirement System as defined in G.S. 128-21 for any and all employees hired on or after October 1, 2011. Johnston Memorial Hospital Authority's Board of Trustees shall communicate their decision and provide to the Retirement Systems Division of the State Treasurer's Office copies of any Board action relating to this election. Johnston Memorial Hospital Authority will continue to report the payroll of employees and remit the employee and employer contributions on all employees employed as of September 30, 2011, until such time as none exist." At the direction of the Revisor of Statutes, subdivision (5a) as added by Session Laws 2012-185, was redesignated as subdivision (4a) to maintain alphabetical order. Subdivision (8a) as added by Session Laws 2014-97, s. 4(b), was redesignated as subdivision (7b) at the direction of the Revisor of Statutes to maintain alphabetical order. At the direction of the Revisor of Statutes, subdivisions (10a)-(10c), as enacted by Session Laws 2015-164, s. 8, were redesignated as subdivisions (18a), (22b) and (22a), respectively, and former subdivision (18a) was redesignated as subdivision (18b). At the direction of the Revisor of Statutes, in subdivision (18a), "subdivision (22b)" and "subdivision (22a)" were substituted for "subdivision (10b)" and "subdivision (10c)" respectively. "Article 1 of Chapter 17C " has been substituted for "Chapter 17C" in subdivision (11d) at the direction of the Revisor of Statutes. Session Laws 2020-3, s. 4.22(a)-(d), provides: "(a) This section shall apply to the following General Statutes: "(1) Article 1A of Chapter 120 . "(2) Article 3 of Chapter 128 . "(3) Article 1 of Chapter 135 . "(4) Article 4 of Chapter 135 . "(5) Article 6 of Chapter 135 . "(b) Whenever the medical board, as established under G.S. 128-28(l) , 135-6(k), or 135-102(d), is required to make a determination or certification of eligibility for disability benefits, the Director of the Retirement Systems Division of the Department of State Treasurer, or the Director's designee, may make an interim determination or an interim certification that a member or beneficiary is eligible for disability benefits. The Director may not make a determination or certification that a member or beneficiary is not eligible for disability benefits. "(c) The medical board shall review any interim determinations or interim certifications made in accordance with this section as soon as practicable and shall then make a final determination or final certification for disability benefits. If, subsequent to an interim determination or interim certification, the medical board makes a final determination that a member or beneficiary is not eligible for disability benefits, then any payment to that member or beneficiary shall cease and the determination shall be applied prospectively only so that the final determination will not require any refund by the member or beneficiary to the applicable retirement system or benefit plan for payments or benefits received during the interim period before the final determination is made. "(d) This section is effective when it becomes law [May 4, 2020]. Subsection (b) of this section expires August 1, 2020. Any interim determinations or interim certifications made, as allowed under subsection (b) of this section, will remain valid until a final determination is made, in accordance with subsection (c) of this section." Session Laws 2020-3, s. 5, is a severability clause. Session Laws 2020-48, s. 6.1, is a severability clause. Session Laws 2021-75, s. 3.1(c), made the substitution of "computed upon the basis of actuarial assumptions" for "computed at regular interest upon the basis of such mortality tables" in subdivision (2) of this section by Session Laws 2021-75, s. 3.1(a), applicable to benefit calculations performed on or after on or after July 1, 2021. Session Laws 2021-75, s. 8.1, is a severability clause. Effect of Amendments. - Session Laws 2009-66, ss. 2(a), 6(f), and 6(j), effective July 1, 2009, added subdivision (7a)a.6., and made related changes; in subdivision (10), added the third sentence; and, in subdivision (11), deleted the last sentence, which read: " 'Employer' also means any fire department that serves a city or county or any part of a city or county and that is supported in whole or in part by municipal or county funds." Session Laws 2011-92, s. 1, effective July 1, 2011, and applicable to beneficiaries of firefighters and rescue squad workers killed in the line of duty on or after that date, added subdivisions (11b) and (18a). Session Laws 2011-294, s. 4, effective July 1, 2011, in subdivision (19), added the second sentence, and in the last sentence, inserted "including part time, temporary, substitute, or contractor service" and substituted "the month immediately following the effective date of retirement" for "that month." Session Laws 2012-185, s. 2(a), effective July 1, 2012, added subdivision (5a); added subdivision (11c) and redesignated former subdivision (11c) as subdivision (11d). Session Laws 2013-288, ss. 3(b), 4(b), effective July 1, 2013, added "or membership service in a North Carolina Retirement System that has been transferred into this system" in subdivision (14); and rewrote subdivision (19). Session Laws 2014-97, s. 4(b), effective January 1, 2015, added subdivision (7b). Session Laws 2015-164, s. 8, effective October 1, 2015, added subdivisions (18a), (22a) and (22b). Session Laws 2015-168, s. 5, effective July 23, 2015, added the last sentence of subdivision (17). Session Laws 2017-125, s. 1(b), effective July 20, 2017, added the last sentence in subdivision (5). Session Laws 2017-128, s. 1(e)-(g), effective July 20, 2017, added present subdivision (7b) and redesignated former subdivision (7b) as subdivision (7c); and inserted "records" in the first sentence of subdivision (11c). Session Laws 2020-48, s. 1.1(a), effective June 26, 2020, added subdivision (8a). For effective date and applicability, see editor's note. Session Laws 2021-75, s. 3.1(a), effective July 1, 2021, substituted "computed upon the basis of actuarial assumptions" for "computed at regular interest upon the basis of such mortality tables" in subdivision (2). For applicability, see editor's note. Legal Periodicals. - For comment on the 1939 enactment, see 17 N.C.L. Rev. 369 (1939). For comment on the 1941 amendment, see 19 N.C.L. Rev. 510 (1941). For article, "The Impact of Law on the State Pension Crisis," see 54 Wake Forest L. Rev. 105 (2019).