How Does the South Carolina Retirement System Work?

FT Contributor  | 

In South Carolina, the Public Employee Benefit Authority (PEBA) administers and oversees the state employee retirement system. If you’re a state or public employee, whether you earn minimum wage or you’re an elected official, you have access to a retirement plan.

There are several different plans available based on your occupation. This allows PEBA to create specific plans for workers, keeping the retirement system financially healthy and funded. These plans are designed to help state employees save for retirement so they can eventually stop working.

To prepare for retirement, state employees pay a percentage of their salary into their respective retirement savings plan. When they reach retirement age and stop working, the plan begins to pay them back. The amount the pension plan pays depends on how long they worked for the state and other factors. This guide provides more information on the retirement plans that state workers are eligible for within the South Carolina retirement system.

Types of Retirement Systems in South Carolina

The South Carolina pension plan that applies to you depends on your occupation. As a state employee, you’re eligible to participate in one of the following six retirement plans.

South Carolina Retirement System

The South Carolina Retirement System (SCRS) is the largest pension plan offered through PEBA and most state employees are eligible. Individuals who work for public and charter schools, higher education institutions, state agencies, and local government subdivisions that participate in the plan may join.

To participate in this retirement plan, you must contribute 9% of your pay. Your retirement account also earns 4% interest annually, which is compounded every year until your account is no longer valid or you retire and your pension plan starts paying you.

When you begin working for the state, you may choose between three different basic retirement plans. The payout options for these plans vary slightly, as does your ability to select a beneficiary for the plan. The retirement benefit amount you receive depends on your retirement age and whether you plan to retire early, the number of years you worked for the state, and your average salary when you were working.

Police Officers Retirement System

The Police Officers Retirement System (PORS) is designed to assist public safety employees who work for state agencies, public and charter schools, or other government divisions. Employees eligible to participate in PORS include the following:

  • Coroners;
  • Magistrates;
  • Firefighters;
  • Probate judges;
  • Police officers;
  • Peace officers.

To participate, you must earn at least $2,000 per year and work at least 1,600 hours with the state. You’re required to contribute 9.75% of your pay but your retirement account earns 4% interest, which is compounded annually until you begin to take distributions or you stop contributing. The benefit amount you receive depends on the payout option you select, when you retire, and how long you worked for the state.

Judges and Solicitors Retirement System

The Judges and Solicitors Retirement System (JSRS) is reserved for eligible workers under the age of 72. This may include appointed judges who serve in family courts, circuit courts, the court of appeals, or in administrative law. Public defenders, solicitors, and those elected to serve on the South Carolina Supreme Court are also eligible to participate in this pension plan.

You must contribute 10% of your pay and your retirement account earns 4% interest, compounded annually. To begin receiving retirement benefits, you must have served at least 10 years as a judge or eight years as a public defender or solicitor. The benefit amount you receive is based on a JSRS retirement benefit formula and not your account balance.

General Assembly Retirement System

If you’re a member of the general assembly in South Carolina and you were elected before November 2012, you qualify to participate in the General Assembly Retirement System (GARS). You must make regular contributions that equal 11% of your pay while working for the state to participate. Your account earns 4% interest that’s compounded each year and the plan also includes in-service death and disability benefits.

When you’re ready to retire, a distribution formula is used to determine your benefit payout. Your retirement age, number of years served, and salary are used to calculate how much pension you receive each month.

South Carolina National Guard Plan

The South Carolina National Guard Plan (SCNG) is meant to be a supplemental source of retirement income and not your only way to save for retirement. As a National Guard member who served at least a total of 15 out of 20 years in South Carolina and at least the last 10 in the state, you’re eligible to participate in this retirement plan.

As a retiree, you’ll receive most of your retirement income from the federal retirement system. The SCNG only pays $50 to $100 per month after you retire, depending on your years of service and retirement age. To qualify for retirement benefits, you must be at least 60 years old when you retire and honorably discharged from the National Guard.

State Optional Retirement Program

You may elect to participate in the State Optional Retirement Program (SORP) instead of SCRS as a state employee. To be eligible, you must qualify for SCRS and your employer must be enrolled in the SORP program.

You’re required to contribute 9% of your pay to the plan and your employer contributes another 5% of your gross pay. Open enrollment for SORP is January 1 to March 1 each year.

There are no minimum working requirements to begin receiving retirement benefits and you have access to your account when you turn 59.5 years old and terminate your employment. When you retire, you choose whether to receive your benefits as lump sum or in monthly payments.

South Carolina Retirement Taxes

It’s important to factor in the retirement income taxes you’re responsible for paying when you begin receiving pension benefits. You’ll owe taxes on your Social Security benefit payments and any income you receive from other retirement vehicles, such as your 401(k) or IRA.

The money you contribute to your retirement plan is tax-deferred. Therefore, when you begin receiving benefits, taxes must first be taken out from your total.

State

While South Carolina is known as a state with low property taxes, it also imposes taxes on your retirement income. The South Carolina state tax system mimics the federal tax system laws.

If you’re younger than 65, you qualify for a $3,000 state tax deduction. A $15,000 tax deduction applies if you’re older than 65 and receiving retirement income. Depending on the amount of retirement income you received for the year, you may be responsible for paying 0% to 7% in state income tax.

Federal

The Internal Revenue Service (IRS) imposes a tax on pension and retirement income. The amount of federal income tax you owe depends on your benefit payout and whether your benefits are fully or partially taxable. If you receive distributions before your full retirement age, you owe an additional 10% early withdrawal fee to the federal government.

Financial Health of the SC System

To ensure the financial health of the SCRS, the governor imposed legislation that raised employee contribution rates. This change in legislation allowed the fund to grow from $31.2 billion in 2018 to $32.3 billion in 2019.

Over $1,010,636 in employee contributions were made to the fund in 2018 and 721 employers participated in the retirement system. While the SCRS shows financial strength, it’s still important to diversify your retirement investments so you know you’ll live comfortably when you stop working.  

SC Retirement Calculator

PEBA offers several resources to assist you in calculating your potential retirement income from your pension plan. There are three different online calculators you can use to estimate benefits, including the following:

  • Quickest method: Input your retirement plan, average salary, and number of years worked to get a rough estimate of your retirement benefits.
  • Quick method: Choose your retirement plan, enter your salary for the three highest earning consecutive years, and how long you plan to work to get a more accurate depiction of estimated pension payments.
  • Full method: To get the most accurate estimate of benefits, choose your retirement plan, provide the 12 highest earning consecutive quarters, input the time you worked, offer information on leave you’ve taken, and provide information on your base compensation.

Use the quickest method when you’re far from retirement and the full method as your retirement age nears. Any online calculator you use provides only an estimate of potential benefits and is not a commitment to the pension you’ll receive in retirement.

Retirement Planning Tips

No matter what age you plan to retire, it’s important to begin saving as soon as possible. To ensure you have an effective retirement plan in place:

  • Create a budget that includes an aggressive retirement savings plan and eliminates unnecessary expenses.
  • Pay off debts, including credit card balances.
  • Diversify your retirement investments.

When you make it to retirement, implement strategies that will help you maintain financial stability when you stop working. It’s important to:

  • Not take on any debt.
  • Create and adhere to a strict budget.
  • Consider taking on a part-time job for extra income.

As a South Carolina state employee, you qualify for one of the retirement plans administered by PEBA. Understanding the pay you must contribute and your estimated pension benefits in retirement will help you create a solid retirement savings plan.


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