COLUMBIA A new law signed last week by Gov. Nikki Haley will cut $2 billion from South Carolinas $15 billion retirement shortfall and eliminate it completely by 2044, according to a recently released analysis.

The law makes it difficult for public employees to retire early, forcing them to work longer, and means less money will be withdrawn from the states $25 billion retirement fund. Without changes, taxpayers would have had to increase their annual contributions to the system by nearly 4percent, or about $337 million, according to the most current payroll information. Because the changes make the retirement system stronger financially, taxpayers will have to increase their contributions by 0.42 percent, or about $39.4 million. The state can spend that $300 million difference on other things.

Thats huge, said Rep. Brian White, R-Anderson and chairman of the House Ways and Means Committee. Thats what we were after.

Accountants estimate that the states $25 billion retirement fund will run out of money over the next 30 years, falling about $15billion short. The retirement fund has three sources: investment returns, employee contributions and taxpayer contributions. The funds shortfall was increasing every year for two reasons: poor investment returns and people retiring earlier while living longer.

Lawmakers have now addressed those issues. Last summer, the State Budget and Control Board lowered the projected investment return on the retirement fund to 7.5 percent from 8percent. The new law limits some popular retirement incentives that encouraged public employees to retire early, including:

Eliminating the TERI program: TERI, short for Teacher and Employee Retirement Incentive, allowed workers to retire and continue working for up to five years, receiving a retirement check and a paycheck at the same time. The program will be phased out gradually, closing for good on June 30, 2018.

Restricting the states return-to-work program:. Beginning in January, if employees retire and return to work at their same job, they will have to forfeit their retirement checks once they earn $10,000 in salary in one year.

Making it tougher to retire early because of a disability: The law adopts the federal Social Security standards, which are more difficult to meet than the state standards. This does not take effect until Dec. 31, 2013.

Police officers and firefighters are upset about the disability changes. They have more dangerous jobs than the average state employee and have a higher rate of disability retirements. That is why lawmakers delayed the disability changes for 17 months, allowing time to come up with another solution during the next legislative session, which starts in January.

We focused so much on the retirement aspect of it weve not really ... had the time to devote to that (disability) issue, said Sen. Thomas Alexander, R-Oconee and one of the authors of the retirement bill. I think what weve done is given the directive to the (retirement) department to study for these next six months and bring us back some recommendations by January.

Excerpt from:
Analysis: S.C. retirement reform will make fund solvent