Public pensions in South Carolina

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South Carolina public pensions
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Pension system
Number of pension systems 5
State pension systems: South Carolina Retirement System
Judges and Solicitors Retirement System
General Assembly Retirement System
Police Officers Retirement System
National Guard Retirement System
System type: Defined Benefit Plan
Pension health (2012)[1]
Fund value: $29,539,613,000
Estimated liabilities: $43,512,617,000
Unfunded liabilities : $13,973,004,000
Percent funded: 67.8%
Percent funded change: Green Arrow Up Darker.svg1.4%[2]
Percent funded rank: 26[3]
Pension fund members (2012)
Total members: 530,446[4]
Active members: 224,412[4]
Other members: 306,034[4]
Other state pension information
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Public pensions
State public pension plans
Public pension health by state
South Carolina public pensions are the state mechanism by which state and many local government employees in South Carolina receive retirement benefits. In South Carolina, there is one state-run system, administered by the South Carolina Public Employee Benefit Authority (PEBA). The system administers multiple plans: the South Carolina Retirement System (which includes plans for South Carolina state employees, teachers, and local subdivisions of government), the Judges and Solicitors Retirement System, the General Assembly Retirement System, the Police Officers Retirement System, the National Guard Retirement System.

As of the end of 2012, South Carolina public pensions had total estimated liabilities of $43.5 billion, but had 67.8 percent of those liabilities funded, resulting in unfunded liabilities of $13.9 billion.[4]


Pension plans

The following data was retrieved from the 2012 Actuarial Valuation Reports for the five separate pension funds, which measured fund status as of July 1, 2012. Valuation reports are annual reports produced by outside consultants, using unaudited data provided by the pension systems themselves, in order to determine what employers in the system should contribute in the coming year to maintain or improve the fiscal health of the pension funds. The valuations were conducted by Gabriel Roeder Smith & Company.

Basic pension plan information -- SCPEBA
Plans Current Value Percentage funded Unfunded liabilities Membership
State Figure SBS Figure[5] State Figure SBS Figure[5]
South Carolina Retirement System[6] $25,540,749,000 64.7 percent $13,916,959,000 185,817 active members[4]
Police Officers Retirement System[7] $3,808,934,000 71.1 percent $1,548,558,000 26,184 active members[4]
General Assembly Retirement System[8] $39,233,000 52.8 percent $35,099,000 170 active members[4]
Judges and Solicitors Retirement System[9] $145,604,000 57.8 percent $106,125,000 144 active members[4]
National Guard Retirement System[10] $20,814,000 34.2 percent $40,128,000 12,097 active members[4]
TOTALS[11] $29,555,334,000 65.3 percent 36 percent $15,646,869,000 $53,166,507,000 224,412 active members[4]

The percent funded figure is calculated by comparing the current actuarial value of the fund and the total liabilities. The current actuarial value for the South Carolina plans is generated with the assumed rate of return of 7.5 percent.[4] While a percent funded ratio of 80 percent is commonly cited by institutions such as the Government Accountability Office (GAO) and Pew Research Center as the threshold for a "healthy" pension fund, the American Academy of Actuaries recommends that all pension systems "should have a strategy in place to attain or maintain a funded status of 100 percent or greater."[12][13][14]


According to U.S. Census data, as of March 2011, South Carolina had 281,786 total public employees.[15] In Fiscal Year 2012, the state had a total of 534,273 members in the retirement plan. This included 224,282 active members and 268,433 inactive members. Our membership figures divide plan participants into two broad categories: active and other. Active members are current employees contributing to the pension system. Other members include retirees, beneficiaries and other inactive plan participants (usually terminated employees entitled to benefits but not yet receiving them).[16]

Annual Required Contribution

Annual Required Contributions (ARC) are the contributions actuarially required to attain or maintain a healthy funding level. ARCs are calculated annually and are a sum of two different costs. The first component is the "normal cost," or what the employer owes to the system in order to support the liabilities gained in the previous year of service. The second component is an additional payment in order to make up for previous liabilities that have not yet been paid for. According to the Pew Research Center, between 1999 and 2008, South Carolina paid 100 percent of its actuarially required contribution each year.[14][17]

Research conducted by State Budget Solutions showed the extent to which each state has funded or underfunded its Annual Required Contribution. Between 2002 and 2011, the total ARC for South Carolina was $8.1 billion; during that time, the state contributed $8.1 billion, a difference of zero.[18] According to the 2012 CAFR, in the five years from FY2007 to FY2012, the ARC grew from $763.9 million to $973.8 million, while the state's actual contributions grew that same amount. Over that period, the state contributed only 100 percent of the ARC.[4]

ARC historical data[4]
Annual Required Contribution (ARC) Percentage contributed Annual Required Contribution (ARC) Percentage contributed Annual Required Contribution (ARC) Percentage contributed Annual Required Contribution (ARC) Percentage contributed Annual Required Contribution (ARC) Percentage contributed
2012 $824,652,000 100% $134,299,000 100% $2,532,000 100% $8,414,000 100% $3,937,000 100.8%
2011 $808,343,000 100% $129,314,000 100% $2,414,000 100% $8,414,000 100% $3,905,000 100%
2010 $818,523,000 100% $129,163,000 100% $2,598,000 100% $8,414,000 100% $3,945,000 102.7%
2009 $827,502,000 100% $124,148,000 100% $2,495,000 100% $8,414,000 100% $3,979,000 101.8%
2008 $774,269,000 100% $114,098,000 100% $2,440,000 100% $7,613,000 100% $3,823,000 103.3%
2007 $644,350,000 100% $106,753,000 100% $2,358,000 100% $6,706,000 100% $3,811,000 103.6%

On June 25, 2012, the Government Accounting Standards Board (GASB) approved a plan to reform the accounting rules for state and local pension funds. These revised standards were set to take effect in fiscal years 2013 and 2014.[19] As a result, ARCs were removed as a reporting requirement. Instead, plan administrators and accountants will use an actuarially determined contribution or a statutory contribution for reporting purposes.[20]

Historical funding levels

Historical pension plan data - SCRS
Year Value of Assets Accrued Liability Unfunded Liability Funded Ratio
2006[4] $22,293,446,000 $32,018,519,000 $9,725,073,000 69.6%
2007[4] $23,541,438,000 $33,766,678,000 $10,225,240,000 69.7%
2008[4] $24,699,678,000 $35,663,419,000 $10,963,741,000 69.3%
2009[4] $25,183,062,000 $37,150,315,000 $11,967,253,000 67.8%
2010[4] $25,400,331,000 $38,774,029,000 $13,373,698,000 65.5%
2011[4] $25,604,823,000 $38,011,610,000 $12,406,78,000 67.4%
Change from 2006-2011 $47,898,269,000 $70,030,129,000 $22,131,860,000 -2.2%

Rate of return

The State Budget and Control Board reduced the presumed rate of return on the pension investments from 8% down to 7.5%.[21] According to a 2012 analysis by the Pew Center for the States, most state pension plans assume an 8 percent rate of return on investments.[22] Critics assert that this assumption is unrealistic, citing changing market conditions and significantly lower investment returns across the board over the past several years.[23]

Using a lower rate of return to predict investment earnings accurately, however, increases the current plan liabilities. This would lower the percent funded ratio and and require increased employer contributions (ARCs). This is because future plan liabilities are discounted based on the rate of return, so smaller expected investment returns result in larger actuarially accrued liabilities.[24] For example, on September 21, 2012, the Illinois Teachers Retirement System voted to lower its rate of return from 8.5 percent to 8.0 percent. This change increased the state's fiscal year 2014 ARC from $3.07 billion to $3.36 billion.[25] Similarly, when California's CalPERS reduced its projected annual rate of return from 7.75 percent to 7.5 percent in March 2012, it cost the state an additional $303 million for fiscal year 2013.[26]

Financial crisis

The 2008 financial crisis had a devastating effect on pension plans nationwide because of slower economic growth and increased market volatility. Some market strategists found the 8 percent assumption to be overly ambitious and "dangerously optimistic."[27] Advocates for a lower assumed rate of return argue that the standard 8 percent assumptions could cause pension fund managers to engage in more risky investments and imprudent stewardship of public funds. Further, if pension plans were using more conservative assumptions, such as the 3 or 4 percent assumed rate of return used in the private sector, and the plans grew more quickly than expected because of a higher rate of return, the fund would have a surplus and smaller future required contributions (ARCs), which would be preferable to using optimistic assumptions and potentially being caught with larger-than-expected deficits.[28][29][30][31][32]

Traditional public pension plan advocates argue that the dip in recent years does not prove there is a long-term, downward trend in investment returns. According to Chris Hoene, executive director at the California Budget Project, "The problem with [the market rate] argument is there isn’t significant evidence other than the short term blip during the economic crisis that there’s been that shift. It’s a speculative argument coming out of a very deep recession."[27]

The National Association of State Retirement Administrators researched the median annualized rate of return for public pensions for the 1-, 3-, 5-, 10-, 20- and 25-year periods ending in 2013 and found it was 7.9 percent over the 20-year period, and exceeded 8 percent for the 1-, 3- and 25-year periods. It is important to note that the NASRA data reported the median returns, which means that median annualized returns of investment portfolios for half of the examined public pension funds failed to meet an 8 percent assumed rate of return.[33]

Contribution rate

Regardless of the plan in which they are enrolled, employees contribute a tax-deferred 6.5% of gross pay into their retirement account.[34] Employer contributions to the state system, which includes state employees and teachers, were increased by 0.92 percent of salaries – or $71 million a year -- bringing the employer contribution to above 10%. Employer contributions to the police officers system, which includes firefighters, were increased by 0.305 percent – or $33 million a year.[21] In 2009, the state contributed 9.24% of pay.[35]

Each employee's account earns 4 percent interest compounded annually on your balance as of the previous June 30.[36]

Investment Commission

The South Carolina Legislature created the South Carolina Retirement System Investment Commission in 2005 and specified the education and experience needed by the four members on the commission in addition to the state Treasurer.[14] It oversees the state's $24 billion pension fund.[37]

The Commission proposed the creation of a state-run company to devote more pension money to more higher risk, and potentially higher profit, investments.[37] Budget and Control Board members said that the Commission had to seek their approval before moving forward with plans to create the investment company and criticized the lack of transparency surrounding the proposal.[37]

Pension fund management fees

See also: Public pension fund management fees

In July 2013, the Maryland Public Policy Institute (MPPI) and the Maryland Tax Education Foundation released a report detailing the fees paid for the management of state pension systems. According to MPPI, the 10 state pension funds that paid the most in management fees relative to net assets experienced lower returns over a five-year period than the 10 state pension funds that paid the least in management fees. For example, in fiscal year 2012 South Carolina's pension system paid approximately $296.1 million in total management fees (1.31 percent of total net assets at the beginning of the fiscal year) and its five-year rate of return was 1.46 percent. By contrast, Alabama's pension system paid roughly $13.3 million in management fees (0.05 percent of total net assets) and its five-year rate of return was 7.53 percent.[38]

The table below presents the information collected by MPPI for South Carolina and surrounding states. For each state's pension system, total net assets are listed (both for the beginning and end of the fiscal year in question), as well as the total amount paid in management fees. In addition, the rates of return for the pension systems are presented. Compared to surrounding states, South Carolina had the lowest total net assets, but third highest total management fees.

Public pension fund management fees, 2011-2012
State Fiscal year Total net assets at the beginning of the year Total net assets at the end of the year Total management fees Management fees as a percentage of total net assets at the beginning of the year Five-year rate of return for the pension fund
South Carolina 2012 $22,691,660,000 $25,891,849,000 $296,135,000 1.31% 1.46%
Georgia 2012 $69,563,890,000 $68,239,850,000 $53,014,039 0.08% 2.95%
North Carolina 2012 $74,900,000,000 $74,500,000,000 $317,796,275 0.42% 2.64%
Tennessee 2012 $33,663,308,000 $34,912,773,000 $32,379,360 0.10% 3.11%
Virginia 2012 $54,562,257,000 $53,309,180,000 $307,706,000 0.56% 0.80%
1"Three states— Hawaii, Nevada and Rhode Island—were excluded because they hadn’t published CAFRs for fiscal years ending December 31, 2011 or later. West Virginia was excluded because its June 30, 2012 CAFR lacked sufficient disclosure."[38]
Source: Maryland Public Policy Institute, "Wall Street Fees, Investment Returns, Maryland 49 Other State Pension Funds," July 1, 2013


Enacted reforms


S484 - Police Officers Retirement System Disability Provisions[39]

The bill, signed into law in June 2013, amends the SC Code of Laws relating to disability retirement for members of the Police Officers Retirement System (PORS) to delete the provision that would have required PORS members who apply for disability retirement after December 31, 2013, to provide proof of Social Security disability benefits to continue to receive a disability retirement benefit after three years. This bill also amends other sections in order to require all PORS disability retirement claims be reviewed by a medical board of three physicians.

H3624 – PEBA Indemnification Bill (R35, Act 24)[39]

The bill, signed into law in May 2013, amends the SC Code of Laws of 1976 by adding a section to provide that the state shall defend members of the Board of Directors of the South Carolina Public Employee Benefit Authority (PEBA) against claims and suits arising out of performance of their official duties and to require that the state indemnify these directors for any loss or judgment incurred by them with respect to such a claim or suit. The bill also provides that the state shall defend PEBA officers and management employees against claims and suits arising out of performance of their official duties unless the officer or management employee was acting in bad faith, and requires that the state indemnify those parties for loss or judgment incurred by them with respect to such a claim or suit.

105.7. (PEBA: FY 2014 State Health Plan)[39]

This bill, enacted as part of a general appropriations bill during 2013 legislative session, includes funds authorized for the State Health Plan in Plan Year 2014 and will result in an employer premium increase of 6.8 percent and a subscriber premium increase of 0 percent for each tier (subscriber, subscriber/spouse, subscriber/children, full family) for the Standard State Health Plan in Plan Year 2014. Co-payment increases for participants of the State Health Plan in Plan Year 2014 shall not exceed 20 percent. Notwithstanding the foregoing, pursuant to another section of the law, the Public Employee Benefit Authority may adjust the plan, benefits, or contributions of the State Health Plan during Plan Year 2014 to ensure the fiscal stability of the plan.

105.8 (PEBA: Exempt National Guard Pension Fund)[39]

This bill, enacted as part of a general appropriations bill during 2013 legislative session, adds a new proviso to exempt the National Guard Pension Fund in the calculation of any across-the-board cuts mandated by the Budget and Control Board or General Assembly. The amount of the appropriation for the National Guard Pension Fund shall be excluded.


H4967 - Pension Reform[40]

This legislation was signed into law in June 2012, and includes numerous reforms for the state's pension plans:

  • Most pension changes impact SCRS and PORS participants, but all participants (including Optional Retirement Plan members) are impacted by a change in the employee contribution rate, adjusted from 6.5% to 7%.
  • GARS member contribution rate increases from 10 percent to 11 percent.
  • SCRS employee contribution rate increased from 6.5 percent to 8.0 percent in 0.5 percent increments annually from July 1, 2012 to July 1, 2014
  • PORS employee contribution rate increased from 6.5 percent to 8.0 percent in 0.5 percent increments annually from July 1, 2012 to July 1, 2014
  • PORS employer contribution rate will be 12.3 percent beginning July 1, 2012, will increase to 12. 5 percent July 1, 2013, and will increase to 13 percent July 1, 2014.
  • More changes can be found in the link below.[40]

In May 2012 the South Carolina State Senate approved a pension reform plan that puts most of the changes on new employees. The changes would increase the funded ratio in the state's main retirement system from 65 percent this year to 84 percent in 29 years. The changes would apply only for employees hired after June 30. The House plan applied those anti-spiking efforts to current workers, too. The Senate plan also eliminates in 2018 a special retirement program that allows public workers to officially retire but remain on the job for up to five years and accumulate pension benefits.[41]

South Carolina paid $344 million to hedge fund managers and private equity deal makers in 2011 for pension fund investments. The results of those high costs have yet to manifest, according to a NY Times investigation. Today, the pension fund has a higher share riding on private-equity and hedge-fund plays — called “alternative investments” in some circles — than almost any other state’s: $13 billion, or more than half its total. S.C. faces a $14.4 billion shortfall in its pension funding.[42]


  • On Nov. 3, 2011, the State Budget and Control Board voted to reduce the cost of living adjustment for retiree payments from 2% to 1%. The dollar amount varied per person, but the average retiree received $19,000 a year, meaning a 1 percent cut would equal $190 a year.[21]
  • S.C. retirees would have seen see cost-of-living increases in their pensions delayed, and state workers would have paid more for their pensions based on a 2011 proposed bill. The Senate panel in 2011 looked at ways to reduce the state's $13.4 billion unfunded liability - the difference between the amount of money the retirement system has on hand and the amount it has promised to pay out in the future - for its largest retirement plan, which covers more than 500,000 current, retired and terminated state, city, county and school employees. South Carolina will have to pay $8 billion over the next decade to cover the rising costs of an increasingly aging government work force moving into retirement. A state Supreme Court ruling barred changes for employees who have vested in the system after five years on the job.[43]

Legislators' pensions

Lawmakers passed a law that includes their expenses in the salary used to calculate their pensions. No other South Carolina state workers's pension includes expenses in the calculation. After 30 years of service, lawmakers may opt to receive their pension instead of a salary as they continue to serve in office. Their pensions are at times up to three times higher than their salaries.[44]

Local public pensions

Main article: Local government public pensions

According to the United States Census Bureau, the state has 2 locally-administered pension systems.[45]


See also: Public pension disclosure
See also: Governmental Accounting Standards Board
  • The Retirement System of South Carolina does not include fiduciary information about the state's systems, but the information is available on the pension fund websites. Links are available from the system web page to each plan, where the bulk of the information is found. Recipients of pensions and the amounts paid are not posted on the plan websites.
  • Investment information is not posted on the websites of each pension plan in S.C. The State Optional Retirement Program includes investment information.[46]
  • The assumed rate of return can be found in the annual audits of each fund.
  • Unfunded liabilities can be found in the pension plan actuarial report.

See also

Additional reading

External links


  1. Figures below are compiled by adding up all state pension plans
  2. This figure is derived by calculating the percent difference between the current year's funding level and the system's percent funded from the prior year.
  3. Rank is relative to the 50 state pension programs. "1" refers to the healthiest pension plan while "50" would be the least well-funded plan.
  4. 4.00 4.01 4.02 4.03 4.04 4.05 4.06 4.07 4.08 4.09 4.10 4.11 4.12 4.13 4.14 4.15 4.16 4.17 4.18 4.19 4.20 4.21 4.22 4.23 4.24 4.25 4.26 4.27 4.28 4.29 4.30 4.31 4.32 4.33 4.34 4.35 4.36 4.37 4.38 4.39 4.40 4.41 4.42 South Carolina Retirement Systems 2012 Comprehensive Annual Financial Report," accessed February 27, 2014
  5. 5.0 5.1 State Budget Solutions, "Promises Made, Promises Broken - The Betrayal of Pensioners and Taxpayers," accessed September 20, 2013
  6. 2012 Valuation
  7. PORS 2012 Valuation
  8. GARS 2012 Valuation
  9. JSRS 2012 Valuation
  10. NGRS 2012 Valuation
  11. Cite error: Invalid <ref> tag; no text was provided for refs named valuation
  12. American Academy of Actuaries, "Issue Brief: The 80% Pension Funding Standard Myth," accessed October 23, 2013
  13. United States Government Accountability Office Report to the Committee on Finance, U.S. Senate, "State and Local Government Retiree Benefits: Current Status of Benefit Structures, Protections, and Fiscal Outlook for Funding Future Costs," accessed October 23, 2013
  14. 14.0 14.1 14.2 Pew Research Center, "Trillion Dollar Gap: State Factsheets," accessed October 17, 2013
  15. US Census, 2011 Annual Survey of Public Employment and Payroll
  16. Organisation for Economic Co-operation and Development, "Pensions Glossary," accessed November 27, 2013
  17. Cite error: Invalid <ref> tag; no text was provided for refs named GASB
  18. State Budget Solutions, "How States Underfund Public Pensions," November 2, 2012
  19. Reuters, "Little-known U.S. board stokes hot pension debate," July 10, 2012
  20. State Budget Solutions, "GASB's ineffective public pension reporting standards set to take effect," June 5, 2013
  21. 21.0 21.1 21.2 The State, State retirees take a big hit, Nov. 4, 2011
  22. The Widening Gap Update, "Pew Center on the States," accessed October 17, 2013
  23. The New York Times, "Public Pensions Faulted for Bets on Rosy Returns," accessed May 27, 2012
  24. Benefits Magazine, "Public Pension Funding 101: Key Terms and Concepts," accessed October 23, 2013
  25. Crain's Chicago Business, "State teachers pension board lowers expected rate of return," accessed September 21, 2013
  26. Huffington Post, "California Pension Funds Expect Lower Investment Return," accessed March 14, 2012
  27. 27.0 27.1 Governing, "Expert: Governments Are Masking Their Pension Liabilities," accessed October 25, 2013
  28. The Washington Post, "Kansas’s pension funding gap just grew by $1 billion," accessed September 6, 2013
  29. Topeka Capital-Journal, "KPERS' unfunded liability rises to $10.2B," accessed September 4, 2013
  30. Wall Street Journal, "Pensions Wrestle With Return Rates," accessed October 10, 2011
  31. The Courant, "Promising Too Much On Public Pensions," accessed August 10, 2012
  32. Business Wire, "NCPERS 2013 Survey: Public Pension Plans Report Increasing Confidence, Lower Costs, Growing Returns," accessed October 22, 2013
  33. National Association of State Retirement Administrators, "Issue Brief: Public Pension Plan Investment Return Assumptions," accessed October 23, 2013
  34. Cite error: Invalid <ref> tag; no text was provided for refs named ebb
  35. Select Your Retirement Plan Publication 2009
  36. SCRS Active Members
  37. 37.0 37.1 37.2 The Sun News, State panel puts brakes on shift in pension plan, Sept. 30, 2010
  38. Cite error: Invalid <ref> tag; no text was provided for refs named report
  39. 39.0 39.1 39.2 39.3 South Carolina Public Employee Benefit Authority, "2013 Legislative Update," accessed November 12, 2013
  40. 40.0 40.1 South Carolina Public Employee Benefit Authority, "H.4967 Changes by Effective Date," accessed November 12, 2013
  41. The State, SC Senate approves pension reform, May 16, 2012
  42. NY Times, South Carolina’s Pension Push Into High-Octane Investments, June 8, 2012
  43. The Sun, Delay South Carolina retirees' pension increases, senator says, March 11, 2011 (dead link)
  44. USA Today, How state lawmakers pump up pensions in ways you can't, Sept. 23, 2011
  45. Cite error: Invalid <ref> tag; no text was provided for refs named census
  46. ORP Investments