SC High Court Orders Return of Contributions to Reemployed Retirees

May 5, 2006 ( - The South Carolina Supreme Court ruled unanimously that the state wrongly forced thousands of retirees in a retention incentive program to pay contributions toward their pensions.

The State newspaper  reports that the ruling requires the state to refund the contributions, with interest, to employees who signed up for the Teacher and Employee Retention Incentive (TERI) program before July 1, 2005. Participants enrolled in the program after this date will continue to have contributions deducted from their paychecks.

The ruling affects more than 13,000 participants, most of whom are teachers, according to the news report.   The high court did not decide on the issue for another 9,000 or so employees, sending their claims to a lower court for review.

The TERI program, started in 2000, let state employees retire after 25 years and then return to work for up to five years, during which time the workers would not have to contribute to the retirement system. However, the General Assembly passed a law last year requiring participants to contribute 6.25% in payroll deductions toward the state’s retirement program. 

State employees in the program brought a lawsuit challenging the new law, and South Carolina police officers and firefighters joined the suit in February (See Police Officers Join SC Retirement System Lawsuit).

The justices said the Assembly breached its contract with retirees by enforcing the contributions. They rejected the state’s argument that ruling in favor of the retirees would cause “near crisis” for the retirement system.   Estimates of the cost to the system of the court’s decision have varied between $120 million and $500 million over the next few years.

The high court’s opinion is here .