Bill
HB 1126
The bill updates retirement, health, and investment governance, restoring military credit, adjusts benefits/caps, and moves many funds under NCIA for centralized management.
HB 1126 – 2026 DST Administrative/Technical/Clarifying Changes (North Carolina)
Overview
- Purpose: This act makes administrative, technical, and clarifying changes to laws governing the Department of State Treasurer (DST) and related retirement, health plan, and Investment Authority matters. It also updates several provisions to reflect governance, reporting, and coordination requirements, while consolidating certain authorities under the North Carolina Investment Authority (NCIA) where applicable.
Key Provisions and Changes
Part I. Administrative Changes/Retirement Systems
1) Reinstatement of previously forfeited/withdrawn military credit
- Section 1.1 adds a mechanism for members who forfeited service credit for military time to have that credit reinstated if they later purchase the maximum service allowed under specified statutes (G.S. 135-4.5 or related provisions), with requirements for employer contributions during the period of military service.
- Effective dates:
- General rule (a): January 1, 2027.
- Applies to Teachers’ and State Employees’ Retirement System (TSERS) members with forfeited service who subsequently purchase the maximum allowed after January 1, 2027.
- Additional cross-references extend to G.S. 128-26 and 128-26.5 for analogous restoration rights for other systems.
2) Contributory death benefit not subject to overpayment offsets
- Sections 1.2(a-c) align offset provisions across TSERS and the Local Governmental Employees’ Retirement System (LGERS) with specifics about overpayments/erroneous payments and limits on offsetting against certain fully contributory death benefits (excludes the fully contributory death benefit for certain plans).
3) Exemption/offsets and garnishment consistency
- Section 1.2(c) and 1.2(d) unify garnishment and offset language (e.g., pension, retirement allowance, return of contributions) with existing exemptions for certain death benefits, ensuring consistency with other chapters.
4) Contributory Benefit Cap (CBBC) adjustments
- Section 1.3 introduces and updates the CBBC for service retirement allowances for members who retire on or after January 1, 2015, including:
- Cap factor guidance (0.75% of retirement allowances capped).
- Step-by-step calculation framework for the cap (including actuarial equivalence, averaging, and adjustments).
- Provisions to exclude certain members (pre-2015 retirees, or those with less than five years post-2015) from reductions, with required employer contributions if reporting lags exist.
- Provisions to address restorations and reductions if a member is restored to service and recalculates benefits (dollar-for-dollar adjustments).
5) Legislative Retirement System reemployment flexibility
- Section 1.4 codifies reemployment rules for beneficiaries who retired under TSERS/LGERS:
- Reemployment earnings thresholds (50% of prior-year compensation or $20,000, indexed) to suspend retirement benefits for the calendar year and reinstate in the following year, with annual CPI-based adjustments (effective July 1, 2026, and ongoing for applicable members).
6) Electronic reporting for Firefighters and Rescue Squad Workers Pension Fund
- Section 1.5 adds a new requirement (G.S. 58-86-41) for fire departments and rescue squads to certify and transmit contributions electronically for proper administration of the Pension Fund.
7) Clarification/Felonies and SRIP/LSO benefits
- Section 1.6 clarifies forfeiture rules for the Supplemental Retirement Income Plan (SRIP) for law enforcement, including timing for contribution withdrawals and deposit of forfeited contributions.
8) Personnel flexibility and designated employee pay/benefits
- Sections 1.7 and 1.8-1.9 expand management flexibility by creating “designated employees” with specialized skills who may have tailored compensation plans outside standard HR classifications, subject to caps (not to exceed 40% of the Retirement Systems Division).
- Aligns legal counsel roles and establishes who may serve as legal adviser for the Board.
9) LEIA (Legislative Enactment Implementation Arrangement)
- Section 1.11 preserves LEIA governance, funding, and project criteria for implementing legislative changes affecting retirement benefits and system operations, including cost-savings considerations and limitations on LEIA funding (0.01% of required contributions; sunset on 1/1/2035).
Part II. State Health Plan
1) Maternity benefits for eligible dependent children; coordination with Medicare
- Section 2.1 expands the State Health Plan provisions to treat maternity benefits as applicable to dependent children and clarifies coverage categories.
- Section 2.2 clarifies that Medicare remains the primary payer for covered expenses unless federal law requires otherwise or administrative costs outweigh benefits.
2) Final payee requirement exception
- Section 2.3 preserves protections that moneys deposited with the State Treasurer remain until final disbursement, with exceptions for State Health Plan operations and auditor verification requirements, ensuring proper certification before disbursement.
Part III. North Carolina Investment Authority (NCIA) Coordination
- Section 3 updates and extends governance for many funds and programs that DST previously held in custody, transferring certain investment duties and custodianship to NCIA where appropriate.
- Recasts several funds (e.g., fire insurance, education property insurance, endowment and marine/heath funds) to be invested through NCIA, while preserving Board and Treasurer oversight as required by statute.
- Adds comprehensive cross-references to NCIA for investment of multiple state funds and authorities, with many funds continuing to rely on Article 6 of Chapter 147 for investment guidelines.
Effective Dates
- Many administrative changes are effective July 1, 2026 (e.g., portions of the Legislative Enactment Implementation Arrangement updates).
- Specific provisions (e.g., reinstatement of military service credit) have later effective dates (January 1, 2027 for certain retirement-system restoration provisions).
Potential Impact
- Affects TSERS, SERS, LGERS beneficiaries and retirees, especially around CBBC, reemployment rules, and reinstatement of forfeited military service credit.
- Expands maternity coverage language for State Health Plan dependent children and clarifies Medicare coordination.
- Improves DST governance flexibility via designated employees and legal counsel arrangements.
- Shifts several fund custodianship/investment activities to NCIA, with budgetary and governance implications for fund management and reporting.
- Adds administrative/reporting requirements for fire departments and rescue units and clarifies final-payee disbursement rules.
Note: The bill is comprehensive and touches many funds and provisions. This summary highlights the substantive changes and their practical effects for readers seeking an understanding of the bill’s scope and impact.
Compiled from official sources — confirm details with the bill’s official record.
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