Retirement tax questions

Code your North Carolina Local Governmental Employees’ Retirement System, (LGERS) pension as Bailey settlement retirement benefits to get your $4,000 deduction. This is because NC designated several LGERS pensions as qualifying under the terms of the Bailey settlement.

Since the October 7, 1998 order approving the settlement, the Court has issued several orders resolving questions about refund eligibility. In an Order Regarding Class Definition signed by Judge Thompson on November 20, 1998, the following retirement systems were designated as a "North Carolina state or local governmental retirement system:"

• North Carolina Teachers' and State Employees' Retirement System (G.S. 135, Article 1)
• North Carolina Local Governmental Employees' Retirement System (G.S. 128, Article 3)
• North Carolina Consolidated Judicial Retirement System (G.S. 135, Article 4)
• North Carolina Legislative Retirement System (G.S. 120, Article 1A)
• North Carolina Disability Income Plan (both short-term and long-term disability benefits) (G.S. 135, Article 6)
• North Carolina Supplemental Retirement Income Plan (G.S. 135, Article 5)
• North Carolina Supplemental Retirement Income Plan for State Law Enforcement Officer (G.S. 143-166.30(d))
• North Carolina Deferred Compensation Plan (G.S. 143B, Article 9)
• North Carolina National Guard Pension Fund (G.S. 127A-40)
• North Carolina Sheriffs' Supplemental Pension Fund (G.S. 143, Article 12H)
• North Carolina Registers of Deeds' Supplemental Pension Fund (G.S. 161, Article 3)
• North Carolina Supplemental Retirement Plan for Local Governmental Law Enforcement Officer (G.S. 143-166.50(e))
• North Carolina Firemen's and Rescue Squad Workers' Pension Fund (G.S. 58, Article 86)
• Charlotte Firefighters' Retirement System (Session Laws 1947, Chapter 926, § 6(c))
• Firemen's Supplemental Fund of Hickory (Session Laws 1971, Chapter 65)
• Winston-Salem Police Officers' Retirement System (Session Laws 1939, Chapter 296)

In addition to the local plans listed in the table above, there may be other plans created by local governments pursuant to State authorization that enjoyed a tax exemption prior to 1989 pursuant to G.S. 105-141(b)(13) but have not been identified by the Court at this time. Retirement benefits from these plans are also exempt from income tax if the retiree is "vested."

The Court has not identified optional retirement programs for employees of State institutions of higher learning (Internal Revenue Code § 403(b), including TIAA-CREF) as a qualifying State or local retirement system. If the Court identifies these plans as a qualifying State or local retirement system, the Department will issue a supplementary Directive explaining the Court's decision.

See: Directive PD-99-1.