No. Under the North Carolina Bailey Act, a federal employee who had five or more years of creditable service as of August 12, 1989, is considered vested for the purposes of the Act. This means that their retirement benefits are exempt from North Carolina state income tax, regardless of whether they have withdrawn and not repaid their retirement funds by August 12, 19891.
The key factor is having the required years of service by the specified date, not the repayment of withdrawn funds. So, if the employee met the service requirement by August 12, 1989, they would still be vested under the Bailey Act.
NCDOR
**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"
