Time to scrap the TERI plan

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As state legislators make plans to return to Columbia, this idea should be top of mind: It's time to eliminate the costly and unsustainable retirement option adopted four years ago. With an election looming and the economic good times making most lawmakers a little giddy four years ago, the Legislature adopted a generous retirement incentive for state employees.

This idea started as an incentive program for teachers at a time the state had a problem of retaining qualified teachers in some specialized areas. Every four years, senators join state representatives in facing the voters, and the proposed retirement incentive grew as lawmakers drooled over the prospects of currying favor with a large pool of voters, namely state employees.

Rather than merely lower the retirement age for state employees from 30 to 28 years, and instead of searching for a credible way to attract or retain teachers for positions tough to fill, the state Legislature devised a horribly expensive incentive that has proved wildly popular with most state employees. Called the TERI plan — for Teacher and Employee Retention Incentive — this incentive allows all state employees to retire at 28 years, receive pay for up to 45 days' unused annual leave, return to work at the participant's current salary for another five years and then, upon the second retirement, receive pay for up to another 45 days' unused annual leave.

Guess what? Most state employees have opted for this overly generous incentive. And the state retirement system is suffering for it.

Gov. Mark Sanford's MAP Commission did a thorough bottom-up review of state government and made a number of sensible suggestions for improving state government. One is this: Repeal the TERI program and create a process for administering the program until all the participants now in it work their way through the system.

In an election year, it's going to be difficult to find a majority of state legislators willing to scrap this hugely popular state retirement program. The MAP Commission has provided political cover for those lawmakers.

And this chilling fact should provide the motivation that lawmakers need: The state retirement system has a shocking unfunded liability, and the TERI plan is one of the primary culprits. Adopting the TERI plan and reducing the retirement eligibility from 30 to 28 years are the main reasons for the $1.8 billion increase in the unfunded actuarial accrued liability of the South Carolina Retirement System attributable to plan changes, according to the MAP Commission report.

The fix? Eliminating the TERI plan would reduce the actuarial liabilities by $650 million. And another recommendation worth considering in these times of budget cuts and declining state revenues: Study the benefits and cost savings of returning the normal retirement eligibility to 30 years, said the MAP commission.

The Legislature made a mistake four years ago. The mistake should be corrected this year.