TERI could bring down whole retirement system

The goal of the Teacher and Employee Retention Incentive program at its inception, to retain experienced teachers and good people in all critical positions of government, was well-intended. But this once-diminutive 12,000- teacher and state employee program has become an economic time bomb, destined to sink the entire S.C. Retirement System.

All members of the retirement system with 28 years of service are eligible for TERI, including county and municipal employees, state employees, teachers and many elected officials. Participants continue to receive their annual pay in addition to receiving retirement benefits that amount to about half of their annual salary. For example, TERI participants who make $50,000 annual salary will receive an additional $27,000 per year in retirement salary, for a total pay of $77,000 per year.

The TERI participant permanently discontinues his 6 percent contribution to the retirement system, while the state continues to contribute to the employee’s retirement fund. When the employee retires at the end of the five-year TERI program, the employee collects full retirement.

Should any program that affects a relatively few people compromise the existence of our entire retirement system? The answer is, of course, no. I have introduced legislation to prohibit the retirement system from accepting any new participants to the TERI program as of July 1.

There are numerous reasons to eliminate the TERI program (and I cannot, for the life of me, think of one to continue it):

• When TERI was created four years ago, the entire retirement system had a deficit of $200 million, with an amortization period (expected years to pay off the deficit) of two years. Today, the system has a total unfunded liability of $2.6 billion with an amortization period of 26 years. (When a retirement system has a 30-year amortization period, it is considered fiscally unsound.)

Think about that. In just four years, the system’s unfunded liability has grown 1,300 percent, and its amortization period has grown 1,200 percent. If TERI is eliminated today, that would immediately save the retirement system $650 million in unfunded liability and reduce its amortization period by seven years.

• TERI was originally introduced to retain great employees. TERI has not been effective in this laudable goal. The reason is simple — prior court decisions meant that any individual who has been a member of the retirement system for 28 years eligible for TERI. This includes our great employees, our good employees and any and all underachieving employees.

Why all employees became eligible now is irrelevant. The fact is that the most important reason for having the program — to keep the best employee — is being corrupted by having to keep any employee who chooses to stay.

• TERI inhibits the progression of our state’s workforce. It has the effect of parking individuals in positions for five years, prohibiting managers from receiving promotions and inhibiting young people from obtaining entry-level jobs.

Ironically, many of our valuable state employees are leaving for the private sector because of their stalled career advancement. I recently received a letter that exemplifies this problem. The author wrote: “I was all but ready to take over a middle-management position when the TERI program arrived. My supervisor informed me that he planned to stay another five years. He had 30 years and was about to retire. I was unwilling to stay and took my talents to the private sector.”

A young employee receives this message: There is no room for you here in state government because we have all these employees on the TERI program.

Call it the “law of unintended consequences,” call it just bad government, or call it what you will, it has created an astronomical fiscal disaster for South Carolina.

Allowing this situation to continue is simply not an option. South Carolina cannot allow our retirement system to fall into further deficits. The stability of our retirement funds is just too important. We must immediately deal with this crisis.

South Carolina cannot afford to have every employee, regardless of performance, be able to choose such a lucrative program while we struggle in 2004 to fund even the most basic services.

The time is now for the General Assembly to save the S.C. Retirement System and stop the growth in the TERI program.

Sen. Ryberg represents Aiken and Lexington counties in the S.C. Senate.