South Carolina

How Do Teacher Pensions Work in South Carolina?

In South Carolina, teachers are a part of the South Carolina Public Employee Benefit Authority (PEBA), which includes not only teachers but all state employees. The system was established in 1945.

But unlike most states, new teachers in South Carolina have a choice about their retirement plan. Teachers can either participate in the South Carolina Retirement System, which is a defined benefit (DB) plan or in its State Optional Retirement Program, which is a defined contribution (DC) plan. 

How Are Teacher Pensions Calculated in the South Carolina Retirement System?

Pension wealth is derived from a formula. The figure below illustrates how a teacher pension is calculated in South Carolina. It is important to note, however, that the state assesses an educator’s final salary based on their average salary from the past 20 consecutive months. For example, a teacher who works for 25 years with a final average salary of $70,000 would be eligible for an annual pension benefit worth 45.5 percent of their final salary. 

Who Qualifies for a Teacher Pension in South Carolina?

Like most states, teachers need to serve a number of years before qualifying for a pension. South Carolina has a 8 year vesting period. While educators qualify for a pension after 8 years of service, the pension may not be worth all that much. Moreover, educators can’t begin to collect it until they hit the state’s retirement age. 

The state sets specific windows when teachers can retire with benefits based on age and years of experience. For new teachers starting out in South Carolina, they can retire when their age and years of service combine to equal at least 90, or when they reach 65 years of age. 

Additionally, South Carolina allows early retirement at age 60 once they have acrued at least 8 years of service. However, teachers taking that option will have their benefits reduced based on their years of experience and how early they are retiring. 

How Much Does South Carolina's Teacher Pension Plan Cost?

As they work, teachers and their employers must contribute into the plan. Those contribution rates are set by the state legislature and can change year-to-year. Teachers contribute 9 percent of their salary to the pension fund, while the state contributed 15.56 percent in 2018. In total, 24.56 percent of teacher salary was spent on South Carolina's teacher pension fund. However, not all of that investment goes toward benefits. While the full 9 percent of salary contirbuted by individual teachers is for benefits, the state contributes only 1.66 percent. The remaining 13.9 percent state contribution is to pay down the pension fund's debt. 

Finally, in South Carolina, as with most states, teacher pensions are not portable. This means that if a teacher leaves the SCRS system, they can’t take their benefits with them, even if they continue working in the teaching profession. As a result, someone who leaves teaching or who moves across state lines might have two pensions, but the sum of those two pensions is likely to be worth less than if they remained in one system for their entire career. However, a teacher's benefits generated through the State Optional Retirement Program, described below, are fully portable. 

As with most state pension funds, South Carolina's teacher retirement system provides the greatest benefits to teachers who stay the longest, while leaving everyone else with inadequate benefits. With that in mind, new and current teachers in South Carolina should think carefully about their career plans and how they interact with the state's retirement plan.

How Does South Carolina's Defined Contribution Plan Work?

The state's Optional Retirement Plan functions similarly to a traditional 401k plan. Participating teachers contribute 9 percent of their salary and their employer contributes an additional 5 percent of salary to the fund each year. A teacher's retirement wealth is derived from the value of the a teacher's and employer's contributions and the interest earned on those funds. Teachers immediately vest for both their own and their employer's contributions. This means that if a teacher leaves the professiona or moves to another state, they can take their retirement savings with them and combine them with another retirmeent account. Participating teachers are eligible for full retirement benefits at age 59.5.