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General Assembly considers S.C. pension plan contribution increases

March 25, 2016

Based on the results of regularly scheduled studies of South Carolina’s public pension plans, employee and employer contribution rate increases will be necessary in the near future. The anticipated increases are due in part to recent, lower than expected investment earnings and expected future decreases in investment earnings.


Each year, actuaries conduct an analysis to assess the financial condition of each defined benefit retirement plan. Actuaries are professionals who study uncertain future events and analyze the consequences of risk. When the actuaries conduct the annual studies, or valuations, of the retirement plans administered by the South Carolina Public Employee Benefit Authority (PEBA), they take into account when employees are expected to retire, how much benefit they are expected to earn, how much they will contribute, as well as projected inflation rates and returns on investment, among other factors.


The annual valuations also contain the actuary’s recommendations of the required employee and employer contribution rates necessary to fund the retirement plans on a sound actuarial basis in accordance with the applicable funding statutes and policies. Any recommended changes to the contribution rates must be adopted by the PEBA Board of Directors and are then subject to approval by the State Fiscal Accountability Authority. Contribution rate changes are typically scheduled to go into effect two years after the date of the annual valuation to accommodate employers’ budgeting cycles.  Lawmakers also consider the results of the actuarial valuations to make public policy decisions to ensure adequate funding for the retirement plans.


The state’s defined benefit retirement plans have three sources of funding: employee contributions, employer contributions and investment earnings. By law, if investment returns fall short of the assumptions set for the plans, employee and employer contributions must increase to ensure adequate funding for the plans. The expected rate of investment return for the retirement plans is 7.5 percent. The actual investment return for fiscal year 2015 was 1.6 percent; therefore, the investments for the South Carolina Retirement System (SCRS), the largest of the state’s public pension plans, earned $1.5 billion less than expected in fiscal year 2015.


Based on the 2015 actuarial valuation, the minimum required contribution increase is .03 percent of covered payroll for employers and .03 percent of earnable compensation for employees beginning July 1, 2017. This increase recognizes only a portion of the lower than expected investment returns. To fully absorb the $1.5 billion investment loss from fiscal year 2015, participating SCRS employers would need to pay an additional 0.5 percent of covered payroll and employees participating in SCRS would need to pay an additional 0.5 percent of earnable compensation. Also, investment returns for fiscal year 2016 to-date are negative. If investment markets do not turn around in the relatively near future, further increases in employer and employee contribution rates will be necessary to make up for lower than expected investment earnings.


Beyond the annual actuarial valuations, PEBA’s actuaries conduct a more in-depth experience study of each retirement plan every five years. The experience study determines how closely the assumptions about the future used in the annual valuations line up with actual member behavior and experience, and economic variables. The experience study for the five-year period ending June 30, 2015, identified the need for higher contribution rates due to lower than expected investment earnings, increases in mortality and decreases in payroll growth. The study also contains recommendations for revisions to several assumptions, including a lowering of anticipated investment income. These recommendations must be adopted by PEBA’s Board of Directors and approved by the State Fiscal Accountability Authority or, in the case of the assumed rate of investment return, adopted by the South Carolina General Assembly.


If the recommendations are approved, the actuaries will use the new assumptions when completing the 2016 actuarial valuation, due in December of 2016. SCRS contribution rates for both employers and employees are expected to increase an additional 1.19 percent each as a result of the new assumptions. For employers, the increase is applied to covered payroll and for employees, the increase is applied to earnable compensation.


The results of the experience study (the 1.19 percent increase) do not fully take into account the investment losses the plan experienced in fiscal year 2015, nor the losses the plan has incurred so far in fiscal year 2016. This means total increases of approximately 2-3 percent in both employer and employee contribution rates may be necessary to ensure adequate funding of the retirement plans and preserve the plans’ ability to continue to pay benefits in the future if investment markets do not turn around soon.


The South Carolina General Assembly, the PEBA Board and the State Fiscal Accountability Authority are actively considering what action to take to sustain the state’s pension plans for public workers. As part of the regular legislative process, both the Senate and the House of Representatives will review the need for contribution increases for the plans. Both legislative bodies are discussing the issue and will be approving their respective proposals. Likewise, the Governor’s Office included funding for the 0.5 percent contribution increase for fiscal year 2017 in the Governor’s Executive Budget.


As policymakers discuss the financial requirements for the state’s defined benefit plans, PEBA will continue to keep stakeholders informed of what these discussions and decisions will mean for them.  While the information in this article is primarily focused on SCRS, the largest of the plans, the other retirement plans will be affected as well.


PEBA releases RFP for behavioral health management services

March 11, 2016

The South Carolina Public Employee Benefit Authority (PEBA) has released a Request for Proposal (RFP) for Behavioral Health Management Services. The RFP is located here. Please see the RFP for instructions on asking questions or requesting additional information.


PEBA named 80% by 2018 National Achievement Award honoree

March 8, 2016

March is National Colorectal Cancer Awareness Month and the South Carolina Public Employee Benefit Authority (PEBA) has been recognized as a national leader in the fight to end this disease. The National Colorectal Cancer Roundtable (NCCRT), an organization co-founded by the American Cancer Society and the Centers for Disease Control and Prevention, recently presented five organizations with the 80% by 2018 National Achievement Award, which recognizes leadership in the ongoing effort to increase colon cancer screening rates across the United States.


PEBA was recognized for its efforts to increase the number of eligible State Health Plan members who are current with their colon cancer screening. Though colon cancer screening has been covered by the Plan since 2007, deductibles, copays, and out-of-pocket costs for the consultation visit were required, and data showed that only 55 percent of members age 50 and older were current with their routine colon cancer screening.


Beginning January 2016, PEBA removed the out-of-pocket expense incurred by State Health Plan members for colon cancer screening. To promote this new benefit, PEBA is hosting regional lunch and learn workshops with local gastroenterologists.


To learn more, go to


Important notice about changes to the State Optional Retirement Program

March 7, 2016

The South Carolina Public Employee Benefit Authority (PEBA) oversees the State Optional Retirement Program (State ORP). In collaboration with its investment consultant, PEBA continuously monitors the State ORP’s third party administrators and the performance of the investment options they offer. This collaboration also includes the continual review of the State ORP to ensure that the program is following industry best practices.


As a result of these reviews, PEBA is implementing changes to the program effective April 1, 2016, that will revise the investment options available from all four State ORP third party administrators and change the way you pay administrative fees for the funds in which you are invested.


PEBA understands that change isn’t always easy and we assure you that we did not undertake the revisions to your program lightly. As fiduciary stewards of the programs we administer, we are committed to making sure that your program is aligned with industry best practices that benefit you.


You will receive detailed information about the upcoming revised investment menu directly from your State ORP third party administrator. This letter is to inform you of the pending revisions to the program’s investment options and explain why PEBA is implementing the changes.


Industry best practices driving these changes

The following bullets illustrate several of the industry best practices that PEBA and its investment consultant considered before recommending the upcoming revisions to the State ORP investment options:

  • Ensure clarity of recordkeeping fees
  • Implement transparent participant fee disclosure
  • Reduce or eliminate revenue sharing and assess a recordkeeping or administrative fee


Why your State ORP investment options are changing

One of the industry best practices designed to ensure that participants benefit from the “best price,” or lowest net investment cost is to eliminate revenue sharing, which is when you pay administrative costs for your investment option but only receive a portion of the revenue the option generates. The remainder of the revenue generated is retained by the third party administrator to cover its administrative costs. It is more difficult to determine the lowest net investment cost with revenue sharing in place. By moving to zero-revenue sharing investment options, the program is separating plan administration fees from your investments, and this increases transparency in cost reporting and improves the flexibility PEBA has in creating a high-quality investment menu for State ORP participants.


Elimination of revenue-sharing investment options

Currently, with the exception of VALIC, most State ORP mutual fund investment options include revenue sharing. With this revised structure of the State ORP fund line-ups, you, as a participant, will receive all of the revenue generated from the mutual fund investment option(s) in which you participate, not your third party administrator. In lieu of sharing in the revenue, your third party administrator will charge you a recordkeeping, or administration, fee.


The new zero-revenue sharing fee structure will not only provide you with a more transparent fee assessment but will help PEBA better determine if you and the State ORP are benefiting from the lowest net investment cost.


Why you will see a fee on your State ORP participant statement

As a result of the zero-revenue sharing structure, you will begin to see all of the fees associated with your participation in the State ORP reported on your participant statements. These are not new fees but are a more transparent reporting of the administrative cost of your investment selections. The zero-revenue sharing fund structure will provide you with a clearer picture of your third party administrator’s recordkeeping charges, which is meant to help you make sure you select the investment options that best meet your needs.


Your vendor will provide you with more details soon

Please be on the lookout for more information from your third party administrator. We are working closely with them to make sure their communications will answer any questions you may have about the revised investment options and their process for mapping assets in existing investment options to the new investment options.


Dental Plus network changes coming March 1

February 19, 2016

The provider network for the Dental Plus plan offered through the South Carolina Public Employee Benefit Authority (PEBA) and insured by BlueCross BlueShield of South Carolina will change effective March 1, 2016. PEBA’s current Dental Plus provider network will convert to Blue Cross’ network March 1. Blue Cross’ network is larger than the current Dental Plus network and Blue Cross is actively recruiting dental care providers who participate only in PEBA’s Dental Plus network. If you have questions about the Dental Plus network, contact BlueCross BlueShield of South Carolina at 888.214.6230.


PEBA Board chairman resigns, Sowards elected to complete term

February 18, 2016

Arthur M. Bjontegard, Jr., chairman of the Board of Directors of the South Carolina Public Employee Benefit Authority (PEBA), announced his resignation as chairman effective February 17, 2016, and from the PEBA Board effective February 18, 2016. Bjontegard was appointed chairman of the PEBA Board in September 2012, just months after the agency’s July 1, 2012, creation.


As the PEBA Board’s first chairman, Bjontegard guided the Board and agency staff through the intricacies of the establishment of a new agency and Board while forming the framework for the Board’s functions and roles.


At its meeting today, the PEBA Board elected John A. Sowards to complete the chairman’s term through June 30, 2016. Board members will elect a new chairman in July.


“I would like to thank Art for his outstanding service to this Board and agency. I am honored to complete his term and hope to carry the mantle in the coming months as honorably and adroitly as he has,” said Sowards.


Peggy G. Boykin, executive director of PEBA, added, “Art is one of the most genuinely honorable individuals I have had the pleasure of knowing and working with and he will leave a legacy that reaches far beyond our board room doors and into the outermost corners of our state and the lives of the people we serve.”


Bjontegard, a retired president of South Carolina’s largest bank holding company, the former South Carolina National (SCN), received the Order of the Palmetto from former South Carolina Governor Carroll Campbell.


PEBA releases RFP for third party administration of its health benefits plan

January 15, 2016

The South Carolina Public Employee Benefit Authority (PEBA) has released a Request for Proposal (RFP) for third party administration of PEBA’s health benefits plan. The RFP is located here:


State Vision Plan issues corrected

January 8, 2016

An information systems glitch that resulted in some subscribers being terminated from vision coverage effective January 1, 2016, has been corrected. We apologize for any inconvenience this may have caused. Subscribers who have questions should contact contact EyeMed’s Customer Care Center at 877.735.9314.


State Vision Plan update

January 6, 2016

If you enrolled in the State Vision Plan effective January 1, 2016, or added one of your dependents to your vision coverage effective January 1, 2016, you may have been erroneously terminated from vision coverage. An information systems glitch resulted in some subscribers being terminated from coverage effective January 1, 2016. If you are enrolled in the State Vision Plan, which is administered by EyeMed, and plan to use your benefits soon, please contact EyeMed’s Customer Care Center at 877.735.9314 to make sure your coverage is in effect. We apologize for any inconvenience this may cause those of you who may have been impacted by this issue.


New prescription benefits become effective January 1, 2016

December 31, 2015

The South Carolina Public Employee Benefit Authority (PEBA) and Express Scripts—the company awarded the contract to administer the State Health Plan prescription drug benefit effective January 1, 2016— are working hard to make sure you get the medications you need conveniently and at the lowest possible cost.


Members should have received a welcome packet from Express Scripts that included a new prescription drug identification card. Members should present this card to their pharmacy beginning January 1, 2016, to ensure their benefit is processed accurately.


Physicians and pharmacists continually review and compare the medications on a pharmacy network’s formulary, which is the network’s list of preferred drugs, including new drugs and generics. As a result, some safe and effective drugs become “preferred” and others may become “non-preferred.”


What are “preferred” and “non-preferred” medications?

  • Preferred, or formulary, medications are effective medications that are similar to non-preferred medications. This list of drugs is determined based on the advice of pharmacists and a group of independent doctors. Preferred medications cost less than non-preferred medications. The formulary for the State Health Plan, effective January 1, 2016, is now available. Please note: Not all drugs on the list are covered by all prescription plans and the enclosed list might not show every covered drug.
  • Non-preferred, or non-formulary, medications are those medications not on the State Health Plan’s list of recommended drugs and therefore may cost you more.


If you currently are prescribed a drug that is not on the preferred list, we encourage you to talk with your doctor about prescribing preferred drugs that are on the formulary list. Doing this can save you money, and using generic drugs may save you even more.


Individualized formulary disruption letters were mailed to Medicare Prescription Drug program subscribers identified as being impacted by a change December 29, 2015. Letters to affected commercial (non-Medicare) subscribers are scheduled to be mailed January 5, 2016. Subscribers should allow up to five days for delivery.


If you have any questions about Express Scripts or changes in the formulary, you may contact Express Scripts at 855.612.3128.


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