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PEBA Retirement in South Carolina: A Practical Guide for SC Teachers and State Employees

Carson Strom |

If you work for a South Carolina public employer—including SC teachers, school district and charter school employees, and state agency employees—your retirement benefits are typically administered through South Carolina PEBA (the Public Employee Benefit Authority). PEBA administers the state’s public retirement systems and provides tools to help you understand your benefits and plan your retirement timeline. 

This guide focuses on the two retirement “tracks” most SC public employees encounter:

  • SCRS (South Carolina Retirement System) – a defined benefit pension
  • State ORP (State Optional Retirement Program) – a defined contribution (account-based) plan for eligible employees

What is PEBA?

PEBA is the agency that administers South Carolina’s public employee retirement plans (including SCRS) and provides online tools like Member Access to view account information, run benefit estimates, and apply for retirement. 

SCRS Deep Dive: The SC Teacher and State Employee Pension

For many South Carolina teachers and state employees, SCRS is a cornerstone retirement benefit. SCRS is a defined benefit plan, meaning your retirement income is determined by a statutory formula—not by an investment account balance. 

1) Class Two vs. Class Three

PEBA categorizes SCRS members into:

  • Class Two: generally members with earned service credit before July 1, 2012
  • Class Three: generally members without earned service credit before July 1, 2012 

This affects key items like retirement eligibility, how your Average Final Compensation (AFC) is calculated, and whether certain leave can count toward service or AFC. 

2) Average Final Compensation (AFC): what it is and how it’s calculated

AFC is one of the biggest drivers of your SCRS pension—especially for SC educators and public employees who see pay changes late in career.

Class Two AFC (generally pre–July 1, 2012 members)

PEBA defines Class Two AFC as your 12 highest consecutive quarters of earnable compensation in which you made regular contributions and earned service credit. PEBA also notes that up to 45 days of unused annual leave (termination pay) may be included in AFC for Class Two. 

A common way to think about it is:

  • Sum your highest 12 consecutive quarters, then
  • Convert to an annualized measure (PEBA’s process effectively divides by 3 to get an average annual figure) 

Class Three AFC (generally post–July 1, 2012 members)

PEBA defines Class Three AFC as your 20 highest consecutive quarters of earnable compensation in which you made regular contributions and earned service credit. For Class Three, PEBA specifies unused annual leave payouts are not included in AFC. 

Conceptually:

  • Sum your highest 20 consecutive quarters, then
  • Convert to an annual average (PEBA’s process divides by 5) 

Additional AFC rules that often surprise people

PEBA describes additional rules that can affect AFC and service credit, including:

  • Overtime treatment for work performed after December 31, 2012 (certain overtime may not count in AFC)
  • Unused sick leave: Class Two may add up to 90 days of unused sick leave to service credit; Class Three generally cannot
  • IRS compensation limits may cap compensation used for contributions and AFC for members who became participants on or after January 1, 1996 

3) How SCRS calculates your pension (the formula)

PEBA uses a benefit multiplier of 1.82% to calculate your retirement benefit. In simplified form:

Annual benefit ≈ AFC × 1.82% × Years of Service
Monthly benefit ≈ (AFC × 0.0182 × Years of Service) ÷ 12 

4) When can you start drawing SCRS?

Class Two: Unreduced (normal) retirement

You can generally retire with an unreduced SCRS benefit if you have:

  • 28 years of service credit (with at least 5 years earned), or
  • Age 65 (with at least 5 years earned) 

Class Two: Early (reduced) retirement

PEBA describes early retirement scenarios including:

  • Age 60 with at least 5 years earned service (benefit reduced if under 65), or
  • Age 55+ with 25 years of service credit (reduction applies if under 28 years; other rules can apply) 

Class Three: Unreduced (normal) retirement

Class Three generally uses the Rule of 90 and a higher service requirement:

  • Rule of 90 (your age + service credit = 90) with at least 8 years earned, or
  • Age 65 with at least 8 years earned 

Class Three: Early (reduced) retirement

  • Age 60 with at least 8 years earned (benefit reduced if under 65) 

Planning note for SC teachers and state employees: The “best” retirement date often comes down to how close you are to Rule of 90, age 65, and/or key service milestones, because those determine whether reductions apply. 

5) SCRS benefit payment options: the 3 choices at retirement

When you retire under SCRS, PEBA provides three payment options. In general, PEBA notes payment option changes are limited after retirement and rules can depend on circumstances (e.g., qualifying life events). 

Option A: Maximum payment (highest monthly benefit)

  • Provides the highest monthly lifetime benefit to you (no built-in lifetime survivor benefit). 

Option B: 100% Survivor Benefit (Joint & Survivor)

With Option B, you choose a reduced monthly benefit for your lifetime so that a beneficiary can continue receiving income after your death.

  • While you’re living: you receive a reduced monthly SCRS pension (lower than Option A).
  • After your death: your designated beneficiary receives a lifetime monthly benefit equal to 100% of your reduced benefit.
  • Why your benefit is reduced: PEBA applies an actuarial reduction based on factors such as your age and your beneficiary’s age at retirement, because the plan is pricing in the likelihood of paying a survivor benefit over a longer period.
  • Important beneficiary restriction (age difference): PEBA states that under Option B, you may not name a sole beneficiary who is more than 10 years younger than you (as determined under an IRS formula) unless that person is your spouse. PEBA also notes that if you name multiple beneficiaries, the age restriction does not apply in the same way.

Option C: 50% Survivor Benefit (Joint & Survivor)

With Option C, you also take a reduced monthly benefit for your lifetime, but the survivor protection is smaller—often resulting in more income up front compared with Option B.

  • While you’re living: you receive a reduced monthly SCRS pension, but typically higher than Option B because the promised survivor benefit is smaller.
  • After your death: your designated beneficiary receives a lifetime monthly benefit equal to 50% of your reduced benefit.
  • Why your benefit is reduced: PEBA applies an actuarial reduction based on your age and your beneficiary’s age at retirement (similar concept to Option B, but generally a smaller reduction because the survivor benefit is only 50%).
  • Beneficiary rules: PEBA explains that your beneficiary must be a living person (not an entity), and Option C’s description does not include the “sole beneficiary more than 10 years younger” limitation that PEBA explicitly lists under Option B.

6) Using PEBA tools to estimate your SCRS benefit

PEBA’s Benefit Estimate Calculator (available through Member Access) provides an unofficial estimate of the monthly benefit you may receive at retirement. PEBA notes the estimate is not a guarantee and may not include items like unused leave credit. 

State ORP (Defined Contribution): The Account-Based Alternative for Eligible SC Public Employees

Some SC public employees—including certain teachers, school employees, and state workers—may be eligible for State ORP, a defined contribution retirement plan. 

How your “benefit” is determined (the defined contribution “formula”)

State ORP does not use a pension formula. Your retirement benefit is your account balance, driven by:

  • Contributions (employee + employer)
  • Investment performance
  • Fees and withdrawals 

Contributions and providers

PEBA’s “State ORP at a Glance” (link under sources and helpful links at the bottom of this article) explains key elements, including provider selection and account rights. 
(Provider and contribution details are explained in the PEBA ORP materials; your employer’s benefits office can confirm specifics for your position and election window.) 

Contributions are generally: 

  • Employee contributes 9% (pretax/tax-deferred)

  • Employer contributes 5%
    (Your employer remits contributions to your selected ORP provider.) 

Important: Contribution rates can change by law over time, so it’s worth confirming current rates in PEBA materials and/or with your benefits administrator. 

When can you withdraw?

PEBA notes you have immediate rights to your full account balance when you separate from all covered employment or reach age 59½. 

Distribution options

In defined contribution plans, “benefit options” are about how you take money out, such as:

  • Lump-sum withdrawals
  • Periodic withdrawals
  • Using some or all of the balance to purchase an annuity (if offered by your provider) 

Supplemental savings: SC Deferred Compensation

Many SC teachers and state employees also use the PEBA-related Deferred Comp program to save beyond SCRS/ORP and build more flexibility into retirement income planning. PEBA provides a Deferred Comp overview and links through its site. 

How we help SC teachers and state employees 

PEBA is the source of truth for eligibility and benefit rules. Where an advisor can add value is in the strategy layer, such as:

  • Coordinating SCRS pension income with personal savings and taxes
  • Deciding between Option A vs. survivor options based on household needs
  • Mapping State ORP withdrawals into a retirement paycheck strategy
  • Planning retirement timing around Rule of 90 / age thresholds and benefit reductions 

Compliance note

This article is for educational purposes only and is not legal or tax advice. For official determinations and the most current rules, consult PEBA and your employer benefits office. 

Sources and Helpful Links

Disclosure: The information provided in this blog post is for educational and informational purposes only and should not be construed as financial advice. While we strive to present accurate and up-to-date information, the financial, tax, and legal landscape is subject to change, and individual circumstances vary. Readers are encouraged to consult with a qualified financial advisor or professional before making any financial decisions or implementing strategies discussed in this post. Our firm does not guarantee the accuracy, completeness, or suitability of the information provided, and we disclaim any liability for any direct or indirect damages arising from the use of this information. Artificial Intelligence was used to assist in the writing of this article. Past performance is not indicative of future results. Any investment involves risk, and individuals should carefully consider their financial situation and risk tolerance before making any investment decisions.

 

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