NC TSERS 401(k) and 457 Transfer Benefit: Converting Savings to Pension Income

What the Transfer Benefit Is

The NC 401(k) and NC 457 plans, administered by Empower Retirement through the North Carolina Supplemental Retirement Plans, are voluntary defined contribution savings accounts available to state employees alongside their TSERS pension. The Transfer Benefit lets you transfer eligible pre-tax contributions from these accounts to TSERS at or after retirement in exchange for additional monthly pension income.

Instead of taking your eligible 401(k) or 457 amount as a lump sum or rolling it into an IRA, you can transfer some or all of it to TSERS. The Retirement Systems Division converts the transferred amount into an additional monthly benefit that is added to your regular TSERS pension check.

How the Conversion Works

The additional monthly pension amount is calculated by RSD based on:

• The dollar amount you transfer
• Your age and, if you name one, your survivor beneficiary's age
• The benefit payment, guarantee, and cost-of-living options you choose

Once the funds are transferred, the election is irrevocable. The transferred amount creates an additional monthly benefit under the payment and guarantee options you choose; options include lifetime payments and a survivor benefit.

For members who value guaranteed lifetime income over investment flexibility, the transfer benefit provides a pension-like payout from money that would otherwise sit in a market-exposed account.

NC 401(k) vs. NC 457: Both Are Eligible

Both the NC 401(k) Plan and the NC 457 Plan qualify for the transfer. If you contributed to both plans during your career, you can transfer from either or both. The transfer benefit is available at or after retirement; this differs from a service credit purchase, which may be funded by an eligible rollover or plan-to-plan transfer before retirement.

The supplemental retirement plans also serve another purpose in the retirement process: you can use 401(k) or 457 funds to pay for service credit purchases through a pre-tax rollover. This is different from the transfer benefit. A service credit purchase adds years to your creditable service in the pension formula. The transfer benefit adds a separate monthly supplement on top of your formula-based pension.

When the Transfer Benefit Makes Sense

The transfer is most attractive when:

• You want maximum guaranteed monthly income rather than a lump sum you need to manage and invest
• Your 401(k) or 457 balance is not large enough to generate meaningful investment returns on its own, but would produce a noticeable monthly supplement through the transfer
• You are choosing the Maximum Allowance payout option and want a higher monthly check without reducing it through a joint-and-survivor election

The transfer is less attractive when:

• You need liquidity — the transferred funds are permanently converted to a monthly stream with no lump-sum access
• You expect to need the money for large one-time expenses (home repairs, medical bills, vehicle replacement) in early retirement
• You have other sources of guaranteed income (Social Security, a spouse's pension) and would prefer to keep the 401(k)/457 balance as a flexible reserve

Comparing to Commercial Annuities

Financial advisors marketing to TSERS members sometimes promote rolling 401(k) or 457 balances into commercial annuities. These products come with sales commissions, surrender charges, and management fees that reduce the effective payout rate.

The NC 401(k) and NC 457 transfer forms each list a one-time $100 administrative fee deducted from the amount transferred. RSD calculates the additional monthly benefit based on the amount transferred and the options you choose. Before purchasing any commercial annuity product, compare its guaranteed monthly payout to the TSERS estimate for the same eligible amount.

To learn more about the transfer benefit and the NC supplemental retirement plans, visit the Empower Retirement portal at myNCPlans.gov.

The NC TSERS Retirement Guide covers the transfer benefit alongside the other funding decisions you face at retirement — service credit purchases, payout option elections, and post-retirement income planning — so you can evaluate all of them together.

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