ATLANTA - Ending a legal battle that has clouded South Carolina's finances for almost five years, state officials have agreed to an $85 million settlement of a lawsuit filed by retirees who had claimed unfair taxation of their federal pensions.

The settlement, reached on Tuesday, calls for repayment of state taxes collected on the pensions between 1985 and 1988. The agreement now must be approved by the state's 15th Circuit Court in Horry County, where the lawsuit was originally filed in April 1989.

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