News Release: Ensuring NC's Pension Plan Delivers On Its Promises | News Feature | Creative Loafing Charlotte

News & Views » News Feature

News Release: Ensuring NC's Pension Plan Delivers On Its Promises

by

5 comments

FOR IMMEDIATE RELEASE: February 10, 2020
Contact: Joseph Coletti
John Locke Foundation
919-828-3876
[email protected]   

Changes Needed To Ensure North Carolina’s Pension Plan Remains Strong, Delivers on Its Promises

Report recommends steps for reducing risk and ensuring fiscal sustainability

RALEIGH — It is among the nation’s healthiest pension plan systems, currently funded at almost 90 percent, yet North Carolina’s Teachers’ and State Employees’ Retirement System’s (TSERS) funded ratio has been dropping over the last 20 years. That red flag shouldn’t be ignored, according to experts from the John Locke Foundation and Reason Foundation.

In a new report released Monday, February 10, they provide detailed research on the plan, along with specific recommendations to ensure that TSERS delivers on promises to current and future retirees and shield taxpayers from financial risk.

“The good news is North Carolina’s pension plan applies many best practices and compares quite well with other states,” said Joseph Coletti, senior fellow at the John Locke Foundation and one of the report’s authors. “Still, the data shows potential vulnerabilities in the plan assumptions and in the investment portfolio, and those should be addressed.”

More than 700,000 people have a direct interest in the plan’s viability, with all North Carolina taxpayers on the hook for unfunded liabilities. The report relies on data from Fiscal Year (FY) 2018, when TSERS had liabilities of $80 billion, assets valued at $70 billion, and a net liability of $10 billion.

The pension plan had 304,554 active members, 6,680 members on disability, 160,087 terminated members or survivors of deceased members entitled to, but not currently receiving benefits, and 215,008 retired members or survivors collecting benefits.


Following a detailed look at two decades of data, the authors offer a course correction. They urge policymakers to adopt more conservative actuarial assumptions and to consider expanding new-hire retirement plan choices and providing options to existing employees. They also recommend quick action. “In the realm of pension finance, the best time to make prudent changes to reduce risk is right now, before major problems – such as the next recession – materialize.”

The report also praises the solid foundation of North Carolina’s plan, upon which the reforms would build. They include an 88 percent funded ratio well above the national average of 73 percent, the use of a 7.0 percent assumed rate of return well below the national average of 7.5 percent, and a track record of making the full actuarially determined pension contributions.

“This report is filled with data, but it’s really about people,” Coletti said. “The pension plan embodies the hopes, dreams, and futures for hundreds of thousands of people and their families. The state has made promises, and our goal is help make sure those promises are kept.”

Four experts from the Reason Foundation collaborated with Coletti on the analysis. They are policy analysts Jen Sidorova and Raheem Williams, senior policy analyst Truong Bui, and vice president Leonard Gilroy.

Sidorova and Gilroy will outline the report’s key recommendations at the John Locke Foundation’s Shaftesbury Society at Noon today, Feb. 10. The event, at the John Locke Foundation’s midtown Raleigh office, is open to the public (4800 Six Forks Road, Suite 220, Raleigh). The presentation also will be streamed live on the John Locke Foundation’s Facebook page.

READ THE REPORT

###


Comments (5)

Showing 1-5 of 5

Add a comment
 

Add a comment