(The Center Square) – Retired state employees could eventually benefit from higher investments returns by North Carolina.
The board of the North Carolina Retirement Systems this week approved new policies that would make it possible to use the system’s investment gains as a factor in whether to recommend the Legislature provide cost of living increases for state pensioners.
The current policy requires that all investments gains go toward reducing the pension plan’s unfunded future liabilities – the cost of pensions for future retirees.
The Legislature has not granted state retirees permanent cost of living increases in their pensions since 2017, although they have been awarded one-time annual bonuses.
The returns on pension plan has been increasing lately with an effort by first-term Republican state Treasurer Brad Briner to diversity the funds into higher-yielding investments.
With those gains, the state is “well on the way” toward reducing the deficit on future unfunded liabilities, Briner told TCS on Friday.
That leaves two other options for the investment gains: reducing the state’s contribution to the pensions or increasing the retiree pensions.
“The truth is, I think we should do both,” he said. “How do you do that? It begins with enabling the Retirement System board to consider those investment gains as they think about employer contribution rates and retiree benefits.”
It is ultimately up to the General Assembly to decide exactly how to spend the investment gains, Briner said.
“We get to give them some advice,” he said. “They take those seriously but they don’t have to follow them.”
Cost of living increases for pensions are not guaranteed when state employees retire, Briner said. But without them, the value of the pensions drops as inflation increases, the treasurer said.
“It would be nice to be able to keep up with inflation,” he said.
A more effective investment strategy for state pension reserves can make that option possible, Briner said.
“In the pension system, we made $16 billion last year,” Briner said.
That investment gain was equal to the amount the state collected in personal income taxes last year, Briner said.
“The scale of what we are doing on the investment side is enormous,” the treasurer said. “It matters to every taxpayer in the state. If we don’t do it on that side, we are going to come after taxpayers for it.”
