(The Center Square) – For years, North Carolina’s pension plan has experienced among the nation’s lowest rates of returns because of overly conservative investment choices, state Treasurer Brad Briner told a legislative committee on Tuesday.
“There is no question that our pension plans have underperformed for years.” the first-term Republican told the Joint Legislative Committee on General Government. “We carried too much cash and didn’t have enough return-seeking assets.”
North Carolina held the “dubious distinction” of ranking either 49th or 50th among states for pension returns, the treasurer said.
“That is just unacceptable,” he said.
North Carolina is one of only three states with “sole fiduciary” oversight of the investments, conducted entirely by the state treasurer’s office.
Briner updated legislators on a new board authorized under the 2025 Investment Modernization Act, which will take office in January, to oversee the state’s eight pension plans which serve 1 million people and distributes $640 million in benefit checks each month.
The new board will include the treasurer, financial professionals appointed by the treasurer and members appointed by the governor and legislative leaders.
The treasurer hopes to increase investment returns to at least 6.5% annually, the amount an actuary has determined is needed to meet the plan’s needs in future years, Briner said.
Many people think a retirement plan’s investments should be conservative because of the age of the people who are receiving the checks each month, Briner said.
“The truth is the pension system will be around for hundreds of years,” he said. “So we have the benefit of time to allow compounding to work in our favor. We can allow some volatility into the program, assuming it is correlated with higher returns.”
The pension systems have a current value of $140 billion and pays out $1.5 billion annually, the treasurer said.
“We need to make sure we can pay that out each and every year and we are certain to do that based on having cash and very high quality fixed income for a big chunk of the portfolio,” Briner said.
At the same time, the plans must also be able to keep up with long-term inflation, he said.
“We’ve had 54% inflation over the last 15 years in this country,” Briner said. “Our cost of living adjustments over that period for our retirees are in the single digits. That’s the challenge that we are managing now, not making sure we can send the checks today, it’s making sure we keep our retirees in some semblance whole for inflation in the future.”
