Folwell: NC pension plan is strong, encourages more participation

North Carolina State Treasurer Dale Folwell at press conference

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  • North Carolina's pension system ranked the most efficient in North America by CEM Benchmarking.

North Carolina State Treasurer Dale Folwell had some good news to share regarding pension systems in the state at his monthly “Ask Me Anything” Q&A on Dec. 6. 

There are currently over one million participants in the pension plan, or about one out of ten adult North Carolinians participating in the North Carolina Retirement Systems at different levels. The numbers equal more than 353,000 beneficiaries receiving $590 million in monthly pension payments and another 647,000-plus active and former public employees not yet eligible to receive their pension payouts. 

Current assets of the NCRS were estimated to be nearly $111 billion as of Nov. 25.

Folwell acknowledged that while inflation is terrible and “a thief,” especially for fixed-income and lower-income North Carolinians, higher interest rates have been a blessing to the pension plan.

“We have put hundreds and hundreds of millions of dollars to work just over the last three months at interest rates that we didn’t think we would see for quite some time,” he said. “You know, being able to earn 4 and 5% where we were previously earning less than 1% on hundreds, and hundreds of millions, if not billions of dollars, means that the plan is earning more interest than it has in a long period of time.”

He said, on the other hand, the pension’s funded level continues to be in the mid-80s. For the fiscal year, the pension plan was down 7%. “To put that in some context, Georgia’s pension plan was down 14%, so we entered this year with the highest levels of cash equivalents and the shortest duration of bonds in the history of North Carolina,” Folwell noted.

The state’s pension plan also scored in the zero percentile of CEM Benchmarking and was named the most efficient pension plan in North America. Folwell credited his staff in the treasurer’s office for helping him cut nearly $700 million in “Wall Street fees” out of the plan over the last six years.

He also said that he was pleased to have gotten the National Guard pension system and the volunteer firefighter and rescue pension system back over 100% funded for the first time in over a decade. Folwell said that when he was sworn in as treasurer, the plans were about 65% funded. 

He credits Josh Smith and Kevin Gordon, who are firefighters and sit on local governing boards, staff at the retirement system, and the General Assembly, who helped fund the plans.

Folwell also assured those on the call that there are no ESG investments, cryptocurrency, Bitcoin, or Special Purchase Acquisition Companies (SPACs) inside the pension plan.

“I can tell you as treasurer of North Carolina, the chair of the Local Government Commission, and chair of the State Banking Commission, these ESG policies, I think, have the impact of driving up complexity, driving up cost, and driving up the cost of borrowing money, especially for some of our smaller communities,” he said.

Folwell said he would like people to invest more in the different pension plans, including the $15 billion 401 and 457 plans. He said he and his staff would be working in the long session to get the General Assembly to start doing some things that will encourage more participants in those plans. 

He said the percentage of people at the local level who participate in the 401K is about 65%, and the percentage of people who contribute to the 401K and 457 at the state level is only about 40%. The gap, he said, is not emotional or political but mathematical.

“Many of these local communities make a 401, 457 match, and just that little bit of juice, that little bit of incentive encourages people to also start taking money out of their paycheck for the 401 and 457, so we’re going to be working on that in the long session,” Folwell said.

He also wants to ensure everyone has an equal chance at participating more in their retirement plans, including those just starting in their positions.

“I don’t want it to be a percentage of income that benefits people who make what I make,” Folwell said. “I want retirement readiness to be as focused financially as much as possible on the low and fixed-income people who work for the state of North Carolina that may make less than $50,000 a year. The beginning teacher, the beginning trooper. So I want this match to be an actual dollar amount, not a percentage to encourage them to put their money in the 401K.” 

Folwell stressed that every local and state employee contributes 6% of their monthly salary to the pension plans. 

“These are not just pension plans where the money is put in on their behalf and then they retire with half of their income at retirement,” he said. “Every single month, 6% of their paycheck is going into these pension plans, so they’ve had skin in the game the whole time.”