State Treasurer Janet Cowell has set up a commission to look at the retirement benefits new state and local government employees in North Carolina should receive.

The Future of Retirement Study Commission is scheduled to meet for the first time Jan. 25 in Raleigh. The 13 people on the commission include legislators, state Budget Director Charles Perusse, human resources employees, union members, and policy analysts.

“Is the system as currently structured the right program for the next 50 years?” asked Robert Clark, the chairman of the commission and a professor at the College of Management at North Carolina State University. “It seems like a good time for a review.”

North Carolina is one of at least 14 states studying how their pensions are set up. The North Carolina pension system for state and local government employees is comprised of defined-benefit plans. They, like most other public pensions, guarantee set payments to retirees based on length of employment and regardless of the pension system’s fiscal soundness.

For example, a 60-year-old who made $50,000 a year and had worked for 25 years would receive a maximum monthly payment of $1,895 from the Teachers’ and State Employees’ Retirement System.

In contrast, the vast majority of private retirement programs are defined-contribution plans, including 401(k)s, with benefits that vary based on how well workers’ investments have performed in the marketplace.

According to the National Conference of State Legislatures, only Alaska, Michigan, and the District of Columbia have mandatory defined-contribution plans for state employees. Washington, Oregon, Indiana, and Georgia have hybrid pension plans, with a portion of retirement benefits guaranteed from a defined-benefit plan and the remainder coming from investments made in a defined-contribution component.

Joseph Coletti, a commission member who is fiscal and health care policy analyst for the John Locke Foundation, favors switching to a defined contribution plan. The John Locke Foundation publishes Carolina Journal.

“I think the ideal would be to have a defined contribution on both sides, on the pension side and on the health care side,” Coletti said.

Standard & Poor’s has named North Carolina’s pension fund for state employees and teachers the second strongest in the nation for the past three years, and it is close to being fully funded.

On the other hand, the state’s medical benefits for retirees have about a $28.6 billion hole in funding and need an annual contribution of about $2.7 billion to make up the difference. Even so, the commission is expected to focus on the pension plan instead of the health plan.

Cowell has said she wants the commission to prepare recommendations and present them to the General Assembly’s short session in May.

Clark said he doesn’t know whether the commission will recommend cutting benefits for future employees.

“I have no agenda at this point,” Clark said. “To my knowledge, the treasurer doesn’t have an agenda.”

Sarah Okeson is a contributor to Carolina Journal.