North Carolina public pensions
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The Retirement Systems Division of the Department of State Treasurer administers the Teachers’ and State Employees’ Retirement System, Local Governmental Employees’ Retirement System, Consolidated Judicial Retirement System and the Legislative Retirement System.[1] The NC Retirement Systems covers 820,000 members, approximately one in eight working state residents.[1]
North Carolina has 174,022 total employees as of 2010.[2] In Fiscal Year 2010, the state has a total of 625,891 active and inactive pension fund members, with 219,199 receiving periodic benefit payments. [3]
The North Carolina Retirement Systems serves more than 820,000 state employees, making it the 10th-largest public pension fund in the country.[4]
North Carolina has a total pension liability of $92 billion. According to Eileen Norcross, a George Mason University economist, North Carolina's pension plans are only 60 percent funded and have an unfunded liability of $36 billion. [5] A Pew Center for the State's report on pensions shows that as of 2008, North Carolina's pension system was fully funded, according to reasonable actuarial standards. However, since 2008 the situation facing North Carolina and other states has worsened because of the recession. The value of pension-fund assets has declined, while recessionary deficits have led state legislators to forgo the require annual pension contribution. [6]
[edit] North Carolina's Pension Plans
| Plan | Current Value | Percentage funded | Unfunded liabilities | Total state employees | Avg. pension |
|---|---|---|---|---|---|
| Teachers and State Employee's Retirement System | $55.8 billion | 81.3 percent | $2.4 billion | 316,647 active members | $xx |
| Fireman and Rescue Squad Workers Retirement System | $283.7 million | 86 percent | $50.6 million | 32,216 active members | $xx |
| Local Government Employees' Retirement System | $17.7 billion | 75.3 percent | $81.5 million | 123,398 active members | $xx |
| Consolidates Judicial Retirement System | $599 million | 73 percent | $35 million | 559 active members | $xx |
The Legislative Retirement System and the Law Enforcement Retirement System do not have their own valuation reports.
[edit] Rate of Return
North Carolina presumes a 7.25% return rate on its pension investments.[7] In the third fiscal quarter of 2010 North Carolina's pension systems reported a return of 8 percent. However the prior quarter showed a loss of 4.25 percent. [8]
[edit] Funding Levels
The state's pension liabilities can be calculated in a variety of ways, which yield different numbers. Below are the numbers as calculated by to the Pew Center on the States,[9] the American Enterprise Institute[10] and Professors Robert Novy-Marx of the University of Chicago and Joshua Rauh of Northwestern University, Kellogg Graduate School of Management.[11]
| PEW (2008) | AEI (2008) | Kellogg (2009) |
| $504,760 | $48,898,412 | $37,800,000 |
Other information from the Pew Center on the States Feb. 2010 publication "The Trillion Dollar Gap":
| Latest liability | Latest unfunded liability | Annual required contribution | Latest actual contribution |
|---|---|---|---|
| $73,624,027 | $504,760 | $675,704 | $675,056 |
| Latest liability | Latest unfunded liability | Annual required contribution | Latest actual contribution |
|---|---|---|---|
| $29,364,734 | $28,741,560 | $2,459,469 | $597,176 |
| Number of pension plans | Pension assets ($bn) | Stated liabilities ($bn) | Funding status (% of tax revenue) |
|---|---|---|---|
| 2 | $59.1 | $68.7 | -256% |
This data is based on projected data from 2008 census data.[12] In 2008, $1.94 trillion was set aside for pensions, but it is estimated that states have $5.17 trillion in unfunded liabilities.
[edit] Eligilibity
State employees may retire with an unreduced retirement benefit at age 65 with five years of credit, or at age 60 with 25 years of credit, or at any age with 30 years of credit.[13][14]
[edit] Contribution Rates
For FY 2010, employees contribute 6% of their compensation and the state contributes 8.75%.[14]
[edit] Benefits
The state now requires employees to work 20 years to qualify for full retiree health benefits, which is up from the previously required 5 years.[15]
[edit] Legislative Reforms
With a new Republican led legislature, state lawmakers are looking at revamping the state's pension system to a 401(k) style system. Prior to the Republican takeover of the legislature, The boards of trustees of the Teachers' and State Employees' Retirement System and the Local Governmental Employees' Retirement System rejected the idea of offering a choice between a pension and a 401(k) type plan. [16] The boards also rejected recommending a minimum unreduced retirement age of 55 for state and local employees and teachers. [17]
The N.C. Future of Retirement Study Commission met throughout 2010 to consider recommendations for changes to the retirement systems covering state and local government employees in North Carolina. The commission recommened the following changes: [18]
- Choice between a defined benefit (DB) and defined contribution (DC) plan for all current and future employees.
- A minimum unreduced retirement age of 55 for all future hires other than law-enforcement officers.
- Giving more flexibility to the Local Governmental Employees’ Retirement System Board of Trustees to grant Cost of Living Adjustments (COLAs).
- Changing the way interest is calculated on employee contributions.
- Automatic enrollment in a supplemental DC plan.
- Study of consolidation of administration of 403(b) plans offered by local school systems.
Despite participating in the state's public pension plans, the N.C. League of Municipalities and the N.C. Association of County Commissioners state they are not public agencies. Pension records show that league retirees are some of the best paid in state or local government. The executive directors of both agencies each make over $200,000 per year. [19]
[edit] See also
[edit] External Links
[edit] References
- ↑ 1.0 1.1 Retirement - North Carolina Department of the State Treasurer
- ↑ 2010 Annual Survey of Public Employment and Payroll, Census 2010
- ↑ 2010 Annual Survey of Public Employment and Payroll--Membership by State, Census 2010
- ↑ Carolina Journal Online "Public Employee Pension Debt Explodes" Dec. 16, 2010
- ↑ Carolina Journal, Fiscal analyst says actual unfunded liability 15 times higher than acknowledged, March 7, 2011
- ↑ Carolina Journal, North Carolina Isn’t the Worst, Sept. 2, 2010]
- ↑ 7.0 7.1 7.2 Pew Center on the States "The Trillion Dollar Gap" Feb. 2010
- ↑ NBC 17, Public Pension Funds Grow During Third Quarter, Dec. 7, 2010
- ↑ "State Pensions and Retiree Healthcare Benefits: The Trillion Dollar Gap,” Pew Center on the States, accessed January 4, 2011
- ↑ Biggs, Andrew, “The Market Value of Public-Sector Pension Deficits,” AEI Outlook Series, no. 1 (2010)
- ↑ Novy-Marx, Robert and Joshua Rauh, 2010, "Public Pension Promises: How Big Are They and What Are They Worth," Journal of Finance (forthcoming)
- ↑ Northwestern University, The Liabilities and Risks of State-Sponsored Pension Plans, May 2010
- ↑ Local Government Employees Retirement System Handbook
- ↑ 14.0 14.1 State Employees and Teachers Retirement System Handbook
- ↑ The New York Times "States Aim Ax at Health Cost of Retirement" Feb. 13, 2011
- ↑ News & Obeserver, State Pension Issue Kicked to Legislature, Jan. 31, 2011
- ↑ Pionline, North Carolina Plan Gives Thumbs Down to DB-DC Plan, Feb. 2, 2011
- ↑ FORSC Report
- ↑ News and Observer, Local government association heads' salaries top $200,000, July 6, 2011
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