In a move that's likely to alleviate some financial pressure, the North Carolina Retirement Systems (NCRS) Board of Trustees (BOT) received updates indicating potential pension relief for state employers. The recommendations, delivered during a meeting where various factors affecting the state's pension system were reviewed, come as a result of a periodic deep dive into the system's health, conducted every five years, as reported by the State Treasurer of North Carolina.
The consulting actuary, Gallagher Benefit Services, Inc., has put forth that granting employers more time to pay for their unfunded liabilities, suggesting an extension of the payback period from 12 to 15 years based on model actuarial practices which, if approved, should reduce the amount government employers are contributing annually in the near term compared to their previous payments. However, even with these proposed changes, the Board of Trustees won't be voting on cost-of-living adjustments or one-time bonuses until January since current criteria for 2026 haven't been met.
The actuarial data, reflecting the period from 2020 to 2024, was presented to BOT members of the Teachers’ and State Employees’ Retirement System (TSERS) and Local Governmental Employees’ Retirement System (LGERS), revealing an increase in unfunded liabilities from December 2023 to December 2024 resulting in a slight decrease in the funded level of the plans. The primary reasons for this shift according to State Treasurer of North Carolina were investment losses from the previous year, and salaries that rose higher than expected.
Within their recommendations, Gallagher advocated for adjustments to factors influencing the contribution-based benefit cap (CBBC) to ensure fewer retirees with high final compensation are affected and this aligns with state law laying out a specific threshold of impacted retirees, their presentation disclosed plans to keep the assumed rate of investment return for TSERS and LGERS at 6.5%, they suggested increasing assumed future salary increases and adjusting life expectancies based on post-COVID mortality rates being lower than earlier projections these changes are expected to improve funded percentages and reduce unfunded liabilities. Meanwhile, the NCRS is looking into incorporating artificial intelligence tools and updating systems for document management and online member access, moving towards a more secure sign-on with ID.me come 2026.
These updates come as part of NCRS’s ongoing efforts to optimize the pension system for employers and employees alike, striving to ensure it remains sustainable and beneficial for the long haul.
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