The North Carolina Retirement Systems (NCRS) Boards of Trustees have embraced policy changes that aim to simplify the process of implementing cost-of-living adjustments (COLAs) for retirees, with these modifications poised to take effect in the fiscal year 2027. As reported yesterday, January 29 by the Department of State Treasurer, the boards decided to allow for more flexible use of investment gains, which could result in increased monthly benefits for retirees.
Specifically, the Teachers’ and State Employees’ Retirement System (TSERS) requires legislative endorsement for COLAs, having not seen a permanent pension raise since 2017 and today the board directed staff to formulate a policy under which they could annually recommend COLA approval to lawmakers, however, this is conditional upon sufficient investment returns being available to underwrite such increases. According to the Department of State Treasurer's website, the present policy that routes all investment surpluses into mitigating the pension plan’s unfunded liabilities will evolve if the legislative body consents to the trustees' suggestion.
In contrast, the Local Governmental Employees’ Retirement System (LGERS) does not need General Assembly agreement for benefit increments, and their board has now been authorized to potentially provide COLAs or supplementary increases depending on the availability of investment gains. Unlike TSERS, LGERS has the autonomy to set local government employer rates contributing toward retirement amenities, with the upcoming fiscal year's figures sitting at 15.1% for non-law enforcement personnel, and 17.1% for law enforcement officers. In both instances, these do not necessitate a concurrent climb in contribution rates from employers.
Other action taken by the boards included recommending various adjustments in employer contribution rates for the 2027 fiscal year, where TSERS might see 17.49% of employee compensation geared toward pension funds, among other specific rates for distinct retirement systems and in addition, the boards have also directed a benefit increase in the Disability Income Plan of North Carolina, that hinges on a state-wide salary bump for state employees and a suggestion for a monthly benefit uplift in the North Carolina National Guard Pension Fund from the current rates to slightly higher sums for those with 20 and 30 years of service. The Department of State Treasurer also notes a proposed rise in benefits for members of the Firefighters’ and Rescue Squad Workers’ Pension Fund.
Concurrently, a consultancy firm has advised the boards to maintain the 6.5% annual target for investment returns and to extend the term for paying off unfunded liabilities, which if implemented may strengthen the health and sustainability of the pension plans over an expanded timeframe as for the investment outlook, Kevin SigRist, chief investment officer of the North Carolina Investment Authority reported a hefty $16 billion return on investments in 2025 which reflects a robust 13% increase with the overall pension plan market value nudging just below $144 billion after accounting for $1.6 billion disbursed in benefits throughout the year.
