2020 Hindsight Will Never Sound the Same

And as keeper of the public purse, it’s important to let people know that our state is financially secure because of the conservative management of the state’s finances by the North Carolina General Assembly, as well as previous state treasurers. Because our decisions were based on transparency, data and a willingness to challenge assumptions, we are in a good position to withstand economic headwinds and come out of this crisis stronger than before.

As I reflect on my first term as Treasurer of the State of North Carolina, I am reminded of the choices made to cut costs and bolster the pension system. We have cut more than $350 million in Wall Street fees. We have reduced the state’s Net Other Post-Employment Benefits debt by almost $3.3 billion largely through renegotiation of our Medicare Advantage contract which will save approximately $200 million per year than can be used for education, public safety and roads.

At the same time, the state pension funds saw record values of $110 billion and, according to Moody’s Investors Service, has been widely recognized as one of the best funded pensions in the nation. This incredible performance occurred during one of the most volatile markets in history.

Prior to the pandemic in 2019, the PEW Charitable Trusts performed a ‘stress test‘ which concluded that the state’s pension fund is well-positioned to maintain solvency during tough economic times. With this, the Department of State Treasurer and Board of Trustees proactively created a proposal to formalize the practice of stress testing at least once every five years. The new legislation was enacted on June 26, 2020 and requires comprehensive stress testing and risk reporting. This means we can continue working to make sure the North Carolina pensions are well-funded for retirees, current employees and future public servants.

With these successes, I stand on the shoulders of two groups of people — the staff at the Department of State Treasurer and the state treasurers before me who acted and reacted responsibly when it came to the management of public servants’ assets. I have and will continue to build on that foundation and remain committed to preserving, strengthening and sustaining all North Carolina Pension plans.

There are five different pension plans that make up the North Carolina Retirement System, which is recognized as having the 26th largest pool of public money in the world. These include: Teachers’ and State Employees’ Retirement System, Local Governmental Employees Retirement Systems (LGERS), Consolidated Judicial System, Legislative Retirement System and the Firefighters’ and Rescue Squad Workers’ Pension Fund (FRSWPF). Some fire and rescue personnel fall under LGERS depending on their employer (just over 10,000 members at the end of 2019), but all firefighters and rescue workers in the state of North Carolina, even those that are members of LGERS, can become a member of the FRSWPF if they meet certain criteria.

To be eligible, you must be 18 years or older and belong to a department that:

• Is rated by the Fire Insurance Rating Bureau and is certified by the Department of Insurance as not less than a Class “9S” department.
• Files a roster annually with the North Carolina State Firemen’s Association, which is forwarded to the pension fund by January 31 each year.
• Holds training sessions at least four hours monthly for which members are required to attend at least 36 hours per year.

To become a member of the FRSWPF, you must complete Form 350 (Enrolling in the Firefighters’ and Rescue Squad Workers’ Pension Fund) through your department or squad and provide contributions of $10 per month for each month of creditable service on a partial or annual basis. This contribution may be made by your department or squad on your behalf, or you may make the contribution. The full contribution amount must be received by the Retirement Systems by March 31 to qualify for the previous year. Members normally must pay into the pension fund for 20 years to receive a monthly lifetime benefit at retirement.

In the fourth quarter of 2020, the Department of State Treasurer and the Boards of Trustees (Board) overseeing the FRSWPF announced that preliminary estimates indicated significant increases in the funded ratios of the FRSWPF pension plan. These funded ratios are the percentage of its actuarial accrued liabilities that cover the asset value. By law, the Retirement Systems’ consulting actuary performs an annual valuation of each pension plan to monitor and adjust the plan’s progress toward its funding goals.

At 92.3 percent, the FRSWPF is funded significantly higher than the 88.7 percent just eight years ago. So, how did we work towards strengthening this pension fund? Historically, this plan has been underfunded and in 2017 LGERS adopted a contribution stabilization policy for the FRSWPF. The North Carolina General Assembly responded to the Boards’ recommendations by appropriating contributions that significantly exceeded the actuarily determined contribution. For example, the FRSWPF appropriated contribution for the fiscal year ending June 30,2022 is $19,352,208, over 27 percent more than the actuary determination.

Volunteer fire departments protect 75 percent of North Carolina’s landmass. And all fire departments have to take on the “business” of protecting and serving the citizens of North Carolina. We must continue to preserve and protect the FRSWPF for current and future firefighters and rescue squad workers.

I am proud of the work we have done together to strengthen this pension fund and its administration. The Department of State Treasurer, Retirement Systems’ Board of Trustees, and staff have collaborated with the organizations representing firefighters and rescue squad workers and their employers to improve operations and accuracy of information provided to the consulting actuary so we can continue to maintain strong funding levels.

FRSWPF has approximately $459 million in assets and over 55,000 members. Currently, there are 24,994 actively contributing FRSWPF members and 15,225 people who formerly contributed and may resume contributing in the future. The FRSWPF provides benefits to all paid and volunteer certified firefighters and rescue squad workers. I couldn’t be prouder of the staff here at the Treasurer’s Office. At the end of the day, we are in the check delivery business and everyone has stepped up to the plate to make sure that those who teach, protect and otherwise serve the citizens of this state can rely on their pension.

The Retirement Systems Division listened to the firefighters and rescue squad communities and has worked diligently to create systems of support for the submission of rosters and contributions to the FRSWPF. In the past, turnaround documents were submitted on paper, by mail. This was a cause for concern due to the tedious task of filling out the paperwork, as well as not meeting required deadlines due to possible delays in mail service.

To make the move from paper turnaround documents to an online submission process was a team effort. Currently, the Online Agency Contribution is in a trial implementation phase with a small group of fire departments around North Carolina testing and providing feedback. This program will continue to roll out as we move into 2021. With this new tool, fire departments can add new members, provide updates, categorize members that have max contributions or who do not contribute through a specific department and, most importantly, view and create contributions. This new process eases the burden on those that are protecting North Carolina’s communities and greatly improves the efficiency and quality of service rosters and contributions.

In addition to the continued strength of the North Carolina Pension Plans, we have one of the largest defined contribution plans in the United States. The North Carolina Supplemental Retirement Plans consist of the NC 401(k) and NC 457 Plans and 403(b) Program. Participating in these plans, if eligible, contributes to a total retirement that is also made up of your pension, social security and other savings. Some of you may be eligible for the NC Supplemental Retirement Plans through your state or local government employer. Other volunteers may also have an employer retirement savings plan option. I would encourage you to take advantage of a payroll deduction for a supplemental retirement plan. It is an easy way to continue to save for your retirement.

I remain a staunch supporter of those that teach, protect and otherwise serve, along with Department of State Treasurer staff and the Board of Trustees. I encourage you to bolster your own retirement by contributing to a supplemental savings plan and being proactive in your engagement with your eligible pension(s). One of the best things you can do in preparing for your retirement is to understand your pension and savings.

Thank you for all you do.