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Funded or Unfunded – It’s all in the Details

The North Carolina Retirement Systems (NCRS) is the ninth-largest public pension fund in the country. It provides retirement benefits and savings for more than 950,000 North Carolinians, including teachers, state employees, local governmental employees, firefighters, police officers and other public workers.

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A “stress test” by The Pew Charitable Trusts in 2019 concluded that North Carolina’s state pension fund is well-positioned to maintain solvency during tough economic times. This assessment was put to the test during 2020’s volatile market conditions as the total NCRS valuation has, at times, reached historic levels of more than $115 billion.

This milestone and the resilience of the North Carolina pension fund is due to meaningful and active oversight by the Boards of Trustees, conservative management and investment by the Department of State Treasurer (DST) and staff that remains loyal to “doing the right thing” for each member.

When I took office in 2017, one of my first initiatives was to cut Wall Street fees and other investment costs. I pledged to cut $100 million in fees. As of Dec. 31, 2020, that goal was exceeded by 250 percent, resulting in more than $350 million in incremental cost-savings in the state pension.

NCRS is widely regarded as one of the best funded in the nation. In fact, Moody’s Investors Service reported in 2019 that North Carolina’s Retirement Systems, which includes state and local governmental employees, is the best funded in the nation when looking at its Adjusted Net Pension Liability.

By law, the NCRS consultant performs an annual actuarial valuation of each pension plan to monitor and adjust the plan’s progress toward its funding goals. As of Dec. 31, 2019, the Firefighter and Rescue Squad Workers’ Pension Fund (FRSWPF) annual actuarial valuation placed the funded ratio at 92.3 percent — significantly higher than 83.7 percent just eight years ago. Additionally, the Local Governmental Employees’ Retirement System’s (LGERS) annual actuarial valuation for the same time period is 89.4 percent funded.

A strong funded status means that there are enough assets to cover benefits for current and future retirees who have chosen a career of service to the citizens of North Carolina, like you.

Retirement is an inevitable milestone and is simply defined by the separation of yourself from active employment. The time that you retire may be determined by many things like age, workplace requirements, family or spousal support of your decision and whether or not you have saved enough to generate income in retirement to live the way you envision. Simply put, is your retirement funded or are you entering into retirement with an unfunded liability?

All firefighters and rescue squad workers, volunteer or employed by a local government, are eligible to become a member of FRSWPF. In order to do so, you must complete an enrollment application (Form 350, Enrolling in the Firefighters’ and Rescue Squad Workers’ Pension Fund) through your department or squad, and mail it with your first payment (contributions are $10 per month). Your enrollment date will be effective in the month in which the pension fund receives both your application and first contribution. You may apply for monthly pension benefits after you have 20 years of creditable service as a firefighter or rescue squad worker, and reach age 55. The current pension fund lifetime benefit is $170 per month.

We know that 75 percent of North Carolina’s landmass is protected by volunteer fire departments and all fire departments have important work to do. DST has worked with your team and associations to simplify and modernize the “turnaround” document that improves the quality of the contribution process. The Online Agency Contributions pilot is underway with a staged rollout. This new tool makes it easier for departments to update and modify roster service for each member and note the monthly payment for creditable service. Whether you pay the $10 monthly contribution ($120 annually) or your employer pays this on your behalf, it is ultimately your responsibility to make sure contributions are received by the pension fund no later than March 31 for the previous year. At the time of your eligible retirement, you must apply for these benefits. They are not paid automatically. Visit myNCRetirement.com to learn more about eligibility and benefits for North Carolina’s firefighters and rescue squad workers.

If your employer is a local government that has elected to join LGERS, you contribute six percent of your pay each month to the pension and this, along with your employer contributions (11.35 percent of your pay in the upcoming fiscal year) and investment returns (which reached 11 percent for the calendar year ending Dec. 31, 2020), create a foundation for your retirement income once you become vested and meet certain requirements.

With either of these pension funds, it is important to register your ORBIT account. This online tool allows you to track creditable service, designate and maintain beneficiaries, and access retirement calculators and other resources.

Your pension payment may not be enough for a “funded” retirement. As you plan for your future, you need to consider other sources, such as Social Security and other retirement savings opportunities. As a member of LGERS, you have the option of saving in the NC 401(k) and NC 457 Plans. These plans are exclusively available to state and local governmental employees and are recognized for their exceptional value and strong-performing investments. As a participant, you can save now and carry those savings up to and through retirement, retaining all the benefits, including meaningful board oversight and access to a team of retirement counselors.

As you look to your future, think about the details:

  • Where you want to be and the cost of living
  • Outstanding debts and your ability to address those prior to or during retirement
  • Budgeting that incorporates income, assets and expenses, (Experts recommend that your income in retirement should be equal to about 80 percent of your pre-retirement income.)

Will you be funded or unfunded in your retirement?

It takes work, planning and staying the course to realize a funded retirement. I encourage you to take time to plan, participate in one of our retirement planning events and log in to ORBIT to get a better picture of your creditable service and potential benefits. We will continue to do all we can to maintain the integrity, value and security of the North Carolina pension and supplemental retirement plans for you and future members.

Thank you for the important work and service you provide to the people of North Carolina.

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