The Transparency Principal, Stress Testing and Your Retirement

Embracing and operating with transparency is simple, but not always easy. It means opening the doors and allowing everything to be exposed, including scars, failures and opportunities. In government, the transparency principle is extended to every staff member, vendor and partner. As keeper of the public purse, my first order of business, three years ago, was to work with our vendors and money managers to cut fees charged to you through the Pension Plan. We have cut $175 million with a projected savings of approximately $344 million over four years. North Carolina has been recognized for these efforts in local and national media.

Transparency led the charge in my negotiations with State Health Plan providers. It is no secret we fought a hard battle to push for clear pricing and to eliminate secret contracts for health care and medical services. We take pride in having been able to facilitate a discussion and raise awareness of the sustainability of the State Health Plan while promoting the need for quality, clear pricing, and accessibility of health care for our members who participate in the Plan. This was the first part of the battle, and we won.

The second phase fell to our providers and their acceptance of the need to eliminate secret contracts and provide accessible, high quality health care. Without major reform, the State Health Plan is at significant risk with approved four percent funding from the Governor and North Carolina General Assembly and an estimated seven to nine percent increase in medical and pharmaceutical costs.

As I said before, transparency can be a difficult value to embrace, especially for big business. All of the major hospitals have simply refused to consider being clear with pricing and services. They boycotted those who teach our children, protect our homes and businesses and perform the other core functions of government despite offering them almost a 100 percent profit. Secret contracts, veiled pricing and hidden agendas do not benefit anyone except those who are misleading consumers for profit.

We do not consume health care, it consumes us. We need to push the power to consumers so they can then shop for quality health care and drive the market instead of being controlled by it. I applaud the over 25,000 providers that understand the value and importance in clear pricing for health care and will be providing services to our members in 2020 as a Clear Pricing Project Provider.

Transparency is the key to building trusting relationships and this has allowed the Department of State Treasurer to better serve our members, increase efficiency and create value for the people of North Carolina in coordination with our vendors and partners.

I would encourage you to embrace the conversation about your future in the same way and apply the transparency principle to your retirement planning. Take a look at where you are, where you are headed and how you will get there. Savings and financial planners are not always clear about fees, expenses and investments. As you plan and start the discussion, asking for transparency can go a long way. It is a foundation of consumerism, allowing you to have the information you need to make the choices that benefit your unique situation. One of our main goals in serving our members is to assist you in navigating the road to and through retirement. Our Member Services team is available by phone, in person, or by virtual appointment and you can use our online calculators and resources 24 hours a day, 7 days a week.

Planning for retirement is a process. As a firefighter and rescue worker, you are well-aware of the variability in a situation. In your communities, the security you provide is long term and the help you provide can sometimes be over in an instant. Not unlike your current role, retirement takes effort, an ongoing commitment and is exposed to unforeseen changes in the future. Making time every few years to analyze your retirement goals and perform a retirement stress test can be helpful.

You need to be aware of and be flexible when it comes to future possibilities. Your retirement as a whole is based on variable pieces of information including your existing savings, age, contributions to a pension and/or supplemental retirement plan, vested status, the market in general, rising health care costs and longevity.

A retirement stress test is simply an analysis of your future, taking into account your pension, Social Security and personal savings. How much will you have coming in each year and what are your expenses? Do you have enough? Considerations of downturns in the market, taxes and spending patterns would give you a more comprehensive view as you prepare for retirement. How much variability can you take in the future in order to have the retirement you want?

North Carolina was fortunate this past year to be selected by The Pew Charitable Trusts to participate in a formulized study: Public Pension Stress Testing. I am proud that we were selected as an example of a Pension that is doing things right. I attribute this to the strong oversight and guidance by the Board of Trustees and the diligence of staff and partners.

In the study, Pew applied a variety of scenarios to test the future outcome of our Pension when there is a decrease in member participation and funding of the Plan, recession possibilities and level, no-change scenarios. They found that even in these downside scenarios, North Carolina’s Pension Plan remains fully funded for many years down the road. That is not to say we do not have work to do, but it does show that we perform well in the analysis due to strong funding policy and funding levels through the General Assembly and Employer Contribution Rates. We have to keep this momentum going in order to maintain our recognized Plan success and fulfill our obligations in the future.

We support legislation currently being considered to require a stress test every two and one-half years. This will analyze the environments and fluctuations we may not even be aware of today, allowing for adjustments and corrections if needed.

Similar to being a first responder, it never hurts to be prepared and it all comes back to transparency. If planning for your retirement seems like a scary proposition, it is always better to see things as they are, navigate the road ahead and adjust as you can.

You do this every day for the communities where you work and live. Transition that thought process and apply it to your retirement planning.

I thank you for all you do for North Carolina, the security you bring, help you provide and the courage you carry with you each day.

For Pension Plan and Supplemental Retirement Plan (401(k), 457 Plans and 403(b) Program) information, tools and resources, visit www.myNCRetirement.com.