Despite State Treasurer Dale Folwell’s agency slashing millions in outside management fees, North Carolina’s $96 billion pension fund is going to need to do more to remain solvent and satisfy retirements of its nearly 1 million state employees.
While Folwell delivered on his campaign promise to make heavy cuts on the fees to the tune of $600 million, drawing some praise from his peers, he faced some criticism for his decision to transfer funds to low-earning, short-term accounts. WRAL.com reports that critics argue that while safe, keeping the transfer funds in savings accounts cost the pensions “tens of millions” in earnings during this year’s market growth.
However, despite these cuts and the fund being commonly referred to as one of the best-funded in the country, as per WRAL, it must still pay out $6 billion per year.
In addition, state government and employees only pay in roughly half of what the fund pays out, and there is no minimum retirement age. Of the state citizens receiving pension checks, the latest statistics show that nearly 100,000 are under age 65, while roughly 7,000 are age 90 and above.
“Fees have gone up, payouts have gone up, life expectancy has gone up, and interest rates have gone down,” Folwell told WRAL. “That’s what I inherited.”
As life expectancy increases, a possible solution debated to prevent the potential insolvency is raising the retirement age. While some see it as a logical step, others argue that it does nothing for public workers, as investment managers are the only ones benefitting.
“As age goes up, the working life should go up as well, I would think,” CPA and financial advisor Ron Elmer, a former Democratic candidate for treasurer, told WRAL.
“It might sound good. It might even be well-intentioned, but it’s not going to solve any problems,” Ardis Watkins, director of government relations for the State Employees Association of North Carolina, told WRAL. “The only thing that solves problems is to stop giving huge amounts of money away in multiple levels of fees to investment managers.”
Folwell was unable to provide comment.