N.C. sees ‘surge’ in retirement plan earnings


Dan Way - Carolina Journal



RALEIGH — President Donald Trump has been urging Americans to check their 401(k) retirement plans for gains, but individuals aren’t alone in benefiting from the strong economy. State Treasurer Dale Folwell says the state is “seeing a surge” in retirement plan investment earnings for 2017.

“We’re looking at a total return north of 13 percent for calendar year 2017. We’ve obviously had gains since the [new] year started,” Folwell said during his monthly conference call with reporters. “We do not have the numbers in. … It takes a little while to get everything aggregated.”

That return on investment would nearly double the state’s assumed rate of return of 7.2 percent.

The state’s investments are riding a bull market on Wall Street that set 70 closing day records in 2017, and 90 since the 2016 election. The current investment mix is about 35 percent bonds in fixed income, and 65 percent in public and private equity, alternative investments, real estate, and other strategies.

Folwell said other state retirement systems might be reaping larger earnings. That’s because of the state’s somewhat cautious risk profile. Returns will never go up as much as some pension plans do, and in bad economic times they’ll never lose as much as others.

And, Folwell cautioned, profits were markedly below the target return on investment in the fiscal years that ended in June, and the one before that. The state still hasn’t met its stated return on investment on average for the past 17 years.

“We still have a lot of work to do to make sure this remains one of the top five funded pension plans in the United States,” Folwell said. Plan assets total $94 billion.

The underfunded state health plan will continue to face challenges, Folwell said. Both Gov. Roy Cooper’s budget, which was not enacted, and the legislative budget that was adopted funded the state health plan at 4 percent growth. But prescription and general health costs are rising faster than that.

As chairman of the state’s Local Government Commission, Falwell said he’s monitoring the partnership proposed by UNC Health Care and Carolinas HealthCare System. Both publicly owned health-care giants have used the commission to gain approval for bonds.

“We need to determine how this merger impacts the bond rating,” and the likelihood they will be paid back, Folwell said. Focus also is being placed on how the plan affects accessibility and affordability of health care for state employees, and its effect on the state health plan.

“We’re not going to be shy about it,” Folwell said.

The treasurer said he’s launching a formal search for a new chief investment officer to replace Kevin SigRist, who unexpectedly resigned in July. Two acting chief investment officers have filled the breach since then.

There have been seven CIOs in the past 15 years. Folwell speculated “you’re probably doing something wrong in terms of how you’re structured” with that rate of turnover, and he hopes to correct whatever issues might be involved.

Dan Way is a staff writer for Carolina Journal.

Dan Way

Carolina Journal

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