North Carolina’s pension plan was valued at a record $114.9 billion at the end of 2020.
The plan’s estimated market value at the end of 2020 showed a $9.3 billion gain over $105.6 billion recorded at the end of 2019 even after paying out over $6.5 billion in gross benefits, the Office of the State Treasurer said on Wednesday.
The plan’s earnings were $20.7 billion above 2018’s figure of $94.2 billion.
“The largeness and strength of the state pension plan and staying the course on a decades-long conservative management strategy instead of panicking and chasing risky get-rich-quick investment schemes led to a phenomenal year for the state employees, retirees and taxpayers who are stakeholders in the pension plan,” said State Treasurer Dale Folwell, CPA.
The estimated return on investment was 11% for the 2020 calendar year, exceeding the 7% actuarial rate of return target.
The investments benefited from what was ultimately a frothy year in the markets, despite the economic shock of the pandemic. The Dow Jones Industrial Average finished 2020 up 7.3%, the S&P 500 gained 16.3% and the Nasdaq was up 43.6%.
“By exceeding the investment return goal in 2020 an additional $3 billion is available to help offset $11.5 billion in unfunded liabilities in the Teachers’ and State Employees’ Retirement System,” the treasurer’s office said. “It will add about $1 billion above expectations to help offset $3.3 billion of unfunded liabilities in the Local Governmental Employees’ Retirement System. Those higher earnings are critical as the interest on the unfunded debt continues to accumulate.”
The 2020 figures could change slightly, depending on official results from the monthly auditing process that should be concluded by the end of January, the treasurer's office said.
The treasurer’s office said that even though the state pension plan is among some of the best funded in the United States, the most recent data available shows the Teachers’ and State Employees’ Retirement System has an $11.5 billion unfunded liability while the Local Governmental Employees’ Retirement System is underfunded by $3.3 billion.
Folwell said the plan’s performance last year was all the more remarkable because at the height of the pandemic value dropped to around $93.6 billion on March 23, 2020. Only nine months later the plan, in parallel with the markets in general, had rebounded by almost 23%.
“The credit for that turnaround goes to Christopher Morris and Jeff Smith, the co-CIOs of our Investment Management Division, and their oversight of one of the most seasoned teams in the nation,” Folwell said. “Our ability to grow an already secure pension plan that is the 26th largest pool of public money in the world not only puts current and future retirees at ease, but ensures that North Carolina’s coveted triple-A bond rating is not jeopardized.”
Folwell added that the top-quality bond ratings from Moody’s Investors Service, S&P Global Ratings and Fitch Ratings lets the state and local governments obtain low interest rates when taking on debt to fund capital projects, saving taxpayers’ money.
“We are in the check delivery business, sending out more than $551 million every month to more than 336,000 retirees who can count on us to keep the money coming,” Folwell said.
