North Carolina to consider DC option

The trustees of the $65 billion North Carolina Retirement Systems will vote on whether to introduce a defined contribution plan when the board meets on Jannuary 20, one of the significant recommendations by the Future of Retirement Study Commission.

The Commission, which was created by the board of trustees and tasked with reviewing all major aspects of benefit design, has recommended the choice between a defined benefit and defined contribution plan for all current and future employees, and automatic enrolment in a supplemental DC plan for future hires.

The NCRS’ current defined benefit plan has been under some scrutiny, with its consultant Ennis Knupp recommending in June last year that it was in need of a formal asset liability study and that for the size and complexity of its investments, it was chronically under staffed.

Last financial year was the first in the fund’s history that the General Assembly did not make the full annual required contribution.

At the upcoming board meeting, trustees could either pass the motion requesting the General Assembly adopt some or all of the Commission’s recommendations, or make additional recommedations of its own, but the decision to make any changes to the pension system ultimately lies with the General Assembly.

If the commission’s recommendations are adopted, the state retirement system will manage and regulate the DC plan in conjunction with existing 401(k) or 457 accounts, which are provided by Prudential Retirement.

The commission did not recommend a financial services company for the vendor of the new plan, instead suggesting the state invite proposals.

The commission recommended the default investment for the DC plan should be a lifecycle or target date fund, while also suggesting it should have the same employer costs as the Teachers’ and State Employees’ Retirement System (TSERS) and the Local Governmental Employees’ Retirement System (LGERS).