The North Carolina Retirement Systems (NCRS) Boards of Trustees (BOT) voted today to modify policies intended to make it easier to give retirees a cost-of-living adjustment (COLA) in their monthly benefit payments, effective in the fiscal year beginning in 2027.
For the Teachers’ and State Employees’ Retirement System (TSERS), legislative action is necessary to enact COLAs. A permanent pension increase has not been given since 2017. At its meeting today, the BOT directed staff to develop a policy proposal that would allow the trustees to decide on a year-to-year basis whether to recommend that lawmakers approve a COLA. Investment gains would have to be sufficient to support the increases. The current policy, by contrast, mandates that all investment gains be allocated to reduce the pension plan’s unfunded liability.
In a separate vote, the BOT approved authorizing the Local Governmental Employees’ Retirement System (LGERS) to use investment gains, when they are sufficient, to provide COLAs or supplemental increases to retirees, without requiring a simultaneous increase in the employer contribution rate. Unlike the state pension plan, the local plan does not require General Assembly approval of all benefit increases.
In a related item on the agenda, the BOT voted to recommend legislative approval of employer contribution rates for the fiscal year ending in 2027, for state government agencies providing employee pensions through the Department of State Treasurer. The rates are the employer share of meeting appropriate funding levels for retirement-related costs. The recommended rates are:
- TSERS, 17.49% of employee compensation
- Consolidated Judicial Retirement System, 40.68% of employee compensation
- Legislative Retirement System, 17.87% of employee compensation
- Disability Income Plan of North Carolina, 0.06% of employee compensation
- North Carolina National Guard Pension Fund, in the amount of $1,173,123
Unlike TSERS, the LGERS board has the authority to set local government employer contribution rates toward retirement benefits. The LGERS rates for the fiscal year ending in 2027 were set at 15.1% for employees other than law enforcement, and 17.1% for law enforcement officers.
The TSERS board further voted to recommend benefit increases in the Disability Income Plan of North Carolina and a benefit improvement under the North Carolina National Guard Pension Fund. The Board provided contingent direction to increase benefits under the Disability Income Plan, but only if the General Assembly passes an across-the-board salary increase for state employees, and using the same percentage, up to 3.25%. The board further recommended that the General Assembly increase the National Guard Pension Fund’s monthly benefits from $105 to $110 for 20 years of service, and from $210 to $220 for 30 years of service.
The LGERS board recommended legislative approval of a benefit improvement under the Firefighters’ and Rescue Squad Workers’ Pension Fund, raising the monthly sum from $175 to $184.
Both BOTs voted to adopt a five-year experience study submitted by the Gallagher consulting firm that recommended maintaining the pension plan’s annual 6.5% target investment return. It also recommended extending the time to pay off unfunded liabilities and reach a 100% funded level from 12 years to 15.
Kevin SigRist, chief investment officer of the North Carolina Investment Authority, gave a report on 2025 investment returns, which hit an estimated $16 billion. That is equivalent to a 13% gain. The estimated market value of the pension plan is just below $144 billion, after issuing $1.6 billion in benefit payments in 2025.