Pension Transparency: North Carolina

2015 Pensions Policy



Meets a small part
Suggested Citation:
National Council on Teacher Quality. (2015). Pension Transparency: North Carolina results. State Teacher Policy Database. [Data set].
Retrieved from:

Analysis of North Carolina's policies



Teachers in North Carolina enroll in a final-salary DB plan, which means that employee and employer contributions should be sufficient to pre-fund the employee's pension. As North Carolina has a multi-tier pension system, contributions that exceed the normal cost may be used to fund other teachers' benefits (so-called legacy costs). There is no evidence, however, that North Carolina provides teachers with clear information about how their contributions are being used, including the extent to which current employer contributions are being used to subsidize the retirement benefits of teachers under other tiers.

If North Carolina does share any of this information with teachers, the fact that it does so is hidden from public view.

Public disclosures on teacher pensions in North Carolina also lack transparency. While North Carolina reports projections for future contributions required to fully amortize the system's total unfunded liabilities, it should also report these projections under a range of assumptions about the rate of return on investments for all years, not just under the system's own assumption. Doing so would allow stakeholders in North Carolina to appropriately assign risk to the system's obligations and provide clarity about potential unfunded liabilities facing taxpayers.

The Government Accountability Standards Board (GASB) requires public retirement systems to disclose who makes employer contributions, and the proportion of total contributions for which each contributor is responsible. While all states' pension systems collect this information, North Carolina does not make these data readily available.



Recommendations for North Carolina

Provide teachers with the information necessary to understand their retirement benefits.
North Carolina should provide much more detailed information to teachers about how their benefits accrue at different points during their careers, as well as information about the opportunity costs related to any contributions made into the system. Because the system has multiple tiers, the plan should also disclose to teachers how their contributions are being used (i.e. whether they all are directed at prefunding their own retirement, or whether a portion of their contributions are used to help pay for retirement benefits of other members). Moreover, North Carolina could provide detailed information about how employer contributions are used - e.g. to what extent the employer contributions for an individual teacher are used to subsidize teachers in different tiers and teachers with different tenure. If North Carolina does in fact share any of this information with teachers, it should share with policymakers and the public a template for the data that are provided.

North Carolina should also report projections for future contributions necessary to pay off its unfunded liabilities, and it should disclose those projections under a range of assumptions about its discount rate. GASB requires systems to disclose who makes the employer contributions, and North Carolina should make this report available on its web site. Finally, the state should disclose in its reports whether or not the system has taken debt service to pay for retirement benefits.

State response to our analysis

North Carolina did not respond to repeated requests to review this analysis.