The North Carolina State Retirement Systems made huge gains in 2025, but that may not mean imminent cost-of-living adjustments or bonuses for retirees, who are feeling the burn of rising prices.
The state has estimated that the annual rate of return required for the retirement system to remain viable is somewhere between 6.5% and 7%. However, it undershot that target over the past 20 years, resulting in about $16 billion in unfunded liabilities.
The gap between the benefits promised versus value of assets held by the NCRS would only continue to grow if the retirement system’s investments continued to underperform.
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State Treasurer Brad Briner, a first-term Republican, campaigned on fixing the state’s underperforming pension funds, which paid out more than $9 billion to 345,000 former public servants this year.
The system itself administers several pension plans and funds, the largest of which are the Teachers' & State Employees' and the Local Governmental Employees' retirement systems.
The NCRS invests its money in financial assets like stocks and bonds, which allows it to keep up with the obligations it has made to the more than 644,000 public employees who will some day be owed retirement benefits.
The underperformance isn’t just an issue for future retirees, but current ones as well. The system’s investment model is intended to pay for cost-of-living adjustments (COLAs) to keep up with inflation, but it’s failed to do that in recent years.
Briner delivered on his promise to grow the pension fund in his first year in office, although that welcome news comes with a caveat: the gains made in 2025 will likely be used on paying down the system’s unfunded liabilities rather than raising income for retirees.
The Treasurer’s Office said in November that the total assets managed by the NCRS had grown to $139 billion, which reflects a return of 12% since Jan. 1. While the gains this year are impressive, it doesn’t mean the state has fixed its unfunded liability issue yet, Briner told Carolina Public Press.
“When we talk about making $15 billion this year, that doesn't mean that we've reduced that $16 billion deficit by $15 billion,” he said.
“We’ve reduced it probably by 7 or 8 (billion dollars) by the time you cut through all the actuarial math. So it's great progress in paying down the debt, but we still have a material debt.”
That’s why Briner says now is likely not the time for a cost-of-living adjustment, the last of which came in 2017. Since 2021, lawmakers have opted to give one-time bonuses rather than long-term benefit increases for retirees.
The power to approve cost-of-living adjustments for the Teachers' & State Employees' Retirement System ultimately rests with the state legislature, although its board, which Briner chairs, makes yearly recommendations regarding cost-of-living adjustments.
The board of the Local Governmental Employees' Retirement System maintains the power to make its own cost-of-living adjustments.
The legislature’s ongoing budget stalemate has meant retirees received no benefit increases at all this year. This is coming at a time when more Americans are feeling the pinch of inflation, which has caused prices to rise significantly over the past several years.
Betsy Crone, a former librarian who worked for 27 years in public schools before retiring in 2020, told CPP that she’s put off several home renovation projects because of increased costs.
“The general state of the economy certainly makes you pause and think twice about things,” she said.
According to the U.S. Bureau of Labor Statistics, a dollar today has lost about 20% of its purchasing power since 2020 due to inflation.
Crone lives in Greensboro and works from home as an adjunct professor at Old Dominion University, which both fills her days and supplements her modest retirement income. Without her “side gig,” her pension alone wouldn't be enough to make ends meet.
“Any amount of money is always going to be helpful," Crone said, but the one-time bonuses she’s received from the state since retiring were so small she hardly noticed she’d received them.
The State Employees Association of North Carolina, an organization which advocates on behalf of state employees, has consistently lobbied the legislature for a new COLA.
SEANC’s government relations director Suzanne Beasley told CPP that the gains the retirement system made this year should be enough to pay for a cost-of-living adjustment while still whittling down the system’s $16 billion debt.
“Everybody's not going to retire at one time,” Beasley said.
“So while it's important that we get that back under control, the sky is also not falling.”
Briner thinks that 2027 could be a more appropriate time for the legislature to approve a COLA depending on how the next year goes. In the meantime, he said that North Carolinians can expect more of the same in terms of investment strategy from the Treasurer’s office.
The bountiful past year was fueled by a strong stock market and a shift to a less risk-averse investment strategy.
Briner had criticized his predecessors for being too reliant on U.S. Treasury bonds, which are reliable but yield lower returns than other assets. Upon taking office, his administration adjusted the NCRS’ asset allocation to be more stock-heavy, although North Carolina still maintains a far more conservative investment portfolio than most other states.
While she’s pleased with the returns, Beasley questions how much longer retirees will be able to wait for their next COLA.
“Treasurer Briner is obviously kicking butt with his investment strategy, so we certainly hope to see that continue,” she said.
“What we would like to see is that money used in a way that directly affects the pocketbooks of retirees.”
This article first appeared on Carolina Public Press and is republished here under a Creative Commons Attribution-NoDerivatives 4.0 International License.