(The Center Square) – While the pension plan for North Carolina state employees remains underfunded, the same can’t be said for a separate, voluntary 401(k) style programs for public employees, according to a report Thursday.
There are 294,625 employees enrolled in NC 401(k) Plan, and another 57,413 in the NC 457 Plan. Both plans are designed to supplement public pensions. State Treasurer Brad Briner chairs the board that oversees the two programs.
Briner has expressed concern that the state’s pension plans are underfunded by about $16 billion and rank near the bottom nationally in investment performance.
However, the 401(k) and 457 programs are “among the largest and lowest-cost public plans in the country,” the treasurer’s office said in a release.
The 401(k) plan allow public employees to make contributions with pretax payroll deductions. The 457 plan, also through payroll deductions, is a deferred compensation program.
Michael McCann, managing director of Empower, which manages the North Carolina plans, provided an upbeat report to the state’s Supplemental Retirement Board of Trustees.
“From a plan health perspective, everything is looking really good in terms of the trend line,” McCann told the board. “Average participant balances are continuing to increase. The active participation rate is above its historical norm. The active average employee deferral continues to set higher and higher trends in terms of what participants are contributing.”
Even with an aging population and increased retirements, the plans continue to grow, McCann added.
“We’re also replenishing that population, where total unique participant balances continue to increase,” he said. “Last year, was our second best year ever, beating 2023 in terms of total enrollment.”
Another sign of stability of the plans is loan activity – participants borrowing from their accounts – remained consistent in 2024, despite the heavy damage from Hurricane Helene in the western part of the state.
About 2,000 plan participants did take advantage of the Qualified Disaster Relief distributions that were approved by the board last fall. Participants who lived in the disaster areas were allowed to withdraw up to $22,000 without penalties, and can later recontribute some or all of the amounts withdrawn if they choose.
A waiver extension of the board’s administrative fee for 12 months was approved unanimously. A release says the action will save participants $1.7 million over the next year.
