RALEIGH – Actuarial reports reviewed by North Carolina’s state and local retirement boards say 2025 results produced no actuarial investment gains available to support benefit increases, while stronger 2026 returns could create room for a cost-of-living adjustment or one-time supplement next year.
The Teachers’ and State Employees’ Retirement System and Local Governmental Employees’ Retirement System boards reviewed the reports at their Nov. 5 meeting. The Department of State Treasurer released a summary Friday.
Gallagher, the systems’ consulting actuary, said the Dec. 31, 2025, valuations showed a loss on the actuarial value of assets for both systems. That means the 2025 results did not create gains that could support a TSERS recommendation or an LGERS authorization for a benefit increase under the boards’ current policies.
The report also outlined the investment performance that could change that calculation. For TSERS, a 2026 market-value return above 11.17%, or about $10.9 billion, is estimated to produce an actuarial gain that could support consideration of a benefit increase. For LGERS, the corresponding threshold is 10.64%, or about $4.2 billion.
The thresholds are higher for a permanent 1% cost-of-living adjustment effective July 1, 2027. Gallagher estimated TSERS would need a 2026 return above 14.24%, while LGERS would need more than 13.56%. A 1% one-time supplement would require estimated returns above 11.47% for TSERS and 10.92% for LGERS.
Those figures are not approvals or promises of an increase. The TSERS board may recommend benefit improvements to the General Assembly, but lawmakers must authorize and fund them. The LGERS board has limited statutory authority to approve improvements when investment gains and other conditions are met.
The systems use a five-year smoothing method that recognizes investment gains and losses over time instead of placing the full effect of one year’s market performance into a single valuation. Gallagher said the approach reduces volatility but can also delay when strong or weak market years appear in the actuarial figures used for benefit decisions.
A separate summary put the TSERS funded ratio at 90% and the LGERS funded ratio at 84.5% as of Dec. 31, 2025. The boards received the figures as part of their annual valuation review. They did not approve a 2027 benefit increase at the meeting.
Sources
- North Carolina Department of State Treasurer: boards review actuarial reports and COLA policies
- Gallagher: primer for TSERS and LGERS COLA discussions
- Gallagher: high-level summary of 2025 actuarial valuations
Photo Credit: North Carolina Department of State Treasurer official portrait of Brad Briner, supplied for media use. Image cropped and resized. Portrait is contextual, not a photograph of the Nov. 5 retirement boards meeting.
Editor’s Note: This article was drafted with the assistance of artificial intelligence and was reviewed and fact-checked by a member of the NC Political News editorial team before publication.