North Carolina Restructures Pension Board to Address Investment Challenges

Funding levels for public employee pension programs have greatly improved over the past decade, with states providing more consistent contributions and making adjustments to the benefits offered. Despite better long-term trends, however, much work remains around fund transparency and accountability.

Pension governance—which covers fund management topics from board composition to investment policy and reporting standards—is crucial to maintain fiscally sound retirement systems for public employees. Policies that ensure transparency and responsible investing can protect the rights of retirees, decrease investment risk, and prevent waste and fraud. A wave of state pension board reforms prompted by the financial fallout from the 2007-09 recession helped to exemplify the benefits of updated policies.

More recently, North Carolina passed legislation in 2025 that significantly overhauled the governance structure of its $124 billion public employee retirement system. Lawmakers’ approach highlighted the importance of reassessing these policies during less turbulent times as well. The state’s transition away from a sole fiduciary model—in which the state treasurer alone had final authority over plan investments and appointment of a chief information officer—to a board of trustees took effect Jan. 1. State Treasurer Brad Briner (R), who took office in 2025, had placed a priority on greater oversight, citing poor fund performance.

“We’ve had really good funding from the Legislature, but the investment side is not keeping up,” he told Institutional Investor in March 2025.

Policy updates such as these are a reminder that maintaining strong guardrails around investment decisions is crucial for long-term investment performance as well as improvement in funding levels.

One option: Transitioning from sole trustee model

North Carolina had considered the switch to a board of trustees more than a decade ago, but previous efforts did not result in any significant restructuring.

In 2024, Briner made restructuring a part of his campaign platform to improve the state’s investment performance. According to an analysis of annual reports by The Pew Charitable Trusts, investment returns for the North Carolina Retirement Systems (NCRS) have consistently fallen below benchmarks since 2020, even in years when overall market performance was strong.

Briner has asserted that the sole trustee model “has costs in terms of investment performance,” in part because of the nature of the election cycle. Sole fiduciaries with differing approaches can switch investment strategies every four years, he said. And that can create volatility that hurts fund performance in the long term.

"Simply put, I think more heads are better than one when it comes to having a disciplined long-term investment strategy,” Briner testified to the state House Oversight Committee in 2025. “And so, I think having this kind of concentrated power in a single official, elected or otherwise, doesn’t really make sense.”

Governor Josh Stein (D) signed the Investment Modernization Act in June 2025. The law established the North Carolina Investment Authority and transferred investment responsibility for NCRS and three other state funds from the state treasurer to the new five-member board. The body consists of the state treasurer and four appointees selected by the speaker of the House, the Senate president pro tempore, the governor, and the treasurer. The initial appointees have long careers in investment strategy and portfolio management, and several have previous experience with endowments. The board’s first term began in January.

No one-size-fits-all solution

The new board puts North Carolina in line with other states and represents a broader shift away from the sole-trustee model toward boards to manage public pension funds’ administration and assets. In 1999, 20 states used the one-trustee system to determine investment policy. But as of January this year, New York and Connecticut are the only remaining states where the comptroller or treasurer is the sole trustee of pension funds.

Concerns over the sole trustee model, with the most prominent being fear of corruption, precipitated this long-term transition. Critics of the now largely abandoned approach say  the concentration of power could enable deliberate mismanagement of funds for the personal benefit of the trustee. This, along with potential volatility in investment strategy and putting final investment decisions in the hands of a single expert, can also result in less-than-optimal investment returns.

In contrast, an investment board can provide increased checks and balances. Such a configuration necessitates open discussion of investment decision-making, limiting the risks of personal incentives and corruption. Such boards also can provide diverse perspectives. They tend to be a panel of appointed experts and can better ensure fund management continuity by use of overlapping term limits. Today, board compositions and duties vary broadly from state to state, with some managing only administration, others managing only investments, and some managing both. Boards range in size from three to 20 members, and states have taken differing approaches to member qualifications and inclusion of contributors and beneficiaries of the pension system.

Proponents of the sole trustee model, however, say the approach can boost efficiency, flexibility, and speed in investment decisions, as well as accountability. They say that having a single trustee makes responsibility clear in cases of bad outcomes. With appropriate guardrails and risk management measures, they say, the sole trustee model can facilitate similar levels of transparency and responsibility as a board of trustees.

Furthermore, while there are advantages to the board model, such boards are not foolproof. Funds that are board-managed can be vulnerable to the same dangers of poor investment management and corruption as those managed by sole trustees.

So, governance policies of all kinds should be reassessed regularly. The fallout from the 2008 recession, when extreme fiscal difficulties prompted a wave of governance reform and board reconstruction, highlighted this need for effective governance.

In September 2009, the board-managed Arkansas State Police Retirement System (SPRS) was combined with the Arkansas Public Employees Retirement System (PERS) in response to losses of approximately $100 million in the two years preceding the reforms. Those losses capped 12 years of financial difficulties. During the same period, Illinois enacted  sweeping reforms through the Illinois Government Ethics Act of 2009—which included the complete reconstitution of the boards of the state, university, and teachers’ pension systems and of the Illinois State Board of Investments—in response to the impeachment and indictment of Governor Rod Blagojevich (D) for corruption.

No single approach can inherently protect state funds from mismanagement, which is why strong governance is crucial. States can maintain the well-being of their pension systems by paying close attention to fund activities and conducting regular reviews of governance policies.

Pew has developed a model governance framework to support plan efforts to maintain high standards for governance by increasing transparency and oversight for their funds. The model calls for the establishment of clear plan objectives, assessment of risk profiles, formulation of investment policies, provision of comprehensive disclosures on performance and costs, and engagement in ongoing monitoring and review processes.

North Carolina’s Investment Modernization Act requires the establishment of an investment policy statement by the new board, a monthly report on the performance of all investments, and evaluations of governance, operations, and investments by an independent firm once every four years. The requirements align well with the policies and procedures recommended by the Pew model.

Final thoughts

The past decade has seen overarching improvements in public pension funding. However, investment losses in 2022 and current federal funding volatility create questions about future state and local fiscal stability. Several states are exploring new investment avenues and fiscal tools, such as expanding state investments into nontraditional assets like cryptocurrencies, and making regular adjustments to payment requirements to help maintain fiscal flexibility.

For state leaders and stakeholders of all kinds, a focus on strong governance can help ensure the protection of states’ hard-won funding gains now and into the future. While there is no one correct way to construct a successful pension investment board, maintaining principles of transparency and accountability is a key to setting states up for future success.

Ora Halpern works on The Pew Charitable Trusts’ state fiscal policy project.