2015 Pensions Policy
The state should disclose all financial and other data necessary for policymakers, school districts and the general public to have a clear and accurate depiction of the current standing and future health of the system. State teacher retirement systems als
Teachers, policymakers and taxpayers deserve accurate and reliable information about the costs and benefits of the public pension systems they support.
Just as teachers can easily obtain their salary schedules, they should have access to information about pensions so that they can make informed decisions about their career and retirement futures. While North Dakota provides teachers with an annual benefits statement, the report includes very limited information about the value of pension benefits. North Dakota does not provide teachers with information on how their benefits accrue for each year of service, the amount contributed each year by teachers and employers on behalf of teachers, or the projected value of a teacher's contributions based on different assumptions about the rate of return expected (e.g. 4%, 6%, and 8%). It is notable, however, that the state reports the monthly benefit amount for certain key points in the teacher's career related to retirement eligibility. It would be better, however, if it also reported the value of the stream of benefits that might accrue over one's expected lifetime
for all or most points in the future for a teacher's career. North Dakota also does not provide teachers with transparent information about the opportunity cost of leaving contributions in the system by reporting how much might be earned if teachers were to put contributions into a personal retirement savings account.
Teachers in North Dakota 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 Dakota has a multi-tier pension system, contributions that exceed the normal cost may be used to fund other teachers' benefits (so-called legacy costs). North Dakota, however, does not provide 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 as well as how benefits are distributed across teachers of different cohorts and teachers with different career lengths.
Public disclosures on teacher pensions in North Dakota also lack transparency. While North Dakota 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, not just under the system's own assumption. Doing so would allow stakeholders in North Dakota 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. All states' pension systems collect this information, and North Dakota makes these data readily available.
North Dakota, like most states, reports the portion of total pension contributions that is normal cost and the proportion that is amortization cost. However, the state does not report information about whether it has taken on debt in order to pay for current or future retiree benefits (e.g. through pension obligation bonds or other instruments for raising capital). Even if the state has not taken on debt, it should disclose this information to the public as it is an important indicator of the state's overall health and stability.
North Dakota Teachers' Fund for Retirement, Actuarial Valuation and Review as of July 1, 2015. North Dakota Teachers' Fund for Retirement, Governmental Accounting Standards Board (GASB) Statement Nos. 67 and 68, Actuarial Valuation as of July 1, 2015
Provide teachers with the information necessary to understand their retirement benefits.
North Dakota 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 Dakota 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.
Report to policymakers and the public data that give a complete representation of the system's financial health.
North Dakota should also report projections for future contributions necessary to pay off its unfunded liabilities under a range of assumptions about its discount rate. Finally, the state should disclose in its reports whether or not the system has taken debt service to pay for retirement benefits.
North Dakota was helpful in providing information that enhanced this analysis.