Folwell blasts state budget provision impacting pension plan participation

More than six weeks after the state’s new $30 billion budget became law, state Treasurer Dale Folwell is raising red flags over changes that could dramatically impact the State Health Plan and pension system.

Tucked inside the 625-page spending plan is language that allows UNC Health Care and East Carolina University Health to offer their employees health and retirement benefits outside of the traditional options offered to other state employees and teachers.

“This is a direct attack on the state pension system and the state health care system.”

Folwell told reporters on Tuesday that “divorce” from the state pension plan allows UNC and ECU to leave their liabilities behind for everybody else to pay.

A smaller pool paying into the health plan and pension system creates a greater strain on the remaining participants.

“Eventually what UNC Health is trying to do is going to raise the cost of running community colleges. It’s going to raise the cost of the Department of Transportation. It’s going to raise the cost of corrections. It’s going to raise the cost of public education. It’s going to raise the employer contribution rate, and the cost on everyone else in this family, if this proceeds,” warned Folwell.

Folwell worries that with little scrutiny or understanding of the changes, thousands of healthcare workers could be steered away from the current state retirement system and toward new retirement plans created by the two university systems.

In an October 11 letter, Thomas Causey, executive director of the Retirement Systems Division, expressed similar concerns to the CEO of UNC Health and the Chancellor of East Carolina University.

Causey noted that the law prevents employees hired by UNC Health Care or ECU on or after January 1, 2024 from participating in the Teachers’ and State Employees’ Retirement System (TSERS), which is administered within the Department of the State Treasurer. Current employees would be allowed to make a “one time, irrevocable election” to cease their participation in their current plan and enroll in a “similar plan.”

UNC Health spokesman Alan Wolf has disagreed with the Treasurer’s assessment, telling news outlets the proposed plan will actually save taxpayers money.

In his Tuesday media briefing, Folwell accused the Republican-controlled legislature of “torpedoing, one of the best funded and the most efficient pension plans in North America.”

Folwell said the vast majority of employees who make less than $40,000 a year would choose the certainty and stability of being involved in the state retirement system.

“So, this is some way for UNC Health Care to no longer be a governmental agency and in my opinion, I’m going on the record of saying this, it’s probably going to be to the benefit of people who don’t make less than $40,000 a year, but probably make $400,000 a year. That’s where all this is headed.”

Folwell said his office also had concerns about how an employee vested in the pension system might be treated if they left for example on maternity leave or some other approved leave for a few years, then wanted to come back into the system.

“Every attempt that we have made to talk to the people at UNC Health Care about this decision has been met with, we’re not interested. We’re not interested in anything you have to say about this in committee, we’re not interested in any unintended consequences,” said Folwell.

The executive director of State Employees Association of North Carolina told the Raleigh News & Observer the move could “decimate” the existing state plan.

With limited answers or assurances, Folwell pledged his office would use the power at its discretion to protect employees.

“We have a policy that we have implemented in times past, when a local government or an ABC commissioner or charter school wants to divorce from our pension and health plan. We have a system and a process set up to how we deal with that financially.  We are going to apply every word of that policy to what UNC and ECU are trying to do.”

The Republican-controlled General Assembly that approved the arrangement in its September budget could revisit the issue when it reconvenes in late November.

Folwell is hopeful they heed the warning.

“Things like this can be dealt with in 15 minutes of legislative time. This is kind of a big deal, if they choose to do it.”

It’s not the first time Folwell, a Republican running for governor in 2024, has criticized the state legislature. Last month, he rebuked another policy provision in the budget giving state lawmakers the power and discretion to decide whether work documents should be shared publicly or could be sold or destroyed.