‘Treasurer’s Eleven’ holds first meeting to review pension governance structure

by Jesse Burkhark, Triangle Business Journal, January 24, 2014.

An 11-person commission appointed by North Carolina State Treasurer Janet Cowell to review the governance structure of the state pension fund met for the first time on Thursday in downtown Raleigh — the first of five scheduled meetings before the commission produces a report with recommendations to the state legislature.

The $83 billion pension fund distributes retirement benefits to the state's 875,000 public workers, which include lawmakers, teachers, law enforcement and firemen.

In its preliminary deliberations, the “Treasurer’s Eleven” were guided through a five-hour discussion by commission chairman Michael Kennedy, who also serves as the chairman of the Federal Retirement Thrift Investment Board, which administers the largest pension in the country. The commission heard from various treasury staffers as well as representatives of Hewitt Ennisknupp, the investment consulting firm which prepared a charter for the commission outlining its agenda and mission.

The commission also heard from State Treasurer Janet Cowell, albeit briefly, who said she would not participate in the deliberations in order for the commission to remain independent and objective.

“I think this is unique,” she said. “I think this will be one of the legacies of my office. It’s great to do this from a position of strength.”

Kennedy echoed the sentiment, saying the formation of such a commission is an atypical measure given the relative strength of the pension.

“This is cutting-edge,” he said. “I think more states need to step back and look at their (pension) governance structures.”

Primarily, the commission is assessing whether or not Cowell will remain the sole investment trustee of the fund, or if the fund will use a board of trustees to make investment decisions. At present, only New York, Connecticut and Michigan have sole trustee models like North Carolina.

On Thursday morning, the commission reviewed the history of the current governance model as well as its past performance. After the lunch break, it reviewed various governance models used by other states, developed a list of desired governance principles and determined a limited number of governance models for future study.

The commission is also evaluating investment fiduciary independence (including state laws applicable to personnel, procurement and budget decisions), as well as enhancements to external investment oversight, reporting and monitoring.

The next meeting is scheduled for Feb. 20. At that time, the commission will discuss the pros and cons of the governance models selected for future study.

A briefing book prepared for the commission that outlines the commission’s mission and agenda is available for download on the treasury’s website.