North Carolina Establishes Employee Benefit Trust Fund

North Carolina has passed legislation that will set up an Employee Benefit Trust Fund to address the state’s $50 billion in unfunded pension and healthcare liabilities.

The creation of the fund was established by the Unfunded Liability Solvency Reserve Act, which was signed into law last month by North Carolina Gov. Roy Cooper. The reserve will be funded through appropriations from the state’s general assembly, any overflows or statutory excesses from the “Rainy Day Fund,” or savings from the refinancing of general obligation bonds or special indebtedness.

The state treasurer’s office cited a Pew Charitable Trusts report that said North Carolina’s per-capita obligations for retiree healthcare is approximately $35 billion—the seventh-highest in the country. It also said it believes the new solvency fund will be the only one of its kind in the US.

The North Carolina Department of State Treasurer administers the state pension plan’s $100 billion in assets under management, as well as the state’s health plan, which provides healthcare coverage to more than 720,000 state employees and their dependents.

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According to the act, which was introduced in April 2017 as House Bill 651, the fund would be an “account for resources that are required to be held in trust for the members and beneficiaries of defined benefit pension plans, defined contribution plans, other postemployment benefit plans, or other employee benefit plans.”

The bill states that funds in the reserve must be appropriated by the end of the following fiscal year after the funds enter the reserve. Transfers are allowed to be made only to the Retiree Health Benefit Fund or the Teachers’ and State Employees’ Retirement System of North Carolina for the purposes of reducing the unfunded liabilities of those funds.

It also specifies that transfers to the health benefit fund and the retirement system will not supplant employer contributions, and outlines the various conditions which must be met for a transfer. On the first day of each fiscal year, the total balance of the reserve as of the last day of the preceding fiscal year will be used to appropriate an additional employer contribution to the health benefit trust fund and the retirement system.

The bill becomes effective on October 1.

Tags: North Carolina, Pension, Roy Cooper, Unfunded Liability Solvency Act

The €409 billion ($476.7 billion) Dutch national pension fund APB has divested its shares in Korea’s Posco Daewoo over the deforestation caused by the company’s palm oil plantations in Indonesia.

ABP said it sold off €300,000 worth of shares in South Korean Posco Daewoo due to one of its subsidiaries being involved in environmentally damaging logging in order to create palm oil plantations.

“At the moment we are laying all companies along a strict yardstick to determine what we want to invest in,” APB said in a release. “Posco Daewoo does not meet our requirements and therefore we decided not to include it in our investment portfolio.”

The pension fund said it had held several discussions about sustainability and corporate responsibility with Posco Daewoo. It said the conversations intensified after reports that a subsidiary of the company was involved deforestation of the jungle on the Indonesian island of Papua. There were also conflicts about who was responsible for the land the company used for its plantations.

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“Measures that our investors proposed were not picked up quickly enough by the company,” said APB. “As a result, we no longer had confidence that the company would improve.”

According to the World Wide Fund for Nature, formerly the World Wildlife Fund, large swaths of tropical forests and other ecosystems have been cleared to make room for palm oil plantations, which it says has destroyed the habitat for endangered species such as rhinos, elephants, and tigers.

However, ABP said it believes palm oil production can be done in a sustainable and responsible manner. Earlier this year, it announced that it would stop investing in tobacco and nuclear weapons producers as part of an initiative to not invest in companies that make products that are by definition harmful to people. APB doesn’t consider palm oil to fall under this guidance, and said it could continue to invest in palm oil companies as long as they meet the fund’s requirements.

In 2016, APB introduced a new policy for sustainable and responsible investment. For each investment it not only looks at whether it is attractive in terms of potential investment returns, risks, and costs, but also how sustainable and responsible it is.

“This should ensure that in 2020, investments will only be made in shares and bonds from companies that are at the forefront of sustainable and responsible business,” said APB. “In companies that do not lead the way, we only invest when we are confident that they can and want to improve.”

Tags: APB, Pension, Posco Daewoo