North Dakota’s pension reform is showing early signs of success

A version of the following public comment was submitted to the members of the Employee Benefits Program Committee of North Dakota on September 29, 2026.

The framework established by House Bill 1040 now serves new employees, while the state continues to strengthen funding for existing pension commitments, with encouraging signs of progress. HB 1040 addressed two related challenges, providing a strong retirement benefit for future employees and establishing a sustainable funding path for the Main Defined Benefit Plan. Both remain important measures of the reform's success.

Funding for the legacy pension plan has improved. The July 2025 valuation from the North Dakota Public Employees Retirement System (NDPERS) reported a funded ratio of 71.3 percent, up from 67.7 percent in 2024. Its unfunded actuarial liability declined from approximately $1.89 billion to $1.73 billion. Strong investment returns and changes in actuarial assumptions contributed to this improvement.

The legacy pension plan will remain an obligation for decades. Closing the Main Plan to new entrants did not close the obligation to existing members, and employees covered by the plan continue to earn pension benefits. The remaining unfunded liability must be paid down. Before the 2023 reform, the Main Plan was not on track to pay off its unfunded liability. Reason Foundation analysis projected eventual asset depletion under the pre-reform funding policy, even if actuarial assumptions were met. The actuarial funding policy beginning in 2026 is a crucial part of changing that path. NDPERS's actuarial projections show a path to full funding in 2056, assuming funding policy and actuarial assumptions are realized. Maintaining that discipline through changing budgets and market conditions is essential.

Another crucial part of that reform was the DC 2025 Tier 3 plan, which became available to new employees on January 1, 2025. By September 30, 2025, NDPERS reported that 2,485 new employees had enrolled, and that 74.3 percent had elected to contribute above the default employee contribution rate. This is an encouraging indicator that employees see the value of the benefit and are taking advantage of the opportunity to build additional retirement savings. This information demonstrates that the DC plan is fully operational, and employees are participating meaningfully. NDPERS and participating employers deserve recognition for the work it took to make this transition happen.

As the DC plan grows, the focus should turn to employees' experience. Attention should be given to whether employees elect the full available match, whether investments and fees support long-term savings, and whether participants have guidance as they approach retirement.

It is also essential that the exact risks of these changing market conditions are clear. North Dakota already conducts pension risk analysis. Building on that work can help the committee understand how the funding path changes if investment returns disappoint, the closed plan's cash needs change, or if contribution requirements increase disproportionately. A regular, accessible presentation of these scenarios would help legislators anticipate the budget consequences and adjust early. It would also provide employees and retirees with a clearer view of how the state is managing the risks to their benefits.

We encourage the committee to keep its next steps forward focused on preserving the existing DC framework, maintaining full actuarially determined funding of the legacy plan, and building on existing stress analysis. North Dakota has established a promising path forward. The goal must now be to sustain it, helping employees build adequate retirement savings while improving the security of benefits already promised. We support that commitment and would welcome the opportunity to assist the committee as its oversight continues.