Lawmakers urge investment board to delay action on bonuses, citing lingering questions

BISMARCK (North Dakota Monitor) — Two state lawmakers have raised concerns to the State Investment Board that the $1.3 million in bonuses slated to go to the Retirement and Investment Office employees may be a violation of state law.

Sen. Sean Cleary, R-Bismarck, in a Tuesday letter to board members said that the bonuses are required by law to be based on the performance of investment money the state manages internally. Cleary said that instead, it appears that bonuses for 2025 were calculated based on the performance of funds mostly managed by outside firms.

The board will consider approving the bonuses to 12 Retirement and Investment Office employees on Friday.

The goal of the bonuses is to encourage the agency’s employees to bring in more money from state investment funds. According to State Investment Board policy, the incentive pay is awarded if the state’s top four funds outperform the market. Those four funds are the Legacy Fund, the Public Employees Retirement System, the Teachers Fund for Retirement and Workforce Safety and Insurance.

State data indicates only a fraction of the four funds was invested by in-house employees during the period of time the bonuses cover, Cleary wrote.

“This disconnect undermines both the intent of the law and the credibility of the incentive program,” he said in the letter.

In a memo to the State Investment Board, Retirement and Investment Office Executive Director Jodi Smith noted that “internally managed” is not defined in state statute.

She said that under even the most strict interpretation of the phrase, the agency’s funds performed well enough in 2025 for staff to receive the bonuses.

The agency’s staff was directly managing roughly $400 million in investments as of June 30, 2025, the memo says. Those investments made $7.9 million in returns in the preceding year.

Smith wrote that “internally managed” could also be interpreted as any money with the Retirement and Investment Office’s oversight, even funds that are invested by external managers.

State law doesn’t say the bonuses have to be proportional to the performance of internally managed investments, she added.

Based on the Retirement and Investment Office’s benchmarks, which were set by a third-party first, the agency’s largest four funds outperformed the market by $191 million in 2025.

The agency’s bonus policy was reviewed by a separate third-party firm and approved by the State Investment Board in May 2024.

Rep. Mitch Ostlie, R-Jamestown, in a Wednesday letter raised similar concerns as Cleary.

Ostlie also noted that he and Cleary submitted a request for an Attorney General’s opinion on whether the State Investment Board has continuing authority to pay out the bonuses.

“With so many questions still outstanding, it does not make sense for the State Investment Board to pay out any bonuses at this time,” Ostlie wrote.

An assistant attorney general within the Attorney General’s Office previously advised that the agency could legally award the pay, Smith said at a December meeting.

Seven of the bonuses exceed $100,000, and the largest exceeds $293,000. If the State Investment Board approves the bonuses, it would be the first time the state awards them.

Smith has said bonus pay is common in state investment programs.

The Legislature gave the Retirement and Investment Office the authority to create the program in 2023, with the agency enacting it the following year.

Cleary said he’s considering asking for another Attorney General’s opinion to see if the bonus program is complying with the statute’s internal management requirement. He also said he may bring legislation to clarify state law in a future legislative session.

North Dakota Monitor reporter Mary Steurer can be reached at msteurer@northdakotamonitor.com.