North Dakota board delays vote on paying $1.3M in bonuses to 12 state employees

The North Dakota State Investment Board on Friday tabled a controversial incentive policy that would provide bonuses exceeding $100,000 to some Retirement and Investment Office staff — with one bonus exceeding $290,000 — if RIO investments surpass certain benchmarks.

The State Investment Board administers investment programs for some of the state’s largest funds, including the Public Employee Retirement System and the Legacy Fund oil tax savings account.

The incentive policy has already been adopted by the SIB, but the board was set to make a final vote approving a total incentive compensation payment of roughly $1.26 million for the 2025 fiscal year.

SIB vote delayed by legal questions

The board tabled the topic, citing legal concerns that had arisen in the 24 hours preceding the meeting.

Board Member Adam Miller raised concerns about whether the SIB has the legal authority to spend the money necessary to fund the incentive compensation payments.

RIO Executive Director Jodi Smith said “I think all questions are fair questions, and I think that because it is a new program we do need to have some good conversation about it and a clear understanding of some of our next steps forward.”

The board did not present a timeline on when the legal questions would be resolved, but Gov. Kelly Armstrong, who chairs the SIB, said he would like to consult with the attorney general and potentially Legislative Council on the matter.

“We’ll know when we know,” Armstrong said.

The governor said he has qualms about the incentive policy and is interested in reevaluating it to determine if it is the best way to attract and retain staff “because as somebody ... who has been involved in the hiring process over the last 10 months, it hasn’t helped.”

“There are things about this I don’t love,” he said. “But I want to be perfectly clear, changing the plan going forward and not honoring our commitment to our employees going back are two very different questions.”

His comments mirror those made by North Dakota Office of Management and Budget Director Joe Morrissette, who is also on the SIB.

Morrissette told the Tribune on Thursday there have been RIO staff hired with the understanding they would be eligible for this incentive policy. Choosing not to provide the bonuses now would not be fair to them, he said.

Morrisette has opposed the incentive policy from its original introduction to the state board.

“I felt like that was inappropriate because it creates this dichotomy in state government where you’ve got folks doing similar accounting work in different agencies but subject to vastly different compensation structures, and so I felt like that created this imbalance in state government that I didn’t like,” Morrisette said.

He said he continues to have concerns with the incentive policy.

How were the RIO bonuses structured?

The roughly $1.26 million would be paid out to 12 employees involved in managing the investment of the state’s funds.

Some of the state’s analysts and portfolio managers are eligible to receive a bonus equivalent to 50% or 75% of their base salary if the state’s investments surpass a benchmark recommended by consultant Mercer LLC and adopted by the SIB.

During the 2025 fiscal year, the funds managed by the RIO outperformed the performance benchmark adopted by the SIB by $191 million.

In the meeting’s agenda, the RIO said given the level of excess returns, the incentive payments are a “modest and reasonable payout.”

Armstrong said during the meeting that it was his understanding that hitting the investment metrics necessary for full incentive payments would be like a “unicorn,” in reference to how rare it would be.

“Apparently the unicorn happened right away,” Armstrong said. “Which — great. I mean, we’re $191 million above benchmark, and everybody should recognize that number, too.”

The state’s Chief Investment Officer Scott Anderson is eligible to receive a bonus equaling 100% of his base salary under the incentive policy. He is currently paid $312,000 annually. With the proposed bonus, he would make roughly $600,000 in 2025.

Some in the Legislature have called this excessive. Sen. Sean Cleary, R-Bismarck, sponsored an amendment to the RIO’s budget during the 2025 legislative session aimed at curtailing the amount offered in the incentive plan, capping the amount offered in bonuses to 70% of staff’s base salary, and to ensure the only RIO staff members receiving bonuses were those directly involved with managing the state’s investments. His amendment failed.

Cleary said he is happy to see that it appears only those directly involved in managing the state’s investments will be receiving bonuses according to the agenda for SIB’s Friday meeting, but he was not as happy with the bonus amounts.

“I still do think that they are a bit excessive, but the Legislature chose to reject my amendment during the session,” Cleary told the Tribune on Thursday.

Smith told the Tribune that the incentive plan is designed to attract and retain staff, and that the $600,000 total payment for the RIO’s chief investment officer is in line with the payment structure of other states’ chief investment officers across the country, if not a little low for his experience, based on a national compensation survey. She also said North Dakota’s chief investment officer faces a level of complexity that other states do not because of the number of funds the RIO oversees. North Dakota’s RIO manages 29 client funds.

“If you look at what Scott’s base salary is, he’s sitting at about $320,000,” Smith said. “He should be at more like $363,000, and Scott is a pretty seasoned investment professional. So ... you’re looking at somebody who should be over the 75th percentile (in compensation), and so that would be closer to like the $444,000 mark.”

Smith said Anderson’s counterpart in South Dakota makes over $600,000 as a base annual salary with the potential to bump that to over $1.3 million with incentives.