There are potential advantages to extending operational seasonal forecast models to predict decadal variability but major efforts are required to assess the model fidelity for this task. In this study, we examine the North Atlantic climate simulated by the NCEP Climate Forecast System, version 2 (CFSv2), using a set of ensemble decadal hindcasts and several 30-year simulations initialized from realistic ocean–atmosphere states. It is found that a substantial climate drift occurs in the first few years of the CFSv2 hindcasts, which represents a major systematic bias and may seriously affect the model’s fidelity for decadal prediction. In particular, it is noted that a major reduction of the upper ocean salinity in the northern North Atlantic weakens the Atlantic meridional overturning circulation (AMOC) significantly. This freshening is likely caused by the excessive freshwater transport from the Arctic Ocean and weakened subtropical water transport by the North Atlantic Current. A potential source of the excessive freshwater is the quick melting of sea ice, which also causes unrealistically thin ice cover in the Arctic Ocean. Our sensitivity experiments with adjusted sea ice albedo parameters produce a sustainable ice cover with realistic thickness distribution. It also leads to a moderate increase of the AMOC strength. This study suggests that a realistic freshwater balance, including a proper sea ice feedback, is crucial for simulating the North Atlantic climate and its variability.