Requires the state to contribute 15% of retirement contributions for teacher, police, and fire. The remaining 85% would be covered by local government. At the time of this bill's submission, local government is responsible for 100% of retirement costs.
Retirement System Changes
As of June 2017, the New Hampshire Retirement System (NHRS) reported an unfunded liability—pension money it will owe in the future but does not currently have the assets to pay—of $5.04 billion.
Three factors have contributed to the unfunded liability:
- The 2001-2002 and 2009 fiscal crashes;
- A flawed funding methodology between 1991-2007 in which the NHRS faked low employer contribution rates;
- "Gain sharing" where roughly $900 million in investment returns went into a special account which funded non-pension benefits such as the cost-of-living adjustment.
According to the NHRS website, there is a plan in place to erase the unfunded liability by 2039.
Options for recovering the retirement system liability
First, the retirement system was designed to weather fluctuations in the economy. As the economy improves the NHRS investments could rebound, earning more money and eliminating the unfunded liability.
Higher Employee Contributions
In December 2014, the New Hampshire Supreme Court upheld the right of the state to increase public employees' contribution rates. Going forward, state employees will contribute a greater percentage of their paychecks toward their pensions.
Defined Contribution Plan
The state could switch from a defined benefit system to a defined contribution system. Under the current defined benefit plan, employees are guaranteed a yearly pension of a specific amount upon retirement. A contribution system instead establishes 401(k)-style retirement accounts for employees. Although many policymakers believe that a 401(k)-type system would be cheaper for the state than the current system, the New Hampshire Retirement System actuary estimates that switching to a 401(k)-style plan could actually cost the state $1.2 billion.
The state could switch to a "cash-balance" plan, which combines individual 401(k)-style accounts and pension guarantees. Under a cash-balance plan, each year the employer contributes a set percentage of an employee's yearly pay, plus interest, to an individual account. If the employee leaves the employer before retirement age, the employee may take the cash contents of the individual account with them. If the employee stays until retirement age, the employee is guaranteed a set monthly pension payment.
Costs for Municipalities
The burden of retirement contributions on municipalities is another problem. The recession caused the New Hampshire Legislature to increase the amount local governments pay into the retirement system. To handle those increasing costs, some local governments have allowed full-time employees to retire—at which point they start receiving their pensions—then rehired those same employees part time (up to 32 hours per week). This strategy means the employer does not have to pay into the pension system anymore for that employee in a part-time position, but still benefits from having an experienced worker on hand.
Some stakeholders have called this retiring/re-hiring "gaming the system." Local governments have argued that the practice is a natural consequence of the state downshifting the burden of retirement contributions.
In 2018, the Legislature passed a law that tightened the limits on working for an employer that participates in the NHRS after you've started collecting your pension. Employees who retired after January 1, 2019 are limited to working 1,352 hours per year for employers who participate in the NHRS. That works out to 26 hours per week. Retirees who were already working part-time for NHRS employers before January 1, 2019 were grandfathered in to a 1,664 hour-per-year limit (or 32 hours per week).
Grants a cost of living adjustment (COLA) of 1.5 percent to all retirees or beneficiaries who have been retired for at least 60 months (5 years). The House amended the bill to only apply 1.5 percent to the first $50,000 of a pension benefit.
Establishes a defined contribution plan for new members of the retirement system.
Modifies the calculation methodologies for the cost of New Hampshire Retirement System (NHRS) service credit for active service in the armed forces as well as service credit in cases of employer fault to timely enroll an employee in the NHRS. The NHRS estimates this bill will have a minimal financial impact.
Adds a nonvoting member to the Independent Investment Committee of the Retirement System, from a list of union nominees.
Requires that the cost of the fiscal analysis of proposed legislation done by the New Hampshire Retirement System (NHRS) be reimbursed from general funds. The NHRS says costs for analyzing legislation vary from about $20,000 to $50,000.
Changes the method for determining the classification of an existing or newly created state or local position in the New Hampshire Retirement System (NHRS).
Excludes emergency response and training by retired members working for municipal fire departments from the annual limitations on part-time employment. The House amended the bill to instead allow retired members whose part-time hours are already grandfathered under the law, to extend the grandfathering to a different position with the same participating employer.
Includes attendance stipends and bonuses in the compensation that must be reported to the New Hampshire Retirement System. The Senate amended the bill to also include additional pay for instructional activities of full-time faculty of the community college system. The House must agree to that change.
Allows a retired faculty member of the community college system to begin part-time employment a college prior to 28 days after retirement without affecting his or her retirement allowance.
Allows some government retirees who decline the state health benefits to get a payment towards other health insurance.
Established a new defined contribution plan for new government employees in the retirement system.
Grants a one-time additional allowance of $500 to government retirees receiving a benefit under $30,000 per year who served more than 20 years and have been retired for at least 5 years. The bill also grants a cost of living adjustment (COLA) of 1.5% to the same retirees. The Senate amended the bill to remove the COLA.
Changes the reduction of some government retirees' annuity from age 65 to "the member's full retirement age under the federal Social Security system."
Establishes a committee to study level dollar amortization of retirement system unfunded accrued liability.
Requires the retirement system to amortize annual unfunded liabilities accrued on or after July 1, 2017 separately from existing liabilities. According to the retirement system, this bill would have an undetermined financial impact, starting in 2022.
Establishes a commission to oversee the creation of a voluntary retirement plan for employers with 50 employees or fewer that do not currently offer a retirement plan to their employees and for self-employed individuals.
Changes premium contribution requirements for retired state employees and/or spouses who are eligible for Medicare Parts A and B due to age or disability, and are therefore eligible for retiree coverage under the State Health Benefit Plan. At the time of this bill's submission, Medicare-eligible retirees with a date of birth before 1949 are exempt from any premium contribution. This bill would make any Medicare-eligible retiree hired prior to September 1, 2009 exempt from any premium contribution.
Limits medical benefits through the New Hampshire Retirement System for spouses and new hires after July 1, 2017. The bill also requires the state to develop a defined contribution retiree health benefit plan.
Requires a health care premium contribution for retired state employees and spouses receiving benefits who are eligible for Medicare Parts A and B due to age or disability.
Requires that the state reimburses the Retirement System for the cost of analyzing any proposed bills.
Grants a one-time $500 additional allowance to some retirees in the state retirement system if the person is retired with at least 20 years of creditable service; the person retired and has been receiving an allowance for at least 5 years prior to July 1, 2017; and the annual retirement allowance for the person is not greater than $30,000.
Allows the New Hampshire Retirement System to revoke the benefits of a member if the member commits a crime related to the his or her public office or public employment for which the member resigned or was dismissed from employment.
Requires the New Hampshire Retirement System to use the assumed rate of return of 7.75% when calculating employer contribution rates for the next two fiscal years. The current assumed rate of return is 7.25%.
Requires a retired member of the retirement system who becomes part-time public employee to pay a fee to the retirement system.
Forbids a retiree in the New Hampshire Retirement System from getting a part-time job with the same employer for which the retired member was employed at the time of retirement.
This bill changes the retirement age for newer public employees to be the normal retirement age under the federal Social Security Act. The current state retirement ages varies from 60-65 years-old. The retirement age under the federal Social Security Act varies from 66-67.
Modifies the calculation of average final compensation for retirement system members who commenced service on or after July 1, 2011 or who had not attained vested status prior to January 1, 2012 by including the highest five years of the members' service. At the time of this bill's submission, the highest five years of service are excluded from some calculations.
Extends the period to correct the unfunded liability of the New Hampshire Retirement System (NHRS) from 30 to 40 years. According to the NHRS, in the short term there will be savings in employer rates, however extending the amortization period will result in additional employer payments of $4.1 billion over the additional ten years.
Requires the Decennial Retirement Commission to study the feasibility and cost of eliminating the reduction in a retiree's retirement allowance upon reaching the age of 65. The House amended the bill to add other duties to the Commission, such as reviewing the effects of retirees returning to work for government employers. The Senate amended the bill to establish a Bureau of Health and Benefits, a Bureau of Property, Casualty and Workers' Compensation, and a Bureau of Finance within the Department of Administrative Services.
Requires the state to pay 15% of the retirement system contributions for group I teachers and group II (police and fire) members. The remaining 85% will be paid by the cities, towns, and counties that pay 100% of such contributions under current law.
Limits a retired public employee to 1,352 hours of part-time work for any employer participating in the New Hampshire Retirement System (with exceptions for emergencies). If a retiree exceeds that limit, that retiree must forfeit his or her yearly state retirement allowance. The bill also prohibits part-time employment in the first 28 days after retirement.
Extends the interest and dividends tax to capital gains and increases exemptions for the tax. This bill also adds a state contribution to retirement system costs for county and local employers.
Corrects the age for certain group II vested deferred state retirees to be eligible for retiree medical benefits. The bill changes the maximum age for certain children of state retirees to participate in the state retiree group medical insurance plan, to under age 25. The bill also clarifies the authority for judges and retired judges to participate in the state retiree group medical insurance plan.
Establishes a cash balance pension plan for retirement system members who begin service with the state on or after July 1, 2017.
Requires the retirement system board of trustees to give employers notice and an opportunity to explain before assessing the penalty for failing to report required data to the retirement system.
Removes a reference in the law that permitted a portion of state procurement card rebates to be used to reduce the unfunded liability of the New Hampshire retirement system.
Requires premium contribution amounts for retiree health benefits for retired state employees who have attained the age of 65 on or after July 1, 2016, and makes an appropriation to the Department of Administrative Services for a health care consultant to design a long-term retiree health care funding plan.
Requires that proposed changes to the state retiree group insurance plan have a hearing before the legislative fiscal committee.
Establishes a cash balance pension plan for state retirement system members.
Increases the premium contribution for retired state employees and judges who have attained the age of 65 on or after July 1, 2016.
Increases the premium contribution for retired public employees and judges who have attained the age of 65 on or after July 1, 2016.
Establishes a committee to study the rates of employer contributions in the retirement system.
Creates additional temporary supplemental allowances for retired members of the retirement system or their beneficiaries.
Removes some of the limits on hours for retired government employees working during emergencies. The NH Retirement System says this bill would have no fiscal impact on the retirement system.
Establishes a committee to study alternative public employee retirement plans, such as cash balance plans.
Establishes a statutory commission to study the creation of a state retirement security program for New Hampshire residents who do not have access to an employer-sponsored plan, and appropriates $100,000 for the study.
Establishes a defined contribution retirement plan for public employees. Beginning November 1, 2015, all new hires by employers participating in the retirement system shall be enrolled in the public employee defined contribution plan.
Increases from 1,300 hours to 1,664 hours the annual hourly limit on retired members’ part-time employment, and removes the weekly 32-hour limit on part-time employment.
Permits a state retiree to terminate benefits to a former spouse in accordance with a divorce decree. This bill also allows a retired member of the retirement system to terminate the designation of a single, non-spouse beneficiary to receive an optional allowance.
Establishes a commission to study post-retirement employment of New Hampshire retirement system retirees.
Establishes a cash balance pension plan for all New Hampshire retirement system members hired on and after July 1, 2015.
Authorizes the Department of Administrative Services to create a credit card affinity program in which fees are directed to offset the Retirement System's unfunded liability.
Requires that the Retirement System take action to recover overpayments, and establishing a committee to study accidental overpayment.
Creates a committee to study alternative public employee retirement plans.
The New Hampshire Retirement System decreases monthly benefits once a recipient reaches age 65 and is eligible for Social Security. This bill would change that reduction from age 65 to whenever the recipient starts receiving Social Security checks, potentially after age 65.
Requires the New Hampshire Retirement System to stop benefits for any retiree that exceeds the legal limit of part-time hours with a government employer.
Requires contribution rates for members in the retirement system and employers to be calculated by assigning one half of the biennial change in the retirement system liabilities to each.
Requires retirement system employers to report all compensation paid to retirees collecting pensions. This bill also requires the retirement system to notify retirees of the annual limitations on hours for part-time employment with a public employer.
Requires municipal, county, and school district officials to notify those receiving New Hampshire Retirement System benefits of the limit on the hours retirees are allowed to work (1,300 per year).
Makes various changes to the state retirement system, such as raising retirement ages and increasing member contributions.
Should NH government switch from a pension system to a 401(k)-style retirement plan?
The Legislature passed a bill that would give a single cost-of-living adjustment to retirees who left work before 2014, raising their pensions by 1.5%. Cost-of-living adjustments for state retirees were suspended in 2010 when a fiscal crisis struck the retirement system.
The House held back a bill that would increase the state's contribution to the NHRS from zero to 15%. The state contribution to the system stood at 35% before the recession, when costs were downshifted to towns.That bill may be studied over the summer and pop back up next fall.
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