HB568 (2007) Detail

Repealing the option to purchase nonqualified service credit in the New Hampshire retirement system.


HB 568-FN – AS INTRODUCED

2007 SESSION

07-0064

10/01

HOUSE BILL 568-FN

AN ACT repealing the option to purchase nonqualified service credit in the New Hampshire retirement system.

SPONSORS: Rep. Hawkins, Hills 18; Rep. Pilotte, Hills 16; Rep. Graham, Hills 18

COMMITTEE: Executive Departments and Administration

ANALYSIS

This bill repeals the provision added by 2006, 178:8 which allows retirement system members to purchase certain nonqualified service credit.

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Explanation: Matter added to current law appears in bold italics.

Matter removed from current law appears [in brackets and struckthrough.]

Matter which is either (a) all new or (b) repealed and reenacted appears in regular type.

07-0064

10/01

STATE OF NEW HAMPSHIRE

In the Year of Our Lord Two Thousand Seven

AN ACT repealing the option to purchase nonqualified service credit in the New Hampshire retirement system.

Be it Enacted by the Senate and House of Representatives in General Court convened:

1 Repeal. RSA 100-A:4, VII, relative to purchase of nonqualified service credit, is repealed.

2 Effective Date. This act shall take effect upon its passage.

LBAO

07-0064

Revised 04/05/07

HB 568 FISCAL NOTE

AN ACT repealing the option to purchase nonqualified service credit in the New Hampshire retirement system.

FISCAL IMPACT:

      The Retirement System indicates the fiscal impact of this bill on state, county, and local expenditures is indeterminable in FY 2008 and each year thereafter. There will be no fiscal impact on state, county, and local revenue.

METHODOLOGY:

    The Retirement System states this bill repeals the option to purchase nonqualified service credit in the New Hampshire Retirement System. The System states as of January 17, 2007, 2,573 members have completed service credit purchases, with 65 percent or more purchasing the full 5 years of service. The System has collected approximately $42 million from members purchasing service credit from November 1, 2006 through January 17, 2007. The System’s actuary states the members purchasing the service credit are more likely to stay in service until retirement and retire at an earlier age. Service purchases are subsidized if the cost of the benefit exceeds the cost of the member payment. The amount of the subsidy will vary from year to year based on the contribution rates in effect at the time of purchase. Given the funded status of the System it is possible member payments could exceed the cost of the service purchases in aggregate until the funded status improves.

    The System was not able to provide data on members who have specifically purchased service to the actuary therefore no specific impact on contribution rates can be computed. The actuary estimated the net effect of all System members purchasing service credit would increase System liabilities by $25 to $40 million, which amortized over 30 years would increase contributions by approximately 0.05 percent to 0.10 percent of payroll. As a result of repealing this provision, System liabilities would decrease by a like amount. However, the actuary states the repealing of this provision could result in an increased utilization of the provision in the short-term.