SB314 (2008) Detail

Relative to the use of certain prior service credit in the retirement system for purposes of eligibility for medical benefits.


SB 314-FN – AS INTRODUCED

2008 SESSION

08-2655

10/04

SENATE BILL 314-FN

AN ACT relative to the use of certain prior service credit in the retirement system for purposes of eligibility for medical benefits.

SPONSORS: Sen. Roberge, Dist 9; Sen. Barnes, Dist 17; Rep. Hawkins, Hills 18; Rep. Graham, Hills 18; Rep. Villeneuve, Hills 18; Rep. Spaulding, Hills 18; Rep. Ulery, Hills 27

COMMITTEE: Executive Departments and Administration

ANALYSIS

This bill clarifies the use of prior service credit for eligibility for medical benefits after retirement.

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Matter which is either (a) all new or (b) repealed and reenacted appears in regular type.

08-2655

10/04

STATE OF NEW HAMPSHIRE

In the Year of Our Lord Two Thousand Eight

AN ACT relative to the use of certain prior service credit in the retirement system for purposes of eligibility for medical benefits.

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

1 Prior Service Credit; Medical Benefits. Amend RSA 100-A:3, VI(c) to read as follows:

(c) Except for service described in subparagraph (d), in no case shall prior service purchased as credible service in the New Hampshire retirement system, on or after July 23, 2006, under the provisions of this section be deemed to be creditable service for the purposes of eligibility for medical benefits after retirement under the provisions of RSA 21-I:30, RSA 100-A:52, RSA 100-A:52-a, or RSA 100-A:52-b. Prior service credit purchased before July 23, 2006 shall be creditable service for the purposes of eligibility for medical benefits after retirement.

2 Political Subdivision Members; Prior Service Credit. Amend RSA 100-A:22 to read as follows:

100-A:22 Modifications. Membership in the retirement system shall be optional for officers and employees of the employer who are in the service of the employer on the date when participation becomes effective, and any such officer or employee who elects to join the retirement system within one year thereafter shall be credited with prior service covering such periods of prior service rendered to such employer for which the employer is willing to make accrued liability contributions. If the employer is unable or unwilling to make such contributions, a member in service may petition the board of trustees for periods of prior service rendered to such employer. Upon payment by the member of the amount determined in accordance with RSA 100-A:3, VI(b) and with the approval of the board, the member shall receive credit for such prior service. Thereafter, service for such employer on account of which contributions are made by the employer and member shall also be considered as creditable service. However, in no event shall prior service purchased as creditable service under this section, on or after July 23, 2006, be used as creditable service for the purpose of eligibility for medical benefits under RSA 100-A:52, RSA 100-A:52-a, or RSA 100-A:52-b. Prior service credit purchased between August 11, 2003 and July 23, 2006 shall be creditable service for the purposes of eligibility for medical benefits after retirement. Membership shall be compulsory for all employees entering the service of such employer after the date participation becomes effective. Municipalities may, by action of their city council or board of selectmen, exempt their chief administrative officer, at the time of initial hiring or appointment, from compulsory membership provided herein. The chief fiscal officer of the employer, and the heads of its departments, shall submit to the board of trustees such information and shall cause to be performed with respect to the employees of such employer, who are members of the retirement system, such duties as shall be prescribed by the trustees in order to carry out the provisions of this chapter.

3 Effective Date. This act shall take effect July 1, 2008.

LBAO

08-2655

Revised 01/16/08

SB 314 FISCAL NOTE

AN ACT relative to the use of certain prior service credit in the retirement system for purposes of eligibility for medical benefits.

FISCAL IMPACT:

The Department of Administrative Services states this bill will increase state expenditures by $3,136,500 in FY 2009, $3,450,150 in FY 2010, $3,795,165 in FY 2011 and $4,174,666 in FY 2012. There will be no fiscal impact on county and local expenditures or state, county, and local revenue.

METHODOLOGY:

The Department of Administrative Services states this bill would allow prior service purchased as creditable service before July 23, 2006 to be used for the purpose of eligibility for medical benefits after retirement and prior service purchased as creditable service between August 11, 2003 and July 23, 2006 be used for the purpose of eligibility for medical benefits after retirement for political subdivision members. The Department states it does not have information to determine the exact number of state employees that will retire with health coverage as a result of this bill. The Department administers the self-funded employee and retiree health benefit program and will administer coverage for any state retired employee who is eligible for medical benefits as a result of this bill. The Department assumes this bill will increase the cost of state retiree health coverage by 5 percent a year.

Fiscal Year

Appropriation (Actual or Estimated)

5 percent increase

FY 2009

$62,730,008 (Actual)

$3,136,500

FY 2010

$69,003,009 (Estimated)

$3,450,150

FY 2011

$75,903,310 (Estimated)

$3,795,165

FY 2012

$83,493,310 (Estimated)

$4,174,666

The New Hampshire Retirement System’s actuary assumed this bill applies only to members active as of June 30, 2007 who had purchased creditable service. The System’s actuary identified the following number of members to include in the valuation:

 

Employees

Teachers

Police

Fire

Total

Members with Prior Purchased Service

195

142

14

1

352

Using the June 30, 2007 actuarial valuation assumptions of an annual rate of return of 8.5 percent, wage inflation at 4.5 percent a year, and using the entry-age normal cost valuation method, the System’s actuary determined the postretirement medical subtrust is not materially affected by the bill. The contribution rate required to maintain solvency of the postretirement medical subtrust is unaffected for each member group. However, it is expected the police member group would become insolvent one year sooner, 2037 instead of 2038, as a result of this bill.