Bill Text - HB580 (2011)

(New Title) relative to the New Hampshire retirement system, and relative to continuation of provisions of a collective bargaining agreement following the end of the term of the agreement.


Revision: March 31, 2011, midnight

HB 580-FN-LOCAL – AS AMENDED BY THE HOUSE

30Mar2011… 1174h

2011 SESSION

11-0488

10/09

HOUSE BILL 580-FN-LOCAL

AN ACT relative to the New Hampshire retirement system, and relative to continuation of provisions of a collective bargaining agreement following the end of the term of the agreement.

SPONSORS: Rep. Kurk, Hills 7; Rep. Hawkins, Hills 18; Sen. White, Dist 9

COMMITTEE: Special Committee on Public Employee Pensions Reform

AMENDED ANALYSIS

This bill makes various changes to the state retirement system including:

I. Increasing retirement ages of group I and group II members for service retirement, disability retirement, vested deferred retirement, and split benefits.

II. Changing the definitions of earnable compensation and average final compensation used in calculating retirement benefits.

III. Changing the composition of the board of trustees.

IV. Eliminating the special account.

V. Increasing contribution rates.

VI. Establishing a committee to study the establishment of a voluntary defined contribution plan.

VII. Prohibiting a member in service from concurrently receiving benefits.

This bill also establishes a program allowing a state employee to refuse his or her rights as a state employee to receive state medical, dental, and retirement benefits in order to instead receive an increase in his or her base salary or wage; and provides that after the end of a collective bargaining agreement, the public employer has exclusive authority for continuation of benefits.

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Matter which is either (a) all new or (b) repealed and reenacted appears in regular type.

30Mar2011… 1174h

11-0488

10/09

STATE OF NEW HAMPSHIRE

In the Year of Our Lord Two Thousand Eleven

AN ACT relative to the New Hampshire retirement system, and relative to continuation of provisions of a collective bargaining agreement following the end of the term of the agreement.

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

1 Findings and Intent.

I. It is imperative for the state to take immediate action to assure the state retirement system’s future financial health.

(a) The Pew Institute has concluded that unfunded pension and healthcare liabilities are a nationwide problem, estimated at over $1 trillion.

(b) The New Hampshire retirement system has an estimated unfunded pension liability of $3.7 billion and $1.5 billion of unfunded medical insurance liability. Although a plan is underway for recovery over 30 years, uncertainties in future market returns, rapid increases in medical costs, increases in life expectancy, and slower growth in public sector employment require prudent intervention to assure financial viability.

(c) The level of federal debt of almost $14 trillion and growing rapidly suggests that federal assistance to the states may be significantly reduced in the future, adding to the problem.

(d) The budget reductions planned for the state fiscal years 2012 and 2013 are large, and do not fully meet the state’s commitments to health and human services, education, transportation, and other services. Reductions in state retirement costs are a necessary part.

II. The current level of benefits for public employees is unsustainable.

(a) On average, benefits constitute an additional 52 percent increase to the cost of public salaries. This is significantly higher than the percent paid in the private sector, and taxpayers are increasing unable to continue this level of support, especially in our recessionary climate.

(b) Public employees are increasingly not cost-competitive with private alternatives to providing state and municipal services.

(c) Public employee contributions to their pensions have not been increased for many years.

III. The financial viability of the state retirement system must be preserved.

(a) Simply shifting who pays (i.e., employees or employers) will not solve the problem.

(b) It is important to adjust the system fairly among employee classes, and to introduce changes in a way to ameliorate impact on present employees, especially those closest to retirement.

(c) Pension costs must not make public employees uncompetitive with the private sector.

2 Retirement System; Definitions; Average Final Compensation. Amend RSA 100-A:1, XVIII to read as follows:

XVIII. “Average final compensation” shall mean, for members who retire prior to July 1, 2016, the average annual earnable compensation of a member during his or her highest 3 years of creditable service, or during all of the years in his or her creditable service if less than 3 years. For members who retire on or after July 1, 2016, “average final compensation” shall mean the average annual earnable compensation of a member during his or her highest 5 years of creditable service, or during all of the years in his or her creditable service if less than 5 years.

3 Retirement System; Definition of Earnable Compensation. Amend RSA 100-A:1, XVII to read as follows:

XVII. “Earnable compensation’’ shall mean:

(a) For all members in service on or before June 30, 2011 and who retire prior to July 1, 2016, the full base rate of compensation paid plus any overtime pay, holiday and vacation pay, sick pay, longevity or severance pay, cost of living bonus, additional pay for extracurricular and instructional activities or for other extra or special duty, and any military differential pay, plus the fair market value of non-cash compensation paid to, or on behalf of, the member for meals or living quarters if subject to federal income tax, but excluding other compensation except cash incentives paid by an employer to encourage members to retire, supplemental pay paid by the employer while the member is receiving workers’ compensation, and teacher development pay that is not part of the contracted annual salary. However, earnable compensation in the final 12 months of creditable service prior to termination of employment shall be limited to 1- 1/2 times the higher of the earnable compensation in the 12-month period preceding the final 12 months or the highest compensation year as determined for the purpose of calculating average final compensation, but excluding the final 12 months. Any compensation received in the final 12 months of employment in excess of such limit shall not be subject to member or employer contributions to the retirement system and shall not be considered in the computation of average final compensation. Provided that, the annual compensation limit for members of governmental defined benefit pension plans under section 401(a)(17) of the United States Internal Revenue Code of 1986, as amended, shall apply to earnable compensation for all employees, teachers, permanent firemen, and permanent policemen who first become eligible for membership in the system on or after July 1, 1996. Earnable compensation shall not include compensation in any form paid later than 120 days after the member’s termination of employment from a retirement eligible position, with the limited exceptions of disability related severance pay paid to a member or retiree no later than 120 days after a decision by the board of trustees granting the member or retiree disability retirement benefits pursuant to RSA 100-A:6 and of severance pay which a member was entitled to be paid within 120 days after termination but which, without the consent of the member and not through any fault of the member, was paid more than 120 days after the member’s termination. The member shall have the burden of proving to the board of trustees that any severance payment paid later than 120 days after the member’s termination of employment is earnable compensation and meets the requirements of an asserted exception to the 120-day post-termination payment requirement.

(b) For any member in service on and after July 1, 2011 and who retires after July 1, 2016, the full base rate of compensation paid plus holiday pay, vacation pay, and sick pay, and any compensation for mandatory training and any military differential pay. Earnable compensation shall not include pay for accumulated unused sick or vacation time. However, earnable compensation in the final 2 12-month periods of creditable service prior to termination of employment shall each be limited to 1-1/2 times the highest compensation year as determined for the purpose of calculating average final compensation, but excluding the final 24 months. Any compensation received in the final 24 months of employment in excess of such limit shall not be subject to member or employer contributions to the retirement system and shall not be considered in the computation of average final compensation. Provided that, the annual compensation limit for members of governmental defined benefit pension plans under section 401(a)(17) of the United States Internal Revenue Code of 1986, as amended, shall apply to earnable compensation for all employees, teachers, permanent firemen, and permanent policemen. Earnable compensation shall not include compensation in any form paid later than 120 days after the member’s termination of employment from a retirement eligible position.

4 Membership; Employees; Full-Time Requirement. Amend RSA 100-A:3, III to read as follows:

III. The board of trustees may, in its discretion, accept as members any class of full-time employees, or any class of teachers, permanent policemen or permanent firemen, whose compensation is only partly paid by an employer or who are serving on a temporary or other than per annum basis, and it may also, in its discretion, make optional with such employees, teachers, permanent policemen or permanent firemen in any such class their individual entrance into membership. Provided, however, that membership as an employee as defined in RSA 100-A:1, V shall require full-time employment, which shall not be satisfied by the combination of service in one or more part-time positions. In addition, no member in a full-time position as an employee shall be permitted to make contributions or to accrue benefits under this chapter on account of any such part-time employment. Any rule or practice adopted by the board which is inconsistent with the requirements of this paragraph shall be without effect.

5 Service Retirement; Age Increased. Amend RSA 100-A:5 to read as follows:

100-A:5 Service Retirement Benefits.

I. Group I Members.

(a) Any group I member, who may retire on a service retirement allowance upon written application to the board of trustees setting forth at what time, not less than 30 days nor more than 90 days subsequent to the filing thereof, the member desires to be retired, provided the member at the time so specified for retirement has attained age 60 if the member is in vested status before July 1, 2011 or age 65 if the member is not in vested status on July 1, 2011, and notwithstanding that during such period of notification the member may have separated from service. For the purposes of this section, a teacher member of group I who remains in service throughout a school year shall be deemed to be in service during July and August at the end of such school year.

(b) Upon service retirement, an employee member or teacher member of group I shall receive a service retirement allowance which shall consist of a member annuity which shall be the actuarial equivalent of the member’s accumulated contributions at the time of retirement, and a state annuity. Prior to the member’s attainment of age 65, the state annuity, together with the member annuity, shall be equal to 1/60 of the member’s average final compensation multiplied by the number of years of creditable service. After attainment of age 65, the state annuity, together with the member annuity, shall be equal to 1/66 of the member’s average final compensation multiplied by the number of years of creditable service.

(c) Notwithstanding any other provision of law, any group I member who meets the requirements of RSA 100-A:10, I(a), and who has either completed at least 20 years of creditable service which, when combined with his or her age equals at least [70] 75 years, or who has attained the age of [50] 55, but not the age of 60 if the member is in vested status before July 1, 2011 or the age of 65 if the member is not in vested status on July 1, 2011, may elect to retire and have benefits commence immediately as a reduced service retirement allowance upon written application to the board of trustees setting forth the time, not less than 30 days nor more than 90 days subsequent to the filing thereof, at which the member desires to have benefits commence. The service retirement allowance shall be determined in accordance with RSA 100-A:5, I(b) and shall be reduced, for each month by which the date on which benefits commence precedes the month after which the member attains 60 years of age if the member is in vested status before July 1, 2011 or 65 years of age if the member is not in vested status on July 1, 2011, by 1/8 of one percent if the member has 35 years or more of creditable service, by 1/4 of one percent if the member has 30 years but less than 35 years of creditable service, by 1/3 of one percent if the member has at least 25 years but less than 30 years of creditable service, by 5/12 of one percent if the member has at least 20 years but less than 25 years of creditable service, and by 5/9 of one percent if the member has less than 20 years of creditable service.

(d) [Repealed.]

II. Group II Members.

(a)(1) Any group II member in service, who is in vested status before July 1, 2011, who has attained age 45 and completed 20 years of creditable service, or who has attained age 60 regardless of the number of years of creditable service, may retire on a service retirement allowance upon written application to the board of trustees setting forth at what time not less than 30 days nor more than 90 days subsequent to the filing thereof the member desires to be retired, notwithstanding that during such period of notification the member may have separated from service.

(2) Any group II member in service who is not in vested status on July 1, 2011, who has attained age 50 and completed 25 years of creditable service, or who has attained age 65 regardless of the number of years of creditable service, may retire and receive a service retirement allowance beginning upon the attainment of age 55 upon written application to the board of trustees setting forth at what time not less than 30 days nor more than 90 days subsequent to the filing thereof the member desires to be retired, notwithstanding that during such period of notification the member may have separated from service.

(b) Upon service retirement, a group II member shall receive a service retirement allowance which shall consist of:

(1) A member annuity which shall be the actuarial equivalent of his accumulated contributions at the time of retirement; and

(2) For members who are in vested status before July 1, 2011, a state annuity which, together with his or her member annuity, shall be equal to 2-1/2 percent of his or her average final compensation multiplied by the number of years of his or her creditable service not in excess of 40 years, or for members who commenced service or are not in vested status on July 1, 2011, a state annuity which, together with his or her member annuity, shall be equal to 2 percent of his or her average final compensation multiplied by the number of years of his or her creditable service not in excess of 25 years.

(c)(1) Notwithstanding any provision of RSA 100-A to the contrary, any group II member who is in vested status before July 1, 2011 and has retired on or after the effective date of this subparagraph after attaining the age of 45 with at least 20 years of creditable service shall receive a minimum annual service retirement allowance of $10,000, and any group II member who is not in vested status on July 1, 2011 and has retired on or after the effective date of this subparagraph after attaining the age of 50 with at least 25 years of creditable service, shall receive beginning upon the attainment of age 55 a minimum annual service retirement allowance of $10,000. If such group II member has elected to convert the retirement allowance into an optional allowance for the surviving spouse under RSA 100-A:13, the surviving spouse shall be entitled to a proportional share of the $10,000.

(2) [Repealed.]

(3) [Repealed.]

6 Disability Retirement; Group I Age Increased. Amend RSA 100-A:6, I(b) to read as follows:

(b)(1) Upon ordinary disability retirement, the group I member who has attained age 60 if the member is in vested status before July 1, 2011 or the age of 65 if the member is not in vested status on July 1, 2011 shall receive an ordinary disability retirement allowance which shall consist of a member annuity and shall be the actuarial equivalent of the member’s accumulated contributions at the time of his ordinary disability retirement, and a state annuity as follows:

(A) Prior to the member’s attainment of age 65, the state annuity, together with the member annuity, shall be equal to 1/60 of the member’s average final compensation at the time of his ordinary disability retirement multiplied by the number of years of creditable service at the time of his ordinary disability retirement;

(B) After attainment of age 65, the state annuity, together with the member annuity, shall be equal to 1/66 of the member’s average final compensation at the time of his ordinary disability retirement multiplied by the number of years of creditable service at the time of his ordinary disability retirement;

(C) Regardless of age at disability, the ordinary disability retirement allowance shall not be less than 25 percent of the member’s average final compensation at the time of his or her disability retirement.

(2) Upon ordinary disability retirement, the group I member who has not attained age 60 if the member is in vested status before July 1, 2011 or the age of 65 if the member is not in vested status on July 1, 2011 shall receive an ordinary disability retirement allowance which shall consist of: a member annuity which shall be the actuarial equivalent of the member’s accumulated contributions at the time of his ordinary disability retirement; and a state annuity which, together with the member annuity, shall be equal to 1.5 percent of the member’s average final compensation at the time of his ordinary disability retirement multiplied by the number of years of creditable service at that time of his ordinary disability retirement. However, regardless of age at disability, the ordinary disability retirement allowance shall not be less than 25 percent of the member’s average final compensation at the time of his or her disability retirement.

7 Accidental Disability Retirement; Group I. Amend RSA 100-A:6, I(d) to read as follows:

(d)(1) Upon accidental disability retirement, the group I member who has attained age 60 if the member is in vested status before July 1, 2011 or the age of 65 if the member is not in vested status on July 1, 2011 shall receive an accidental disability retirement allowance which shall consist of a member annuity and shall be the actuarial equivalent of the member’s accumulated contributions at the time of his accidental disability retirement, and a state annuity as follows:

(A) Prior to the member’s attainment of age 65, the state annuity, together with the member annuity, shall be equal to 1/60 of the member’s average final compensation at the time of his accidental disability retirement multiplied by the number of years of creditable service at the time of his accidental disability retirement;

(B) After attainment of age 65, the state annuity, together with the member annuity, shall be equal to 1/66 of the member’s average final compensation at the time of his accidental disability retirement multiplied by the number of years of creditable service at the time of his accidental disability retirement;

(C) Regardless of age at disability, such allowance shall not be less than 50 percent of the member’s average final compensation at the time of his accidental disability retirement.

(2) Upon accidental disability retirement, the group I member who has not attained age 60 if the member is in vested status before July 1, 2011 or the age of 65 if the member is not in vested status on July 1, 2011 shall receive an accidental disability retirement allowance which shall consist of: the member annuity which shall be the actuarial equivalent of the member’s accumulated contributions at the time of his accidental disability retirement; and a state annuity which, together with the member annuity, shall be equal to 50 percent of the member’s average final compensation at the time of his disability retirement.

8 Ordinary Disability Retirement; Group II. Amend RSA 100-A:6, II(b) to read as follows:

(b) Upon ordinary disability retirement, the group II member shall receive an ordinary disability retirement allowance which shall consist of: a member annuity which shall be the actuarial equivalent of his accumulated contributions at the time of his or her ordinary disability retirement; and a state annuity which, together with his or her member annuity, for members who are in vested status before July 1, 2011, shall be equal to 2-1/2 percent of his or her average final compensation at the time of [his] ordinary disability retirement multiplied by the number of years of his or her creditable service not in excess of 40 at the time of [his] ordinary disability retirement, or for members who are not in vested status on July 1, 2011, shall be equal to 2 percent of his or her average final compensation at the time of ordinary disability retirement multiplied by the number of years of his or her creditable service not in excess of 25 at the time of ordinary disability retirement, provided, however, that such allowance shall not be less than 25 percent of the member’s final compensation at the time of his or her disability retirement.

9 Accidental Disability Retirement; Group II. Amend RSA 100-A:6, II(d) to read as follows:

(d)(1) Upon accidental disability retirement, the group II member who is in vested status before July 1, 2011, shall receive an accidental disability retirement allowance equal to 2/3 of his or her average final compensation at the time of [his] disability retirement, and the group II member who is not in vested status on July 1, 2011, shall receive an accidental disability retirement allowance equal to 1/2 of his or her average final compensation at the time of disability retirement.

(2) For any group II member who has more than 26-2/3 years of service, a supplemental disability retirement allowance shall be paid. Such supplement shall be equal to 2-1/2 percent of his or her average final compensation multiplied by the number of years of his or her creditable service in excess of 26-2/3 but not in excess of 40 years. Provided however that an accidental disability retirement allowance together with a supplemental disability retirement allowance, as provided in this subparagraph, shall not exceed 100 percent of the disability retiree’s average final compensation.

10 Vested Deferred; Group II Age Increased. Amend RSA 100-A:10, II(b) to read as follows:

(b) For members who are in vested status before July 1, 2011, upon the member’s attainment of age 45, provided the member would then have completed 20 years of creditable service, otherwise the subsequent date on which such 20 years would have been completed, or at any time after age 60, or for members who are not in vested status on July 1, 2011, upon the member’s attainment of age 50, provided the member would then have completed 25 years of creditable service, otherwise the subsequent date on which such 25 years would have been completed, or at any time after age 65, a group II member who meets the requirement of subparagraph (a) may make application on a form prescribed by the board of trustees and receive a vested deferred retirement allowance which shall consist of: (1) A member annuity which shall be the actuarial equivalent of accumulated contributions on the date the member’s retirement allowance commences; and (2) A state annuity which, together with the member annuity, shall be equal to a service retirement allowance based on the member’s average final compensation and creditable service at the time the member’s service is terminated.

11 Return of Contributions. Amend RSA 100-A:11, I(c) to read as follows:

(c) Upon the death of a group I member who has elected, pursuant to RSA 100-A:10, to receive a vested deferred retirement allowance before his or her attainment of age 60 if the member is in vested status before July 1, 2011 or the age of 65 if the member is not in vested status on July 1, 2011, the amount of his or her accumulated contributions at the time of his or her death shall be paid to the person or persons, if any, nominated by [him] the member, if living, otherwise to the member’s estate.

12 Split Benefits; Minimum Age. Amend RSA 100-A:19-b to read as follows:

100-A:19-b Minimum Age. For the purposes of this subdivision only, minimum age shall mean:

I. For a member who has completed less than 20 years combined creditable service in both group I and group II, 60 years if the member is in vested status before July 1, 2011 or 65 years if the member is not in vested status on July 1, 2011.

II. For a member who is in vested status before July 1, 2011 and, who has completed 20 or more years of combined creditable service, one year shall be deducted from age 60 for each year of creditable group II service, provided that the age shall not be less than 45 years. For a member who commenced service or is not in vested status on July 1, 2011 and, who has completed 25 or more years of combined creditable service, one year shall be deducted from age 65 for each year of creditable group II service, provided that the age shall not be less than 50 years.

13 Split Benefits; Reduced Early Retirement; Minimum Age. Amend RSA 100-A:19-d to read as follows:

100-A:19-d Reduced Early Retirement. Notwithstanding any other provision of law, any retirement system member who has creditable service in both group I and group II with at least 10 years combined creditable service, and who has attained an age which is at least 45 for members who are in vested status with group II service prior to July 1, 2011 or at least 50 for members who commenced group II service or are not in vested status on July 1, 2011 and is within 10 years of the minimum age set forth in RSA 100-A:19-b, may elect to retire and have benefits commence immediately as a reduced split-benefit service retirement allowance. Application shall be as provided in RSA 100-A:5, I(c). The allowance shall be determined as a split-benefit service retirement allowance in accordance with RSA 100-A:19-c, and the total combined split-benefit service allowance shall be reduced by the percentages shown in RSA 100-A:5, I(c), based on the total combined length of creditable service, for each month by which the date on which benefits commence precedes the month after which the member attains the minimum age set forth in RSA 100-A:19-b.

14 State Employees; Retirement. Amend RSA 21-I:30, II(a) to read as follows:

(a) Has at least 10 years of creditable service for the state if the employee’s service began prior to July 1, 2003 or 20 years of creditable service if the employee’s service began on or after July 1, 2003, and who also is at least 60 years of age at the time of retirement if the employee is in vested status before July 1, 2011 or at least 65 years of age at the time of retirement if the employee is not in vested status on July 1, 2011; or

15 State Employees; Group Insurance Benefits; Group II. Amend RSA 21-I:30, III to read as follows:

III. Any vested deferred state retiree may receive medical and surgical benefits under this section if the vested deferred state retiree is eligible. To be eligible, a group I vested deferred state retiree shall have at least 10 years of creditable service with the state if the employee’s service began prior to July 1, 2003 or 20 years of creditable service with the state if the employee’s service began on or after July 1, 2003 and a group II vested deferred state retiree shall have at least 20 years of creditable service with the state if the employee’s service with the state began on or after July 1, 2010. In addition, if the vested deferred state retiree is a member of group I, such retiree shall be at least 60 years of age to be eligible if the member is in vested status before July 1, 2011 or 65 years of age if the member is not in vested status on July 1, 2011. If the vested deferred state retiree is a member of group II who is in vested status before July 1, 2011, such retiree shall not be eligible until 20 years from the date of becoming a member of group II and shall be at least 45 years of age, and any group II member who is not in vested status on July 1, 2011 shall not be eligible until 25 years from the date of becoming a member of group II and shall be at least 50 years of age.

16 Retirement Age Changed; Vested Status; Group I. Notwithstanding the provisions of RSA 100-A:5, RSA 100-A:6, RSA 100-A:10, RSA 100-A:11, RSA 100-A:19-b, and RSA 21-I:30 relating to retirement at age 60, persons who are in vested status in the retirement system or as a state employee under RSA 21-I:30 on the effective date of this section shall be permitted to retire on an unreduced service retirement, disability retirement, vested deferred retirement, or split benefit retirement at the following ages, based on the corresponding number of years of creditable service:

I. At least 10 but not 15 years of creditable service, age 64.

II. At least 15 but not 20 years of creditable service, age 63.

III. At least 20 but not 25 years of creditable service, age 62.

IV. At least 25 but not 30 years of creditable service, age 61.

V. At least 30 years of creditable service, age 60.

17 Retirement Qualifications; Members Not in Vested Status; Group II. Notwithstanding the provisions of RSA 100-A:5, RSA 100-A:6, RSA 100-A:10, RSA 100-A:11, RSA 100-A:19-b, and RSA 21-I:30 relating to retirement qualifications and calculation of benefits for group II members, any group II member not in vested status on July 1, 2011 shall be subject to the transition provisions of this section for years of service required for regular service retirement, the minimum age for regular service retirement, and the multiplier used to calculate the retirement annuity, which shall be applicable on July 1, 2011 according to the following table:

Creditable service Minimum years of service Minimum age attained Annuity multiplier

on July 1, 2011

(1) Less than 4 years 24 age 49 2.1%

(2) At least 4 years but 23 age 48 2.2%

less than 6 years

(3) At least 6 years but 22 age 47 2.3%

less than 8 years

(4) At least 8 years but 21 age 46 2.4%

less than 10 years

18 Financing; Contribution Rates; Group II Member Payroll Deduction. Amend RSA 100-A:16, I(a) to read as follows:

(a) The member annuity savings fund shall be a fund in which shall be accumulated the contributions deducted from the compensation of members to provide for their member annuities together with any amounts transferred thereto from a similar fund under one or more of the predecessor systems. Such contribution shall be, for each member, dependent upon the member’s employment classification at the rate determined in accordance with the following table:

[Employees of employers other than the state 5.00

Employees of the state hired on or before June 30, 2009 5.00

Employees of the state hired after June 30, 2009 7.00

Teachers 5.00

Permanent Policemen 9.30

Permanent Firemen 9.30 ]

Group I members, 7.00

Group II permanent fireman members, 11.80

Group II permanent police members, 11.55

The board of trustees shall certify to the proper authority or officer responsible for making up the payroll of each employer, and such authority or officer shall cause to be deducted from the compensation of each member, except group II members who are in vested status before July 1, 2011 with creditable service in excess of 40 years or group II members who are not in vested status on July 1, 2011 with creditable service in excess of 25 years, as provided in RSA 100-A:5, II(b) and RSA 100-A:6, II(b), on each and every payroll of such employer for each and every payroll period, the percentage of earnable compensation applicable to such member. No deduction from earnable compensation under this paragraph shall apply to any group II member who is in vested status before July 1, 2011 with creditable service in excess of 40 years, or group II member who is not in vested status on July 1, 2011 with creditable service in excess of 25 years, as provided in RSA 100-A:5, II(b) and RSA 100-A:6, II(b), and this provision for such members shall not affect the method of determining average final compensation as provided in RSA 100-A:1, XVIII. In determining the amount earnable by a member in a payroll period, the board may consider the rate of compensation payable to such member on the first day of a payroll period as continuing throughout the payroll period and it may omit deduction from compensation for any period less than a full payroll period if such person was not a member on the first day of the payroll period, and to facilitate the making of deductions it may modify the deduction required of any member by such an amount as shall not exceed 1/10 of one percent of the annual earnable compensation upon the basis of which such deduction is made. The amounts deducted shall be reported to the board of trustees. Each of such amounts, when deducted, shall be paid to the retirement system at such times as may be designated by the board of trustees and credited to the individual account, in the member annuity savings fund, of the member from whose compensation the deduction was made.

19 Retirement System; Recalculation of Employer Rates; Recertification. Notwithstanding the notice requirements of RSA 100-A:16, III, the board of trustees of the retirement system shall recalculate employer contribution rates for the state fiscal years 2012 and 2013 to reflect the requirements of RSA 100-A as amended by this act. Notwithstanding the notice requirements of RSA 100-A:16, III, such employer contribution rates shall be effective for the biennium beginning July 1, 2011, and the recertification of employer contribution percentages, applicable beginning July 1, 2011, shall be provided to each employer within a reasonable period of time not to exceed 30 days from the effective date of this section. The exception to the notice requirements of RSA 100-A:16, III in this section shall be limited to the applicable employer contribution rates for the biennium beginning July 1, 2011.

20 New Section; Retirement System; Return to Work. Amend RSA 100-A by inserting after section 27 the following new section:

100-A:27-a Return to Work; Suspension of Benefits. Beginning July 1, 2011, no person for whom membership in the retirement system is optional under RSA 100-A:3, I, and no person employed by an employer on a full- or part-time basis or as a consultant for longer than 3 months in a year, may concurrently receive benefits under this chapter as a retired member. Benefits shall be suspended during any such period of employment.

21 Repeal. 2002, 137:7, relative to the application of the repeal of former RSA 100-A:3, I(c), is repealed.

22 Retirement System; Administration; Membership of Board. Amend RSA 100-A:14, I to read as follows:

I. The administration of this system is vested in a board of [14] 13 trustees. Each newly appointed or reappointed trustee shall have familiarity with or experience in finance or business management. The state treasurer shall be an ex officio voting member of the board. The governor and council shall appoint [2] 4 trustees, to be known as non-member trustees, who shall be qualified persons with investment and/or financial experience as provided in this paragraph and not be members of the system, and who shall serve for a term of 2 years and until their successors are appointed and qualified. The non-member trustees of the board shall have substantial experience in the field of institutional investment or finance, taking into account factors such as educational background, business experience, and professional licensure and designations. The original appointment of [one] 2 of the non-member trustees shall be for a term of one year. The remaining [11] 8 members of the board shall consist of [2 employees, 2 teachers, 2 permanent policemen, 2 permanent firemen, one member of the senate who shall be appointed annually by the senate president, one member of the house of representatives who serves on the executive departments and administration committee and who shall be appointed annually by the speaker of the house, and one person representing management in local government. Whenever a vacancy occurs, the senate president or the speaker of the house shall fill the vacancy in the same manner by appointing a senate or a house member who shall serve for the unexpired term.] 4 member representatives and 4 employer representatives. The New Hampshire state employees’ association, the New Hampshire education association, the New Hampshire police association, and the New Hampshire state permanent firemen’s association, [and the New Hampshire Local Government Center] shall each annually nominate from their members a panel of 5 persons, [all of whom except for the panel of the Local Government Center shall be active members of the retirement system, or one of the 4 predecessor systems,] no later than May 31 of each year, and the panels so named shall be filed with the secretary of state no later than June 10 of each year. From [each of] the above named panels, the governor and council shall appoint [one person annually to] the active member representatives of the board[, except for the panel of the Local Government Center, which shall have one person appointed every 2 years] as needed so as to maintain the representation on the board. The governor and council shall appoint the employer representatives of the board with the advice of employer organizations. Members appointed to the board in the manner aforesaid shall serve for a term of 2 years. Each member so appointed shall hold office until his or her successor shall be appointed and qualified. Whenever a vacancy occurs, the governor and council shall fill the vacancy by appointing a member who shall serve for the unexpired term [from the same panel from which the former member was appointed]. The governor shall designate one of the non-member trustees to serve as chairman of said board of trustees.

23 Application; Board of Trustees Membership. Members of the board of trustees for the retirement system on the effective date of this section shall serve for the remainder of their terms. In order to conform to changes to the retirement system board of trustees made by this act, upon a vacancy occurring in the membership on the board of trustees after the effective date of this section, the appointment of a trustee shall be made to reasonably conform to the trustee designations in RSA 100-A:14, I.

24 Repeal of Special Account. RSA 100-A:16, II(h)–(j), relative to the special account, are repealed.

25 Transfer of Balance of Special Account. Any funds remaining in the special account on the effective date of the repeal of the special account by this act shall be transferred to the respective components of the state annuity accumulation fund.

26 Definition of Terminal Funding. Amend RSA 100-A:1, XXX to read as follows:

XXX. “Terminal funding’’ shall mean providing the full present value of the total liability for benefit improvement. [Unless otherwise specified, the source of terminal funding shall be the special account established under RSA 100-A:16, II(h).]

27 Benefits Upon Death After Retirement; References to Special Account. Amend RSA 100-A:12, I-a and II to read as follows:

I-a. In addition to any other provision of this section, upon the death of a retired group II member of the New Hampshire retirement system or any predecessor system, who retired pursuant to RSA 100-A:5, II with at least 20 years of creditable service or pursuant to RSA 100-A:6, II(a) prior to April 1, 1987, there shall be paid to the member’s spouse at the time of retirement, if surviving, an allowance to continue until the spouse’s death or remarriage equal to 50 percent of the service or ordinary disability retirement allowance payable to the retired member prior to the member’s death. The total cost of terminally funding the benefits provided by this paragraph shall be funded from the [special account established under RSA 100-A:16, II(h)] state annuity accumulation fund.

II. Upon the death of a group II member who has retired on or after April 1, 1987, or upon the death of a group II member who has filed an application for retirement benefits with the board of trustees after January 1, 1991, there shall be paid to the person nominated by the member by written designation filed with the board, if living, otherwise to the retired member’s estate, in addition to the amount payable under RSA 100-A:11 a lump sum of $3,600 if the member retired before July 1, 1988, and if the member is married on the date of such member’s retirement, there shall be paid to such surviving spouse an allowance to continue until the spouse’s death or remarriage equal to 50 percent of the member’s service, ordinary disability, or accidental disability retirement allowance payments. For any person who is a group II member as of June 30, 1988, and who retires on or after July 1, 1988, the lump sum payment shall be $10,000. For any person who becomes a member of group II on or after July 1, 1988, and on or prior to July 1, 1993, the lump sum payment shall be $3,600. It is the intent of the legislature that future group II members shall be included only if the total cost of such inclusion can be terminally funded [by reimbursement from the special account established under RSA 100-A:16, II(h)].

28 Supplemental Allowance; Reference to Special Account. Amend RSA 100-A:41-a, III to read as follows:

III.(a) The payment of any such supplemental allowance shall be contingent on terminal funding of the total actuarial cost thereof. [Such terminal funding shall be from the special account established under RSA 100-A:16, II(h).]

(b) [No supplemental allowance shall reduce the funds in the respective component of the special account to an amount less than zero.

(c)] Cost of living adjustments shall be retroactive to the member’s eligibility date pursuant to paragraph I.

29 Management of Funds; Investment Committee. Amend RSA 100-A:15, I to read as follows:

I. The members of the board of trustees shall be the trustees of the several funds created hereby and shall set the investment policy relative to those funds. The independent investment committee shall have full power to invest and reinvest such funds in accordance with the policy set by the board. The board of trustees and the members of the independent investment committee shall have the powers, privileges, and immunities of a corporation. The independent investment committee shall have full power to hold, purchase, sell, assign, transfer, and dispose of any of the securities and investments in which any of the funds created hereby have been invested, as well as the proceeds of such investments in accordance with the policy set by the board. All of the assets and proceeds, and income therefrom, of the New Hampshire retirement system, and all contributions and payments made thereto, shall be held, invested, or disbursed in trust.

30 Independent Investment Committee Amend RSA 100-A:15, IX to read as follows:

IX. The non-trustee members of the independent investment committee shall be afforded the same liability insurance [and], indemnification, and statutory protections as board members.

31 New Section; Retirement System; Construction of Provisions; Member Acknowledgement. Amend RSA 100-A by inserting after section 1 the following new section:

100-A:1-a Construction of Provisions; Member Acknowledgement.

I. The benefits provided under this chapter shall not be construed to constitute a binding contractual obligation with respect to members and may be modified or discontinued by the adoption of appropriate legislation.

II. Every employer shall keep on file for each member commencing service after June 30 2011 a statement of the employee’s, teacher’s, policeman’s, or fireman’s acknowledgement of the provisions of paragraph I of this section.

32 New Paragraph; Public Employee Labor Relations; Status Quo; Authority of Employer. Amend RSA 273-A:11 by inserting after paragraph II the following new paragraph:

III. Following the end of the term of a collective bargaining agreement and during any period of negotiation, the status quo shall be maintained as to the wages, hours, and conditions of employment of employees in good standing. Except where required by statute, the continuation, after the expiration of the agreement, of the provision of any medical, dental, and life insurance benefits, retirement or pension benefits, and any other fringe benefits, shall be subject to the exclusive authority of the public employer.

33 New Section; Department of Administrative Services; State Employee Refusal of Benefits Program. Amend RSA 21-I by inserting after section 43-a the following new section:

21-I:43-b State Employee Refusal of Benefits Program.

I. The commissioner of the department of administrative services shall establish and administer a program which shall allow a permanent full-time state employee to refuse his or her rights as a state employee to receive state medical, dental, and retirement benefits in order to instead receive an increase in his or her base salary or wage.

II. The department shall develop forms, establish procedures, and adopt rules for administering the program established by this section. The forms shall include specific notice of the details of the benefits refused by the election of a state employee under this section. Any such election shall be required to be signed and dated by the state employee.

III. A permanent full-time state employee paid through the office of the state treasurer shall be eligible to refuse state employee benefits as described in paragraph I. Upon verification by the department of the state employee’s refusal of employment benefits, the state employee shall be granted an increase of 25 percent of his or her base salary or wage, excluding pay related to overtime, unused vacation time, unused sick time, longevity pay, or other compensation not deemed by the department to be base salary or wages, to be paid on regular pay schedule for employment during good standing.

IV. The election to refuse state employment benefits for an increase in base salary or wages shall only be available to a permanent full-time state employee who first commenced service with the state on or after July 1, 2004.

V. The source of funds for the payment of the increase of 25 percent for a state employee electing to refuse state employment benefits under this section shall be the employee and retiree benefit risk management fund established in RSA 21-I:30-e.

34 Severability; Contingent Amendment; Effective Date.

I. The provisions of this act making various amendments concerning the New Hampshire retirement system shall be severable and if any phrase, clause, sentence or provision of this act is declared to be contrary to the constitution of this state or of the United States or the applicability thereof to any government, agency, person, or circumstance is held invalid, the validity of the remainder of this act and the applicability thereof to any government, agency, person, or circumstance shall not be affected thereby.

II. If as provided in paragraph I of this section, any phrase, clause, sentence, or provision is held contrary to the constitution of this state or of the United States, the remaining provisions of the act shall be in full force and effect as to all severable matters, and section 35 of this act shall take effect on the July 1 next following the date that the board of trustees certifies to the secretary of state and the director of legislative services of the occurrence of a final ruling on the declaration described in paragraph I.

35 Member Contribution Rates; Contingent Version. Repeal and reenact the introductory paragraph of RSA 100-A:16, I(a) and the contribution rates following the introductory paragraph to read as follows:

(a) The member annuity savings fund shall be a fund in which shall be accumulated the contributions deducted from the compensation of members to provide for their member annuities together with any amounts transferred thereto from a similar fund under one or more of the predecessor systems. Such contribution shall be, for each member, the rate percent of each member’s compensation as determined by the retirement system which shall by annual total represent 50 percent of the normal contribution and accrued liability contribution determined under paragraph II.

36 Study Committee Established; Voluntary Defined Contribution Plan. There is established a committee to study the establishment of a federal tax qualified voluntary defined contribution plan.

I. The members of the committee shall be as follows:

(a) Three members of the senate, who shall be from the executive departments and administration committee, appointed by the president of the senate.

(b) Three members of the house of representatives, each of whom shall be from the special committee on public employee pensions reform, appointed by the speaker of the house of representatives.

II. Members of the committee shall receive mileage at the legislative rate when attending to the duties of the committee.

III. The members of the study committee shall elect a chairperson from among the members. The first meeting of the committee shall be called by the first-named house member. The first meeting of the committee shall be held within 45 days of the effective date of this section. Four members of the committee shall constitute a quorum.

IV. The committee shall report its findings and any recommendations for proposed legislation to the president of the senate, the speaker of the house of representatives, the senate clerk, the house clerk, the governor, and the state library on or before November 1, 2011.

37 Repeal. RSA 100-A:41-d, relative to additional temporary supplemental allowances, is repealed.

38 Effective Date.

I. Section 35 of this act shall take effect as provided in section 34 of this act.

II. The remainder of this act shall take effect July 1, 2011.

LBAO

11-0488

Revised 03/24/11

HB 580 FISCAL NOTE

AN ACT relative to the New Hampshire retirement system.

FISCAL IMPACT:

      The New Hampshire Retirement System states this bill will have an indeterminable impact on state, county, and local expenditures in FY 2014 and each year thereafter. There will be no impact on state, county, and local revenues.

METHODOLOGY:

    The New Hampshire Retirement System states RSA 100-A:16, I stipulates the NHRS member contribution rates for each of the four classifications of employees, however section 17 of this bill would permit the governing body of each participating political subdivision to deviate from stipulated rates by setting a higher or lower member contribution rate with respects to its members. The System states the total amount of anticipated member contributions is a key component in the actuary’s determination of employer contribution rates. The System states there are currently more than 50,000 System members and more than 475 political subdivisions which are employers participating in the System. The System states given those statistics, the range of member contribution rates and total member contributions is virtually limitless and totally unpredictable and without being able to reasonably estimate the total member contributions, the actuary could not determine with any actuarial certainty the employer contribution rates and therefore the fiscal impact of this bill is indeterminable.

    The System further states it would incur $250,800 in computer programming costs to implement the changes in this bill.

None