Bill Text - SB3 (2011)

Making comprehensive changes to the state retirement system.


Revision: April 18, 2011, midnight

SB 3-FN-A-LOCAL – AS AMENDED BY THE SENATE

03/16/11 0701s

03/16/11 0797s

03/16/11 0905s

03/30/11 1221s

2011 SESSION

11-0951

10/03

SENATE BILL 3-FN-A-LOCAL

AN ACT making comprehensive changes to the state retirement system.

SPONSORS: Sen. Bradley, Dist 3; Sen. Barnes, Jr., Dist 17; Sen. Bragdon, Dist 11; Sen. De Blois, Dist 18; Sen. Forrester, Dist 2; Sen. Forsythe, Dist 4; Sen. Gallus, Dist 1; Sen. Groen, Dist 6; Sen. Luther, Dist 12; Sen. Odell, Dist 8; Sen. Rausch, Dist 19; Sen. White, Dist 9; Rep. Hawkins, Hills 18; Rep. Kurk, Hills 7; Rep. Reagan, Rock 1; Rep. Bettencourt, Rock 4

COMMITTEE: Executive Departments and Administration

AMENDED ANALYSIS

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

I. Increasing retirement ages of 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. Eliminating the retirement system funding of medical benefits premium payments.

VI. Increasing contribution rates.

VII. Establishing committee to study the establishment of a federal tax qualified voluntary defined contribution plan administered by the board of trustees.

VIII. Limiting when a member in service may concurrently receive 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Matter which is either (a) all new or (b) repealed and reenacted appears in regular type.

03/16/11 0701s

03/16/11 0797s

03/16/11 0905s

03/30/11 1221s

11-0951

10/03

STATE OF NEW HAMPSHIRE

In the Year of Our Lord Two Thousand Eleven

AN ACT making comprehensive changes to the state retirement system.

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

1 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 who have attained vested status prior to January 1, 2012 the full base rate of compensation paid, as determined by the employer, 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. Compensation for extra and special duty, as determined by the employer, shall be included but limited during the highest 3 years of creditable service as provided in paragraph XVIII. 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 members who begin service after December 31, 2011 or who are not in vested status on January 1, 2012 the full base rate of compensation paid, as determined by the employer, plus any overtime pay, holiday and vacation pay, sick pay, longevity pay, cost of living bonus, additional pay for extracurricular and instructional activities, 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 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. Compensation for extra and special duty, as determined by the employer, shall be included but limited during the highest 5 years of creditable service as provided in paragraph XVIII. Earnable compensation shall not include incentives to encourage members to retire, severance pay, and pay for unused sick or vacation time. 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.

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

XVIII. “Average final compensation” shall mean:

(a) For members who have attained vested status prior to January 1, 2012, 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 purposes of this calculation, the inclusion of the average annual compensation for extra and special duty in the 3 years shall not exceed the average annual amount of compensation for extra and special duty paid to the members over the member’s last 7 years or over all of the years in his or her creditable service if less than 7 years.

(b) For members who began service after December 31, 2011 or have not attained vested status on January 1, 2012, 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. For purposes of this calculation, the inclusion of the average annual compensation for extra and special duty in the 5 years shall not exceed the average annual amount of compensation for extra and special duty paid to the members over the member’s last 7 years or over all of the years in his or her creditable service if less than 7 years.

3 Maximum Initial Benefit; Effective 2016. Amend RSA 100-A:6-a to read as follows:

100-A:6-a Maximum Retirement Benefit. Notwithstanding any other provision of this chapter to the contrary, [for members who commenced service before July 1, 2009,] a member’s initial calculation of the retirement benefit granted under the provisions of RSA 100-A:5 or RSA 100-A:6 shall not exceed 100 percent of the member’s highest year of [earnable compensation] full base rate of compensation paid. [For members who commenced service on or after July 1, 2009, a member’s maximum retirement benefit granted under the provisions of RSA 100-A:5 or RSA 100-A:6 shall not exceed $120,000.] Nothing in this section shall affect the ability of a member to receive disability benefits pursuant to RSA 100-A:6, II(b) and (c). This provision shall not limit the application of supplemental allowances under RSA 100-A:41-a.

4 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 vested deferred state retiree is a member of group II who is in vested status before January 1, 2012, 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 commenced service after December 31, 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, and group II members not in vested status on January 1, 2012 shall be as provided in the transition provisions in RSA 100-A:5, II(d).

5 Service Retirement; Group II. Amend RSA 100-A:5, II to read as follows:

II. Group II Members.

(a) Any group II member in service, who is in vested status before January 1, 2012, who has attained age 45 and completed 20 years of creditable service, and any group II member who commenced service after December 31, 2011 who has attained age 50 and completed 25 years of creditable service, and group II members not in vested status on January 1, 2012 as provided in the transition provisions in RSA 100-A:5, II(d), or any group II member in service 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.

(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 or her accumulated contributions at the time of retirement; and

(2) For members who are in vested status before January 1, 2012, 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 after December 31, 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 50 years, and group II members not in vested status on January 1, 2012 shall be as provided in the transition provisions in RSA 100-A:5, II(d) with the maximum number of years adjusted proportionally between 40 and 50.

(c)(1) Notwithstanding any provision of RSA 100-A to the contrary, any group II member who is in vested status before January 1, 2012 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, and any group II member who commenced service after December 31, 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, and group II members not in vested status on January 1, 2012 shall be as provided in the transition provisions in RSA 100-A:5, II(d), shall receive 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.]

(d) Active group II members who are not in vested status on January 1, 2012 shall be subject to the following transition provisions 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 January 1, 2012 according to the following table:

Creditable service Minimum years of service Minimum age attained Annuity multiplier

on January 1, 2012

(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

6 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 or her 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 January 1, 2012, 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 commenced service after December 31, 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 50 at the time of ordinary disability retirement, and group II members not in vested status on January 1, 2012 shall be as provided in the transition provisions in RSA 100-A:5, II(d) with the maximum number of years adjusted proportionally between 40 and 50 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.

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

(d) Upon accidental disability retirement, the group II member 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.

(1) For members who are in vested status before January 1, 2012, 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.

(2) For members who commenced service after December 31, 2011, any group II member who has more than 33-1/3 years of service, a supplemental disability retirement allowance shall be paid. Such supplement 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 in excess of 33-1/3 but not in excess of 50 years.

(3) For group II members not in vested status on January 1, 2012 calculation of the supplemental allowance shall be as provided in the transition provisions in RSA 100-A:5, II(d) with the number of years for the supplement adjusted proportionally.

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

(b) For members who are in vested status before January 1, 2012, 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 for members who commenced service after December 31, 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, and group II members not in vested status on January 1, 2012 shall be as provided in the transition provisions in RSA 100-A:5, II(d), or at any time after age 60, 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.

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

II.(a) For a member who is in vested status before January 1, 2012 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.

(b) For a member who commenced service after December 31, 2011 and who has completed 25 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 50 years.

(c) For group II members not in vested status on January 1, 2012, minimum age shall be as provided in the transition provisions in RSA 100-A:5, II(d) with one year deducted from age 60 to not less than the adjusted minimum age.

10 Split Benefits; Reduced Early Retirement. 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 before September 1, 2011 or at least 50 for members who commenced group II service after December 31, 2011, and group II members not in vested status on January 1, 2012 shall be as provided in the transition provisions in RSA 100-A:5, II(d), 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.

11 Financing; Member 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:

(1) [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 ]

Group I members, 7.00

(2) [Permanent Policemen 9.30

Permanent Firemen 9.30]

Group II members, 11.30

(aa) 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 January 1, 2012 with creditable service in excess of 40 years and group II members who commenced service after December 31, 2011 with creditable service in excess of 50 years, and group II members not in vested status on January 1, 2012 shall be as provided in the transition provisions in RSA 100-A:5, II(d) with the maximum number of years adjusted proportionally between 40 and 50, 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 January 1, 2012 with creditable service in excess of 40 years, and any group II member who commenced service after December 31, 2011 with creditable service in excess of 50 years, and group II members not in vested status on January 1, 2012 shall be as provided in the transition provisions in RSA 100-A:5, II(d) with the maximum number of years adjusted proportionally between 40 and 50, 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.

12 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 trustees, to be known as nonmember 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 nonmember 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 of the nonmember trustees shall be for a term of one year. The remaining [11] 10 members of the board shall consist of [2 employees, 2 teachers, 2 permanent policemen, 2 permanent firemen]: one employee member, one teacher member, one permanent police member, one permanent fireman member, 4 employer members; one member of the senate who shall be appointed annually by the senate president, and 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 for a legislative member, 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. 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 trustees 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 members of the board with one member nominated by the New Hampshire Association of Counties, one member nominated by the New Hampshire Municipal Association, one member nominated by the New Hampshire School Boards Association, and one member to represent management of state employees. 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 nonmember trustees to serve as chairman of said board of trustees.

13 Quorum. Amend RSA 100-A:14, IV to read as follows:

IV. Each trustee, including the chairman, shall be entitled to one vote in the board of trustees. [Seven] Six trustees shall constitute a quorum for the transaction of any business of the board of trustees. [Seven] Six votes shall be necessary for any resolution or action by the board at any meeting.

14 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.

15 Repeal of Special Account Funding. RSA 100-A:16, II(h)(2), relative to the method of allocating funds to the special account, is repealed.

16 Return of Members’ Contributions; Reference to Assumed Rate of Return. Amend RSA 100-A:11, I(a) to read as follows:

(a) If a group I member ceases to be an employee or teacher for reasons other than retirement or death and if he or she has not elected to receive a vested deferred retirement allowance under RSA 100-A:10, the amount of his or her accumulated contributions shall be paid within 3 months after his or her written request therefor, provided that the member may not file a written request for such payment until at least 30 days from the date the member ceases to be an employee or a teacher and provided that the member may not again become a group I member during said 30-day period. A group I member shall cease to be an active member if he or she is absent from service for more than 180 days, without requesting return of the amount of his or her accumulated contributions, and the retirement system shall retain his or her accumulated contributions. The annual return credited on inactive, vested members shall be paid pursuant to RSA 100-A:16, II(g). The board shall hold and invest such accumulated contributions on behalf of the inactive member, provided that the annual return credited on the inactive member’s accumulated contributions shall be 2 percentage points less than either the assumed rate of return determined [under RSA 100-A:16, II(h)] by the trustees or the actual rate of return, whichever is lower, for the immediately preceding fiscal year as reported in the comprehensive annual financial report (CAFR), provided the rate of return shall not be less than zero. The inactive member may make a written request for his or her total accumulated contributions, provided he or she is not on a leave of absence, and he or she shall be paid within 3 months after his or her written request. In the event an inactive member who has not withdrawn his or her contributions under this section returns to become an active member in service, his or her previous service shall count toward that member’s creditable service to the extent that his or her accumulated contributions have remained in the retirement system.

17 Return of Members’ Contributions; Reference to Assumed Rate of Return. Amend RSA 100-A:11, II(a) to read as follows:

(a) If a group II member ceases to be a permanent policeman or permanent fireman for reasons other than retirement or death and if he or she has not elected to receive a vested deferred retirement allowance under RSA 100-A:10, the amount of his or her accumulated contributions shall be paid within 3 months after his or her written request therefor. A group II member shall cease to be an active member if he or she is absent from service for more than 180 days, without requesting return of the amount of his or her accumulated contributions, and the retirement system shall retain his or her accumulated contributions. The annual return credited on inactive, vested members shall be paid pursuant to RSA 100-A:16, II(g). The board shall hold and invest such accumulated contributions on behalf of the inactive member, provided that the annual return credited on the inactive member’s accumulated contributions shall be 2 percentage points less than either the assumed rate of return determined [under RSA 100-A:16, II(h)] by the trustees or the actual rate of return, whichever is lower, for the immediately preceding fiscal year as reported in the comprehensive annual financial report (CAFR), provided the rate of return shall not be less than zero. The inactive member may make a written request for his or her total accumulated contributions, provided he or she is not on a leave of absence, and he or she shall be paid within 3 months after his or her written request. In the event an inactive member who has not withdrawn his or her contributions under this section returns to become an active member in service, his or her previous service shall count toward that member’s creditable service to the extent that his or her accumulated contributions have remained in the retirement system.

18 Medical Benefits Subsidy; Payment by Retirement System. Amend RSA 100-A:52, II to read as follows:

II. However, for the fiscal year beginning July 1, 1990, the maximum amount payable by the retirement system under this subdivision on account of each person qualified under paragraph I who is not entitled to Medicare benefits, shall be $101.50 per month, and on account of each person qualified under paragraph I who is entitled to Medicare benefits, shall be $64 per month. As of July 1, 1991, and on each July 1 until and including July 1, 2007, the maximum amount payable by the retirement system as provided in this paragraph shall be increased by 8 percent, compounded on previous increases. After July 1, 2007 [and until and including July 1, 2011], the rate payable under this paragraph shall not be increased. [As of July 1, 2012, and on each July 1 thereafter, the maximum amount payable by the retirement system as provided in this paragraph shall be increased by 4 percent, compounded on previous increases.]

19 New Sections; Retirement System; Return to Work; Form Required. Amend RSA 100-A by inserting after section 27 the following new sections:

100-A:27-a Return to Work; Suspension of Benefits. No person who retires after January 1, 2012 and is receiving retirement benefits under this chapter shall within 6 months of his or her retirement be employed by the state or another participating employer. Beginning January 1, 2012, no person shall be hired into a full-time position for which membership is required under RSA 100-A:3, or hired into a full-time state position for which membership is optional under RSA 100-A:3, I, while concurrently receiving a retirement benefit under this chapter. Benefits shall be suspended during any such period of employment.

100-A:27-b Form Required. The retirement system shall provide to employers a form to be signed, dated, and submitted by persons hired by the employer containing such information as determined necessary by the retirement system and a statement establishing that the person is not currently receiving an allowance under this chapter. Employers shall submit such forms to the retirement system.

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

21 Transfer Required; Retirement System. The board of trustees of the retirement system shall forthwith transfer the sum of $89,000,000 from the group II components of the special account established under RSA 100-A:16, II(h) to the state annuity accumulation fund.

22 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) One member 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 senate member. The first meeting of the committee shall be held within 45 days of the effective date of this section. Three 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.

23 Repeal. The following are repealed:

I. RSA 100-A:16, III-a, relative to employer assessments for excess benefits paid by employers in the retirement system.

II. RSA 100-A:4-b, relative to group I employees and teachers purchase of credit for out-of-state service.

III. RSA 100-A:4-c, relative to group II members purchase of credit for out-of state service.

24 Severability. If any provision of this act or the application of such provision to any person or circumstance is held invalid or is deemed not to comply with applicable law or regulations of the Internal Revenue Service so as to jeopardize the retirement system’s status as a qualified governmental pension plan, the invalidity or non-compliance does not affect other provisions or applications of the act which can be given effect without the invalid provisions or applications, and to this end the provisions of this act are severable.

25 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 this act. Notwithstanding the notice requirements of RSA 100-A:16, III, such employer contribution rates shall be effective during the biennium beginning July 1, 2011, and the recertification of employer contribution percentages, applicable beginning January 1, 2012, shall be provided to each employer within a reasonable period of time not to exceed 30 days from January 1, 2012 and shall be calculated using most recent information available. 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.

26 Effective Date.

I. Sections 1, 2, 4-10, 11, 19, and 20 of this act shall take effect January 1, 2012.

II. Section 3 of this act shall take effect July 1, 2016.

III. The remainder of this act shall take effect upon its passage.

LBAO

11-0951

Amended 04/18/11

SB 3 FISCAL NOTE

AN ACT making comprehensive changes to the state retirement system.

FISCAL IMPACT:

      The New Hampshire Retirement System and Department of Administrative Services state this bill, as amended by the Senate (Amendments #2011-0701s, #2011-0797s, #2011-0905s, and #2011-1221s), may decrease state, county, and local expenditures by an indeterminable amount in FY 2012 and each year thereafter. There will be no fiscal impact on state, county, and local revenues.

METHODOLOGY:

      The New Hampshire Retirement System states the majority of the provisions in this bill do not impact entitlement to or the amount of benefits payable under current law to members vested as of January 1, 2012. The System’s actuary has assumed there will be no grandfathering of provisions under current law, except to the extent specified in the bill. The System’s actuary’s estimated fiscal impact is based on the June 30, 2010 actuarial valuation, assumes an annual rate of return of 8.5 percent, wage inflation at 4.5 percent a year, and uses the entry-age normal cost valuation method. Any differences between the assumed total payroll increase and rate of return percentages and actual percentages will affect the estimated fiscal impact. The System notes its board of trustees is currently in the process of updating actuarial assumptions used to determine employer costs. The System states best practice is to utilize updated assumptions in recertifying rates as directed in section 25 of this bill, which could materially affect the actuarially determined cost savings stated in this fiscal note.

      The System’s actuary considered the following provisions of the bill as part of determining the fiscal impact on state, county, and local expenditures: the change in the definition of average final compensation (section 2); the imposition of a limit on member’s retirement benefit of no more than 100% of the member’s highest year of full base rate compensation paid, effective in 2016 (section 3); the change to group II eligibility for certain retirement and disability benefits and the calculation of those benefits for certain members (sections 5 through 10); the change to member contribution rates for members (section 11); the elimination of future increases to medical subsidy payments made by the System (section 18); and the transfer of $89,000,000 from the group II components of the special account to the state annuity accumulation fund (section 21).

      The actuary did not consider the following provisions of the bill as part of determining the fiscal impact because there was either no impact or there was insufficient data to estimate an impact to computed contribution rates: the change to the definition of earnable compensation (section 1), the change in the composition of the board of trustees (sections 12-14), the elimination of future transfers to the special account (section 15), the ban on so-called “double dipping” (section 19), the establishment of a study committee (section 22), and the repeal of the employer assessment and purchase of credit for out-of-state service (section 23).

      The decreases attributable to each pension group as a result of this bill can be found below in the sections titled Impact on Current Members Pension Assets and Impact on Current Members Medical Subsidy Subtrust.

      Impact on Current Members Pension Assets

      The following table shows the impact of the proposed bill on the June 30, 2010 valuation for the pension assets.

Supplemental Actuarial Valuation as of June 30, 2010

including proposed pension assets changes affecting current members

 

Employees

Teachers

Police

Fire

June 30, 2010 Valuation (Current Law)

       

Covered Payroll (in millions)

$1,093.1

$1,020.8

$258.5

$109.0

Valuation of Assets

$1,721.0

$2,049.6

$997.3

$465.9

Unfunded Actuarial Accrued Liability

$1,260.6

$1,503.5

$637.9

$318.1

Funded Status

57.7%

57.7%

61.0%

59.4%

FY 2012 Employer Rate

10.71%

11.51%

22.92%

28.25%

FY 2013 Employer Rate

10.66%

11.51%

22.92%

28.25%

June 30, 2010 Valuation Including Proposed Change

       

Covered Payroll (in millions)

$1,093.1

$1,020.8

$258.5

$109.0

Valuation of Assets

$1,721.0

$2,049.6

$1,052.1

$500.1

Unfunded Actuarial Accrued Liability

$1,136.2

$1,378.1

$519.9

$256.5

Funded Status

60.2%

59.8%

66.9%

66.1%

FY 2012 Employer Rate (1st 6 Months)

10.71%

11.51%

22.92%

28.25%

FY 2012 Employer Rate (2nd 6 Months)

8.15%

8.88%

16.60%

20.53%

FY 2013 Employer Rate

8.15%

8.88%

16.60%

20.53%

      The actuary states this bill will decrease the employer contribution rates to the pension fund resulting in the amount contributed by employers to the fund decreasing by the following amounts (in millions):

 

Employees

Teachers

Police

Fire

FY 2012

($15.28)

($14.66)

($8.92)

($4.60)

FY 2013

($31.31)

($30.64)

($18.64)

($9.60)

      Impact on Current Members Medical Subsidy Subtrust

      The following table shows the impact of the proposed bill on the June 30, 2010 valuation for the medical subsidy subtrust.

Supplemental Actuarial Valuation as of June 30, 2010

including proposed medical subsidy changes affecting current members

 

State Employees

Political Subdivision Employees

Teachers

Police and Fire

June 30, 2010 Valuation (Current Law)

       

Covered Payroll (in millions)

$520.7

$572.4

$1,020.8

$367.5

Valuation of Assets

$0

$34.0

$7.3

$16.5

Unfunded Actuarial Accrued Liability

$122.3

$66.5

$360.1

$427.1

Current Statutory Rate FY 2012 & FY 2013

1.60%

0.38%

2.44%

2.65%

June 30, 2010 Valuation Including Proposed Change

       

Covered Payroll (in millions)

$520.7

$572.4

$1,020.8

$367.5

Valuation of Assets

$0

$34.0

$7.3

$16.5

Unfunded Actuarial Accrued Liability

$92.5

$39.5

$254.8

$286.4

Statutory Rate FY 2012 (1st 6 Months)

1.60%

0.38%

2.44%

2.65%

Statutory Rate FY 2012 (2nd 6 Months)

1.82%

0.32%

2.31%

3.97%

Statutory Rate FY 2013

1.54%

0.32%

2.31%

3.97%

      The actuary states the bill will change the employer contribution rates to the medical subsidy subtrust in FY 2012 and FY 2013 resulting in employer contributions to the subtrust changing by the following amounts (in millions):

 

State Employees

Political Subdivision Employees

Teachers

Police and Fire

FY 2012

$0.63

($0.19)

($0.72)

$2.66

FY 2013

($0.36)

($0.39)

($1.51)

$5.53

      Impact on Special Account

      The System assumes the amounts transferred from the special account will be as follows (in millions):

 

State

Political Subdivisions

Total

Police

$12.90

$41.93

$54.83

Fire

$0.99

$33.18

$34.17

Total

$13.89

$75.11

$89.00

      The System states this asset transfer produces a contribution reduction in accordance with current funding policies in the statute.

      Impact on New Hires (After January 1, 2012)

      The System’s actuary states the proposed changes to benefits for new hires has no effect on the System’s current benefit obligation or current employer contributions for active members. The actuary states the normal cost of providing benefits to new members hired after January 1, 2012 will decrease, in total, for each group by the following:

 

Employees

Teachers

Police

Fire

Percentage of Payroll

(0.25%)

(0.24%)

(4.19%)

(4.90%)

      In summary, the New Hampshire Retirement System states projected annual state and political subdivision (county and local) employer contribution savings as a result of this bill are as follows:

 

(1)

 

(2)

(3)

(4)

 

Political Subdivisions

 

35% of Political Subdivisions

100% of State Employees

Total State Savings

(2 + 3)

2012

         

Employees

($8,188,983)

 

$0

($6,652,982)

($6,652,982)

Teachers

($9,998,669)

 

($5,383,899)

$0

($5,383,899)

Police

($3,322,767)

 

($1,789,182)

($1,944,486)

($3,733,668)

Fire

($2,389,977)

 

($1,286,911)

($132,795)

($1,419,706)

Total

($23,900,396)

 

($8,459,992)

($8,730,263)

($17,190,255)

2013

         

Employees

($16,788,353)

 

$0

($15,271,436)

($15,271,436)

Teachers

($20,897,218)

 

($11,252,348)

$0

($11,252,348)

Police

($6,944,582)

 

($3,739,391)

($4,063,975)

($7,803,366)

Fire

($4,995,053)

 

($2,689,644)

($277,542)

($2,967,186)

Total

($49,625,206)

 

($17,681,383)

($19,612,953)

($37,294,336)

2014

         

Employees

($18,567,788)

 

$0

($16,890,090)

($16,890,090)

Teachers

($21,362,863)

 

($11,503,080)

$0

($11,503,080)

Police

($12,714,420)

 

($6,846,226)

($7,440,488)

($14,286,714)

Fire

($8,066,269)

 

($4,343,376)

($448,189)

($4,791,565)

Total

($60,711,340)

 

($22,692,682)

($24,778,767)

($47,471,449)

2015

         

Employees

($19,546,010)

 

$0

($18,558,607)

($18,558,607)

Teachers

($23,812,471)

 

($12,822,100)

$0

($12,822,100)

Police

($13,650,584)

 

($7,350,315)

($7,988,333)

($15,338,648)

Fire

($8,582,666)

 

($4,621,435)

($476,882)

($5,098,317)

Total

($65,591,731)

 

($24,793,850)

($27,023,822)

($51,817,672)

    The System further states it estimates it would incur $222,000 in computer programming costs in FY 2012 to implement the changes in this bill.

    The Department of Administrative Services states this bill amends RSA 21-I:30, III changing the age and years of service requirements for eligibility for retiree health insurance benefits for group II employees, unless the employee is in vested status by January 1, 2012. The Department is unable to determine the number of years of creditable service on an employee basis and therefore is unable to estimate a fiscal impact to this bill. The Department estimates the decrease in costs of delayed health benefits per retiree in would be $6,009 for the 2nd 6 months of FY 2012, $12,618 in FY 2013, $13,881 in FY 2014, and $15,995 in FY 2015.

None