Bill Text - SB3 (2011)

Making comprehensive changes to the state retirement system.


Revision: June 10, 2011, midnight

VERSION ADOPTED BY BOTH BODIES

03/16/11 0701s

03/16/11 0797s

03/16/11 0905s

03/30/11 1221s

4May2011… 1576h

4May2011… 1710h

06/08/11 2289CofC

06/08/11 2316eba

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. Transferring remaining funds from the special account into the state annuity accumulation fund.

V. Eliminating future increases to medical benefits premium payments.

VI. Increasing member contribution rates.

VII. Establishing a committee to study the establishment of a federal tax qualified voluntary defined contribution plan and a committee to study matters related to disability, medical subsidies, and COLAs.

VIII. Limiting when the option to become a member of retirement system applies, and defining part-time employment.

IX. Changing the eligibility for state employees to receive medical benefits.

X. Extending a temporary supplemental allowance for fiscal year 2013

XI. Changing the interest calculation attributed to contributions.

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Matter which is either (a) all new or (b) repealed and reenacted appears in regular type.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

4May2011… 1576h

4May2011… 1710h

06/08/11 2289CofC

06/08/11 2316eba

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 Findings; Intent. The New Hampshire general court makes the following findings of fact and states the following intent and purpose for this act.

I. Immediate action is necessary to make the New Hampshire retirement system (NHRS) viable and solvent.

(a) NHRS is the successor to the State Employees’ Retirement System. NHRS was created and established as of July 1, 1967. The NHRS was intended to and does establish a defined benefit pension plan qualified under Section 401(a) of the United States Internal Revenue Code (IRC). The NHRS plan is a governmental plan within the meaning of Section 414(d) of the IRC.

(b) As a defined benefit pension plan, the provisions of NHRS describe benefits which will be made available to members as vested deferred retirement benefits payable on retirement or on events such as disability or death. Benefits pursuant to the NHRS are payable after a period of years during which members accrue creditable service. Members are deemed to be in vested status for those benefits after 10 years of creditable service.

(c) As a governmental plan, the NHRS is only available to governmental employers.

(d) The NHRS is funded with contributions from members, through mandatory payroll deductions, and with contributions from the governmental employers, all of which are raised through taxation. Such contributions are held in trust by the NHRS Board of Trustees; funds held by the trust are held and invested on behalf of all members.

(e) As a defined benefit pension plan, the NHRS requires actuarial calculations in order to determine benefits which are payable as well as funding obligations.

(f) The benefit calculations which are required by the NHRS generate funding obligations which are complex and depend on numerous variables with consequences that occur over a period of many years, in some circumstances in ways that are not foreseeable.

(g) The NHRS has an estimated unfunded pension liability of $3.72 billion and an estimated unfunded medical insurance liability of $976 million.

(h) In 2007, legislation was adopted to require the state and other public employers to pay down over 30 years the unfunded accrued liability, which was approximately $2.7 billion at the time. While that plan is now being implemented, large increases in the amount of the unfunded liability result in the current $4.7 billion total, uncertainties in future market returns, recommendations by NHRS actuaries to lower income earning assumptions, rapid increases in medical costs, increases in life expectancy, and slower growth in public sector employment require prudent legislative intervention to ensure financial viability of NHRS.

(i) Financial viability of the NHRS is essential to the operation of state government and local government performing its constitutional and statutory obligations. Therefore, the stability of NHRS is an important, immediate, and fundamental necessity.

(j) The Pew Institute has concluded that unfunded pension and health care liabilities are a nationwide problem, estimated at over $1 trillion. Additionally, the level of direct federal debt in excess of $14 trillion means that federal funding to the states will have to be significantly reduced in the near future. Thus, the state cannot expect assistance from the federal government in meeting NHRS obligations, and indeed it is reasonable to anticipate a loss in federal funds.

(k) The NHRS plan (and its trust) was created by the New Hampshire legislature and can be amended or terminated by the New Hampshire legislature at any time. Notwithstanding the general court’s power, it is the general court’s intention and public necessity to protect the reasonable interests of the members who accrue benefits under the NHRS plan, of the employers of those members, and of the citizens of New Hampshire.

(l) It is the legislature’s intention that its actions taken at this time will not prevent future legislatures from acting to make any and all laws necessary and proper to preserve the public security, order, health, morality and justice, including further changes to the NHRS.

(m) The legislature’s ongoing power to amend the NHRS is a fundamental power essential to government, and cannot and will not be surrendered by the legislature or irrevocably transferred away from government.

(n) The legislature finds that members who are deemed to be in vested status should be treated differently than members who are not deemed to be in vested status.

(o) The legislature finds that pension entitlements must be viewed in terms of benefits which have accrued up to the time when valuation is determined, and that such entitlements can be essentially expressed as a dollar value by taking into account the time value of money.

(p) The legislature finds that participants who are deemed to be in vested status in the NHRS have a reasonable expectation that the value of benefits which have accrued to them will not be taken away, although they may be changed prospectively.

(q) The legislature intends that the present value of accrued benefits for members who are deemed to be vested will not be diminished financially, as determined based upon an actuarial determination.

(r) It is the legislature’s intention that benefits of members who have already retired will not be significantly diminished or impaired.

(s) The legislature does not intend that the rate of future benefit accruals is or should be protected.

(t) It is the legislature’s intention that changes to the NHRS are and will continue to be constrained by the Internal Revenue Code tax qualification requirements imposed by Code Section 401(a) and related guidance; that is, changes will be made, or will not be made, in order to protect the NHRS qualified status.

II. Making NHRS viable and solvent through the actions to be undertaken pursuant to this legislation is a matter of extreme policy importance to the state.

(a) On average, benefits currently constitute an additional 52 percent increase to the cost of state employee salaries.

(b) These benefits paid by the NHRS are significantly higher than are paid in the private sector and cannot be sustained. Public employees are increasingly not cost-competitive with private alternatives to providing state and municipal services.

(c) Absent the actions to be taken pursuant to this legislation, it is likely that the state and its political subdivisions will not be able to afford to continue providing governmental services directly, but will have to provide these services through private alternatives.

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

(e) Public employer contributions have been increasing significantly, erratically, and unpredictably in amounts that are undermining state and local government budgets, the public policies reflected in these budgets, and the ability of the state and local government to perform core constitutional and statutory obligations.

(f) Public employees provide state and municipal services which are essential to residents and visitors. Without changes to address the unsustainable increases in the costs of public employee benefits, however, the state and local governments will be forced to reduce the number of public employees, and shrink public service, in order to fund these growing benefit costs. The general court finds that such a result would be detrimental to the ability of state and local government to protect the lives, health, morale, comfort, and general welfare of the public.

(g) Increasing employer contributions would result in significant harm to the state’s economy.

(h) Taxes to fund employer contributions are imposing an unreasonable burden on taxpayers.

III. This act contains the minimum actions necessary to assure the viability and solvency of the NHRS.

(a) The changes to be made to the NHRS at this time pursuant to this act are essential to assuring the solvency of the NHRS, addressing its structural problems, and balancing reforms fairly among employee classes, while minimizing the impact on present employees, especially those closest to retirement.

(b) The legislature specifically finds after many public hearings, hours of studying the issue, and hours of debate, that this act constitutes the minimum actions necessary to assure the viability and solvency of the NHRS.

(c) The response of public sector employers to significantly increasing premium contributions has been to reduce their number of employees. Without significant reform to the NHRS, this trend is likely to escalate.

(d) Absent this legislation, public safety, public education, and other elements of the social safety net will be increasingly compromised and unable to provide services to the public.

(e) This legislation represents the minimum reform necessary to continue to provide appropriate public safety, public education, and other governmental services.

(f) Where public sector employers have raised taxes to pay for increasing pension contributions, there has been an adverse effect on job growth and retention.

(g) Raising taxes to pay for increasing pension contributions, would discourage business from relocating to this state and encourage businesses to move from New Hampshire or expand their operations in other states.

(h) The legislature specifically finds after many public hearings, hours of studying the issue and hours of debate, that raising taxes to address NHRS’ issues would be harmful to the state’s economy, the quality of life of its citizens, place New Hampshire at a competitive disadvantage to other states, and would be against the public interest.

(i) The financial viability of the NHRS must be preserved, as it serves an important public purpose. The general court expressly finds that the changes made in this act are reasonable and necessary, and are the minimum adjustments possible to the retirement system and to public employee retirement benefits to accomplish the important public purpose of preserving and maintaining the ability of the state and local government to provide retirement benefits to public employees.

(j) The changes set forth in this act have been deliberately designed to adjust the system fairly among employee classes, to introduce changes in a way to minimize the impact on present employees, especially those closest to retirement, and to improve the long-term fiscal health and sustainability of the retirement system.

2 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 reported 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)(1) For members who have not attained vested status prior to January 1, 2012, the full base rate of compensation paid, as determined by the employer, plus compensation over base pay. Compensation over base pay shall include as applicable, subject to subparagraphs (2), (3), and (4), any overtime pay, holiday and vacation pay, sick pay, cost of living bonus, annual longevity pay, additional pay for extracurricular and instructional activities, compensation for extra and 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 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.

(2) Compensation over base pay shall be limited during the highest 5 years of creditable service as provided in paragraph XVIII.

(3) Earnable compensation shall not include compensation for extra and special duty for members who commence service on and after July 1, 2011.

(4) Earnable compensation shall not include incentives to encourage members to retire, severance pay or end-of-career additional longevity payments, and pay for unused sick or vacation time. 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.

3 Applicability; Earnable Compensation. For members of the retirement system who were in active status immediately prior to the effective date of section 2 of this act, the provisions of RSA 100-A:1, XVII as amended by section 2 of this act shall not apply until January 1, 2012.

4 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 commenced service on or after July 1, 2011 or who have not attained vested status prior to 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, inclusion of compensation in each of the highest 5 years which is in excess of the full base rate of compensation paid as determined by the employer shall not exceed the average annual amount of compensation over base pay paid to the member over all the member’s years of service on or after January 1, 2012, but excluding the highest 5 years.

5 Maximum Initial Benefit. 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. [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.] For members who commenced service on or after July 1, 2009 or have not attained vested status prior to January 1, 2012, a member’s maximum retirement benefit granted under the provisions of RSA 100-A:5 or RSA 100-A:6 shall not exceed the lesser of 85 percent of the member’s average final compensation or $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].

6 State Employees; Medical and Surgical Benefits; Eligibility. Amend RSA 21-I:30 to read as follows:

21-I:30 Medical and Surgical Benefits.

I. The state shall pay a premium for each state employee and permanent temporary or permanent seasonal employee as defined in RSA 98-A:3 including spouse and minor, fully dependent children, if any, and each retired employee, as defined in paragraph II of this section, and his or her spouse, or retired employee’s beneficiary, only if an option was taken at the time of retirement and the employee is not now living, toward group hospitalization, hospital medical care, surgical care and other medical benefits plan or a self-funded alternative within the limits of the funds appropriated at each legislative session and providing any change in plan or vendor is approved by the fiscal committee of the general court prior to its adoption. Funds appropriated for this purpose shall not be transferred or used for any other purpose.

II. For the purposes of this section, “retired employee” means each group I state employee who:

(a)(1) 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 prior to July 1, 2011, and who also is at least 60 years of age at the time of retirement; or

(2) Has at least 20 years of creditable service if the employee’s service began on or after July 1, 2011, and who also is at least 60 years of age at the time of retirement, provided the employee shall not be eligible to receive benefits under this section until attaining 65 years of age; or

(b) Has at least 30 years of creditable service for the state at the time of retirement if the employee’s service began prior to July 1, 2011, regardless of the employee’s age; or

(c) Is but for the provisions of 1989, 376:10, otherwise eligible to receive medical and surgical benefits under this section notwithstanding subparagraphs (a) and (b), and paragraph IV, on June 30, 1989, and who retires between July 1, 1989, and June 30, 1994; or

(d) Dies or retires and is eligible for accidental death or accidental disability retirement benefits, regardless of the state employee’s age or number of years of creditable service; or

(e) Retires and is eligible for ordinary disability retirement benefits, regardless of the state employee’s age; or

(f) Dies and is eligible for ordinary death retirement benefits, if the state employee was eligible for service retirement at the time of his or her death, if the state employee had 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.

II-a. For the purposes of this section, “retired employee” also means each group II state employee who:

(a) Retires if the employee’s state service began prior to July 1, 2010 or who retires with at least 20 years of creditable service for the state if the employee’s state service began on or after July 1, 2010; or

(b) Dies or retires and is eligible for accidental death or accidental disability retirement benefits, regardless of the state employee’s age or number of years of creditable service; or

(c) Retires and is eligible for ordinary disability retirement benefits, regardless of the state employee’s age; or

(d) Dies and is eligible for ordinary death retirement benefits, if the state employee was eligible for service retirement at the time of his or her death, if the state employee had at least 20 years of creditable service for the state if the employee’s state service began on or after July 1, 2010.

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 on or after 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, and group II members who have not attained vested status prior to January 1, 2012 shall be as provided in the transition provisions in RSA 100-A:5, II(d).

IV. Each state employee who 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 prior to July 1, 2011, and who elects to take a reduced service retirement allowance shall be defined as a “retired employee” for the purposes of being eligible to receive medical and surgical benefits under this section when the state employee reaches age 60.

V. No state employee who terminates his or her state service before he or she becomes eligible for retirement benefits as a “retired employee” as defined under paragraphs II-IV shall be eligible for medical and surgical benefits under this section.

VI. A state employee who commences service on or after July 1, 2011 and who is eligible for benefits under this section shall not receive such benefit until attaining age 52.5 if the state employee retired from group II service with the state or attaining age 65 if the state employee retired from group I service with the state.

7 Service Retirement Benefits. Amend RSA 100-A:5 to read as follows:

100-A:5 Service Retirement Benefits.

I. Group I Members.

(a) Any group I member 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 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. Provided, however, that a group I member who commenced service on or after July 1, 2011 shall not receive a service retirement allowance until attaining the age of 65; but may receive a reduced allowance after age 60 if the member has at least 30 years of creditable service where the allowance shall be reduced, for each month by which the date on which benefits commence precedes the month after which the member attains 65 years of age, by 1/4 of one percent.

(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. Provided, however, that a group I member who commenced service on or after July 1, 2011 shall not receive a service retirement allowance until attaining the age of 65; but may receive a reduced allowance after age 60 if the member has at least 30 years of creditable service where the allowance shall be reduced, for each month by which the date on which benefits commence precedes the month after which the member attains 65 years of age, by 1/4 of one percent.

(c) Notwithstanding any other provision of law, any group I member who commenced service prior to July 1, 2011 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 years, or who has attained the age of 50, but not the age of 60, 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, 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) 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 on or after July 1, 2011 who has attained age 50 and completed 25 years of creditable service, and group II members who have not attained vested status prior to 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. Provided, however, that a group II member who commenced service on or after July 1, 2011 shall not receive a service retirement allowance until attaining the age of 52.5; but may receive a reduced allowance after age 50 if the member has at least 25 years of creditable service where the allowance shall be reduced, for each month by which the date on which benefits commence precedes the month after which the member attains 52.5 years of age, by 1/4 of one percent.

(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 on or after 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 42.5 years, and group II members who have not attained vested status prior to January 1, 2012 shall be as provided in the transition provisions in RSA 100-A:5, II(d) with the maximum number of years of creditable service not in excess of 40.5 years.

(3) Provided, however, that a group II member who commenced service on or after July 1, 2011 shall not receive a service retirement allowance until attaining the age of 52.5; but may receive a reduced allowance after age 50 if the member has at least 25 years of creditable service where the allowance shall be reduced, for each month by which the date on which benefits commence precedes the month after which the member attains 52.5 years of age, by 1/4 of one percent.

(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 on or after July 1, 2011 and retires 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 who have not attained vested status prior to January 1, 2012 who qualify 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 commenced service prior to July 1, 2011 and who have not attained vested status prior to 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 or after 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

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 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 on or after 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 42.5 at the time of ordinary disability retirement, and group II members who have not attained vested status prior to January 1, 2012 shall be as provided in the transition provisions in RSA 100-A:5, II(d) with the maximum number of years of creditable service not in excess of 40.5 years 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) 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 on or after July 1, 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 42.5 years.

(3) For group II members who have not attained vested status prior to 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.

10 Vested Deferred Retirement. Amend RSA 100-A:10 to read as follows:

100-A:10 Vested Deferred Retirement Benefit.

I. Group I Members.

(a) A group I member who has completed 10 years of creditable service and who, for reasons other than retirement or death, ceases to be an employee or teacher shall be deemed in vested status and upon meeting the eligibility requirements of subparagraph (b) may collect a vested deferred retirement allowance. In lieu of a vested deferred retirement allowance, the member may make application on a form prescribed by the board of trustees and receive a return of the member’s accumulated contributions under RSA 100-A:11. Provided, however, that a group I member who commenced service on or after July 1, 2011 shall not receive a vested deferred retirement allowance until attaining the age of 65; but may receive a reduced allowance after age 60 if the member has at least 30 years of creditable service where the allowance shall be reduced, for each month by which the date on which benefits commence precedes the month after which the member attains 65 years of age, by 1/4 of one percent.

(b) At any time after attainment of age 50, a group I 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 a member annuity which shall be the actuarial equivalent of the member’s accumulated contributions on the date of retirement and a state annuity which, together with the member annuity, shall be equal to either the service retirement allowance payable under RSA 100-A:5, I(a) and I(b) or the reduced early service retirement allowance payable under RSA 100-A:5, I(c), based on the member’s age when the vested deferred retirement allowance begins and on the member’s average final compensation and creditable service at the time service is terminated. Provided, however, that a group I member who commenced service on or after July 1, 2011 shall not receive a vested deferred retirement allowance until attaining the age of 65; but may receive a reduced allowance after age 60 if the member has at least 30 years of creditable service where the allowance shall be reduced, for each month by which the date on which benefits commence precedes the month after which the member attains 65 years of age, by 1/4 of one percent.

II. Group II Members.

(a) A group II member who has completed 10 years of creditable service and who, for reasons other than retirement or death, ceases to be a permanent policeman or permanent fireman shall be deemed in vested status and upon meeting the eligibility requirements of subparagraph (b) may collect a vested deferred retirement allowance. In lieu of a vested deferred retirement allowance, the member may make application on a form prescribed by the board of trustees and receive a return of the member’s accumulated contributions under RSA 100-A:11. Provided, however, that a group II member who commenced service on or after July 1, 2011 shall not receive a vested deferred retirement allowance until attaining the age of 52.5; but may receive a reduced allowance after age 50 if the member has at least 25 years of creditable service where the allowance shall be reduced, for each month by which the date on which benefits commence precedes the month after which the member attains 52.5 years of age, by 1/4 of one percent.

(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 on or after 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, and group II members who have not attained vested status prior to 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. Provided, however, that a group II member who commenced service on or after July 1, 2011 shall not receive a vested deferred retirement allowance until attaining the age of 52.5; but may receive a reduced allowance after age 50 if the member has at least 25 years of creditable service where the allowance shall be reduced, for each month by which the date on which benefits commence precedes the month after which the member attains 52.5 years of age, by 1/4 of one percent.

11 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 on or after July 1, 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, and provided that a the member shall not be eligible to receive a retirement allowance until attaining the age of 52.5.

(c) For members who have not attained vested status prior to 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.

12 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 January 1, 2012 or at least 50 for members who commenced group II service on or after July 1, 2011, and group II members who have not attained vested status prior to 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.

13 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, and except as provided in RSA 100-A:16, II-a, 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 permanent fireman members, 11.80

Group II permanent police members, 11.55

(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 on or after July 1, 2011 or who have not attained vested status prior to January 1, 2012 with creditable service in excess of 42.5 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 January 1, 2012 with creditable service in excess of 40 years, and any group II member who commenced service on or after July 1, 2011 or who have not attained vested status prior to January 1, 2012 with creditable service in excess of 42.5 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.

14 New Paragraph; Alternative Contribution Calculation. Amend RSA 100-A:16 by inserting after paragraph II the following new paragraph:

II-a.(a) Notwithstanding the method of calculating member and employer contributions under this section, if for any year the board of trustees certifies that within a member classification the employer rates determined under paragraph III have lowered to require them to be equal to the member rates under paragraph I, then for all subsequent years following such certification the employer rates and the members rates for such member classification shall continue to be equal whether the system liabilities increase or decrease.

(b) The provisions of subparagraph (a) shall not take effect and shall be inapplicable to the retirement system calculation of contribution rates under this section if such provisions of subparagraph (a) would violate the requirements set forth in U.S. Treasury Regulation 1.401-1.

15 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 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] made to provide for staggered terms. 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.]: one employee member, one teacher member, one permanent police member, one permanent fireman member, and 4 employer members. 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.

16 Application; Board of Trustees Membership. Upon the effective date of this section, and based upon the suggestions submitted by 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, the governor and council shall determine which one of the 2 current member trustees in each of the 4 employee categories shall remain on the board. 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 as amended by this act.

17 New Paragraph; Board of Trustees; Report to General Court. Amend RSA 100-A:14 by inserting after paragraph VII the following new paragraph:

VII-a. The board of trustees shall submit a report each quarter by January 1, April 1, July 1, and October 1, to the chairpersons of the house and senate executive departments and administration committees. Such report shall describe recent board actions including any changes to actuarial assumptions and investment returns.

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

II. For the fiscal year beginning July 1, 2011, 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 $375.56 per month, and on account of each person qualified under paragraph I who is entitled to Medicare benefits, shall be $236.84 per month. The rate payable under this paragraph shall not be increased.

19 Retirement System Membership. Amend RSA 100-A:3, I to read as follows:

I.(a) Any person who becomes an employee, teacher, permanent policeman, or permanent fireman after the date of establishment, working in a position for an employer under this chapter as determined by common law standards, shall become a member of the retirement system as a condition of employment. In addition, employees appointed to an unclassified position with no fixed term on or after July 1, 2011 shall become members of the retirement system as a condition of employment, if they are receiving benefits from the retirement system. Any retirement benefit collected by such an unclassified employee shall be suspended during the period of employment. Membership in the retirement system [; except that membership] shall be optional in the case of elected officials, officials appointed for fixed terms, [unclassified state employees] employees appointed to an unclassified position with no fixed term prior to July 1, 2011, or those employees of the general court who are eligible for membership in the retirement system. Elected officials and officials appointed for fixed terms shall, however, be eligible for membership in the retirement system only under the following conditions:

(1) The office held is a full-time position with eligibility for the same fringe benefits as other full-time employees of the employer;

(2) The office held is the primary occupation of the person holding the office;

(3) The base rate of annual compensation for the office held is at least $15,000, and requires at least 1,700 hours of employment; and

(4) The official satisfies the condition under subparagraphs (1)-(3) by using only one elected or appointed office to qualify.

(b) Any employee who is currently an employee of the general court who works on a full-time basis and who is eligible for other state benefits, but whose salary was or is calculated on a per diem basis shall be eligible to exercise those buy-back provisions set forth in RSA 100-A:3, VI(a), (b), and (c) for such previous service, only if the employee is currently a member in the retirement system.

(c) [Repealed.]

(d) The option in subparagraph (a) shall not be available in the case of any newly created positions for unclassified employees or officials whether appointed with fixed terms or with no fixed terms nor in the case of any newly appointed positions created by political subdivisions after July 1, 2011.

20 New Paragraph; Definition Added; Part-time Employment. Amend RSA 100-A:1 by inserting after paragraph XXXIII the following new paragraph:

XXXIV. “Part-time,” for purposes of employment of a member, but excepting per diem court security officers and court bailiffs, means employment by an employer depending on the group classification of the employment as follows:

(a) For group I, in no instance shall part-time employment of the member exceed 32 hours in a normal calendar week.

(b) For group II, part-time employment of the member shall not exceed 32 hours in a normal calendar week; except for group II employment which in some instances may exceed 32 hours in any normal calendar week. In such case the part-time employment of the member shall not exceed 1,300 hours in a calendar year, so long as such part-time employment does not occur outside of a 5-consecutive-month period in any 12-month period.

21 Credit of Interest. Amend RSA 100-A:16, II(g) to read as follows:

(g) All interest and dividends earned on the funds of the retirement system shall be credited to the state annuity accumulation fund. The board of trustees shall allow interest [at such rate or rates as it shall determine from time to time] on the individual accounts of members in the member annuity savings fund and shall annually transfer such interest amount from the state annuity accumulation fund. The rate of interest shall be 2 percentage points less than either the most recent board of trustees approved assumed rate of return determined under RSA 100-A:16, II(h) or the actual rate of return, whichever is lower, for the immediately preceding fiscal year as reported in the comprehensive annual financial report (CAFR) as approved and accepted by the board of trustees by December 1 of each year, provided the rate shall not be less than zero. Such interest shall be compounded at an annual rate and shall be prorated and credited to the member annuity savings fund to the date of processing upon termination of active service for any reason including withdrawal, retirement, or death.

22 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.

23 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.

24 Additional Temporary Supplemental Allowance; 2012 Added. Amend RSA 100-A:41-d, III to read as follows:

III. The supplemental allowance in this paragraph shall apply only for the fiscal years beginning July 1, 2008 up to and including the fiscal year beginning July 1, [2011] 2012. In addition to paragraphs I and II, any retired member of the New Hampshire retirement system or any of its predecessor systems or any beneficiary of such retired member who is receiving an allowance, except for a retired state member, or his or her beneficiary, whose medical benefits are paid by the state pursuant to RSA 21-I, who is receiving a medical benefit subsidy payment under RSA 100-A:52 or RSA 100-A:52-a, shall be entitled to receive an additional supplemental allowance, in addition to the provisions of RSA 100-A:41-a, on the retired member’s latest anniversary date. The amount of the additional temporary supplemental allowance under this paragraph shall be $500 for retirees taking a one-person medical benefit and $1,000 for retirees taking a 2-person medical benefit, paid from the respective component of the special account. Provided, however that no 2-person subsidy recipient may receive more than $1,000 per year under this paragraph, and that once a recipient is entitled to Medicare, the additional allowance under this paragraph shall be reduced to 60 percent of the non-Medicare eligible retiree amounts.

25 Transfer of Balance of Special Account. Except for funds necessary to comply with the requirement of RSA 100-A:41-d, III as amended by this act, any funds remaining in the special account as of June 30, 2011 as determined on a generally accepted accounting principles basis shall be transferred to the respective components of the state annuity accumulation fund effective June 30, 2011.

26 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, appointed by the president of the senate.

(b) Three members of the house of representatives, 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 senate 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.

27 Study Committee Established; Disability, Medical Subsidy, COLAs. There is established a committee to study retirement system matters related to disability retirement, medical subsidies, and cost of living adjustments or supplemental allowances.

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

(a) Three members of the senate, appointed by the president of the senate.

(b) Three members of the house of representatives, 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 senate 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.

28 Repeal. The following are repealed:

I. RSA 100-A:6, III(b)(3), relative to the group II accidental disability beneficiary exception from gainful occupation reduction.

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.

29 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.

30 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. The retirement system board of trustees has determined that the assumed rate of return recently approved by the board is determined to take effect in fiscal year 2014. Notwithstanding the notice requirements of RSA 100-A:16, III, such employer contribution rates shall be effective as soon as possible following July 1, 2011. The recertification of employer contribution percentages shall be effective when provided to each employer within a reasonable period of time not to exceed 30 days from the approval by the board of the recalculation from the system actuary. 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.

31 Effective Date.

I. Sections 2-14 and 18-21 of this act shall take effect July 1, 2011.

II. Sections 15-17 of this act shall take effect September 1, 2011.

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