HB 369-FN-A-LOCAL - AS INTRODUCED
2015 SESSION
\t15-0463
\t10/03
HOUSE BILL\t\t369-FN-A-LOCAL
AN ACT\testablishing a defined contribution retirement plan for public employees.
COMMITTEE:\tSpecial Committee on Public Employee Pension Plans
\tThis bill establishes a defined contribution retirement plan for public employees and requires the issuance of a request for proposals for plan administration. Beginning November 1, 2015, all new hires by employers participating in the retirement system shall be enrolled in the public employee defined contribution plan.
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Explanation:\tMatter added to current law appears in bold italics.
\t\tMatter removed from current law appears [in brackets and struckthrough.]
\t\tMatter which is either (a) all new or (b) repealed and reenacted appears in regular type.
\t15-0463
\t10/03
STATE OF NEW HAMPSHIRE
In the Year of Our Lord Two Thousand Fifteen
AN ACT\testablishing a defined contribution retirement plan for public employees.
Be it Enacted by the Senate and House of Representatives in General Court convened:
\t1 Participation by Members; Retirement System. Amend the introductory paragraph of RSA 100-A:3, I(a) to read as follows:
\t\tI.(a) Any person who becomes an employee, teacher, permanent policeman, or permanent fireman [after the date of establishment] prior to November 1, 2015, 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. Employees, teachers, permanent policemen, and permanent firemen beginning service on or after November 1, 2015, working in a position for an employer under RSA 100-E as determined by common law standards, shall as a condition of employment participate in the public employee defined contribution plan established under RSA 100-E. Until November 1, 2015, membership in the retirement system shall be optional in the case of elected officials, officials appointed for fixed terms, 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:
\t2 New Chapter; Public Employee Defined Contribution Plan. Amend RSA by inserting after chapter 100-D the following new chapter:
CHAPTER 100-E
PUBLIC EMPLOYEE DEFINED CONTRIBUTION PLAN
\t100-E:1 Authorization of Plan. The public employee defined contribution plan authorized in this chapter is intended as a qualified retirement plan established and maintained by the state with contributions treated as provided in 26 U.S.C. section 414(h).
\t100-E:2 Definitions. In this chapter:
\t\tI. “Earnable compensation” means earnable compensation as defined in RSA 100-A:1.
\t\tII. “Employer” means all employers participating in the New Hampshire retirement system under RSA 100-A on October 31, 2015, and any new employers electing to participate in the plan on and after November 1, 2015.
\t\tIII. “Group I members” means employees and teachers as defined in RSA 100-A:1.
\t\tIV. “Group II members” means permanent policemen and permanent firemen as defined in RSA 100-A:1.
\t\tV. “Member” means any person included in the membership of the plan, as provided in RSA 100-E:3.
\t\tVI. “Plan” means the public employee defined contribution plan established in this chapter for members who begin service on and after November 1, 2015.
\t100-E:3 Membership. Any person who is first employed, or reemployed after separation from service, by an employer and entered on the payroll on a full-time basis on or after November 1, 2015 shall be a member of the plan established in this chapter; except that membership shall be optional in the case of elected officials, unclassified state employees appointed for fixed terms, or full-time employees of the general court.
\t100-E:4 Member Contributions.
\t\tI. Mandatory member contributions shall be at the following rate percent applied to the member’s earnable compensation:
\t\t\t(a) Group I members, 7.00.
\t\t\t(b)(1) Group II permanent fireman members, 11.80.
\t\t\t\t(2) Group II permanent police members, 11.55.
\t\tII. Additional voluntary employee contributions shall be allowed to the extent permitted by the federal Internal Revenue Code and Regulations for qualified governmental retirement plans.
\t100-E:5 Employer Contributions.
\t\tI. For group I employees and teachers, the employer shall contribute on behalf of the member an amount equal to 9 percent of the member’s earnable compensation, minus the sum of the following:
\t\t\t(a) Mandatory contributions of the member under RSA 100-E:4, I.
\t\t\t(b) The cost of the required premium contributions for long term disability insurance and life insurance attributable to the member.
\t\tII. For group II members, the employer shall contribute on behalf of the member an amount equal to 15 percent of the member’s earnable compensation, minus the sum of the following:
\t\t\t(a) Mandatory contributions of the member under RSA 100-E:4, I.
\t\t\t(b) The cost of the required premium contributions for long term disability insurance and life insurance attributable to the member.
\t100-E:6 Employer Payments for State Retirement System Unfunded Accrued Liability.
\t\tI. Each employer participating in the New Hampshire retirement system under RSA 100-A on October 31, 2015 shall pay to the retirement system a sum, calculated as the percentage of earnable compensation of its members participating in the plan, in an amount equal to the employer contribution rate determined under RSA 100-A:16, II minus the employer contribution determined in RSA 100-E:5 for the respective member.
\t\tII. Employer payments under this section shall continue until the New Hampshire retirement system actuary determines that the funded ratio of the consolidated retirement system in RSA 100-A as of June 30 of any given year is equal to or greater than 100 percent. Provided, however that employer payments under this section shall resume if for any subsequent period the retirement system under RSA 100-A incurs new unfunded accrued liability.
\t100-E:7 Adjustment of Contribution Rates.
\t\tI. The sum of the employer contributions under RSA 100-E:5 and the employer payments under RSA 100-E:6, expressed as the rate percent of a member’s earnable compensation, shall be the “total employer rate.”
\t\tII. Upon attainment of the reduction in the total employer rate to 7 percent for group I, 11.80 percent for group II permanent fireman members, or 11.55 percent for group II permanent police members, the contribution rates under RSA 100-E:4 and RSA 100-E:5 shall, upon further reductions in required contributions, both be adjusted and reduced equally until the sum of the total employer rate and the employee contribution rate equals 9 percent for group I members or 15 percent for group II members.
\t100-E:8 Employer Costs for Long Term Disability and Life Insurance Benefits. The employer shall pay the costs for long term disability insurance benefits and life insurance benefits which shall be provided at benefit levels to be determined.
\t100-E:9 Plan Administration.
\t\tI. The governor and council shall contract according to the procedure in RSA 100-E:13 with an administrator for the public employee defined contribution plan for the administration of assets accumulated under each member’s account.
\t\tII. The plan shall include a range of investment options and a procedure for election of options by the member. If a member exercises control over the assets in the individual account, the member is not considered a fiduciary for any reason on the basis of exercising that control.
\t\tIII. No member-in-service loans, hardship withdrawals, or other in-service withdrawals shall be permitted.
\t\tIV. The plan shall include the requirement that at least 50 percent of funds in an individual member account at the member’s retirement be converted to a life annuity contract to provide income during retirement. The plan shall include life annuity options which may be elected by the member upon retirement.
\t100-E:10 Vesting.
\t\tI. Member contributions and investment return attributable to member contributions shall be 100 percent vested as of the date of contribution or accrual.
\t\tII. Employer contributions and investment return attributable to employer contributions held in an account of a member by the administrator shall be vested under this chapter according to the following schedule:
\t\t\t(a) Twenty percent of funds in an account after 6 years total of active service by a member.
\t\t\t(b) Forty percent of funds in an account after 7 years total of active service by a member.
\t\t\t(c) Sixty percent of funds in an account after 8 years total of active service by a member.
\t\t\t(d) Eighty percent of funds in an account after 9 years total of active service by a member.
\t\t\t(e) One hundred percent of funds in an account after 10 years total of active service by a member.
\t\tIII. Employer contributions which are not vested as provided in paragraph II shall upon termination of the membership of the employee in the plan be forfeited funds and applied toward the reduction of future employer contribution requirements.
\t100-E:11 Disbursement of Funds. Upon retirement of a member:
\t\tI. At least 50 percent of funds in an individual member account shall be converted by the administrator to a life annuity contract.
\t\tII. Up to 50 percent of the vested balance in an individual member account shall be available for withdrawal by the participant at retirement.
\t100-E:12 Retirement Age. The age at which a member first becomes eligible for receipt of disbursed funds held in the member’s individual account shall be as follows:
\t\tI. Group I members, age 60.
\t\tII. Group II members, age 50.
\t100-E:13 Selection of Administrator.
\t\tI. The department of administrative services shall issue a request for proposals (RFP) to qualified entities engaged in retirement and pension plan management. In addition, the New Hampshire retirement system may bid on management of the public employee defined contribution plan.
\t\tII. The RFP shall be issued requesting 3 options for plan management and administration, as follows:
\t\t\t(a) Investment management and plan administration for the public employee defined contribution plan only.
\t\t\t(b) Investment management and plan administration for the public employee defined contribution plan, plus investment management for the retirement system corpus fund under RSA 100-A pending legislative authorization for such management.
\t\t\t(c) Investment management and plan administration for the public employee defined contribution plan, plus investment management and plan administration for retirement system corpus fund under RSA 100-A pending legislative authorization for such management and administration.
\t\tIII. The governor and council shall contract to provide for a fully bundled retirement plan including investment management and plan administration that will include full services to employer and employee participants in the plan. Plan management shall provide educational services for employer and employee participants.
\t\tIV. The selection of an administrator for plan management shall be based on the best combination of contracted management and administrative costs and proposed services.
\t3 Effective Date. This act shall take effect July 1, 2015.
\t\t\t\t\t\t\t\t\t\t\t15-0463
\t\t\t\t\t\t\t\t\t\t\t01/09/15
HB 369-FN-A-LOCAL - FISCAL NOTE
AN ACT\testablishing a defined contribution retirement plan for public employees.
FISCAL IMPACT:
The New Hampshire Retirement System states this bill, as introduced, will have an indeterminable impact on state, county, and local expenditures in FY 2016 and each year thereafter. There will be no fiscal impact on state, county, and local revenues.
METHODOLOGY:
The New Hampshire Retirement System states this bill establishes a defined contribution retirement plan for public employees, requiring participation for all new employees hired on or after November 1, 2015, by employers that participate in the New Hampshire Retirement System. The System states this bill also requires the issuance of a request for proposals (RFP) for plan administration. The System estimates the following increases (decreases in parentheses) to the FY 2016 through FY 2019 employer contributions assuming an interest rate of 7.75% and wage inflation of 3.75%. The System states the analysis below was conducted by its consulting actuary:
| FY 2016 | FY 2017 | FY 2018 | FY 2019 |
Employees |
|
|
|
|
State | $46,153 | $110,752 | $72,932 | $98,009 |
Political Subdivisions | $54,755 | $131,396 | $86,526 | $116,278 |
Teachers | ($182,614) | ($452,486) | ($917,696) | ($1,247,073) |
Police |
|
|
|
|
State | $70,802 | $176,749 | $234,123 | $318,751 |
Political Subdivisions | $201,171 | $502,201 | $665,223 | $905,678 |
Fire |
|
|
|
|
State | $6,056 | $14,064 | $21,307 | $29,293 |
Political Subdivisions | $178,299 | $414,049 | $627,293 | $862,408 |
Totals | $374,622 | $896,725 | $789,708 | $1,083,344 |
State | $123,011 | $301,565 | $328,362 | $446,053 |
Political Subdivisions | $251,611 | $595,160 | $461,346 | $637,291 |
The System states that several sections of this bill will have an indeterminable impact on state, county, and local expenditures including employer costs for long-term disability and life insurance benefits, and plan administration and selection of an administrator through a RFP process including 3 alternatives for plan management and administration.