HB 1205-FN - AS INTRODUCED
2020 SESSION
20-2329
10/03
HOUSE BILL 1205-FN
AN ACT relative to the reduction in the calculation of state retirement system annuities at age 65.
SPONSORS: Rep. Schuett, Merr. 20; Rep. Ellison, Merr. 27
COMMITTEE: Executive Departments and Administration
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ANALYSIS
This bill provides for the application of the reduction of a retiree’s annuity at the member’s full retirement age under the federal Social Security system.
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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Matter which is either (a) all new or (b) repealed and reenacted appears in regular type.
20-2329
10/03
STATE OF NEW HAMPSHIRE
In the Year of Our Lord Two Thousand Twenty
AN ACT relative to the reduction in the calculation of state retirement system annuities at age 65.
Be it Enacted by the Senate and House of Representatives in General Court convened:
1 Retirement System; Service Retirement Benefits; Reduction Age. Amend RSA 100-A:5, I(b) to read as follows:
(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 member’s full retirement age for Social Security, 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 member’s full retirement age for Social Security, 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.
2 Retirement System; Ordinary Disability Retirement Benefits; Reduction Age. Amend RSA 100-A:6, I(b)(1)(A) and (B) to read as follows:
(A) Prior to the member’s attainment of [age 65] the member’s full retirement age for Social Security, the state annuity, together with the member annuity, shall be equal to 1/60 of the member’s average final compensation at the time of his or her ordinary disability retirement multiplied by the number of years of creditable service at the time of his or her ordinary disability retirement;
(B) After attainment of [age 65] the member’s full retirement age for Social Security, the state annuity, together with the member annuity, shall be equal to 1/66 of the member’s average final compensation at the time of his or her ordinary disability retirement multiplied by the number of years of creditable service at the time of his or her ordinary disability retirement;
3 Retirement System; Accidental Disability Retirement Benefits; Reduction Age. Amend RSA 100-A:6, I(d)(1)(A) and (B) to read as follows:
(A) Prior to the member’s attainment of [age 65] the member’s full retirement age for Social Security, the state annuity, together with the member annuity, shall be equal to 1/60 of the member’s average final compensation at the time of his or her accidental disability retirement multiplied by the number of years of creditable service at the time of his or her accidental disability retirement;
(B) After attainment of [age 65] the member’s full retirement age for Social Security, the state annuity, together with the member annuity, shall be equal to 1/66 of the member’s average final compensation at the time of his or her accidental disability retirement multiplied by the number of years of creditable service at the time of his or her accidental disability retirement;
4 Effective Date. This act shall take effect 60 days after its passage.
20-2329
11/4/19
HB 1205-FN- FISCAL NOTE
AS INTRODUCED
AN ACT relative to the reduction in the calculation of state retirement system annuities at 65.
FISCAL IMPACT: [ X ] State [ X ] County [ X ] Local [ ] None
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| Estimated Increase / (Decrease) | |||
STATE: | FY 2020 | FY 2021 | FY 2022 | FY 2023 |
Appropriation | $0 | $0 | $0 | $0 |
Revenue | $0 | $0 | $0 | $0 |
Expenditures | $0 | $2,500 | $1,010,000 | $1,040,000 |
Funding Source: | [ X ] General [ X ] Education [ X ] Highway [ X ] Other | |||
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POLITICAL SUBDIVISIONS: |
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Revenue | $0 | $0 | $0 | $0 |
Expenditures | $0 | $0 | $3,550,000 | $3,650,000 |
*The New Hampshire Retirement System states it is not able to separate the fiscal impact of this legislation between county and local government, therefore the fiscal impact is shown together as political subdivisions.
METHODOLOGY:
This bill would would eliminate the automatic reduction provision for state retirement annuities of Group I members at age 65 and replace it with a reduction based on the member's full retirement age for Social Security, with an effective date of 60 days after passage. Currently, the normal Social Security retirement age varies from 65 to 67 and depends upon birth year. The New Hampshire State Retirement System assumes the bill will be effective on July 1, 2020, and therefore apply only to Group I members who retire on or after July 1, 2020, and members who retire before that date are assumed to be unaffected by the proposal.
Assuming an annual rate of return of 7.25 percent, wage inflation at 3.25 percent a year (2.75% for teachers), and an amortization period of a closed 20 year period beginning in FY 2020, the New Hampshire Retirement System’s actuary determined the following increases:
Employer Pension Rates as a Percent of Payroll - State | |||
| Current 2020-2021 Rates | Impact of Proposal | Proposed 2020-2021 Rates |
Employees | 10.88% | 0.16% | 11.04% |
Police | 24.77% | 0.00% | 24.77% |
Fire | 26.43% | 0.00% | 26.43% |
State Estimated Employer Increase/(Decrease) Due to Proposal | |||
| FY 2022 | FY 2023 | FY 2024 |
Employees | $1,010,000 | $1,040,000 | $1,070,000 |
Police | - | - | - |
Fire | - | - | - |
State Total | $1,010,000 | $1,040,000 | $1,070,000 |
Employer Pension Rates as a Percent of Payroll - Political Subdivisions | |||
| Current 2020-2021 Rates | Impact of Proposal | Proposed 2020-2021 Rates |
Employees | 10.88% | 0.16% | 11.04% |
Teachers | 15.99% | 0.19% | 16.18% |
Police | 24.77% | 0.00% | 24.77% |
Fire | 26.43% | 0.00% | 26.43% |
Political Subdivisions Estimated Employer Increase/(Decrease) Due to Proposal | |||
| FY 2022 | FY 2023 | FY 2024 |
Employees | $1,210,000 | $1,250,000 | $1,290,000 |
Teachers | $2,340,000 | $2,400,000 | $2,470,000 |
Police | - | - | - |
Fire | - | - | - |
Political Subdivisions Total | $3,550,000 | $3,650,000 | $3,760,000 |
The System states the proposal would be reflected in the next rate setting valuation as of June 30, 2019, which determines employer contribution rates for the 2022-2023 biennium. Since the rates for the 2022-2023 biennium are unknown at this time, the impact of the proposal is shown on the estimated contribution rates for the 2022-2023 biennium based on the June 30, 2017 actuarial valuation. This bill would increase the unfunded actuarial accrued liability by $37.0 million (a 0.1 percent decrease in the funded ratio). The unfunded actuarial accrued liability was $5.04 billion as of June 30, 2017. In addition to the actuarial accrued liability, which will be amortized over 20 years, the proposal would permanently increase the normal cost to fund future benefits by 0.06% for employees and 0.05% for teachers. These increases are reflected in the rates shown in the tables above.
The System states it will need to make an estimated $2,500 change to the Pension Gold reporting software.
AGENCIES CONTACTED:
New Hampshire Retirement System
| Date | Body | Type |
|---|---|---|
| Jan. 22, 2020 | House | Hearing |
| Feb. 5, 2020 | House | Exec Session |
| House | Floor Vote | |
| Feb. 19, 2020 | House | Floor Vote |
| March 18, 2020 | House | Exec Session |
: Committee Report: Refer for Interim Study (Vote 22-0; CC) HC 23 P. 4
April 30, 2020: Executive Session: 04/30/2020 10:00 am Members of the public may attend using the following link: https://zoom.us/j/95408968840
March 18, 2020: ==CANCELLED== Executive Session: 03/18/2020 01:00 pm LOB 210-211
March 3, 2020: Division I Work Session: 03/03/2020 11:00 am LOB 212
Feb. 19, 2020: Referred to Finance 02/19/2020 HJ 4 P. 49
Feb. 19, 2020: Ought to Pass: MA DV 181-151 02/19/2020 HJ 4 P. 49
: Minority Committee Report: Inexpedient to Legislate
Feb. 19, 2020: Majority Committee Report: Ought to Pass for 02/19/2020 (Vote 11-8; RC) HC 7 P. 19
: Majority Committee Report: Ought to Pass (Vote 11-8; RC)
Feb. 5, 2020: Executive Session: 02/05/2020 01:30 pm LOB 306
Jan. 22, 2020: Public Hearing: 01/22/2020 02:30 pm LOB 306
Jan. 8, 2020: Introduced 01/08/2020 and referred to Executive Departments and Administration HJ 1 P. 13