Revision: Jan. 3, 2022, 8:43 a.m.
HB 1587-FN-A - AS INTRODUCED
2022 SESSION
22-2657
10/11
HOUSE BILL 1587-FN-A
SPONSORS: Rep. Pratt, Rock. 3; Rep. Deshaies, Carr. 6; Rep. Bordes, Belk. 3; Rep. Trottier, Belk. 6
COMMITTEE: Executive Departments and Administration
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ANALYSIS
This bill modifies the calculation of compensation paid in excess of the full base rate of compensation under the definition of average final compensation in the retirement system for persons hired after July 1, 2011. The actuarial cost of the change is funded from general funds of the current biennium.
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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Matter which is either (a) all new or (b) repealed and reenacted appears in regular type.
22-2657
10/11
STATE OF NEW HAMPSHIRE
In the Year of Our Lord Two Thousand Twenty Two
Be it Enacted by the Senate and House of Representatives in General Court convened:
1 Retirement System; Definition of Average Final Compensation. Amend RSA 100-A:1, XVIII(b) 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 member over the member's last 7 years of creditable service on or after July 1, 2009, as reported by the employer in accordance with RSA 100-A:16, VI, or over all of the years in his or her creditable service on or after July 1, 2009 if less than 7 years.
(b) For group I 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 inclusion in this calculation, the average percentage of compensation paid in excess of the full base rate of compensation in the highest 5 years shall not exceed the average percentage of compensation paid in excess of the full base rate of compensation over all the member's years of service on or after January 1, 2012, but excluding the highest 5 years.
(c) For group II 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 inclusion in this calculation, the average percentage of compensation paid in excess of the full base rate of compensation in the highest 5 years shall not exceed the average percentage of compensation paid in excess of the full base rate of compensation over all the member's years of service on or after January 1, 2012.
2 Funding Source; Average Final Compensation; Group II Change; Appropriation. The total actuarial cost of the amendment to the group II determination of average final compensation as amended by section 1 of this act, shall be determined by the actuary and certified by the board of trustees of the retirement system, and shall be terminally funded from surplus funds from the state from the current biennium. The amount required for terminally funding the total actuarial cost is hereby appropriated to the board of trustees of the retirement system. The governor is authorized to draw a warrant for said sum out of any money in the treasury not otherwise appropriated.
3 Effective Date. This act shall take effect 60 days after its passage.
22-2657
Revised 12/30/21
HB 1587-FN-A- FISCAL NOTE
AS INTRODUCED
FISCAL IMPACT: [ X ] State [ X ] County [ X ] Local [ ] None
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| Estimated Increase / (Decrease) | ||||
STATE: | FY 2022 | FY 2023 | FY 2024 | FY 2025 | |
Appropriation | $0 | $55,900,000 | $0 | $0 | |
Revenue | $0 | $0 | $0 | $0 | |
Expenditures | $0 | $55,900,000 | $240,000 | $250,000 | |
Funding Source: | [ X ] General [ ] Education [ ] Highway [ ] Other | ||||
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POLITICAL SUBDIVISIONS: |
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Revenue | $0 | $0 | $0 | $0 | |
Expenditures | $0 | $0 | $950,000 | $970,000 | |
*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.
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METHODOLOGY:
This bill modifies the calculation of average final compensation for retirement system members who commenced service on or after July 1, 2011 or who had not attained vested status prior to January 1, 2012 by including the highest five years of the members’ service. Assuming an annual rate of return of 6.75 percent, wage inflation at 2.75 percent a year, and a 20-year amortization period would be added to the June 30, 2023 actuarial valuation. The New Hampshire Retirement System’s (NHRS) actuary determined the following increases:
State
Employer Pension Rates as a Percent of Payroll | |||||||
| Current 2022-2023 Rates | Impact of Proposal | Proposed 2022-2023 Rates | ||||
Employees | 13.75% | 0.00% | 13.75% | ||||
Police | 30.67% | 0.24% | 30.91% | ||||
Fire | 29.78% | 0.22% | 30.00% | ||||
Expected Employer Dollar Increase (Decrease) Due to Proposal | |||||||
| FY 2022 | FY 2023 | FY 2024 | FY 2025 | |||
Employees | - | - | $0 | $0 | |||
Police | - | - | $230,000 | $240,000 | |||
Fire | - | - | $10,000 | $10,000 | |||
TOTAL | - | - | $240,000 | $250,000 | |||
Political Subdivisions
Employer Pension Rates as a Percent of Payroll | |||||||
| Current 2022-2023 Rates | Impact of Proposal | Proposed 2022-2023 Rates | ||||
Employees | 13.75% | 0.00% | 13.75% | ||||
Teachers | 19.48% | 0.00% | 19.48% | ||||
Police | 30.67% | 0.24% | 30.91% | ||||
Fire | 29.78% | 0.22% | 30.00% | ||||
Expected Employer Dollar Increase (Decrease) Due to Proposal | |||||||
| FY 2022 | FY 2023 | FY 2024 | FY 2025 | |||
Employees | - | - | $0 | $0 | |||
Teachers | - | - | $0 | $0 | |||
Police | - | - | $630,000 | $640,000 | |||
Fire | - | - | $320,000 | $330,000 | |||
TOTAL | - | - | $950,000 | $970,000 | |||
This bill also requires this proposal to be “terminally funded.” The New Hampshire Retirement System’s actuary determined to “terminally fund” the proposal or have it funded through general fund appropriation or surplus funds from the “current biennium” to the NHRS Board of Trustees the cost would be $55.9 million in FY 2023. The NHRS actuary estimated the impact of this bill on the present value of future benefits for the current population adjusted for June 30, 2022, the assumed effective date of the bill.
The NHRS state there will be an additional impact to FY 2025. Lastly, the NHRS notes there will be an unknown cost to make changes to the NHRS pension software program.
AGENCIES CONTACTED:
New Hampshire Retirement System