Revision: Dec. 15, 2023, 4:05 p.m.
HB 1673-FN - AS INTRODUCED
2024 SESSION
24-2668
10/08
HOUSE BILL 1673-FN
AN ACT relative to average final compensation for certain group II members.
SPONSORS: Rep. Pratt, Rock. 4
COMMITTEE: Executive Departments and Administration
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ANALYSIS
This bill redefines average final compensation for group II retirement system members who commenced service prior to July 1, 2011 and who did not attain vested status prior to January 1, 2012.
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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Matter which is either (a) all new or (b) repealed and reenacted appears in regular type.
24-2668
10/08
STATE OF NEW HAMPSHIRE
In the Year of Our Lord Two Thousand Twenty Four
AN ACT relative to average final compensation for certain group II members.
Be it Enacted by the Senate and House of Representatives in General Court convened:
1 Retirement System; Average Final Compensation; Group II. Amend RSA 100-A:1, XIII(c)(1) to read as follows:
(c)(1) For group II members who commenced service prior to July 1, 2011 and 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] last 7 years of creditable service on or after January 1, 2012.
2 Effective Date. This act shall take effect 60 days after its passage.
24-2668
12/10/23
HB 1673-FN- FISCAL NOTE
AS INTRODUCED
AN ACT relative to average final compensation for certain group II members.
FISCAL IMPACT: [ X ] State [ X ] County [ X ] Local [ ] None
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Estimated State Impact - Increase / (Decrease) | ||||||
| FY 2024 | FY 2025 | FY 2026 | FY 2027 | ||
Revenue | $0 | $0 | $0 | $0 | ||
Revenue Fund(s) | None | |||||
Expenditures | $0 | Indeterminable System Change Costs | $450,000 | $460,000 | ||
Funding Source(s) | General Fund and Highway Fund Various Agency Funds | |||||
Appropriations | $0 | $0 | $0 | $0 | ||
Funding Source(s) | None | |||||
• Does this bill provide sufficient funding to cover estimated expenditures? [X] N/A • Does this bill authorize new positions to implement this bill? [X] N/A | ||||||
| ||||||
Estimated Political Subdivision Impact - Increase / (Decrease) | ||||||
| FY 2024 | FY 2025 | FY 2026 | FY 2027 | ||
Revenue | $0 | $0 | $0 | $0 | ||
Expenditures | $0 | $0 | $2,040,000 | $2,100,000 | ||
*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 modifies how the average final compensation is computed for Tier B group II retirement system members who started their service before July 1, 2011, and didn't achieve vested status before January 1, 2012. Specifically, it would cap a member's extra compensation beyond the base pay within their top 5 years at the average percentage of compensation beyond base pay in their last 7 years of credible service. Presently, the calculation is based on the average percentage of compensation beyond base pay throughout the member's entire career.
The New Hampshire Retirement System (NHRS) states the majority of the active group affected by this bill won't qualify for retirement within the next five years, and there have been minimal retirements from this subset so far. As a result, there isn't enough data to independently evaluate an accurate liability adjustment based on the current population. To estimate the proposal's impact, it is assumed a rise in normal, early, and vested retirement liabilities for these active members—75% of the assumption used for Group II members hired before July 1, 2011, and vested by January 1, 2012. Specifically, this analysis projected increases of 8.25% for Police members and 9.00% for Fire members affected by the proposal. Actuaries will reassess this assumption as more data becomes available.
The NHRS's actuary states contributions for fiscal years 2024 and 2025 are certified and won't change. The potential impact for FY 2026 and FY 2027 are solely due to this bill. Future employer contributions are anticipated to rise in line with wage inflation. Additionally, the actuary provided valuations based upon data used in the annual actuarial valuation as of June 30, 2021. The valuation assumes an annual rate of interest of 6.75 percent, wage inflation of 2.75 percent per year and uses the entry-age actuarial cost valuation method. Actual FY 2026-2027 employer rates will be based on the June 30, 2023 actuarial valuation and could differ. The allocation of this benefit is estimated as follows:
Estimate State Impact
Increase (Decrease) in Employer Pension Rates as a Percent of Payroll | |
| Net Impact of Proposal |
Employees | 0.00% |
Police | 0.40% |
Fire | 0.59% |
Expected Employer Dollar Increase (Decrease) Due to Proposal | ||||
| FY 2024 | FY 2025 | FY 2026 | FY 2027 |
Employees | - | - | - | - |
Police | - | - | $420,000 | $430,000 |
Fire | - | - | $30,000 | $30,000 |
TOTAL | $0 | $0 | $450,000 | $460,000 |
Estimated Political Subdivision Impact
Increase (Decrease) in Employer Pension Rates as a Percent of Payroll | |
| Net Impact of Proposal |
Employees | 0.00% |
Teachers | 0.00% |
Police | 0.40% |
Fire | 0.59% |
Expected Employer Dollar Increase (Decrease) Due to Proposal | ||||
| FY 2024 | FY 2025 | FY 2026 | FY 2027 |
Employees | - | - | - | - |
Teachers | - | - | - | - |
Police | - | - | $1,080,000 | $1,110,000 |
Fire | - | - | $960,000 | $990,000 |
TOTAL | $0 | $0 | $2,040,000 | $2,100,000 |
The NHRS actuary projects an increase in the actuarial accrued liability of $18.5 million based on the provisions in the bill which will be amortized over a fixed period of no longer than 20-years.
Lastly, the NHRS states there will be an indeterminable increase in expenditures in FY 2025 due to administrative costs relating to the reprogramming of the pension administrative system.
AGENCIES CONTACTED:
New Hampshire Retirement System