Overhaul Proposed for State Retirement System

When it comes to the New Hampshire Retirement System (NHRS), Sen. Jeb Bradley (R-Wolfeboro) is ready for a major overhaul. He believes the situation demands prompt and decisive action.

“We need to get people off the dime,” Bradley told Front Door Politics shortly after he released details of his retirement system overhaul proposal late last week. “The problems are immense and the longer we wait, the worse it becomes.”

Sen. Jeb Bradley (R-Wolfeboro) will soon release his plan for a major overhaul of the NH Retirement System.

The measure will be known as Senate Bill 3. Bradley says it will be introduced within the next two weeks and it will require a detailed financial actuarial analysis by the NHRS. Bradley says it the bill is designed to stabilize and build up a retirement fund that is currently underfunded by an estimated $4.75 billion.

The SB 3 proposals, which would mostly target new hires and those employees who have not* reached 10 years of “vesting” service (meaning they’re eligible for retirement benefits), include:

• Increasing employee contribution rates for Group I (teachers) to 7 percent from 5 percent and for Group II (police and firefighters) to 11 percent from 9.3 percent. The proposal would apply only to new hires after the effective date of the legislation.
• Changing the retirement eligibility age and time of service to 50 years of age and 25 years of service for police and firefighters. Currently, eligibility for those employees is 45 years of age and 20 years of service.
• Change the membership of the NHRS board to have equal representation between employees and employers — one each from all four member classifications. The board is currently mandated to include only one employer seat and eight employee seats. The state treasurer, a senator, a representative, and two non-member trustees appointed by the governor and executive council will remain on the board.**
• Change the “earnable compensation” formula from the highest three years of compensation to an average over the employee’s five highest years of compensation.***

Bradley says that reforms must maintain the goals of the system “with pensions that are reasonable to beneficiaries, affordable to taxpayers, and a system that is stable and viable and that does not put, as it does today, all of the risk and all of the cost of this unfunded liability on the taxpayer.”

While Bradley said at a press conference announcing the proposals that the reforms could eventually include increased employer contributions, employee union leaders such as David Lang of the Professional Firefighters of New Hampshire says the initial proposals focus solely on employees.

“Senator Bradley said this is a day of reckoning for the pension systems. It’s really a day of reallocation. And that reallocation is, they’re trying to shift the cost from the employers’ obligation over to the employees, which we think is unconstitutional on its face and it’s patently unfair,” Lang told New Hampshire Public Radio.

A group of labor organizations representing employees and retirees, the New Hampshire Retirement Security Coalition, said it will soon release its own pension reform proposals.

The NHRS was established by the N.H. Legislature in 1967. It covers more than 76,000 active and retired teachers, firefighters, police officers and state and local government workers. In addition to investments, the system is funded by a combination of state/employer and employee contributions. The system has been underfunded in part because for more than a decade, employer contributions were too low. The financial meltdown of 2008 also devastated investment returns.

>> The New Hampshire Retirement System will be holding three public “NHRS 101” sessions explaining the retirement system. This is the same presentation that has been given to House and Senate members in recent weeks. All sessions listed will be held at the NHRS office, 54 Regional Drive, in Concord. Visit their website for more information and registration.

Tuesday, Feb. 1, 4:30 to 6:00 p.m.

Monday, Feb. 7, 10:00 to 11:30 a.m.

Wednesday, Feb. 9, 2:30 to 4:00 p.m.

This Daily Dispatch was written by Michael McCord.

Editor’s Notes:

* The original Daily Dispatch mistakenly reported that Sen. Bradley’s proposed changes would affect vested employees. In fact, it affects primarily new hires and those current employees who will not have reached 10 years of vesting service by the time the legislation takes effect.

** The original Daily Dispatch mistakenly reported that the board is weighed with two employees for every employer member.

*** The original Daily Dispatch indicated that final compensation would be determined according to an average of the employee’s final five years of compensation. Technically, the bill proposes final compensation be determined according to the five highest years, not necessarily the final years.

Posted by Hilary Niles on Jan 31 2011. Filed under agencies & departments, cities & towns, Government, retirement, state budget, state employees, state employees, Weekly Briefing, Work. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry