Bill Text: NH HB436 | 2024 | Regular Session | Amended
Bill Title: Making an appropriation to the New Hampshire retirement system to pay down the unfunded accrued liability.
Sponsorship: Partisan Bill (Republican 1)
Status: (Engrossed - Dead) 2024-04-18 - Refer to Interim Study, Motion Adopted, Voice Vote; 04/18/2024; Senate Journal 10 [HB436 Detail]
Download: New_Hampshire-2024-HB436-Amended.html
HB 436-FN-LOCAL - AS AMENDED BY THE HOUSE
22Feb2023... 0483h
3Jan2024... 2458h
2023 SESSION
23-0713
10/08
HOUSE BILL 436-FN-LOCAL
SPONSORS: Rep. Pratt, Rock. 4
COMMITTEE: Executive Departments and Administration
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AMENDED ANALYSIS
This bill makes an appropriation to the New Hampshire retirement system to pay down the unfunded accrued liability.
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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Matter which is either (a) all new or (b) repealed and reenacted appears in regular type.
22Feb2023... 0483h
3Jan2024... 2458h 23-0713
10/08
STATE OF NEW HAMPSHIRE
In the Year of Our Lord Two Thousand Twenty Three
Be it Enacted by the Senate and House of Representatives in General Court convened:
1 Appropriation; New Hampshire Retirement System; Unfunded Accrued Liability. The sum of $50,000,000 for the fiscal year ending June 30, 2024 is hereby appropriated to the New Hampshire retirement system. Said appropriation shall be used by the New Hampshire retirement system to pay down the unfunded accrued liability and shall not be used for any other purposes. The governor is authorized to draw a warrant for said sum out of any money in the treasury not otherwise appropriated.
2 Effective Date. This act shall take effect June 30, 2024.
23-0713
Amended 3/2/23
HB 436-FN-LOCAL- FISCAL NOTE
AS AMENDED BY THE HOUSE (AMENDMENT #2023-0483h)
AN ACT relative to group II retirement under transition provisions in the retirement system.
FISCAL IMPACT: [ X ] State [ X ] County [ X ] Local [ ] None
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| Estimated Increase / (Decrease) | |||
STATE: | FY 2023 | FY 2024 | FY 2025 | FY 2026 |
Appropriation | $0 | $0 | $25,000,000 | $25,000,000 |
Revenue | $0 | $0 | $0 | $0 |
Expenditures | $0 | $165,000+ | $3,280,000 | |
Funding Source: | [ X ] General [ ] Education [ X ] Highway [ X ] Other - Various Agency Funds | |||
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|
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POLITICAL SUBDIVISIONS: |
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|
|
|
Revenue | $0 | $0 | $0 | $0 |
Expenditures | $0 | Indeterminable | $13,860,000 | |
*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 restores, to Group II members, age and service requirements, benefit calculations, and definition related to average final compensation and enable compensation to its original form prior to 2011 amendments. It also adopts an adjustment in transition provisions also adopted in 2011 for Group II members who were in service prior to July 1, 2011, but not vested prior to January 1, 2012. The bill establishes a $25,000,000 General Fund appropriation each year from July 1 ,2024 thru July 1, 2033 to the Retirement System to fund the cost of this bill.
The New Hampshire Retirement System (NHRS) states this bill restores the provisions previously amended in 2011 by amending the "vested by" date in RSA 100-A:5,II(d) between January 1, 2024 and January 1, 2033 in effect allowing a member who has completed 21 to 22 years of service to have the applicable vested date when the law becomes effective. The chart below assumes no breaks in employment during the first 10 years of service. The NHRS states there are provisions in the bill for members who become eligible to retire before the change in the vested date is applicable to them and has become law.
Hired In Calendar Year | Effective Date of Law |
2002 | 1/1/2024 |
2003 | 1/1/2025 |
2004 | 1/1/2026 |
2005 | 1/1/2027 |
2006 | 1/1/2028 |
2007 | 1/1/2029 |
2008 | 1/1/2030 |
2009 | 1/1/2031 |
2010 | 1/1/2032 |
Between 1/1/11 and 6/30/11 | 1/1/2033 |
The NHRS states this bill clarifies and establishes a definition for the term "Vested" to mean "qualified for a benefit upon 10 years of service". The bill establishes a definition change for earnable compensation for Group II members subject to the transition rules, essentially reinstating certain types of earnable compensation, including payouts of unused earned time, changing the calculation of the pension benefit from high 5 years to high 3, and eliminating the limit on compensation over base pay. The NHRS states the bill restores Group I and Group II members, active but not vested prior to January 1, 2012, maximum benefit provision to a maximum equal to the lesser of 100% of average final compensation or $125,000. For members commencing service on or after July 1, 2011, the maximum percentage remains at 85%. In each case, the bill would also increase the fixed dollar maximum by 1.25% each year. Lastly, the NHRS notes in section 5 there is an overlap of dates in sections (a) and (b) of 100-A:6-a, which may need addressing as well as some ambiguity in the new proposed RSA 100-A:1, XVII,(b)(2) concerning the non-reduction of service after 3 years in terms of calculation for “earnable compensation” and “average final compensation”
The NHRS actuary states since contributions rates for FY 2024-2025 have been certified they are not subject to change and there will be no fiscal impact in FY 2024-2025. The NHRS actuary states the FY 2026-2027 contribution rates will be set using the June 30, 2023 valuation. Since the rates for the 2026-2027 biennium are unknown at this time, only the net impact for FY 2026 is shown. It should be noted the fiscal impact of this bill will go well beyond FY 2026. The actuary assumes the $25,000,000 annual appropriation will be split proportionally based on the increase of benefit changes between Group II members.
STATE
Increase (Decrease) in Employer Pension Rates as a Percent of Payroll | |
| Net Impact of Proposal |
Employees | 0.06% |
Police | 2.62% |
Fire | 2.72% |
Expected Employer Dollar Increase (Decrease) Due to Proposal | ||||
| FY 2023 | FY 2024 | FY 2025 | FY 2026 |
Employees | - | - | - | $400,000 |
Police | - | - | - | $2,750,000 |
Fire | - | - | - | $130,000 |
TOTAL | $0 | $0 | $0 | $3,280,000 |
POLITICAL SUBDIVISIONS
Increase (Decrease) in Employer Pension Rates as a Percent of Payroll | |
| Net Impact of Proposal |
Employees | 0.06% |
Teachers | 0.14% |
Police | 2.62% |
Fire | 2.72% |
Expected Employer Dollar Increase (Decrease) Due to Proposal | ||||
| FY 2023 | FY 2024 | FY 2025 | FY 2026 |
Employees | - | - | - | $490,000 |
Teachers | - | - | - | $1,870,000 |
Police | - | - | - | $7,070,000 |
Fire | - | - | - | $4,430,000 |
TOTAL | $0 | $0 | $0 | $13,860,000 |
The NHRS assumes the annual $25 million appropriations will be made annually from July 1, 2024 through July 1, 2033. If the appropriation is not paid employer contributions rates for police and fire would increase by 5.58% and 5.41% and the actuarial accrued liability would increase by $203.5 million. If the appropriation is made annually, the actuarial accrued liability would increase by $13.8 million based on the provisions in the bill and will be amortized over a fixed period of no longer than 20-years..
The NHRS states the proposed changes in the bill will involve significant administrative costs relating to reprogramming of the pension administration system, revisions to administrative procedures and staff training which will result in an indeterminable increase in expenditures. The NHRS also states they are currently in the process of upgrading the pension administration system and the proposed changes would require updates to the current and future systems with $64,000 in reprogramming costs for the current system and $101,000 for the future system starting in FY 2024. In addition, the NHRS states the changes could delay the implementation of the new system by an indeterminable time and any related staffing, professional and consultant expenses are not included in this estimate of programming costs. Lastly, the NHRS indicates the change in the definition to the earnable compensation will require substantial reeducation regarding the proper reporting to NHRS and revisions to training materials and numerous interpretive memorandums that provide guidance to employers. NHRS states the changes will also result in possible significant costs to 461+ participating employers relating to reprogramming of employer payroll systems all of which is an indeterminable increase in expenditures reflected in both the State and Political Subdivisions expenditures in FY 2024 and FY 2025.
AGENCIES CONTACTED:
New Hampshire Retirement System
