In a decisive vote, the House voted to table HB 647, the governmental immunity bill, 333-37. Although it is conceivable that the House could take the bill off the table and act on it prior to crossover, it is more likely that we will see this perennial bill return next session. 

We are grateful to all the legislators who voted to table this bill and our many members who reached out and had conversations with their legislators to explain the significant problems with this bill.

This week, both the Senate and the House took actions to move forward bills that would increase NH Retirement System (NHRS) costs for cities and towns. 

Yesterday, the Senate unanimously voted to pass SB 205, which grants a 1.5 percent cost-of-living adjustment (COLA) to all New Hampshire Retirement System retirees on the first $50,000 of their pension benefit if they retired on or before July 1, 2018, or any beneficiary of such member who is receiving a pension benefit. The COLA would take effect beginning July 1, 2024. The fiscal impact of this policy is an estimated increase to the actuarial accrued liability (UAAL) of $119.3 million which would be paid by increasing future employer contribution rates over the next 20 years. (The estimated impact on Group I and Group II employer contribution rates is as follows: Employees−0.23%; Teachers−0.34%; Police−0.54%; Fire−0.53%.)

NHMA has no objection to COLAs when paid by the state, but we oppose additional assessments on local government employers.  Unless the state is willing to fully fund the upfront cost of this proposal, this mandated increase in retirement costs will downshift to local budgets and need to be paid for by local taxpayers. NHMA expressed this concern to the Senate in testimony.

In fact, in 2018, the 2017 Decennial Retirement Commission issued a report which addressed the fiscal impact of COLAs on the health of the retirement system. The commission’s report stated as follows (page 11):

• Recommendation: Authorize a one-time payment of $500 per retiree, in 2018, and whenever funding is available.
• Summary: A compounded cost-of-living allowance (COLA) is prohibitively expensive. A one-time temporary supplemental allowance creates no future obligations and can be funded in the normal budget process. $500 is an amount that is large enough to be helpful, while still low enough that the total cost (approximately $8 million) is reasonable to consider in the context of other demands for funding. 

It is important to note that the reference to “whenever funding is available” was made in relation to state funding, not debits against the UAAL, which would be borne by employers, a.k.a. local taxpayers. (We note also that there was an unfunded COLA passed in 2019, which we opposed because it increased the then-existing $5 billion NHRS unfunded liability by a 19.6 percent aggregate increase.) The current bill is similar in that it would increase rates and work against the current plan to pay down the unfunded liability to decrease employer rates and, thus, local taxation.

The Senate also passed SB 57 and then immediately laid it on the table. This bill would change the time of the one percent NHRS pension reduction from age 65 to the member’s full retirement age under Social Security (up to age 67 depending on year of birth). It is estimated that this policy change will increase the actuarial accrued liability by $45 million and in turn increase the employer contribution rates for Group I members only. (Estimated increase in rates: Teachers−0.30%; Employees−0.21%).

Meanwhile, in the House, the Executive Departments and Administration Committee voted to recommend two concerning bills that will impact NHRS participating employers:

• HB 461 would require municipal employers to obtain an analysis from NHRS when eliminating or transferring a Group II position from full-time to part-time. Additionally, it would impose a costly requirement on the employer to continue to make contributions to the NHRS based on the highest compensation paid for the position in the prior five years and would impose a penalty equal to 2 percent of such contribution on the employer. Both the contribution and penalty are required in perpetuity unless the position is restored to full-time status. Although NHRS actuaries are unable to estimate the fiscal impact of this proposal, there would be a significant cost to any municipality that changed its staffing structure to better suit the needs of its citizens.

• HB 559 would establish a new, defined contribution retirement state retirement plan for
  new state employee members of the retirement system who begin service on or after July 1,
  These employees would be known as “Group III” and, because the creation of Group III would prevent new employees from entering into the current retirement system, this bill will have an estimated impact on the existing retirement system for political subdivisions of approximately $29.5 million beginning in 2026. That cost would increase in future years as more positions transition to Group III.

Note that the House previously passed HB 250 and HB 436, which have been retained in the House Finance Committee to be considered for inclusion in HB 2:

• HB 250 would increase the Group II accidental death benefit under RSA 100-A:8, II(b) from 50 percent to 100 percent of member’s annual rate of earnable compensation at the date of the member’s passing. NHRS estimates an increase in the actuarial accrued liability of $4 million based on the proposed change. (Estimated increase in rates beginning in fiscal year 2026: Police−0.29%; Fire−0.32%.)

• HB 436, as amended, would adjust the transition provisions for Group II, Tier B members adopted in 2011 for a 10-year period until 2033, and require the state to appropriate $25 million from the general fund each year to fund the cost of the benefits. HB 436, as amended, would adjust the transition provisions for Group II, Tier B members adopted in 2011 for a 10-year period until 2033, and require the state to appropriate $25 million in general fund appropriations each year to fund the cost of the benefits. Although the bill requires the state to fund the cost, it will still add $13.8 million to the UAAL, resulting in an impact on municipal rates across both Group I and Group II employers. (The estimated impact on Group I and Group II employer contribution rates is as follows: Employees−0.06%; Teachers−0.14%; Police−2.62%; Fire−2.72%.)

We note that the changes proposed to the retirement system are particularly troubling because they would greatly outweigh any cost savings created by HB 50, which proposes to pay $50 million toward the UAAL (See Bulletin #7). We urge our members to consider the impact that retirement costs have on municipal, school, and county budgets—and ultimately on the property taxpayers who fund those budgets. Please contact your representatives and advocate for the state to restore its promise of a contribution to the retirement system and to fund, through the state budget, any policy changes that would add new costs to the retirement system. It is imperative that mandated increases in retirement costs be funded by state dollars, rather than local tax dollars.