Below are some of the most asked questions regarding the NH Retirement System and Retirement Security. Please feel free to submit your questions to us, and we would be happy to answer them and add them to this list for others to access.

Is the Retirement System Bankrupt?

Due to a change in the funding methodology regarding employer rates in 1991, The New Hampshire Retirement System has a temporary $5 billion unfunded liability, meaning that what the system owes in retirement benefits is more than what its assets are worth at the moment. Right now the system is 60% funded. The unfunded liability is what makes employer rates higher than they were in the past because it is a constitutional obligation they must pay back, in order for the system to reach a higher funded level. However it is not uncommon to have a funding gap during harder economic times and the unfunded liability it not what impacts the short-term fiscal stability of the System. There are already measures in place to take care of the difference over the next 22 years. We must give these changes time to take root and be patient as we work through the 30 year horizon.

Are Defined Contribution (DC) plans better and cost less than Defined Benefit (DB) Plans?

Converting to a DC plan would effectively “close the system” therefore forcing the state to pay off the 5 bullion unfunded liability within 7-8 years, rather than the 30 year horizon we are now working through. Overall DB plans cost significantly less (46%) to implement than Defined Contribution Plans, and the cost difference is 3-fold:

  1. Because DB plans pool the longevity risks of large numbers of individuals, they need only accumulate enough funds to provide benefits for the average life expectancy of the group.
  2. DB plans are able to take advantage of the enhanced investment returns that come from a balanced portfolio over long periods of time.
  3. DB plans achieve greater investment returns than DC plans.

(NRTA Pension Education Toolkit, NIRS)

Do Employer pay more than Employees?

Due to the 5 billion unfunded liability, employer rates must be increased to pay back what they owe into the system. In fact, if the unfunded liability did not exist employer rates would drop by almost 60%. The system built in a 30 year interest free loan for the employers to pay the unfunded liability back.

Won’t making changes to the Retirement System help the overall cost control of the State Budget?

By reducing the already reasonable benefits of public employees will not greatly impact the state budget, but it will have a great impact on middle class and working New Hampshire families. In 2006, state and local pensions supported 3,088 job and over 4.55 million dollars in economic activity. In a rush to satisfy what appears to be some public perception we caution the legislature to make positive changes and stay away from gimmicks that will otherwise undermine or destroy the NH Retirement System. We also caution them to not water down retirement security for current or future middle class public workers. All parties must not slow down one of the economic engines of our economy.