Our Response: Concord Monitor Article: NH pension fund liability balloons in 2 years, with brunt of cost on taxpayers.

As the partners of the New Hampshire Retirement Security Coalition (NHRSC), who represent nearly all 80,000 active and retired members of the New Hampshire Retirement System (NHRS), we felt it necessary to respond to the March 19, 2021 article NH pension fund liability balloons in 2 years, with brunt of cost on taxpayers.

We’d like to start by saying how disappointing it is to see public employee benefits used in what seems to be an “ah ha gotcha” article drawing attention to the top 5% of pensioners in New Hampshire. These benefits were earned by following the rules. Creating and publishing a searchable database of these earned benefits, especially as we recently hit the one-year mark of a pandemic in which our public employees have gone above and beyond for the citizens of this state, is frustrating, to say the least. For context, it’s important to mention that 94% of NH retirees receive a benefit of $50,000 or less and 66% of retirees receive a benefit of $25,000 or less.

Beyond the sensational direction of the article, it’s important to highlight a few things. First, employee rates have not stayed flat for decades. Employee rates increased in 2011, from 5% to 7% for Group I members (teachers and employees), from 9% to 11.55% for police, and from 9% to 11.8% for fire     fighters. Employees cover nearly 80% of their actual benefit and employers only pay 20% of the actual cost of what it takes to provide retirement benefits to public employees. 

Second, the article mentions higher benefits for Group II members without explaining why. What is not mentioned is that Group II members and their employers do not pay into Social Security. Therefore, this differential in pensions is to make up for the fact Group II members will not collect Social Security in retirement.

Third, NH has some of the lowest retirement costs compared to the national average, including the Unfunded Actuarial Accrued Liability (UAAL) payment. In 2017, the Boston College Center of Retirement Research showed that NHRS’ total accrued liabilities is 4.7% of payroll, while the national average is 6.8%. Additionally, NHRS employers pay very little to the benefit’s actual cost, contributing only 2.7%, while the national average is 5.9%. 

Changes and performance at the NHRS have led to the recent cost increase to cities and towns, not the benefits provided. This past fall, the Board of Trustees voted to lower the assumed rate of return from 7.25% to 6.75%, and the Independent Investment Committee (which is responsible for investing the $9 billion trust) only received a 1.1% return. Also, nearly a decade ago, employee representation on the NHRS Board of Trustees was cut by 50%, and the Independent Investment Committee was created. Research shows that systems perform better when there is significant employee representation over decisions made, including investments.

One of the best ways for cities and towns to see lower costs is for NHRS to meet its assumptions, which it did not do this year. We would suggest, instead of calling out public employees for following the rules and collecting earned benefits, attention should be given to how the state legislature can return more responsibility of investment oversight to actual members of the system by increasing their representation on both the Board of Trustees and the Independent Investment Committee.  

Submitted by The NH Retirement Security Coalition representing:

American Federation of State County and Municipal Employees Council 93

American Federation of Teachers – New Hampshire

National Education Association – New Hampshire

New Hampshire Retired Educators Association

New Hampshire School Administrators Association

New Hampshire Higher Education Union – a division of IBEW Local 2320

New Hampshire Troopers Association

Professional Fire Fighters of New Hampshire

State Employees Association of New Hampshire – SEIU Local 1984

Teamsters Local 633