HB 1535-FN - AS INTRODUCED
2022 SESSION
22-2655
10/08
HOUSE BILL 1535-FN
AN ACT relative to cost of living adjustments for retirees in the state retirement system.
SPONSORS: Rep. Merner, Coos 7; Rep. Deshaies, Carr. 6; Rep. Guthrie, Rock. 13; Rep. Bordes, Belk. 3
COMMITTEE: Executive Departments and Administration
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ANALYSIS
This bill establishes an initial cost of living adjustment in 2022, and subsequent increases subject to the prior approval of the board of trustees, to be paid by the retirement system on the first $30,000 of a retired member's or beneficiary's allowance.
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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Matter which is either (a) all new or (b) repealed and reenacted appears in regular type.
22-2655
10/08
STATE OF NEW HAMPSHIRE
In the Year of Our Lord Two Thousand Twenty Two
AN ACT relative to cost of living adjustments for retirees in the state retirement system.
Be it Enacted by the Senate and House of Representatives in General Court convened:
1 New Section; Retirement System; Cost of Living Adjustments; Supplemental Allowance. Amend RSA 100-A by inserting after section 41-e the following new section:
100-A:41-f Annual Cost of Living Adjustments; Supplemental Allowances.
I. Any retired member of the New Hampshire retirement system or any of its predecessor systems, who has been retired for at least 60 months, or any beneficiary of such member who is receiving an allowance, shall be entitled to receive cost of living adjustments (COLA) as a supplemental allowance, if approved, on the retired member's latest anniversary date. The amount of the supplemental allowance shall be:
(a) For a retired member's first anniversary date occurring after July 1, 2022: 1 1/2 percent of a member's or beneficiary's annual retirement allowance which is $30,000 or less, or otherwise 1 1/2 percent of the first $30,000 of a retired member's or beneficiary's allowance.
(b) For a retired member's anniversary date occurring after July 1, 2023 and for each subsequent year: a percentage increase equal to the annual published cost of living adjustment in federal Social Security benefits, applied to member's or beneficiary's annual retirement allowance which is $30,000 or less, or otherwise such percentage of the first $30,000 of a retired member's or beneficiary's allowance. Provided that any percentage increase under this subparagraph after July 1, 2023 shall be subject to the prior approval of the retirement system board of trustees.
II. The total actuarial cost of the supplemental allowances under paragraph I, as determined by the actuary and certified by the board of trustees of the retirement system, shall be terminally funded from the state annuity accumulation fund.
III. The supplemental allowances shall become a permanent addition to the beneficiary's base retirement allowance and shall be included in the monthly annuity paid to the retired member, or to the member's beneficiary if the member is deceased and the beneficiary is receiving an allowance under RSA 100-A:8, 100-A:9, 100-A:12, 100-A:13, or similar provisions of predecessor systems.
2 Effective Date. This act shall take effect July 1, 2022.
22-2655
12/6/21
HB 1535-FN- FISCAL NOTE
AS INTRODUCED
AN ACT relative to cost of living adjustments for retirees in the state retirement system.
FISCAL IMPACT: [ X ] State [ X ] County [ X ] Local [ ] None
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| Estimated Increase / (Decrease) | |||
STATE: | FY 2022 | FY 2023 | FY 2024 | FY 2025 |
Appropriation | $0 | $0 | $0 | $0 |
Revenue | $0 | $0 | $0 | $0 |
Expenditures | $0 | $0 | $36,650,000 | $37,660,000 |
Funding Source: | [ X ] General [ ] Education [ X ] Highway [ X ] Other - Various Funds | |||
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POLITICAL SUBDIVISIONS: |
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Revenue | $0 | $0 | $0 | $0 |
Expenditures | $0 | $0 | $135,920,000 | $139,320,000 |
* 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 grants a cost of living adjustment (COLA) of 1.5 percent to all retirees or beneficiaries whose annual retirement allowance is $30,000 or less, or otherwise up to the first $30,000, who have been retired for at least 60 months (5 years) prior to or on July 1, 2022 payable on the retired member's first anniversary date occurring after July 1, 2023, and funded from the state annuity accumulation fund under RSA 100-A:16, II. The COLA shall become a permanent addition to the member or beneficiary's base retirement allowance.
The New Hampshire Retirement System's actuary provided valuations based upon data used in the annual actuarial valuation as of June 30, 2019. The valuation assumes an annual rate of return of 6.75 percent, wage inflation of 2.75 percent per year (2.25 percent for teachers) and an amortization period of a closed 20-year period beginning in FY 2022. Actual FY 2024-2025 employer rates will be based on the actuarial valuation of June 30, 2021. The allocation of this benefit is estimated as follows:
State
Employer Pension Rates as a Percent of Payroll | |||||||
| Current 2022-2023 Rates | Impact of Proposal | Proposed 2022-2023 Rates | ||||
Employees | 13.75% | 4.35% | 18.10% | ||||
Police | 30.67% | 8.19% | 38.86% | ||||
Fire | 29.78% | 7.72% | 37.50% | ||||
Expected Employer Dollar Increase (Decrease) Due to Proposal | |||||||
| FY 2022 | FY 2023 | FY 2024 | FY 2025 | |||
Employees | - | - | $28,280,000 | $29,060,000 | |||
Police | - | - | $7,990,000 | $8,210,000 | |||
Fire | - | - | $380,000 | $390,000 | |||
TOTAL | - | - | $36,650,000 | $37,660,000 |
Political Subdivisions
Employer Pension Rates as a Percent of Payroll | |||||||
| Current 2022-2023 Rates | Impact of Proposal | Proposed 2022-2023 Rates | ||||
Employees | 13.75% | 4.35% | 18.10% | ||||
Teachers | 19.48% | 5.48% | 24.96% | ||||
Police | 30.67% | 8.19% | 38.86% | ||||
Fire | 29.78% | 7.72% | 37.50% | ||||
Expected Employer Dollar Increase (Decrease) Due to Proposal | |||||||
| FY 2022 | FY 2023 | FY 2024 | FY 2025 | |||
Employees | - | - | $33,780,000 | $34,710,000 | |||
Teachers | - | - | $69,530,000 | $71,100,000 | |||
Police | - | - | $21,370,000 | $21,960,000 | |||
Fire | - | - | $11,240,000 | $11,550,000 | |||
TOTAL | - | - | $135,920,000 | $139,320,000 |
The projected increase to the unfunded actuarial accrued liability estimated as of June 30, 2019 with the COLA being effective after July 1, 2022 (FY 2022), assuming a 6.75 percent rate of return for 3 years, the unfunded actuarial accrued liability would increase by $1,852.9 million in FY 2022. This amount represents the cost to "terminally fund" the COLA up-front, rather than through future employer contribution rates.
The NHRS states this bill's fiscal impact does go out to FY 2026 with a fiscal impact of $38.7 million to the State and $142.8 million to Political Subdivisions.
The NHRS states the expected cost to make these changes to the NHRS pension database software Pension Gold is estimated to be approximately $10,000 in other funds.
AGENCIES CONTACTED:
New Hampshire Retirement System