HB 673-FN – AS INTRODUCED
2009 SESSION
10/05
HOUSE BILL 673-FN
AN ACT relative to withdrawal of political subdivisions from the New Hampshire retirement system.
SPONSORS: Rep. Bouchard, Merr 11
COMMITTEE: Executive Departments and Administration
This bill allows political subdivisions in the retirement system to withdraw all employees or all non-vested employees from the retirement system and changes the procedure for withdrawal of participation.
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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Matter which is either (a) all new or (b) repealed and reenacted appears in regular type.
09-0843
10/05
STATE OF NEW HAMPSHIRE
In the Year of Our Lord Two Thousand Nine
AN ACT relative to withdrawal of political subdivisions from the New Hampshire retirement system.
Be it Enacted by the Senate and House of Representatives in General Court convened:
1 Retirement System; Withdrawal from Participation. Amend RSA 100-A:43 to read as follows:
100-A:43 Withdrawal Authorized. Notwithstanding any governing board, or authority which, pursuant to RSA 100:29 or 30, RSA 100:49 or 50 or any governing board or authority which, pursuant to RSA 100-A:20 or RSA 100-A:29 or 30, elected to have its officers and employees become eligible to participate under the respective systems, such officers and employees are hereby authorized to withdraw either all employees or all non-vested employees from the retirement system on the next anniversary date of their participation provided notice is filed with the board of trustees, on a form prescribed by the board, no less than 120 days prior to the withdrawal date. The right of an employer to withdraw from the retirement system under this section shall be subject to the condition that prior to withdrawal, the employer shall present to the board of trustees a [certified] report [from an enrolled actuary] which states that [the] alternative benefits [which] shall be provided to all its employees [shall be at least equal to the benefits which the employees currently receive from the retirement system; provided, however,] that are members of the retirement system prior to the date of withdrawal and who will no longer be members after the withdrawal. For employees who were vested in the retirement system prior to the date of withdrawal and remain members of the retirement system, the employer shall continue to pay contributions on behalf of those members. For employees who were vested in the retirement system prior to the date of withdrawal and who will no longer be members after the withdrawal, the benefits shall be at least equal to the benefits which the employees receive from the retirement system prior to the date of withdrawal. Notwithstanding the obligation to pay for those members that remain in the system, if an employer which has an established unfunded accrued liability at the time which it elects to withdraw from the retirement system under this section, and whose officers and employees have elected to and are receiving retirement benefits or have filed for a vested deferred retirement allowance, shall pay the balance of the unfunded accrued liability on a prorated basis as determined by the retirement system actuary for any such officers or employees.
2 Retirement System; Withdrawal Procedure. RSA 100-A:43-a is repealed and reenacted to read as follows:
100-A:43-a Withdrawal Procedure.
I. The withdrawal authorized by RSA 100-A:43 may occur when the governing body submits written notice of the request to withdraw to the board of trustees of the New Hampshire retirement system and after the governing body submits payment or a plan for payment of its unfunded accrued liability.
II. The board of trustees may not refuse to allow an employer to withdraw from the system unless the employer refuses to or is unable to pay its unfunded accrued liability to the retirement system.
III. The retirement system shall return all employee and employer contributions, including interest, on behalf of those employees who will be withdrawn from the system, for the purposes of funding the alternative retirement benefits.
3 Effective Date. This act shall take effect 60 days after its passage.
LBAO
09-0843
Revised 03/04/09
HB 673 FISCAL NOTE
AN ACT relative to withdrawal of political subdivisions from the New Hampshire retirement system.
FISCAL IMPACT:
The New Hampshire Retirement System states this bill may have an indeterminable effect on state, county, and local expenditures in FY 2012 and each year thereafter. There is no fiscal impact on state, county, and local revenue.
METHODOLOGY:
The New Hampshire Retirement System states this bill will make it easier for employers participating in the System to withdraw from the System, as those withdrawing will no longer be required to provide benefits to non-vested or future employees that are at least equal to the benefits provided by the System. The System’s actuary states the proposed change will not affect contribution rates until an employer actually elects to withdraw from the System, and it cannot reasonably estimate the effect of such a withdrawal, although any effects from a withdrawal would not be seen until FY 2012, as contribution rates for FY 2010 and 2011 have already been set. The actuary estimates withdrawal by an employer without retirees or deferred members will cause covered payroll to decline more rapidly than the unfunded accrued liability, because the retiree liability is not fully funded. This situation will cause contribution rates for the remaining System employers to rise. The actuary anticipates this rise could motivate other employers to withdraw from the System, feeding a downward spiral of increasing contribution rates and declining employer members. The actuary also points out that, due to the unfunded status of the retiree liabilities, it is unlikely that any employer contribution would be available to be returned to any withdrawing employers. The actuary states that the proposed legislation does not appear to address the handling of medical subsidy funds, although it assumes that rates will rise in a manner similar to that outlined for pension plan above. Additionally, as the System points out, the refunding of employer contributions plus interest to withdrawing employers would mean that the System would no longer meet the requirements of a qualified pension trust as defined in section 401(a) of the Internal Revenue Code (IRC) of 1986, as amended, which prohibits any part of the corpus or income of the trust to be used for or diverted from purposes other than the exclusive benefit of System members and beneficiaries. By not being in compliance with IRC 401(a), the System would be in violation of RSA 100-A:2, which calls for the System to always be in compliance with that section of the Internal Revenue Code.