SB 309-FN - AS INTRODUCED
2024 SESSION
24-3092
05/10
SENATE BILL 309-FN
AN ACT relative to the vesting period for members of the state retirement system.
SPONSORS: Sen. Soucy, Dist 18; Sen. Gray, Dist 6; Sen. Watters, Dist 4; Sen. Bradley, Dist 3; Rep. Leishman, Hills. 33; Rep. C. McGuire, Merr. 27; Rep. Packard, Rock. 16; Rep. Wilhelm, Hills. 40
COMMITTEE: Executive Departments and Administration
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ANALYSIS
This bill changes the vesting period for retirement system benefits from 10 years to 5 years.
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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Matter which is either (a) all new or (b) repealed and reenacted appears in regular type.
24-3092
05/10
STATE OF NEW HAMPSHIRE
In the Year of Our Lord Two Thousand Twenty Four
AN ACT relative to the vesting period for members of the state retirement system.
Be it Enacted by the Senate and House of Representatives in General Court convened:
1 Vesting Period Reduced; Disability Retirement Benefits; Group I. Amend RSA 100-A:6, I(a) to read as follows:
(a) Upon the application of a group I member in service or of his employer, any such member who has [10] 5 or more years of creditable service may be retired by the board of trustees on an ordinary disability retirement allowance, not less than 30 nor more than 90 days subsequent to the filing of such application; provided that a physician or physicians designated by the board of trustees, after a medical examination of such member, shall certify, and the board shall find, that he is mentally or physically incapacitated for the further performance of duty, that such incapacity is likely to be permanent and that he should be retired.
2 Vesting Period Reduced; Disability Retirement Benefits; Group II. Amend RSA 100-A:6, II(a) to read as follows:
(a) Upon the application of a group II member in service or of his employer, any such member who has [10] 5 or more years of creditable service may be retired by the board of trustees on an ordinary disability retirement allowance, not less than 30 nor more than 90 days subsequent to the filing of such application; provided that a physician or physicians designated by the board of trustees, after a medical examination of such member, shall certify, and the board shall find, that he is mentally or physically incapacitated for the further performance of duty, that such incapacity is likely to be permanent and that he should be retired.
3 Vesting Period Reduced; Vested Deferred Retirement Benefit; Group I. Amend RSA 100-A:10, I(a) to read as follows:
(a) A group I member who has completed [10] 5 years of creditable service and who, for reasons other than retirement or death, ceases to be an employee or teacher shall be deemed in vested status and upon meeting the eligibility requirements of subparagraph (b) may collect a vested deferred retirement allowance. In lieu of a vested deferred retirement allowance, the member may make application on a form prescribed by the board of trustees and receive a return of the member's accumulated contributions under RSA 100-A:11. Provided, however, that a group I member who commenced service on or after July 1, 2011 shall not receive a vested deferred retirement allowance until attaining the age of 65; but may receive a reduced allowance after age 60 if the member has at least 30 years of creditable service where the allowance shall be reduced, for each month by which the date on which benefits commence precedes the month after which the member attains 65 years of age, by 1/4 of one percent.
4 Vesting Period Reduced; Vested Deferred Retirement Benefit; Group II. Amend RSA 100-A:10, II(a) to read as follows:
(a) A group II member who has completed [10] 5 years of creditable service and who, for reasons other than retirement or death, ceases to be a permanent policeman or permanent fireman shall be deemed in vested status and upon meeting the eligibility requirements of subparagraph (b) may collect a vested deferred retirement allowance. In lieu of a vested deferred retirement allowance, the member may make application on a form prescribed by the board of trustees and receive a return of the member's accumulated contributions under RSA 100-A:11. Provided, however, that a group II member who commenced service on or after July 1, 2011 shall not receive a vested deferred retirement allowance until attaining the age of 52.5; but may receive a reduced allowance after age 50 if the member has at least 25 years of creditable service where the allowance shall be reduced, for each month by which the date on which benefits commence precedes the month after which the member attains 52.5 years of age, by 1/4 of one percent.
5 Vesting Period Reduced; Split Benefits; Disability. Amend RSA 100-A:19-d through 100-A:19-f to read as follows:
100-A:19-d Reduced Early Retirement. Notwithstanding any other provision of law, any retirement system member who has creditable service in both group I and group II with at least [10] 5 years combined creditable service, and who has attained an age which is at least 45 for members who are in vested status with group II service before January 1, 2012 or at least 50 for members who commenced group II service on or after July 1, 2011, and group II members who have not attained vested status prior to January 1, 2012 shall be as provided in the transition provisions in RSA 100-A:5, II(d), and is within 10 years of the minimum age set forth in RSA 100-A:19-b, may elect to retire and have benefits commence immediately as a reduced split-benefit service retirement allowance. Application shall be as provided in RSA 100-A:5, I(c). The allowance shall be determined as a split-benefit service retirement allowance in accordance with RSA 100-A:19-c, and the total combined split-benefit service allowance shall be reduced by the percentages shown in RSA 100-A:5, I(c), based on the total combined length of creditable service, for each month by which the date on which benefits commence precedes the month after which the member attains the minimum age set forth in RSA 100-A:19-b.
100-A:19-e Vested Deferred Retirement. Notwithstanding the vesting requirements of RSA 100-A:10, any member who has creditable service in both group I and group II with at least [10] 5 years combined creditable service and who, for reasons other than retirement or death, ceases to be a member of the retirement system may elect, as provided in RSA 100-A:10, to receive a vested deferred retirement allowance. A member who has made such election shall receive a split-benefit vested deferred retirement allowance commencing upon attainment of the minimum age as set forth in RSA 100-A:19-b in an amount equal to the service retirement allowance as provided in RSA 100-A:19-c based on average final compensation and creditable service at the time service is terminated, or at an earlier age in a reduced amount as provided in RSA 100-A:19-d.
100-A:19-f Ordinary Disability Retirement. Notwithstanding the creditable service requirements set forth in RSA 100-A:6, any member in service who has creditable service in both group I and group II with at least [10] 5 years combined creditable service may be retired on an ordinary disability retirement allowance as provided in RSA 100-A:6, I(a) or II(a), subject to all applicable provisions of RSA 100-A:6. If the member has attained the minimum age as set forth in RSA 100-A:19-b, the split-benefit ordinary disability retirement allowance shall be equivalent to a split-benefit service retirement allowance as provided in RSA 100-A:19-c; otherwise, the allowance shall be determined as the sum of the ordinary disability retirement allowance with respect to service in each group classification computed as follows; provided, however, that the total combined ordinary disability retirement allowance payable before the reduction provided in RSA 100-A:5, I(b) for the group I portion shall not be less than the minimum provided in RSA 100-A:6, I(b) or II(b) depending on the member's group classification at the time of retirement:
I. The average final compensation shall be as defined in RSA 100-A:1, XVIII, computed on the basis of the entire period of service in both classifications.
II. The group I portion of the ordinary disability retirement allowance shall be equal to 90 percent of the service retirement allowance as provided in RSA 100-A:5, I(b), based on the number of years of creditable service in group I.
III. The group II portion of the ordinary disability retirement allowance shall be equal to the service retirement allowance as provided in RSA 100-A:5, II(b), based on the number of years of creditable service in group II.
6 Effective Date. This act shall take effect July 1, 2024.
24-3092
Revised 12/18/23
SB 309-FN- FISCAL NOTE
AS INTRODUCED
AN ACT relative to the vesting period for members of the state retirement system.
FISCAL IMPACT: [ X ] State [ X ] County [ X ] Local [ ] None
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Estimated State Impact - Increase / (Decrease) | ||||||
| FY 2024 | FY 2025 | FY 2026 | FY 2027 | ||
Revenue | $0 | $0 | $0 | $0 | ||
Revenue Fund(s) | None | |||||
Expenditures | $0 | Indeterminable Increase | $1,220,000 | $1,260,000 | ||
Funding Source(s) | General Fund and Highway Fund Various Agency Funds | |||||
Appropriations | $0 | $0 | $0 | $0 | ||
Funding Source(s) | None | |||||
• Does this bill provide sufficient funding to cover estimated expenditures? [X] N/A • Does this bill authorize new positions to implement this bill? [X] N/A | ||||||
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Estimated Political Subdivision Impact - Increase / (Decrease) | ||||||
| FY 2024 | FY 2025 | FY 2026 | FY 2027 | ||
Revenue | $0 | $0 | $0 | $0 | ||
Expenditures | $0 | $0 | $2,120,000 | $2,180,000 | ||
*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 changes the vesting period for retirement system benefits from 10 years to 5 years. The New Hampshire Retirement System (NHRS) Actuary states the unfunded actuarial accrued liabilities would decrease by $12.1 million, but proposed changes would increase the present value of future benefits (PVFB) by approximately $11 million based on data and assumptions used for the June 30, 2021 actuarial. The increase in PVFB usually leads to higher normal costs as reflected in the rate increases. Because of how costs are spread out over a person's career and the specific makeup of the active group, the overall rise in future costs is more than the increase in total future benefits. So, there's a decrease in the amount of future costs calculated from the entry age.
Additionally around half of the active group have worked for 10 or more years and meet the requirements for benefits. For these members, the amount owed slightly goes down, but regular costs go up. This happens because these employees tend to start working at older ages and become eligible for retirement earlier based on their age. On average, employees in this group start at 38 years old, compared to 32 for teachers, leading to a shorter time for the company to save up for their retirement.
The NHRS's actuary states contributions for fiscal years 2024 and 2025 are certified and won't change. The potential impact for FY 2026 and FY 2027 are solely due to this bill. Future employer contributions are anticipated to rise in line with wage inflation. Additionally, the actuary provided valuations based upon data used in the annual actuarial valuation as of June 30, 2021. The valuation assumes an annual rate of interest of 6.75 percent, wage inflation of 2.75 percent per year and uses the entry-age actuarial cost valuation method. Actual FY 2026-2027 employer rates will be based on the June 30, 2023 actuarial valuation and could differ. The allocation of this benefit is estimated as follows:
Estimated State Impact
Increase (Decrease) in Employer Pension Rates as a Percent of Payroll | |
| Net Impact of Proposal |
Employees | 0.17% |
Police | 0.08% |
Fire | 0.07% |
Expected Employer Dollar Increase (Decrease) Due to Proposal | ||||
| FY 2024 | FY 2025 | FY 2026 | FY 2027 |
Employees | - | - | $1,140,000 | $1,170,000 |
Police | - | - | $80,000 | $90,000 |
Fire | - | - | $0 | $0 |
TOTAL | $0 | $0 | $1,220,000 | $1,260,000 |
Estimated Political Subdivision Impact
Increase (Decrease) in Employer Pension Rates as a Percent of Payroll | |
| Net Impact of Proposal |
Employees | 0.17% |
Teachers | 0.03% |
Police | 0.08% |
Fire | 0.07% |
Expected Employer Dollar Increase (Decrease) Due to Proposal | ||||
| FY 2024 | FY 2025 | FY 2026 | FY 2027 |
Employees | - | - | $1,390,000 | $1,430,000 |
Teachers | - | - | $400,000 | $410,000 |
Police | - | - | $220,000 | $220,000 |
Fire | - | - | $110,000 | $120,000 |
TOTAL | $0 | $0 | $2,120,000 | $2,180,000 |
The NHRS actuary projects a decrease in the actuarial accrued liability of $12.1 million based on the provisions in the bill which will be amortized over a fixed period of no longer than 20-years.
Lastly, the NHRS states there will be an indeterminable increase in expenditures in FY 2025 due to administrative costs relating to the reprogramming of the pension administrative system.
AGENCIES CONTACTED:
New Hampshire Retirement System