March 2010 1 New Hampshire Retirement System. March 2010 2 Overview of Presentation Structure and Governance Plan Funding Legislation Important.

March 2010 1

New Hampshire

Retirement System

March 2010 2

Overview of Presentation

Structure and Governance

Plan Funding

Legislation

Important Reminders

Health Insurance after Retirement

Working after Retirement

March 2010 3

53,000 active and vested deferred members

Employees, teachers, firefighters, police officers

24,500 pension recipientsRetirees and beneficiariesGrowing by 1,500 - 2,000 per year

475 participating employersState of NH, cities, counties, towns, school

districts, and other units of local government

Membership Structure

March 2010 4

NH Legislature: Plan Sponsor RSA 100-A serves as plan document

NHRS Board of Trustees and Independent Investment Committee Members serve as fiduciaries

Internal Revenue Code provisions

NH Constitution Art. 36-a protects funds “for the exclusive purpose” of providing benefits

Sununu – Supreme Court ruling

Plan Governance

March 2010 5

Defined Benefit Plan

Benefits are determined by a specific formula which consists of three components:

Earnings

Creditable Service

Benefit Multiplier

March 2010 6

Defined Benefit Plan

Lifetime pension benefits

To retired member

To eligible beneficiary upon retired member’s death (Survivorship Option)

Benefits are not based on investment returns or contributions

March 2010 7

InvestmentEarnings

InvestmentEarnings

BenefitPaymentsBenefit

Payments

Equation must balance over time

ContributionsContributions

Fiduciary Management

+ =+ExpensesExpenses

+

March 2010 8

Member Contributions

Member Contributions Set by Statute Group I Members:

Employees* & teachers = 5.0% of earnings Group II Members:

Firefighters & police officers = 9.3% of earnings

*State employees hired on or after July 1, 2009, must contribute 7.0% of gross earnings

March 2010 9

Biannual Actuarial ValuationCalculates funding status and employer ratesRates based on membership classificationRates include pension contribution and medical

subsidy contribution Actuarial Experience Study

Conducted every five yearsEvaluates underlying assumptions

Employer Contributions

March 2010 10

Employer Contributions – FY 10Group I Political Subdivision Employers

Member Classification Pension

Medical Subsidy Total

Employees 9.09% 0.07% 9.16%

Teachers*Employer ShareState share

Total

6.57%

2.81%

9.38%

0.92%

0.40%

1.32%

7.49%

3.21%

10.70%

*The State of NH contributes 30% of the cost for teacher members,and the employer contributes the remaining 70%.

March 2010 11

Employer Contributions

State’s share reduced for teachers, firefighters, and police officers of political subdivisions (Laws of 2009)

From 35% to 30% for fiscal year 2010 To 25% for fiscal year 2011 To revert back to 35% for fiscal year

2012 and each fiscal year thereafter

March 2010 12

Employer Assessment

Employer assessment for excess pension benefits

“Spiking” To address high end of career payments

March 2010 13

Employer Assessment

“Spiking” Legislation from 2009Delayed the implementation of employer assessment - “spiking assessment”- to July 1, 2010 (House Bill 223)

NHRS to recommend methodology for determining employer assessment for excess pension benefits (House Bill 641)

Established a study committee to review employer assessments (Senate Bill 108)

March 2010 14

Employer Assessment

Status of “Spiking” in 2010 Senate Bill 504 recommends delaying

spiking assessment to July 1, 2011 NHRS recommended methodology for

determining fair assessment Study committee reviewing employer

assessmentsSurveying employers, seeking spiking dataRecommends delaying employer assessment

one more year

March 2010 15

2010 Legislation

House Bill 1576 – employment as a retired member

House Bill 1664-FN – increase in member contribution rates

Senate Bill 108 (retained) - study committee reviewing implementation of employer assessments

Senate Bill 504 - spiking assessment

March 2010 16

Important Reminders

Salary Continuance Plans Contributions must be remitted to NHRS

based on the portion of the plan funded by the employer

Member earns service credit Member is “in service” for certain

benefits

March 2010 17

Important Reminders

Health Insurance “Buy Outs” and “Payments in lieu of” are not earnable compensation

Do not report those amounts to NHRS Do not remit contributions on those

amounts

March 2010 18

Important Reminders

Workers’ Compensation Report supplemental pay paid by the

employer while the member is receiving Workers' Compensation

Contributions must be remitted to NHRS on supplemental pay but not on actual Workers’ Compensation payments

March 2010 19

Important Reminders

Active Military Duty Report military differential pay Contributions must be remitted to NHRS

on differential pay Members should contact NHRS upon

returning to NHRS-covered employment May be eligible for service credit even if no

differential pay

March 2010 20

Retiree Health Insurance

NHRS-participating local government employers must allow their retiring employees to participate in their health insurance plan

Employers are not required to pay for the health insurance coverage

Legislative Study Commission re: funding of medical benefits

March 2010 21

Retiree Health Insurance

Deductions from pensions for health insurance premiums cannot be pre-taxInternal Revenue Code regulationsCafeteria plans for employees only

March 2010 22

Medical Subsidy

A payment made by NHRS directly to the former employer or health insurance administrator, applied toward the cost of health insurance for the qualified retired member and qualified spouse

The medical subsidy is not a health insurance plan

March 2010 23

Medical Subsidy Rates

Type of Plan Rate1 Person $375.562 Person $751.121 Person $236.84(Medicare supplement)

2 Person $473.68 (Medicare supplement)

Rates effective through 6/30/2012

March 2010 24

Working after Retirement

May work for non-NHRS employer (such as private sector)

May not occupy NHRS-covered position and receive pension

Pension will ceaseActive membership will be restored

Disability Retirement – Contact NHRS for details

March 2010 25

Working after RetirementFrom Retiree to Active Member

Teachers who are “regularly scheduled” for 30 hours per week

Employees who are “regularly scheduled” for 35 hours per week

Teachers who are employed for 30 or more hours per week for 18 weeks during the school year

March 2010 26

Working after RetirementFrom Retiree to Active Member

NHRS-covered position that requires mandatory enrollment

“Under Contract” or “Independent Contractor” to avoid enrollment

“Part-time” but working and/or being paid for full-time work

March 2010 27

Communications Initiatives

Outreach and education Member education sessions Regional approach - more members

Mailing to employers in March 2009 Law books Employer newsletter

Website and content enhancements Online resources User-friendly information

March 2010 28

Does NHRS have your current email address?

Send email to:[email protected]

March 2010 29

NH Retirement System54 Regional Drive

Concord, NH 03301Phone: 603-410-3500

Toll Free: [email protected]