By GARRY RAYNO, InDepthNH.org
CONCORD — The Retirement Benefits Commission intends to adjust retirement benefits for some police and firefighters and to look at possible long-term changes to the system.
Meeting Thursday the commission heard concerns raised by member organizations in the state’s Retirement System and will discuss cost of living increases at its next meeting in two weeks.
The commission was formed when the Senate Finance Committee decided to remove $50 million the House had included in the fiscal 2024-2025 biennial budget to increase the benefits for between 1,700 and 1,800 Group 2 (police and firefighters) members who were not vested in the system when the last significant changes were made in 2011.
Advocates for the increase in benefits said the change disproportionately affected those members who were members of the system but not vested and makes it difficult for communities to retain experienced employees.
The Senate Finance Committee did not want to include the $50 million in the budget without greater understanding of who was impacted and what the final cost could be.
At Thursday’s meeting, the wide ranging discussion touched on many areas including changing the benefit formula back to what is was before the 2011 change when the system faced significant financial issues including a multi-billion dollar unfunded liability, and increasing employer rates for communities, counties and the state, and some employees earning more in retirement than they did when they were working due to unused sick and vacation time, and overtime collected during the last three years of employment.
Several members noted those changes were made in reaction to the situation at the time, but since then the system’s investment beat assumptions and stabilized with a long amortization plan that will mostly cover the unfunded liability by 2039.
Rep. Peter Leishman, D-Peterborough, reminded the commission it was established when the Senate rejected the bipartisan solution to the Group 2 issue.
“That charge had made considerable progress to address the gap,” he said, and to reach a solution for those 1800 employees.
Commission chair Rep. Carol McGuire, R-Epsom, said the commission is considering doing something early in the next session to address the Group 2 problem and is currently having actuaries working on the projected cost of a proposal from Senate President Jeb Bradley, R-Wolfeboro, and other options.
Those figures will be available at the commission’s next meeting Sept. 7.
McGuire said other changes the commission wants to consider would be through bills going through the regular legislative process next session.
“We need to look very hard at how we fund the retirement system now as most changes flow directly to property taxpayers and that concerns a lot of our constituents,” she said. “I’d like to see if we make changes, to fund it from the state rather than flow down to employer rates.”
Germano Martins of the State Employees Association said as a long-time property taxpayer, the most effective way to reduce property taxes is to have the state pay a portion of the retirement cost for everyone as it did before 2011.
“The state has other pockets to get money from,” he said, “not like the cities and towns who have one source.”
Sen. James Gray, R-Rochester, asked if Martins was suggesting the state go back to paying a portion of cities and towns retirement costs again when the state has increased what communities receive from the rooms and meals tax and for roads and bridges.
“There are a whole bunch of things that have increased,” he said. “I’m just looking for balance, I’m looking for fairness.”
Gray suggested they need to look outside the retirement system if they want to have cost of living increases and suggested cities and towns could negotiate with employees for a percentage of a pay increase to go into a retirement account employers could match.
“I don’t see how you fund a COLA that is meaningful when you look at the impact in the 10th year going out,” he said. “People are retiring and living for many years.”
Sen. David Watters, D-Dover, suggested using the state’s current deferred compensation program in the Department of Administrative Services as a way of providing increases to retirees and supported a plan developed several years ago that would have state employees automatically enroll in the plan unless they opt out. Currently state employees can opt into the program.
McGuire, who sponsored a bill to do that several sessions ago, said she gave up trying because most employee organizations were not interested.
Brian Ryll of the Professional Firefighters Association said his group has some reservations noting retirees now and in the future do and will not receive a medical subsidy as in the past.
Some use the deferred compensation program to cover future medical costs when they retire, he said.
“I am not sure what you want to cover or what you are looking to accomplish,” Ryll said, “but in 2007 a 2 percent increase in (employee rates was recommended to) self-fund a COLA. The rates were increased but the COLA was never funded. You could look at that.”
Martins agreed and noted the commission should determine how much was collected with the increase and the gain on investments, noting it was estimated to be $750 million in 2011 and must be close to $1 billion now.
“There were a lot of drastic changes and permanent fixes to a temporary problem,” he said, noting the system is doing very well now.
Robert Fuller of NEA — NH said knowing the cost of an ongoing COLA would be helpful.
Marty Karlon of the retirement system said the 2017 study commission estimated a permanent COLA would have been in excess of a billion dollars on top of the unfunded liability.
The COLA approved in 2018 of 1.5 percent for those retired for five years or more on the first $50,000 cost $70 million to $71 million, Karlon said.
Martins said the retirement system used to pay an annual COLA when the legislature determined how much it could spend and paid it from general funds.
In 1983 the special account was created and funded a COLA for three decades, Martins said, but was stopped in 2011 without any provision to continue.
“The special account was not perfect, it could have been fixed or replaced, not just stopped,” he said. “Doing that is a real problem for workers with tight budgets, the Group 1 average is $22,000. A COLA is not so much a luxury, but whether to buy food, or medication or pay the oil bill.”
Ryll suggested the commission look at undoing a provision of the 2011 changes made to prevent spiking, noting some public employees have to work overtime regularly to fill vacancies.
Currently overtime is not considered part of base pay as it was before 2011, he said, but should be again for those who are forced to work overtime like corrections officers, police and firefighters who have to fill additional shifts.
He said there are enough provisions in place to prevent spiking like not including sick and vacation time count during the last five years of employment to make the change.
Other suggestions include changing the period to determine the person’s benefit from the last five years to the last three years as it was before 2011, and decreasing the time needed to be fully vested in the system.
Several members noted in Maine and Vermont, employees with five years in their retirement system are vested.
Some states are as low as three years, Karlon said, adding the state’s 10 year requirement is on the long end of what most states require.
The commission will not meet Aug. 31 as scheduled, and will hold its next meeting Sept. 7 at 1 p.m. in the Legislative Office Building.
Garry Rayno may be reached at firstname.lastname@example.org.