Retirement Benefits Panel Votes 8-6 to Support Senator Soucy’s Solution

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Marty Karlon, director of communications and legislative affairs for the New Hampshire Retirement System, is pictured testifying Thursday before the Retirement Benefits Commission.


CONCORD – A retirement benefits solution for public safety workers across the state was recommended by a House and Senate Commission on a vote of 8-6, Thursday upon state Sen. Donna Soucy’s recommendation. But some, particularly Republicans, expressed concern for funding much of the package with unanticipated revenue when the payout costs for the settlement to victims of the Youth Development Center loom.

It could be that there are 1,000 physical and sexual abuse victims and the current settlement for each one is close to $500,000.

But some members said it is important to focus on one problem at a time and Soucy’s recommendation would finally fix after 10 years the retirement benefits dilemma that has worried municipalities and state departments from prisons to state police for retention of the so-called “Group B” class of safety officials across the state.

They were left out in an overhaul of the state retirement system 10 years ago. It reduced how benefits were determined for law enforcement and firefighter members of the system, but not for those with the 10 years needed to be vested.

Senate President Jeb Bradley, R-Wolfeboro, presented two amendments to the commission several weeks ago that would increase benefits for those affected by the change 10 years ago.

One would raise the multiplier in determining retirement benefits from 2.0 to 2.5 percent, and the other would be a two-tiered system raising it to 2.5 percent for those between six and 10 years of service when the calculation was changed and 2.25 percent for those with between four and six years of service.

Sen. James Gray, R-Rochester, also previously asked the commission to also consider his proposal which would raise the multiplier to 2.5 percent for all Group 2 employees when they reach the 20-year mark and for all Group 1 employees when they reach the 30-year mark for full benefits.

The study for Bradley’s amendment considered the cost of when employees actually leave the system instead of assuming they would work until their 20-year anniversary when they could collect full benefits.

The original estimates were for the first amendment to cost between $52.2 million and $92.6 million, and the second with less increase in benefits costing $57.1 million.

In one amendment scenario Bradley said “the unfunded liability portion of approximately $44 million I think is getting into the range that I think offers some opportunity for consideration,” he said.

But the commission decided to go back to get more actuarial information of what it would look like at 10 and 15 years of service.

In the end, they narrowly chose the 10-years of service scenario supported by Democrat Soucy, D-Manchester, costing $55 million with some saying it provided more of a sweetener to stay at the job rather than being lost to the private sector and was broader in scope. 

Others favored the 15-year, including Gray and Bradley, both Republicans which has a price tag of closer to $36 million.

Union representatives have said there is a concern for retaining these life safety workers who may consider quitting for long-term better pay elsewhere, and that would put cities and town and state police coverage at risk at a time when there are currently many vacancies.

A legislative fix in House Bill 436 was rejected this spring, knowing that those workers might walk, but a promise by leadership to work on the issue. That led to this commission which has a report due Dec. 1.

Marty Karlon, director of communications and legislative affairs for the New Hampshire Retirement System, offered additional information it received from a private actuarial firm GRS for both amendments at 10- and 15-years.

He showed a grid with two rows highlighted in gray at the top of the page of numbers.

“What this does is it takes a previous proposal that was analyzed, that called for the multiplier for all Group 2 members in Tier B and Tier C as well future hires to change to a 2.5 percent multiplier for every year worked after attainment of 20 years.

“Last week the commission asked if GRS could turn around analysis with that 2.5 multiplier kicking in at 15 years of service, after completing 15 years and after 10 years,” he said.

Those were the two proposals.

He said the state would have an unfunded liability component to both and he said obviously the 10 years is larger than the 15 year proposal.

He said a third column showed the rate increase in addition to the current rates, with no pre-funding by the state. He said it would raise the percent by about 1.35 to 1.4 percent of pay on the employer rates. With pre-funding appropriation from the state for the unfunded liability, the second set of numbers, .6 and .63 would be the percentage increase which would be about $3.3 million a year right out across the employers’ proportionally based on the size of the employer’s public safety payroll.

Similarly, he said in the next column which was the 10-year proposal, a higher unfunded liability, a higher employer rate increase, and this would impact not only Group 2 tier B, existing Tier C and future hires meaning it was broader.

The numbers showed it would be $44 million in fiscal year 2026 to deal with the current employees or $54 million to deal with the current employees plus all future hires in the 10 year proposal.

If the unfunded portion of that was appropriated by the state, Karlon said, the increase to employer rates for the ongoing future costs of this change would be .95 or .94 percent of pay beginning in 2026 and the contribution rates collected from participating employers of Group 2 by $5.1 million a year.

“And that is not a one-year cost. Because this is open-ended, everybody who is coming into the system will have a normal cost associated with it going forward that could moderate over time based on other demographic changes but this one you can’t pay in advance on because it is open-ended.”

Soucy said that could be mitigated by the ongoing reduction of rates as the state pays off its unfunded liability “so the rates could even out.”

Karlon agreed that it was true that the rates change every two years based on the actuarial numbers and depending on investment experience and demographics, it could fluctuate.

“Ultimately, once the bulk of the unfunded is paid off in the end of the 2030s, we’re going to see a fairly large cliff in the rates at that point,” he said.

Soucy said the number of employees, for Tier B, that number is from last year and that number may have declined a bit, too.

He said he expected more accurate numbers, particularly as the legislation goes forward and it will be less as people have left that group and are retired.

“These numbers should be thought of as the ceiling,” he said, and it may have less impact, either noticeable or unnoticeable.

Gray said if he looks at the 10-year cost, and he was going to use the 15-year proposal, he would have $36.3 million and by the year 2036, he would have an additional $33 million for a total cost of $69 million.

“For back of the envelope math, ‘yes,” Karlon said. “If you wanted to take out a slightly bigger envelope you would just increase that $3.3 million by the payroll growth assumption of 2.75 percent a year,” Karlon said. 

Soucy made a motion to accept the plan with 2.5 percent multiplier at 10 years.

“I think the creation of this commission, although the language is broad in scope, looking at a number of retirement issues, the creation really occurred because we were unable to quickly enough ascertain a modified version of the language in House Bill 436 dealing with the multiplier.”

Since that time she said the commission has got a series of numbers to better quantify.

“The concerns I have heard expressed about previous plans offered are that they are too narrow in scope, they only impact a small number. This plan does not, and they cost even more. We were talking about upwards of $80 million.

“I think the beauty of this plan is that it satisfies the concerns that people came in with. It accomplishes what had always been the intention, which is to come up with a way to retain employees, because that is one of our biggest challenges,” Soucy said. “And I think this plan strives to hit the right balance and does hit the right balance and the benefit portion and the cost portion.”

But Gray, who got part of what he wanted by expanding the group to be covered in Soucy’s plan, said he would prefer to support the 15-year plan.

“Taking it down to 2.5 in 10 years becomes a problem for me. The reason I was happy with the 15 year plan, it would have been half way through their career, OK? Figuring they would work 30 years at 15 years, halfway, then we boost their rate from the 2 to the 2.5,” he said.

Gray said he was looking at 10-year costs and since rates don’t adjust until 2026, you are not going to see either that $3 million or the $5 million reflected in rates until that time. But when you take that into consideration, he said, that is a significant number and when you look at it over the two plans that is $37 million.

“Given the economy we are in, given the other obligations we are going to have, that is why I would be more comfortable at the 15-year point with the $36.3 million plus the $3.3 million,” he said.

Bradley agreed in principle with both versions because they both address retention.

“So as I said last week, when the analysis of my amendment which was just Group B came in at $43 million, that was getting to the range of what I thought was affordable. I think $55 million really is more than the affordability index that I am willing to go with at this point.”

He said looking at final revenue numbers now available, we have a general fund surplus of $58 million, he said.

“So we would basically use 96 percent of the existing surplus to fund the upfront cost of this benefit. I think it is a bridge too far. I am sorry to say it,” the Senate president said.

He said what he and Gray have access to as members of the Fiscal Committee, is the numbers related to the YDC settlement so far.

He said in the public document, that at the end of the third quarter, 180 claims had been filed and about $13 million had been paid out of the $100 million fund. That averages $460,000 per claim.

The amount of filing has accelerated he said and that is a good thing.

“I’m just troubled by dedicating over 95 percent of today’s surplus to this purpose and this purpose alone when we are looking at this right in the face knowing this is a big issue that has to be dealt with. I don’t know what the end results are going to be,” he said.

With uncertainty in the economy, real estate tax revenues off, Bradley said the more cautious approach is the right approach.

The recommendation is just that, a recommendation and House and Senate members on the commission said this would continue to be played out in the first months of the legislature, likely with better numbers of where the state is with respect to revenue.

Brian Ryll of the Professional Firefighters Association has said previously that the issue has gone way beyond restoring benefits to 1,700 to the public’s safety as State Troopers are down 77 positions, while the National Guard has to cover shifts in the state prisons.

And it is, he said, a matter of public safety.

“We have a real problem here, because we are losing people in this state.”

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