Defined benefit plan provides secure retirement benefits, helps support NH economy
With close to 80 percent of NHRS’ retirees and beneficiaries living in the Granite State, most of these retirement benefits support local economic activity.
“It’s a milestone for NHRS and for our members and retirees,” said Executive Director Jan Goodwin. “For more than 50 years, these members – many of them our friends, neighbors, and even family members – have served their local communities or the state, educating our children, providing services to residents, and keeping us all safe. NHRS is proud to administer their benefits.”
When the June pension benefit payments are issued at the end of the month, NHRS will have paid more than $1 billion in retirement benefits to approximately 45,000 retirees and beneficiaries in fiscal year (FY) 2024. The exact numbers won’t be available until later this year, following the completion of annual audits. In FY 2023, the retirement system paid $971.1 million in pension benefits to 43,603 retirees or their beneficiaries.
NHRS pension benefits are funded by member contributions, employer contributions, and investment income. Investment returns historically provide the majority of trust fund assets. The fund was valued at $11.51 billion as of the end of FY 2023 and stood at $12.2 billion as of March 31, 2024. Ten years ago, NHRS’ net assets were $7.3 billion. Over the past decade, NHRS investments have achieved an average annual return of 7.9 percent.
Economic Impact
“With four out of five retirees still living in New Hampshire, they, in turn, continue to contribute to the state’s economic health,” said Goodwin.
Every pension dollar distributed in the Granite State generated $1.70 in local economic output, according to the Pensionomics 2023 report issued by the National Institute on Retirement Security (NIRS). The report, which analyzed 2020 data, estimated that monies coming from all state and local pensions paid to New Hampshire residents supported $1.4 billion in total economic output. NHRS is by far the largest defined benefit plan in the state, although some cities have separate plans for some of their employees.
Studies examining the economic impact of defined benefit pension plans have shown how these benefits generate economic activity at various levels:
· Direct Impact: When pensioners spend their money, it directly stimulates local businesses. For instance, a retiree dining at a neighborhood restaurant contributes to its revenue.
· Indirect Impact: The restaurant, in turn, uses this income to replenish supplies, indirectly benefiting suppliers and distributors.
· Induced Impact: Employees of the restaurant, paid from the same revenue, use their earnings to buy groceries or other goods, further circulating money within the community.
· Societal Impact: The steady and guaranteed pension income received by retirees ensures continued spending, even during economic downturns, and allows many retirees to do volunteer work.
Most NHRS retirees receive a modest pension; approximately 60 percent of NHRS benefit recipients receive an annual benefit of less than $25,000 and more than 90 percent receive a benefit under $50,000. Members of NHRS are full-time state, county, and municipal employees, teachers, police officers, and firefighters. The membership consists of two groups: Group I (Employee and Teacher) and Group II (Police and Fire). In FY 2023, the average annual pension across all groups was $22,218. Looking back a decade, as of June 30, 2014, the average annual benefit was $19,407.
AVERAGE PENSION BENEFIT BY GROUP
FY 2023 FY 2014
Employee $15,324 $12,932
Teacher $23,441 $21,401
Police* $39,818 $35,154
Fire* $44,968 $36,562
* Police and Fire members do not participate in Social Security
“My NHRS pension is two-thirds of my income as a retired senior,” said Nancy Andrews, a former teacher and principal who worked in Hampton, Bedford, and Portsmouth. “I combine this pension with Social Security and a little savings to make it possible to continue to own my home and pay living expenses. Each year the cost of my medical insurance has increased and as a result my pension is less. I do not have ‘extra money’ beyond my basic expenses to live and maintain my home and my health.”
“I am grateful that my 40-plus years of contributing to the NHRS have made it possible for me to have a monthly pension so that I can manage to live independently in my home,” Andrews said. “I am hopeful that the NHRS will stay strong. I count on my NHRS pension as a major part of my retirement income.”
Promoting retirement security
Unlike a 401(k)-type benefit, which relies solely on investment performance, a defined benefit plan like NHRS provides guaranteed lifetime benefits. Many retirees appreciate the security provided by a pension.
Kate McGovern, who is a retired professor from the NH Bureau of Education & Training, said, “…. I have particular appreciation for my NHRS pension because I also had the privilege of serving on the NHRS Board and previously on staff at NHRS. I understand how the defined benefit pension provides retirement security that is unfortunately lacking for those reliant on 401(k) type defined contribution plan. With the security of my pension, I have had the time to write two books on Lean process improvement while teaching part-time at College Unbound in Providence, Rhode Island.”
Anne Burke, who contributed to the retirement system while she was a school counselor at Souhegan High School for 16 years, had this to say about her NHRS pension, “My NHRS pension is a very important component of my financial solvency. Since I worked in higher education for most of my career, the NHRS pension is not my only income source, but I would not sleep at night without it. With some of my other retirement funds still in active investments, it is reassuring to have a source that is guaranteed over time.”
Pam Smarling, a retired NH House committee researcher, said, “My pension has allowed me to focus on spending time doing the things I love to do which includes volunteering in my community, enjoying the great outdoors and traveling. Since I retired my husband and I have biked British Columbia, gone on safari in Tanzania and sailed the Greek islands.”
Maj. Ernest Loomis, who joined the NH State Police in 1963, said, “Thank you NHRS, for your diligence, and continuing to strengthen a system that has been under nearly constant assault from a variety of sources.”
Goodwin, who has served as Executive Director since 2021, reflected on how far NHRS has come.
“Since 1967, the retirement system has grown its membership and assets from its humble beginnings as a $98 million pension fund,” said Goodwin. “According to a 2024 study from AARP, 20 percent of U.S. adults aged 50 and older have no retirement savings, and more than 60 percent are worried they will not have enough money to support them in retirement. The guaranteed lifetime benefit NHRS helps provide economic stability for our members.”
“We are pleased to celebrate this moment in NHRS history.”
Related links
NHRS Benefits by County, FY 2023:
https://www.nhrs.org/docs/default-source/reports-and-valuations/other-reports/county-benefit-map-fy-2023.pdf
Pensionomics 2023 – NH data:
https://www.nirsonline.org/wp-content/uploads/2023/01/pensionomics2023_NH.pdf
Pensionomics 2023 – Full Report:
https://www.nirsonline.org/reports/pensionomics2023/
About NHRS
NHRS provides retirement, disability, and death benefits to its eligible members and their beneficiaries. The State of New Hampshire and more than 460 local government employers participate in NHRS for their employees, teachers, firefighters, and police officers. NHRS has approximately 48,500 active members and 43,500 benefit recipients. NHRS administers a defined benefit plan qualified as a tax-exempt entity under sections 401(a) and 501(a) of the Internal Revenue Code.
