SB326: relative to contributions by political subdivision employers for certain employee service, and repealing certain retirement system provisions permitting additional contributions by members.

SB 326-FN - AS INTRODUCED

2004 SESSION

04-3021

10/01

SENATE BILL 326-FN

AN ACT relative to contributions by political subdivision employers for certain employee service, and repealing certain retirement system provisions permitting additional contributions by members.

SPONSORS: Sen. Flanders, Dist 7; Rep. Zolla, Rock 77

COMMITTEE: Insurance

ANALYSIS

This bill requires political subdivision employers under the retirement system to contribute 100 percent of the employer share of normal contribution made for the purpose of additional pay for extra or special duty of its employees.

This bill also repeals the provisions for making additional contributions for the benefit of a retirement system member's retirement allowance.

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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Matter which is either (a) all new or (b) repealed and reenacted appears in regular type.

04-3021

10/01

STATE OF NEW HAMPSHIRE

In the Year of Our Lord Two Thousand Four

AN ACT relative to contributions by political subdivision employers for certain employee service, and repealing certain retirement system provisions permitting additional contributions by members.

Be it Enacted by the Senate and House of Representatives in General Court convened:

1 Retirement System; Method of Financing; State Annuity Accumulation Fund. Amend RSA 100-A:16, II(b) and (c) to read as follows:

(b)(1) The contributions of each employer for benefits under the retirement system on account of group II members shall consist of a percentage of the earnable compensation of its members to be known as the "normal contribution", and an additional amount to be known as the "accrued liability contribution'; provided that any employer, other than the state, shall pay 65 percent of such total contributions, and 35 percent thereof shall be paid by the state; and provided further that[,]:

(A) In case of group II members employed by the state, the state shall pay both normal and accrued liability contributions.

(B) Contributions by an employer, other than the state, for service of an employee which is extra or special duty and for which pay is included as additional pay in earnable compensation, shall not be included in the 35 percent share paid by the state under this subparagraph. Employer contributions for such normal and accrued liability costs shall be made pursuant to paragraph III of this section.

(2) The rate percent of such normal contribution in each instance shall be fixed on the basis of the liabilities of the system with respect to the particular members of the various member classifications as shown by actuarial valuations, except as provided in subparagraphs (h) and (i).

(c) The contributions of each employer for benefits under the retirement system on account of group I members shall consist of a percentage of the earnable compensation of its members to be known as the "normal contribution", and an additional amount to be known as the "accrued liability contribution"; provided that, in the case of teachers, any employer, other than the state, shall pay 65 percent of such total contributions, and 35 percent thereof shall be paid by the state; and provided further that :

(A) In case of teacher members employed by the state the state shall pay both normal and accrued liability contributions.

(B) Contributions by an employer, other than the state, for service of an employee which is extra or special duty and for which pay is included as additional pay in earnable compensation, shall not be included in the 35 percent share paid by the state under this subparagraph. Employer contributions for such normal and accrued liability costs shall be made pursuant to paragraph III of this section.

(2) The rate percent of such normal contribution in each instance shall be fixed on the basis of the liabilities of the system with respect to the particular members of the various member classifications as shown by actuarial valuation, except as provided in subparagraphs (h) and (i).

2 Repeal. RSA 100-A:16, I(c), relative to additional contributions by or on behalf of a member, is repealed.

3 Effective Date.

I. Section 1 of this act shall take effect July 1, 2004.

II. The remainder of this act shall take effect 60 days after its passage.

LBAO

04-3021

Revised 1/7/04

SB 326 FISCAL NOTE

AN ACT relative to contributions by political subdivision employers for certain employee service, and repealing certain retirement system provisions permitting additional contributions by members.

FISCAL IMPACT:

The New Hampshire Retirement System states this bill will decrease state expenditures, and increase county and local expenditures by an indeterminable amount in FY 2005 and each year thereafter. There will be no fiscal impact on state, county, and local revenue.

METHODOLOGY:

The New Hampshire Retirement System states this bill will repeal the provisions of RSA 100-A:16, I(c) which allows members to make additional contributions. The repeal would have no fiscal impact on the System since the members pay the additional contributions.

The System states this bill will also require political subdivision employers under the System to contribute 100% of the employer share of normal contributions attributable to additional pay for extra or special duty employment for Teachers, Policemen, and Firemen. Currently, the State pays 35% and the political subdivision pays 65% of the employer's share of normal contributions. As a result, this bill will shift a portion of the employer normal contribution from the state to political subdivisions. The System states that based on the June 30, 2003 valuation, the target funding normal contribution would be applicable in determining the fiscal impact of this bill. The System was not provided with the necessary data to calculate the exact impact of this legislation, however, they assume 1% of total compensation is due to extra or special duty employment. The estimated fiscal impact is as follows:

Annual Increase in Annual (Decrease)

Political Subdivision in State Normal

Membership Classification Normal Contributions Contributions

Teachers $230,000 ($230,000)

Policemen $130,000 ($130,000)

Firemen $ 80,000 ($ 80,000)

Total $440,000 ($440,000)

The System states the fiscal impact would increase by a corresponding amount for every 1% of total compensation due to extra or special duty employment. For instance, if compensation due to extra or special duty employment is actually 2% of total compensation, the fiscal impact would be $880,000 (2 x $440,000).

The System states that there will be an annual decrease in administrative expenses of $3,000 associated with the repeal of RSA 100-A:16, and an annual increase in administrative expenses of $3,000 for System staff to track extra and special duty employment. In addition, there will be a one-time expense associated with updating payroll systems.

The Actuary's letter is on file in the bill jacket in the Senate Clerk's Office.