HB532: excluding extra or special duty pay from earnable compensation in the retirement system.

HB 532-FN – AS INTRODUCED

2009 SESSION

09-0200

10/01

HOUSE BILL 532-FN

AN ACT excluding extra or special duty pay from earnable compensation in the retirement system.

SPONSORS: Rep. Hawkins, Hills 18

COMMITTEE: Executive Departments and Administration

ANALYSIS

This bill removes extra or special duty pay from the definition of earnable compensation used in the calculation of retirement system benefits.

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Matter which is either (a) all new or (b) repealed and reenacted appears in regular type.

09-0200

10/01

STATE OF NEW HAMPSHIRE

In the Year of Our Lord Two Thousand Nine

AN ACT excluding extra or special duty pay from earnable compensation in the retirement system.

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

1 Retirement System; Earnable Compensation; Extra or Special Duty Pay Removed. Amend RSA 100-A:1, XVII to read as follows:

XVII. “Earnable compensation” shall mean for all members the full base rate of compensation paid plus any overtime pay, holiday and vacation pay, sick pay, longevity or severance pay, cost of living bonus, additional pay for extracurricular and instructional activities [or for other extra or special duty], and any military differential pay, plus the fair market value of non-cash compensation paid to, or on behalf of, the member for meals or living quarters if subject to federal income tax, but excluding other compensation except cash incentives paid by an employer to encourage members to retire, supplemental pay paid by the employer while the member is receiving workers’ compensation, and teacher development pay that is not part of the contracted annual salary. However, earnable compensation in the final 12 months of creditable service prior to termination of employment shall be limited to 1 1/2 times the higher of the earnable compensation in the 12-month period preceding the final 12 months or the highest compensation year as determined for the purpose of calculating average final compensation, but excluding the final 12 months. Any compensation received in the final 12 months of employment in excess of such limit shall not be subject to member or employer contributions to the retirement system and shall not be considered in the computation of average final compensation. Provided that, the annual compensation limit for members of governmental defined benefit pension plans under section 401(a)(17) of the United States Internal Revenue Code of 1986, as amended, shall apply to earnable compensation for all employees, teachers, permanent firemen, and permanent policemen who first become eligible for membership in the system on or after July 1, 1996. Earnable compensation shall not include compensation in any form paid later than 120 days after the member’s termination of employment from a retirement eligible position, with the limited exceptions of disability related severance pay paid to a member or retiree no later than 120 days after a decision by the board of trustees granting the member or retiree disability retirement benefits pursuant to RSA 100-A:6 and of severance pay which a member was entitled to be paid within 120 days after termination but which, without the consent of the member and not through any fault of the member, was paid more than 120 days after the member’s termination. The member shall have the burden of proving to the board of trustees that any severance payment paid later than 120 days after the member’s termination of employment is earnable compensation and meets the requirements of an asserted exception to the 120-day post-termination payment requirement.

2 Effective Date. This act shall take effect 60 days after its passage.

LBAO

09-0200

01/20/09

HB 532-FN - FISCAL NOTE

AN ACT excluding extra or special duty pay from earnable compensation in the retirement system.

FISCAL IMPACT:

The New Hampshire Retirement System states this bill may decrease state expenditures by $400,000, and decrease county and local expenditures by an indeterminable amount in FY 2012 and each year thereafter. This bill will have no fiscal impact on state, county, and local revenue.

METHODOLOGY:

The System states this bill would eliminate extra and special duty pay from inclusion in its earnable compensation computation, as defined in RSA 100-A:1. The System states since it does not currently track the nature of the individual components of earnable compensation, it was unable to provide its actuary with information on the specific amounts or percentages of compensation related to extra or special duty pay or which groups received extra or special duty pay. The System’s actuary did estimate covered payroll would decrease by 1% for employees 3 or more years away from retirement as of June 30, 2008 if the proposed bill were to pass, and extra and special duty pay were no longer included in earnable compensation. The actuary used the information gathered for the June 30, 2008 interim actuarial valuation in performing this supplemental valuation and estimated that the decline in covered payroll for all System participants would be $10.1 million. Due to this decline, the actuary estimated reduced employer contribution amounts to the System in FY 2012 and FY 2013. The estimated dollar impact on employer pension and health subsidy contribution amounts for the state and the political subdivisions (PS) is as follows:

(In millions of $)

FY 2012 FY 2013

State PS Total State PS Total

Employee Members (0.1) (0.3) (0.3) (0.1) (0.3) (0.4)

Teacher Members (0.1) (0.2) (0.3) (0.1) (0.3) (0.4)

Police Members (0.1) (0.2) (0.3) (0.1) (0.2) (0.3)

Fire Members (0.1) (0.1) (0.2) (0.1) (0.1) (0.2)

Total Contributions (0.4) (0.8) (1.1) (0.4) (0.9) (1.3)

LBAO

09-0200

01/20/09

The actuary could not break down the political subdivision amount further into its two components, so the county and local impacts are reported together. The actuary states the statutory rates increased from the valuation results, but the employer contributions in dollars have decreased due to the lower covered payroll. This bill would not impact employer contributions in FY 2010 and FY 2011 due to fact that rates have already been set.