SB434: relative to the reduction in the calculation of state retirement annuities at age 65.

SB 434-FN - AS INTRODUCED

2022 SESSION

22-2983

10/04

SENATE BILL 434-FN

AN ACT relative to the reduction in the calculation of state retirement annuities at age 65.

SPONSORS: Sen. Cavanaugh, Dist 16; Sen. Rosenwald, Dist 13; Rep. Deshaies, Carr. 6; Rep. Allard, Merr. 21; Rep. Pratt, Rock. 3; Rep. Merner, Coos 7

COMMITTEE: Executive Departments and Administration

ANALYSIS

This bill provides for the application of the reduction of a retiree’s annuity at the member’s full retirement age under the federal Social Security system.

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Matter which is either (a) all new or (b) repealed and reenacted appears in regular type.

22-2983

10/04

STATE OF NEW HAMPSHIRE

In the Year of Our Lord Two Thousand Twenty Two

AN ACT relative to the reduction in the calculation of state retirement annuities at age 65.

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

1 Retirement System; Service Retirement Benefits; Reduction Age. Amend RSA 100-A:5, I(b) to read as follows:

(b) Upon service retirement, an employee member or teacher member of group I shall receive a service retirement allowance which shall consist of a member annuity which shall be the actuarial equivalent of the member’s accumulated contributions at the time of retirement, and a state annuity. Prior to the member’s attainment of [age 65] the member’s full retirement age for Social Security, the state annuity, together with the member annuity, shall be equal to 1/60 of the member’s average final compensation multiplied by the number of years of creditable service. After attainment of [age 65] the member’s full retirement age for Social Security, the state annuity, together with the member annuity, shall be equal to 1/66 of the member’s average final compensation multiplied by the number of years of creditable service. Provided, however, that a group I member who commenced service on or after July 1, 2011 shall not receive a service retirement allowance until attaining the age of 65; but may receive a reduced allowance after age 60 if the member has at least 30 years of creditable service where the allowance shall be reduced, for each month by which the date on which benefits commence precedes the month after which the member attains 65 years of age, by 1/4 of one percent.

2 Retirement System; Ordinary Disability Retirement Benefits; Reduction Age. Amend RSA 100-A:6, I(b)(1)(A) and (B) to read as follows:

(A) Prior to the member’s attainment of [age 65] the member’s full retirement age for Social Security, the state annuity, together with the member annuity, shall be equal to 1/60 of the member’s average final compensation at the time of his or her ordinary disability retirement multiplied by the number of years of creditable service at the time of his or her ordinary disability retirement;

(B) After attainment of [age 65] the member’s full retirement age for Social Security, the state annuity, together with the member annuity, shall be equal to 1/66 of the member’s average final compensation at the time of his or her ordinary disability retirement multiplied by the number of years of creditable service at the time of his or her ordinary disability retirement;

3 Retirement System; Accidental Disability Retirement Benefits; Reduction Age. Amend RSA 100-A:6, I(d)(1)(A) and (B) to read as follows:

(A) Prior to the member’s attainment of [age 65] the member’s full retirement age for Social Security, the state annuity, together with the member annuity, shall be equal to 1/60 of the member’s average final compensation at the time of his or her accidental disability retirement multiplied by the number of years of creditable service at the time of his or her accidental disability retirement;

(B) After attainment of [age 65] the member’s full retirement age for Social Security, the state annuity, together with the member annuity, shall be equal to 1/66 of the member’s average final compensation at the time of his or her accidental disability retirement multiplied by the number of years of creditable service at the time of his or her accidental disability retirement;

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

LBA

22-2983

12/27/21

SB 434-FN- FISCAL NOTE

AS INTRODUCED

AN ACT relative to the reduction in the calculation of state retirement annuities at age 65.

FISCAL IMPACT: [ X ] State [ X ] County [ X ] Local [ ] None

Estimated Increase / (Decrease)

STATE:

FY 2022

FY 2023

FY 2024

FY 2025

Appropriation

$0

$0

$0

$0

Revenue

$0

$0

$0

$0

Expenditures

$0

$0

$1.23 million

$1.27 million

Funding Source:

[ X ] General [ ] Education [ X ] Highway [ X ] Other - Various Funds

POLITICAL SUBDIVSIONS:

Revenue

$0

$0

$0

$0

Expenditures

$0

$0

$4.26 million

$4.38 million

*The New Hampshire Retirement System states it is not able to separate the fiscal impact of this legislation between county and local government, therefore the fiscal impact is shown together as political subdivisions.

METHODOLOGY:

This bill provides for the application of the statutory recalculation of a Group I (employee or teacher) retiree’s annuity at the member’s full retirement age under the federal Social Security system, rather than at age 65.

The New Hampshire Retirement System’s (NHRS) actuary assumed the bill will become effective on 7/1/2022 and applied the new provisions to Group I members who retire on or after 7/1/2022. The NHRS also notes that because the employer rates are already set for FY 2022 and FY 2023 the rates associated with the bill will not begin until FY 2024. Using the June 30, 2019 actuarial valuation assumptions of an annual rate of return of 6.75 percent, wage inflation at 2.75 percent a year, and using the entry-age actuarial cost valuation method, the System’s actuary determined the following increases:

State

Employer Pension Rates as a Percent of Payroll

Current 2022-2023 Rates

Impact of Proposal

Proposed 2022-2023 Rates

Employees

13.75%

0.19%

13.94%

Police

30.67%

0.00%

30.67%

Fire

29.78%

0.00%

29.78%

Expected Employer Dollar Increase (Decrease) Due to Proposal

FY 2022

FY 2023

FY 2024

FY 2025

Employees

-

-

$1,230,000

$1,270,000

Police

-

-

$0

$0

Fire

-

-

$0

$0

TOTAL

-

-

$1,230,000

$1,270,000

Political Subdivisions

Employer Pension Rates as a Percent of Payroll

Current 2022-2023 Rates

Impact of Proposal

Proposed 2022-2023 Rates

Employees

13.75%

0.19%

13.94%

Teachers

19.48%

0.22%

19.70%

Police

30.67%

0.00%

30.67%

Fire

29.78%

0.00%

29.78%

Expected Employer Dollar Increase (Decrease) Due to Proposal

FY 2022

FY 2023

FY 2024

FY 2025

Employees

-

-

$1,470,000

$1,520,000

Teachers

-

-

$2,790,000

$2,860,000

Police

-

-

$0

$0

Fire

-

-

$0

$0

TOTAL

-

-

$4,260,000

$4,380,000

The NHRS actuarial projects an increase in the actuarial accrued liability of $44.2 million based on the provisions in the bill. They also note a modification will need to be made to the PensionGold software to meet the requirements of the bill. However, they expect the cost to be less than $10,000. Lastly, the NHRS actuarial states there will be additional impact to FY 2026.

AGENCIES CONTACTED:

New Hampshire Retirement System