The House special committee examining a defined contribution plan for state employees is preparing to take a vote next week. This will not be a simple vote for or against a defined contribution plan (DC), but a vote on a number of alternatives the committee has suggested, including the straight defined contribution option.
Earlier this week, the committee reviewed a report submitted by Segal and Co., a firm that was hired at Speaker Bill O’Brien’s request to re-examine an initial report done by the consulting actuary for the NH Retirement System. Apparently, O’Brien did not trust the NHRS, but he now knows the joke’s on him – his selected consultant came up with the same facts. Number one fact – costs will increase for the state if a DC plan is implemented.
The contractors said the ultimate cost of switching to a DC plan would be between $104 million and $208 million. They were also asked point blank if it would be less expensive to stay with the current Defined Benefit plan, and the answer was yes.
In addition to the costs associated with switching over from one plan to another, the consultants anticipate a $1.2 billion increase to the unfunded liability to account for the change in investment allocations for increased liquidity as the current plan closes.
“This committee was charged with determining whether a defined contribution plan is right for New Hampshire. And I would have to say ‘no,’ ” said Rep. Stephen Shurtleff, a special committee member. “That $1.2 billion would be detrimental to the state and employees. I would ask the legislature to reconstitute this committee to look at hybrid plan options.”
Most members of the committee were not gung-ho on any one option and voiced unease about the numbers and a need for further information. Some said the $1.2 billion was reason enough to consider some of the alternative plans.
The committee will vote next Tuesday on the various options, and all options with thumbs up votes will be presented to House Speaker Bill O’Brien for approval; from there, it would be turned into a bill request.
We will continue to monitor this discussion and keep you updated.