There’s more to retirement system story By ERNEST F. LOOMIS

For the Monitor
Wednesday, March 30, 2016

Reprinted with permission from the Concord Monitor and Major Loomis

I read with interest your editorial “Changes to retirement system needed” (Sunday Monitor Forum, March 27). Some of your points are well taken and have been supported by retirees for some time. In the interest of fairness, I would like to point out some areas that are not precise in your article.

The most important is that the New Hampshire Retirement System has taken note of the issues of return to work post retirement. The NHRS has requested that the Legislature adjust the laws addressing the issue, such as a requirement that employers report to the NHRS monthly, including the number of hours worked by each such associated retiree. In instances where there has been noncompliance, a cash penalty has been levied against the employer (which has resulted in filed legislation to require warnings before such actions).

Secondly, there is legislation that requires retirees who work more than 32 hours per week to have their pension discontinued and their wages once again subjected to contribution by both the member and the employer to the retirement system.

For your information historically, the NHRS was established by law in 1967. Prior to that, the state, and many of the political subdivisions, had individual pension systems. In order to encourage the political subdivisions to join the new system, making it stronger, the state started by offering to pay 40 percent of the employer costs for teachers, followed shortly by an offer of 35 percent for all employees, which was reduced to 30 percent in 2010, 25 percent in 2011 and finally eliminated in 2012.

Employees in Group 1 who were also covered by Social Security were assessed a contribution rate of 4.6 percent with a setback accounting for Social Security, which was later changed to 5 percent with the Social Security offset eliminated, replaced by a 10 percent reduction at age 65. They could retire at age 60.

Employees in Group 2 were required to contribute 9.3 percent of their earnings, and could retire at age 50 and 25 years service. Since most of the original members of the State Police were well into their 30s, they were not eligible to retire until they were well into their 60s. Weather, nature of the duties and advanced ages caused more injuries, and thus the requirements were reduced to 20 years of service and age 45.

From the beginning, state employees (as well as those from political subdivisions) were paid poorly, with raises seldom, if ever, granted. In order to attract good quality employees, the state, as a matter of policy, offered a good pension and good health care, at the full cost to the state, to employees repeatedly over the years. (It was not until 1983 that the subtle change “subject to funds appropriated by the Legislature” was added to begin shifting the costs for health care to the employees).

At the same time, employers at the cities and towns were clamoring for the Legislature to reduce their costs, so in the early 1990s, when the system was funded at over 114 percent, a House member stood in the well of the House, waving a sheaf of papers saying: “This retirement system is rolling in dough, and does not need the heavy contribution of the towns. Let’s give them a break.”

The Legislature did give the employers a “hometown discount,” and they took it for over 16 years. Meanwhile, the employees continued the march and never got a reduction.

Earlier, in 1984, New Hampshire voters amended the state constitution, Part 1 Article 36-A, requiring the NHRS to set rates that required actuarially sound rates of contribution to be required of employers and established that the trust fund of the pension was for the exclusive benefit of the members and was not to be diverted for any other purpose.

In 1985, a lawsuit against the state confirmed the autonomy of the NHRS and established the independence of the system was necessary in order to carry out the mandate that the funds in the trust were to be for the benefit of the members only. This was all as a result of the state attempting to take $5 million from the pension fund to balance the state budget.

In the ensuing years, the Legislature has continually passed laws that do not benefit the employees or retirees but instead have increased contribution rates for Group 1 to 7 percent (employees and teachers), 11.55 percent for police and 11.88 percent for fire. In addition, Group 2 employees (police and fire) must now work at least 25 years and be age 52.5 years to retire. In addition, their final compensation can no longer include outside paid details, and final compensation must be the average of the last five years instead of the last three. In essence, requiring them to work older and longer – for less.

Lastly, I would like to point out that the employers (as the state constitution requires) were essentially given a 30-year mortgage of additional payments toward reducing the unfunded liability and by 2039 will have returned the viability of the system to 85 percent or more funded.

In the meantime, the state retirees have received no cost-of-living adjustments for several years, while constantly being required to contribute more for health care that was originally intended to be at the full cost of the state.

In your editorial, you strongly suggest that something other than the current defined benefit plan be instituted as soon as possible. Were you aware that every one of those alternative plans have been widely panned by experts in the field as well as actuaries, as certain to increase the unfunded liability? Perhaps that is part of the reason HB 1673, to force a cash balance on state employees and allow political subdivision employers to force it on their employees, has been laid on the table by a roll call vote of 188-122. Also, this bill would immediately switch the risk from the employer to the employees.

George Washington said after the Revolutionary War: “The willingness with which our young people are likely to serve in any war, no matter how justified, shall be directly proportional as to how they perceive the veterans of earlier wars were treated and appreciated by the nation.”

I submit that we are New Hampshire’s veterans, and there is much more to this story.

(Ernest F. Loomis retired as a major with the New Hampshire State Police.)

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