This story appeared in the Union Leader on June 21, 2007 and was written by TOM FAHEY
State House Bureau Chief
Concord – Retired police, teachers, firefighters and other public workers will get a 2.25 percent cost of living increase July 1 as part of a pension system reform package adopted today.
A committee of House and Senate members agreed on a bill that includes the increase for all public sector retirees and takes steps meant to shore up the troubled New Hampshire Retirement System.
Beside the cost-of-living adjustment (COLA), the bill changes the system's funding method, closes a drain on earnings and establishes a reform study commission due to report by the years end.
House members wanted to keep the COLA to 2 percent, with a long-term cost of $59 million in NHRS funds, and hoped to concentrate increases among the lowest-paid retirees. The Senate favored an across-the-board increase at 2.5 percent, which would have cost $74 million over time. There was no firm figure on the cost of the 2.25 percent COLA, but estimates were that it would be close to $70 million.
NHRS, with more than $5 billion in assets, is funded only at 58 percent of its long-term liabilities, with a $3 billion deficit when finances are measured over the life of its pension obligations. It has 50,000 active members and provides retirement benefits to nearly 20,000.
The bill, HB 653, changes the system's funding method to one more widely accepted under accounting standards, ends the practice of sending earnings over a certain level into special accounts that fund health insurance subsidies and cost of living increases, and establishes a commission to make a report by Jan. 1 on how to strengthen the system further.
By ending the special accounts system, called gains-sharing in the industry, the system will keep an estimated $26 million in each of the next two years within the main retirement fund pool.
The special account system cannot be revived, the bill says, until the system reaches long-term funding equal to 85 percent of its obligations, and then, only when earnings exceed 10.5 percent in a given year.
Sen. Peter Burling, D-Cornish, led a Senate delegation on the bill. He said the new accounting method is a major accomplishment, but said the commission "is incredibly important. Now the governor gets to put some really smart people in a room and say 'How are we going to deal with all of this?' "
Rep. Anne-Marie Irwin, D-Peterborough, said the agreement is "a critical first step in stabilizing the system and in providing predictability for employees and taxpayers."
She said that under the current accounting system, used only by New Hampshire among the 50 states, the contributions towns and school districts have to make swing widely from year to year. The new method, meant to fund a worker's retirement gradually during his or her years of employment, will reduce the volatility, she said.
