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New Hampshire Retirement System Presentation for NHSAA

New Hampshire Retirement System Presentation for NHSAA. Plan Governance. NH Legislature: Plan Sponsor RSA 100-A serves as plan document NHRS Board of Trustees and Independent Investment Committee Members serve as fiduciaries NHRS staff implements RSA 100-A

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New Hampshire Retirement System Presentation for NHSAA

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  1. New Hampshire Retirement System Presentation for NHSAA

  2. Plan Governance • NH Legislature: Plan Sponsor • RSA 100-A serves as plan document • NHRS Board of Trustees and Independent Investment Committee Members serve as fiduciaries • NHRS staff implements RSA 100-A • Internal Revenue Code provisions • NH Constitution Art. 36-a protects funds “for the exclusive purpose” of providing benefits

  3. Fiduciary Management Contributions Benefit Payments = + + Investment Earnings Expenses + • Equation must balance over long-term

  4. Trust Fund • Member Contributions • Fire and Police = 9.3% of earnings • Employees and Teachers = 5.0% of earnings • Employer Contributions • Actuarially determined • Based on membership classification • Includes pension contribution and medical subsidy contribution • Trust Fund Investment Earnings *State employees hired on or after July 1, 2009, must contribute 7.0% of gross earnings

  5. Actuarial Analysis • Biannual Actuarial Valuation • Calculates funding status • Used to set employer rates • Assumptions derived in experience study • Actuarial Experience Study • Conducted every five years • Evaluates assumptions • Member demographics and mortality • Investment Assumptions • Inflation

  6. Employer Contributions • Actuary recommends average increase in employer rates by 22.7% of total fund for biennium beginning July 1, 2011 • Increases from 11.4% to 31.1% based on membership classification (employee, teacher, fire, police) • Rate increases primarily due to investment losses • Employer rate increases to be less dramatic than other plans

  7. Employer Contributions Group I Political Subdivision Employers – 2010-11 *The State of NH contributes 25% of the cost for teacher members, and the employer contributes the remaining 75%. The contribution percentage is scheduled to revert to a 35% (state)/65% (employer) split in Fiscal Year 2012.

  8. Employer Contributions Group I Political Subdivision Employers – 2012-13 (projected) *The State of NH contributes 35% of the cost for teacher members, and the employer contributes the remaining 65%.

  9. Employer Contributions

  10. Funded Ratio History

  11. Funding Status of NHRS • 58% funded as of June 30, 2009 • NHRS well-positioned to recover as economy improves; 2010 numbers still being audited, but overall return on marketable assets is encouraging.

  12. Investment Management • Board of Trustees • Independent Investment Committee • Investment Strategy • Asset Liability Modeling

  13. Independent Investment Committee • New as of January 1, 2009 • Oversees the administration of the investment program within Board’s policies • Hires investment service providers, such as the custodian and investment managers • Prepares a comprehensive annual investment report for approval by the Board

  14. Investment Strategy • Reviewed annually • Long-term time horizon • Manages risk and liquidity • Diversifies portfolio among different types of assets

  15. Trust Fund Assets

  16. Investment Performance

  17. Financial Status of NHRS • Trust fund stood at $4.9 billion as of June 30, 2010 • Marketable assets showed a 13.7% return for year ending June 30, 2010 • Investment performance better than many other funds

  18. Asset Liability Model • Models asset allocation alternatives • Maximize investment returns • Acceptable levels of liquidity and risk • Liquidity: cash management to fund benefits payments • Goal: Balance expected return, risk, and liquidity

  19. Legislative Review2008 - 2010 • Board Governance • Changes to Certain Benefits • Employer Assessments and Contributions • Funding Source of Certain Benefits • Post-Retirement Benefits • Spiking

  20. 2008 Laws House Bill 1516-FN • Sudan Divestment Act House Bill 1520 • Peace Corps or AmeriCorps service credit House Bill 1643 • Extended eligibility for medical subsidy benefits to certain Group I teacher and political subdivision employee members who retired on or before July 1, 2009

  21. 2008 Laws House Bill 1645 • Definition of “Earnable Compensation” • Transferred $250 million to the State Annuity Accumulation Fund • Special Account funds will not be used to provide medical benefits • Effective July 1, 2008, medical subsidy rates will not increase for four years • Effective July 1, 2012, rates will increase by 4.0% each July 1st

  22. 2008 Laws House Bill 1645 continued: • Extended the deadline for medical subsidy eligibility for teachers and political subdivision employees • Created a legislative study commission to determine future funding for medical benefits

  23. 2008 Laws House Bill 1645 continued: • Granted certain COLA payments to eligible retired members • Granted one-time supplemental allowances to eligible retired members • Created a legislative study commission to determine future funding for COLAs

  24. 2008 Laws House Bill 1645 continued: • Newly appointed and reappointed trustees must have familiarity with or experience in finance or business management • Non-member trustees must have substantial experience in the field of institutional investment or finance • Chairperson now has vote on board

  25. 2008 Laws House Bill 1645 continued: • “Spiking” Legislation – 125% Calculation • Members shall cease to be active after more than 180 days of absence from service • Interest rate applied to funds of non-vested members is different from interest rate applied to funds of vested members

  26. 2008 Laws House Bill 1645 continued: • Maximum benefit for member hired on or after July 1, 2009, will be no more than $120,000 under service or disability retirement • Decennial Retirement Commission

  27. 2009 Laws “Spiking” Legislation House Bill 223 • Delayed the implementation of the “spiking” legislation (HB 1645, Laws of 2008) to July 1, 2010 House Bill 641 • NHRS to recommend methodology for determining employer assessment for excess pension benefits (“spiking assessment”) Senate Bill 108 • Established a study committee to review employer assessments

  28. 2009 Laws House Bill 2 • State’s share of employer contribution • 7.0% contribution rate for new state employees • State OPEB balance to $0.00 for calculating rates • Healthcare premiums for state retirees under age 65 House Bill 436 • Same gender married couples House Bill 633 • Extended eligibility for medical subsidy benefits to certain Group I teacher and political subdivision employee members who retired on or before July 1, 2009

  29. 2009 Laws Senate Bill 160 • Accidental Death Benefit • Pension to spouse continues upon remarriage Senate Bill 200 • Ordinary Death Benefit • Pension to spouse continues upon remarriage • HEART Act: Death benefit payable to beneficiary if member dies during military service

  30. 2010 Laws Special Session House Bill 1 • Provides Cost-of-Living Adjustments (COLA) and Temporary Supplemental Allowances (TSA) to eligible retirees and beneficiaries

  31. Challenges and Initiatives • Spiking • Supplemental Allowances • Working After Retirement • Lawsuits • Legislation 2011

  32. “Spiking” House Bill 1645, Laws of 2008 • Created the 125% employer assessment – “spiking” legislation House Bill 223, Laws of 2009 • Delayed the implementation of the “spiking” legislation (HB 1645, Laws of 2008) to July 1, 2010 Senate Bill 504, Laws of 2010 • Delayed the implementation of the “spiking” legislation (HB 1645, Laws of 2008) to July 1, 2011

  33. Supplemental Allowances • Cost-of-Living Adjustments (COLAs) become a permanent addition to the pension if and when granted by the New Hampshire Legislature • Temporary Supplemental Allowances (TSAs) are one-time payments • A legislative study commission will determine future funding of COLAs

  34. COLAs and TSAs

  35. Working After Retirement • May work for non-NHRS employer (such as private sector) • May not occupy NHRS-covered position and receive pension • Pension will cease • Active membership will be restored • Disability Retirement – Different provisions (gainful occupation earnings limitations) • NHRS is reviewing post-retirement employment issues

  36. Lawsuits • State health insurance for retirees • HB 1645 earnable compensation • Sudan divestment • State’s share of employer contribution rates

  37. Legislation 2011 • “Spiking solution” • State’s contribution to employer rates • Plan design changes

  38. NHRS Communications • Outreach and communication • Employer, member, and retiree education • Public Forums • Website and content enhancements • New “My Account” feature • User-friendly information • Consistent messaging

  39. Email Updates • Visit www.nhrs.org • Enter information in section entitled “NHRS Email Updates” • Receive up-to-date information on various NHRS-related topics

  40. NH Retirement System 54 Regional Drive Concord, NH 03301 Phone: 603-410-3500 Toll Free: 877-600-0158 www.nhrs.org info@nhrs.org

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