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Past - 1984:
A Granite (State) Foundation

» NH Constitution amended (Part |, Article 36-a)

° Establishes that pension funds are for the exclusive
benefit of NHRS members and are not to be diverted
for any other purpose

° Requires Trustees to set actuarially sound employer
contribution rates and employers to pay the rates in
full

¢ Distinguishes NHRS from many systems where
annual funding level is at the discretion of the
legislature (e.g. Illinois, New Jersey, Kentucky)

Past - 1985:
Autonomy from the State

» NH Supreme Court rules in Sununu v NHRS

° Issue: Whether or not NHRS contracts had to be
approved by the Governor & Executive Council

° Decision: NHRS is not an Executive Branch agency
and operates for the exclusive benefit of its
members - largely taking retirement system
management and administration out of the political
realm

9/20/2021

Past - 1991:
Digging the Hole

> Following an actuarial valuation in 1989 which
indicated a dramatic increase in unfunded
liability from $3.9 million to $217.5 million, the
legislature in 1991 adopts the ‘Open Group
Aggregate’ actuarial method and sets the
assumed rate of return at 9.75%, both done for
the purpose of reducing employer contribution
rates

> Infringement of Board’s fiduciary duty to set
actuarially sound rates

>» Resulted in artificially depressed employer

contribution rates from 1991 to 2009

Past - 2007:
The Great Awakening

» Legislature replaces Open Group Aggregate
with ‘Entry Age Normal’ actuarial method and
creates 30-year amortization of liability to
begin in FY 2010
° Unfunded liability is determined to be $2.4 billion

> Funding for Special Account limited

» Legislature creates HB 876 Commission to
examine all aspects of the retirement system;
the first ‘Decennial Commission’

9/20/2021

Past - 2008:
Rebuilding the Foundation

» Legislature enacts HB 1645

° Establishes Independent Investment Committee

° Transfers $250 million from Special Account to
Pension Trust

° Changes method of funding the Medical Subsidy
and freezes the 8% escalator for four years

° Revises definition of earnable compensation

° Followed by litigation; AFT v State of NH

Past - 2009:
Unfunded Mandate?

» Legislature reduces subsidy to political
subdivisions for teacher, police officer and
firefighter employer contributions from 35%,
to 30% in FY 10 and 25% in FY 11
© Followed by litigation in 2010; City of Concord v

State of NH
° Legislature in 2011 repealed subsidy entirely and
provided one-time $3.5M appropriation

9/20/2021

Past - 2011:
Back to the Drawing Board

>» HB 2 enacted
e increases contribution rates for all members by 2% -
2.5% of payroll
° Changes benefit provisions for some current
members and all future members by:

- Increasing retirement ages and reducing benefit
formulas for non-vested and future members

- Amending definition of earnable compensation

- Increasing AFC from 3 to 5 years for some members
° Limits on working after retirement
e Changes the composition of the Board of Trustees
° Foliowed by litigation; PFFNH v State of NH (1&2)

Past - 2012-2016:
The Court Speaks

» NH Supreme Court decides in favor of the State

of NH in four separate cases

° Against the City of Concord in its claim that
eliminating the employer contribution subsidy was
effectively the imposition of an unfunded mandate

° Against PFFNH (1&2) and AFT in their claims that
increasing member contributions, revising the
definition of earnable compensation, and eliminating
or reducing benefits represented an unconstitutional
breach of contract rights

» Adopts, for the first time, the
unmistakability doctrine’

9/20/2021

Past - 2017:
Decennial Commission Redux

» Decennial Commission meets for several months
and generates recommendations, some of which
are subsequently the basis for legislation
° Revisions to Working After Retirement provisions,
limiting the number of hours that can be worked and
simplifying the approach

° Adoption of layered amortization, a mechanism to
reduce volatility by amortizing future asset gains or
losses over 20-year periods

° One-time $500 retiree payment

° Increasing terms of NHRS Trustees from 2 to 3 years,

mitigating turn-over and creating more continuity

Past - 2017:
Decennial Commission Redux

» Decennial Commission also hires the Center for
Retirement Research at Boston College to assess

NHRS, which found:

° NHRS uses among the most conservative assumptions
for mortality and rate of return in comparison to other
large state and local plans

° NHRS investment returns exceed most other plans

° NHRS benefits are modest compared to other plans

° Total government costs for NHRS was about 15% of
payroll compared to a national average of about 18%

° UAAL growth since 2007 was driven by losses in great
financial crisis, level~percent amortization, and

reductions to assumed rate of return

9/20/2021

Present -
Most Recent Facts & Figures

> $11+ billion in Assets

> Unfunded Liability of $6 Billion; 12 years into
a 30-year amortization

> Funded Ratio of 61.0%

» 48,479 members

> 39,612 benefit recipients

> $860 million in annual pension and medical

subsidy benefits
° Nearly 80% of recipients live in NH

Present -
Most Recent Facts & Figures

Active Members and Benefit Recipients, 2011-20

e Active members af Benefit Recipients

9/20/2021

Present -
Most Recent Facts & Figures

Assets in Billions: June 30, 2011 to present

y
__f,

$111132
$9.208 $9.134
$8.293 $8.874
$7.414 $7.530 $7.460

sh $5.774 poses

6/3G/11 630/12 6/30/13 GIFQI14 GlFOIIS $= G30/16 6/30/17 GIO/FB Gi30/19 Gi30/20 6/30/21"

"unaudited

Present -
Most Recent Facts & Figures

100 * Funded ratio relative to peers - FY 2010-19
80 —g 2h 76.0 95-5 44g FP PPP Pt 2

; rare

60 —p S85 574-561 567 580.7 592 60.0 O13 663.6 cos
A A A

400 =

20 _

a

2010 =2011 20120 2013) «2014 «2015 2016 «2017 2018 2019
-o-NHRS -o—Avg.

Ay Oenotes reduction fo assumed rate of return Source NASRA, Nov, 2020

9/20/2021

9/20/2021.

Present -
Most Recent Facts & Figures

| ~—-:20-Year Investment Performance

230% : 15.0%
' 17.6% 209%
0% j 145% 8 / en
i 1% i | woo%
- 35% ir 50%
= B «oll | . | om
i 5o%
1% 54% 00%
15.0%
181% 20.0%
2001 2002 2002 2004 2005 2006 2007 2008 2009 2010 2011 2012 2011 2014 21S 2016 2017 2018 2019 2020
Fuca Year
Suctee Data Tome-neqghted arrtual rétetns [rat of feesi piowded by NEPC LLC
Present -
Most Recent Facts & Figures
Member Pension: | Pension: | UAAL as a% | Medical Total
Category Normal UAAL of Total Subsidy Employer
Cost Pension Cost Rate
Emp. ~ State 2.58% | 11.17% 81.2% 0.78% 14.53%
Emp. - P. Sub. | a5e% | 11.17% 81.2% 0.31% 14.06%
Teacher 2.82% | 16.66% 85.5% 1.54% 21.02%
Police 6.72% | 23.95% 78.1% 3.21% 33.88%
Fire 7.07% | 22.71% 76.3% 3.21% 32.99%
Member Contribution Rates: Employee/ Teacher: 7%, Police: 11.55% Fire 11.8%
Member share of normal cost: Employee: 73%; Teacher: 71%; Police: 63%, Fire: 63%

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9/20/2021

Present -
What’s Important

» NIRS’ six common elements of a successful

plan:

° Employer contributions that pay the full amount of
the annual required contribution, and that maintain
stability in the contribution rate over time;

e Employee contributions to help share pian cost;

° Benefit improvements actuarially valued before

adoption and properly funded upon adoption;

Cost of living adjustments granted responsibly;

“Anti-spiking” measures in place;

° Economic actuarial assumptions that can reasonably

be expected to be achieved over the long term

o

oO

Present -
What’s Important

>» NHRS has a constitutional and statutory

foundation which is designed to protect its

financial future

° Constitutional protections of Part |, Article 36-a
assure that contribution rates are actuarially sound
and paid by employers; and, that the pension trust is
used solely for the benefit of NHRS members

e Statutory provisions of 100-A have been amended to
address structural issues which undermined the
financial security of the system

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Future -

Projected Contribution Rates

Total NHRS Contribution Rate as a Percent of Payroll

MUAAL Core foten

faz O25 ro ft
Fncal Year [nding june 30

Future -
Paying d

own the UAAL

L

Funding Progress, 2020-41

000

120.0%

100.0%

80.0%

60.0%

40.0%

20.0%

0.0%

GAS

9/20/2021

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