Special Board of Aldermen 09-21-2021 Page 5
far the most significant changes to the pension system since it was established. In a set of changes, member
contributions were increased as a percent of pay. Several benefit provisions were reduced for non-vested active
members and for future hires. Some of the pension formulas themselves were changed so they would generate a lower
result for, you know, non-vested in future generations. It changed the composition of our Board of Trustees to bring
more employers on, you know, a huge slate of changes.
Essentially at that point, you Know, we had two benefit plans - Group | and Group II and what this did was created three
tiers of benefits within each group. So there was a lot of changes there. Again, these provisions drew two lawsuits
against the State. One specifically on the increased to member contributions and one basically on everything else in it.
Over a period of decisions between 2012 and 2016, the Supreme Court decided in favor of the State and all of these
cases. The City of Concord was the lead plaintiff in the employer subsidy case. They said that was not an unfunded
mandate. In all of the benefit cases that were brought by various labor groups, you know, in other interested parties,
they claim the court found that those were not an unconstitutional breach of contract and they introduced into New
Hampshire the legal concept of the “unmistakability doctrine”, which has been applied in other States if the legislature
does not have an unmistakable intent in passing legislation that does not represent a contract and can be changed by
future legislative bodies. So everything that, you know, passed between 2007 and 2011, all stood up in court.
So brought us to 2017. A lot of the heavy lifting was done but, you know, the smoke had not yet cleared and the
commission to look at the long term viability of the retirement system, which was created in 2007, was going to convene
every 10 years. So we had Decennial Commission in 2017 that met for a period of three or four months in the fall of 17
to look at the plan. Folks from all ends of the political spectrum, and the members, employers, retirees, legislators, local
representatives, because about a 21 member commission, looked at that and they made several suggestions. They
thought that overall the funding progress was moving in the right direction but they suggested revisions to working after
retirement for NHRS retirees with participating employers. They adopted layered amortization which is sort of a difficult
concept for a non-actuarial like myself to convey but basically, it's a mechanism to reduce a lot of volatility with future
liabilities by spreading them out over 20 year periods going forward. We'll talk a little bit more about that on one of the
funding slides.
They recommended a one-time payment to retirees in lieu of a cost of living adjustment because of costs, made several
other proposals that were ultimately adopted by the legislature. Some as is some with, you know, legislation, legislative
negotiation, modifying them a little bit. The Commission actually had funding from the State and they used some of that
money to hire the Center for Retirement Research at Boston College to do sort of an independent third party review of
NHRS and the changes that the legislature has made over the past 10 years. If you're not familiar and, you know,
they're not in the headlines that much, but they are very well regarded nationally as a nonpartisan Retirement Research
Center both in public and private sector, retirement issues. They do a lot of work. You'll hear them on the nightly
business review and things like that quite a bit representatives from there. They looked at NHRS and found that in 2017,
we use among the more conservative assumptions for mortality and rate of return compared to other State plans which
they created as a good thing. They found that our investment returns over the trailing preceding 10 years exceeded
most other plans. We were above average with returns and sort of a head scratcher for everybody in the room ourselves
included because we hadn't crunched those numbers was that our total government costs for NHRS at the time were
lower than the national average. Fifteen percent (15%) of government spending to 18% nationally, which was an eye
opener.
They also were charged with looking at why has the unfunded liability grown since 2007. Again, it was 2.4 billion than it
was 5 billion as of 2017. What they found were three main drivers to that. We have the great recession and had a
significant loss in fiscal 09 15 percent and we’re digging out from under that for the next 10 years. What reductions to
our assumed rate of return over that period and finally, a level percent amortization. This plays into how the pension
debt is being funded down through employer contributions and level percent is set up so that we're not quite paying off
the principal in the early years like a mortgage. You're almost just making the interest payments or even less than that.
So the liability sort of grows is an intended consequence of the plan. We've just kind of crossed over into not negative
amortization in this past year. So that's their take on where we were at, you know, which was fairly detailed. That report
and the Decennial Commission's report are both available on the State website and MRRs if anybody is interested and |
could follow up with a link to it to Linda.
That kind of brings us to the present. So I'll give you a break from my voice and let Jan take over. But at the break if
anybody has any questions about anything, I'd be glad to try to answer them.
President Wilshire
Anyone have any questions at this point. Seeing none.
