Special Board of Aldermen 09-21-2021 Page 6
Jan Goodwin, Executive Director of NH Retirement System
Thank you. So we're on slide 15 now and fortunately, the past does not always repeat itself. Here are some of our key
actuarial metrics and what they mean. NHRS’s assets continue to grow and as of June 30 of this year, they're now at
$11.3 billion. Although our unfunded actuarial accrued liability the UAAL - that's the difference between the actuarial
value of assets and the benefits our members have earned continues to grow. That growth is largely attributable to the
interest accrual on the unfunded liability each year and the decreases and the assumed rate of return for the investment
portfolio.
As Marty mentioned earlier, the 30 year amortization of the unfunded liability began in fiscal year 2010. Just as with a 30
year mortgage on your home, the payments in the initial years primarily go to interest and like the amortization schedule
for your home's mortgage, we have now reached the tipping point after which the employer contributions will be
increasingly allocated to the principle on the unfunded liability.
Our funded ratio, the ratio of our actuarial value of assets to the pension benefits our members have earned is 61% as of
last June. It's important to consider the funded ratio in the context of what is expected for the retirement system. It's
possible to have two retirement systems with a 61% funded ratio and one of the plans may be significantly more sound
than the other. In NHRS’s situation, we have a plan to get to 100% funding thanks to the Board's commitment, and
statutory, and constitutional provisions that have put us on the path to 100% funding in about another 18 years.
We have about 48,500 members as of last June. This number has remained fairly constant since 2011. In contrast, the
number of our retirees and beneficiary recipients continues to grow and it was 39,600 as of last June. In 2010, there
were only 27,100 retirees and beneficiary recipients. The reason why NHRS exists is to pay pension benefits. This past
fiscal year we paid over $860 million in pension benefits and medical subsidies to our retirees and beneficiaries.
According to the National Institute on Retirement Security, these benefits help drive the New Hampshire economy.
According to their 2021 Pensionomics report, the net benefits supported 8,495 jobs that paid $493 million in wages and
salaries. As you can see, 80% of our retirees stay right here in New Hampshire. Slide 16.
The number of actives is remaining constant while the number of retirees and beneficiary recipients is steadily growing.
While the ratio of active members to benefit recipients is getting closer to a one-to-one ratio that does not mean that the
long-term viability of NHRS is threatened. There is a sound funding plan in place as Marty mentioned earlier. Slide 17.
The value of the NHRS investment portfolio continues to grow. Needless to say it is affected by the downturns in the
financial markets. However, it has improved significantly since the fiscal year 2020 downturn, which was largely caused
by the pandemic. Next slide, slide 18.
This slide shows how NHRS is funded ratio has increased overall since 2010 and as of June 30, 2020 is 61%. In
contrast, the average funded ratio for a US public pension plan has decreased over the same timeframe. And so it an
NHRS is funded ratio is the lower of the two lines and the average national plan is shown on the upper line.
As the three triangles indicate over the same time, NHRS has reduced its assumed rate of return on its investments from
8.5% in 2011 to 6.75% in in 2020. NHRS has gone from having one of the highest assumed rates of return in the 1990s
to one of the most conservative assumed rates of return today. The assumed rate of return reflects the expected
earings on the different parts of our investment portfolio. These returns and the underlying inflation assumptions may
change over time.
Slide 19. Fiscal year investment returns reflect the financial market volatility of those time periods. Fortunately, the
downturns caused by the .com bust, the great financial recession, and today's pandemic has all been followed by
recoveries that often exceed the downturns. For the fiscal year ended June 30, 2021, our net investment return is 26.8%
which is 1.4% over our benchmark. This chart illustrates why actuaries use their five year smoothing convention for
asset valuation and calculating the actuarial...
Mayor Donchess
I'm sorry. | lost where you get this 26% on one of those slides.
Jan Goodwin, Executive Director of NH Retirement System
I'm sorry. We did not update this slide banking to reflect that to 2021.
