Special Board of Aldermen 09-21-2021 Page 7
Mayor Donchess
Oh okay. Sorry.
Jan Goodwin, Executive Director of NH Retirement System
No worries. Without this five years smoothing, the employer contribution rates would experience significant swings every
few years. Slide 20. The employer contribution rate for NHRS has three separate components: normal cost, unfunded
liability amortization, and the medical subsidy. Let's look at these one at a time.
The normal cost is the percent of payroll that is necessary to pay the current cost of the pension benefits as they accrue
for our members. As you can see in the text below the chart, NHRS members pay a substantial proportion of the total
normal costs of their pension benefits. The largest part of the employer contribution rate is the pay down of the unfunded
liability over time. As Marty mentioned earlier, the employer contribution rate has to be sufficient to amortize the
unfunded liability over the remainder of the 30 year closed amortization period. This combined with changes in the
actuarial assumptions can make for significant increases in employer contributions every two years. As you well know,
when the NHRS board sets the employer contribution rates to fulfill its fiduciary, statutory, and constitutional duties.
The medical subsidy is the smallest part of the employer contribution rate for a couple of reasons. First, those eligible for
the subsidy are essentially a closed pool of slightly less than 10,000 individuals either currently receiving the subsidy or
eligible to receive it upon retirement. And second, the funding of the subsidy is on a pay as you go or solvency basis
similar to Social Security so there is no amortization goal of reaching 100% funding as there is with the pension benefit.
Slide 21. So how do NHRS's practices line up with best practices for well-funded public pension plans? In 2011, the
National Institute on Retirement Security examine several well-funded public pension plans to identify what elements
they all have in common. As you can see, these are the six different items and I'll compare how NHRS stacks up against
each one. Employer contributions that pay the full amount of the annual contribution. Yes. And that maintains stability
over time. Not so much because they do vary a great deal from one year to the next.
Two - employee contributions help pay plan costs. And yes, they definitely do here in New Hampshire. Do the benefit
improvements are they actuarially valued before adoption and properly funded upon adoption? Yes. That's also true in
New Hampshire. Costs of living adjustments are granted responsibly. Yes. That happens. Anti-spiking measures are
in place. Yes. And the economic actuarial assumptions can be reasonably expected to be achieved over the long term.
Yes. Based on this, | would give NHRS a 5.5 out of a possible score of six.
President Wilshire
Alderman O’Brien did you have a question?
Alderman O’Brien
Yes. May | ask a question please?
Jan Goodwin, Executive Director of NH Retirement System
Yes, Sir.
Alderman O’Brien
You say cost of living adjustments have been granted responsibly. When was the last one and when was the last one
prior to that so that the public knows what the definition of responsibility is with this?
Jan Goodwin, Executive Director of NH Retirement System
The last one was granted in 2019 and took effect in 2020. And as to the one before that, I'm going to have to defer to
Marty on that.
Marty Karlon, Director of Communications and Legislative Affairs
In 2010.
