Special Board of Aldermen 09-21-2021 Page 12
season.
Also, it appears to me that the only reason you get to 100% funding is so you can close down the pension system. You
pay everybody off, and have a nice day, go another way. | don't see why anybody has to get to 100%. There's nothing
that | can see that drives that. So | think the investments are too conservative. The State's not paying their share and
the implications of the percentages that we have to pay as a city and town based on the fact that we're not making out
money and our investments which seem to be far too conservative even for a pension plan are costing cities and towns
significantly. | think someone needs to look at that and change it. For instance, you just said you made 26% this past
year. When is that going to be sent down to the city so we don't have to pay as much? Is that going to impact us in 22?
Are we gonna wait and see what happens in ‘23 and it's always way behind?
You know as Chair of Budget, | can tell you that hugely impacts when we start looking at city spending. Quite frankly if it
hadn't been for the pension plan and something else, we probably wouldn't have had a tax increase this year in property
taxes. It's all being driven from Concord, which I'm including a pension plan. Those are questions | have | have others
but I'll just go with that one.
Jan Goodwin, Executive Director of NH Retirement System
| just like to add another reason to get to 100% funding is that we no longer will have to pay off the unfunded liability at
that time and at that point, the total contributions for the employer and the members can be closer to the normal cost
which is significantly less than what they are now. The normal cost for the different plans is shown on page 20.
Mayor Donchess
| remembered what | was going to ask you which is very related to the assumed rate of return. Do you anticipate another
reduction? | mean, it's 6.75%. Isn't that good enough? | mean it seems to be what Maine is doing. It's close to what
we're doing. | mean do you really anticipate a drop to six and a quarter or do you think we can stay at six and three
quarters?
Jan Goodwin, Executive Director of NH Retirement System
That's hard to say. It depends on what happens. Our actuaries go through a very detailed process of assessing what
they think our assumed rate of return is. The first thing that they do is they look at what are the expectations for inflation
in the future. And once they do that, then they also look at what they think the different elements of our portfolio will
eam. So they come up with a number for what percent return will US stocks have. What percent will US bonds have?
International stocks? International bonds? Real estate? Private equity? And they come up with a weighted average
that reflects our portfolio and that's how they come up with 6.75%.
So if there are changes in the expectations in the next few years over where inflation is going or what the expected rates
of return for different investments if that changes, then the actuary will develop a recommendation for the Board to
consider and the Board members are fiduciaries and they have to do what is the right thing for the pension plan and its
members. That's their sole responsibility as fiduciaries. Did you want to add anything?
Marty Karlon, Director of Communications and Legislative Affairs
If | can sort of address somewhat Alderman Dowd's question and kind of loop back to the Mayor's question as well about
the 100% funding, and | think it's a very reasonable question to ask us that okay, we're going to be paying, you know,
15% of the city budget until 2039, and then we're going to be paying 2%. How is that, you know, make any sense? And
that question did come up during the Decennial Commission back in 2017. That's where the layered amortization that |
mentioned earlier in brief, you Know, came into account and what that is, is, you Know, the Commission looked at it from
the perspective of, you know, we're reaching, you know, if we get to our 100% funding target, you know, that's, you
know, all fall steam ahead. The rates are gonna be what the rates are going to be get there. Then they're going to be
extremely low, you know, going forward when we reached that funding level and they felt that well what happens after
2039? What if we have another downturn? What if we are over 100% funded? The rates could, you know, become
extremely low. So in the 10 years since 2007 when they put in the 30 year amortization and 30 years seem like a long
time to, you know, people 30 years in the past, they, you know, actuarially this concept of layered amortization has come
into favor and a lot of States have done this where you freeze the lot - your old liabilities and you pay those off by a hard
stop.
They passed the layered amortization language in 2018. So the liability as of July 1° of 2017, which is 5 of the 6 billion,
so it's not a small number, that's going to be paid off by 2039 under the current funding plan but the additional billion in
