State's public pension system gets cash

We gave up 78 percent of what you voted for," said Rep. Ken Hawkins, one of the negotiators.

Fellow House negotiator Ricia McMahon urged passage.

"Please do not allow perfect to become the enemy of good. This is a good bill," she said.

The bill sent to Gov. John Lynch would shift $250 million from an account used to pay for cost-of-living increases for retirees into the main pension fund. That would help hold down increases in employer contributions.

Without the fund shift, contribution rates for the state and local governments would increase 53 percent in 2010. If the deal becomes law, negotiators estimate the increase will be 14 percent for local governments and 27 percent for the state.

The bill also would give retirees a 1.5 percent cost of living increase and continued help paying for medical insurance. It also would leave retirees with a majority on the retirement system's board.

Negotiators resolved a sticking point over the maximum pension allowed workers hired after July 1, 2009, by including overtime and other income in their pay in calculating the pensions. Pensions would be capped at 100 percent of pay.

The provision mostly affects police and firefighters, who rely on overtime to boost their pensions. Pensions would be capped at $120,000, which might affect some senior police and fire officials.

Under the bill, individual communities also will pay more if they offer generous pension packages, such as including unused sick leave or other benefits in the calculation. Currently, all communities share the cost. The provision would only apply to new contracts.

The bill continues work begun last year to shore up the $6 billion retirement system. The system is funded at 63 percent of its long-term liabilities, short by about $2.7 billion on its annuity fund alone.

The system got into trouble by using an accounting method that made its long-term financial future appear rosier than it was. As a result, employers contributed less than they should have. The system also earned poor returns on its investments.

The New Hampshire Municipal Association and New Hampshire Retirement Security Coalition — representing 70,000 active and retired public employees — lobbied hard to protect taxpayers and employees' interests, respectively.

Under the deal, all retirees would get the cost-of-living increase, but capped at $450 for those with pensions over $30,000.

The deal also would give retirees with the smallest pensions an extra check — $1,000 for those with pensions of $20,000 or less, and $500 for those who retired before 1993. The COLA and extra checks would be for one year.

The House had insisted the system's board needed to be overhauled with some employee representatives replaced by people with independent investment experience, but the Senate was equally adamant they retain their role as watchdogs.

The bill leaves the 14-member board alone and creates an independent five-member committee to make investment decisions. Members would have to meet new education and experience standards.

The medical subsidy for some retirees would continue, but with increases frozen for four years and set at 4 percent a year after that.

Retirees whose pensions are $20,000 or less would get a temporary medical subsidy for four years: $500 for singles and $1,000 for couples.

State law requires towns to let their retirees participate in their municipal health plans. The subsidy, paid to the towns, reduces the out-of-pocket costs to the retirees. Currently, the subsidy increases 8 percent each year.

The bill establishes studies of ways to provide health care to retirees not eligible for a health insurance subsidy — which includes most active employees. A commission also would study how to pay for future cost-of-living increases.

The House had proposed requiring police and firefighters to work 25 years, not 20, to be eligible to retire at age 50 instead of age 45. That proposal was dropped in the compromise.

TOP