Report for New Hampshire System Finds Switch to 401(k) May be Costly

Currently the New Hampshire legislature is looking to eliminate the NHRS defined benefit plan to develop a defined contribution system. If NHRS eliminates its public pension program to develop the 401(k) type plan, it would add $237 million to a 3.7 billion unfunded liability, the report says.

According to SeaCoastOnline, this conclusion was published by independent actuaries from Gabriel, Roeder, Smith and Co. in a report to the NHRS. The actuaries studied the financial impact of proposed legislation that would put new public employees, hired after November 1, 2012, into a new defined contribution program.

Kim France, interim executive director for the NHRS, said the projected $237 million shortfall would result from a methodology proposed by legislators who did not have the actuarial report when crafting the proposed change.

As currently written, the proposed legislation would have employer contributions be based on the defined contribution member payroll, which the consulting actuary determined would generate the shortfall, France said.

Representative Ken Hawkins is chairman of the Special Committee on Public Employee Pension Reform, which drafted the proposed change. According to the news report, he said the $237 million shortfall is based on current language in the proposed legislation, but the legislation that will get passed may be different.

Hawkins added, the committee’s goals are to ensure healthy retirements for public employees, lower the accrued liability and “stabilize the entire system.”

NHRS officials attribute the $3.7 billion unfunded liability to market losses and municipalities’ 16-year “pension holiday,” when the NHRS was deliberately unfunded. The retirement system is funded by employees, hiring municipalities (taxpayers) and returns on investments. The system has 50,500 active members and 26,000 pension recipients.