Coalition of 70K Employees Forms to Protect Retirement Security
The New Hampshire Retirement Security Coalition Unified on HB1645
New Hampshire Employees United in Call for Fiscally Responsible Approach for Retirement Funding and Ensuing Delivery of Vital Public Services

CONCORD, NH � More than 70,000 active and retired first responders, teachers and public workers have united to launch the New Hampshire Retirement Security Coalition. The coalition is dedicated to ensuring New Hampshire workers who teach our children, police our streets, and fight our fires can depend on a stable and modest retirement income after a career of public service.

�The New Hampshire Retirement Security Coalition believes that retirement is a shared employee and employer responsibility, and must be done in a fiscally responsible manner,� said Laura Hainey, president of American Federation of Teachers in New Hampshire (AFT-NH). �We are committed to continuing to work with the legislature and Governor John Lynch toward retirement security for New Hampshire�s public servants.�

The coalition is supportive of efforts to maintain defined benefit pension and health care benefits for retired public employees provided by the New Hampshire Retirement System (NHRS) and to ensure the long-term viability of the plan for current and future public employees. These benefits are essential tools for recruiting and retaining a skilled and qualified workforce�educators, first responders, and other essential public servants�to provide vital services for the citizens of New Hampshire.

�Taxpayers can�t afford to lose a high quality, experienced workforce that carries out vital services such as educating our children, protecting our streets, firefighting, disaster response and providing for homeland security,� said David Lang, president of the Professional Firefighters of New Hampshire (PFFNH).

Taxpayers rely upon the public servants represented by the coalition to provide vital services such as emergency and first response including medical aid, 911 and disaster response, police protection, administration and investigation, and firefighting, as well as health care services, child welfare protection, health inspections, forensic investigations, education for children in grades K-12 and college, and prison & correctional services.

The coalition is also announcing its opposition to House Bill 1645 as introduced. This legislation will impair future retirement security of workers; will result in increased costs to taxpayers, and put public services at risk, according to the newly formed group.

House Bill 653, enacted last session, provided a first step to put the NHRS on track toward improved funding. It required shared responsibility by both employees and employers. The coalition remains committed to this legislation, as it is a fiscally responsible solution for improving plan funding.

According to the Coalition, HB 1645 will not solve the issues facing the retirement system. Rather than improving funding, it fails to address employers� responsibility to fund the system�s $2.7 billion obligation. The legislation fails to address the misguided practice of lowering the appropriate contribution rate necessary from employers to fund the core of the pension, the medical subsidy and cost of living adjustments. HB 1645 will serve to increase costs to taxpayers and puts vital public services at risk.

Additionally, it does not reflect the Majority Report issued by the Pension Commission. This legislation will undermine the Retirement Board structure and the important positive role that trustees serve. The Coalition does not support an employee-only contribution to fund supplemental allowances in the future.

�For the past 26 years, New Hampshire public workers have faithfully made continuous and on-time contributions to the retirement fund � nearly 21 percent of the assets in the system,� said Bradford Police Chief James S. Valiquet, a coalition member and member of the House Bill 876 Study Commission. �And, because the retirement benefits are pre-funded and invested under direction of trustees, some 64% of retirement benefits are paid with investment earnings. The coalition simply is asking that the Legislature keep its commitment to pay their 15% promised portion into the fund for workers who often are in high risk, lower paying jobs.�

Valiquet concluded, �HB 1645 should be heavily amended to focus more closely on the intent of the commission.�

The study commission met over 5 months in late 2007 and conducted a comprehensive review of the Retirement System's funding, benefits, and investment results as well as its current financial status, governance structure and future challenges culminating in a series of recommendations included in its final report dated January 2, 2008.

1. House Bill 1645 establishes a new reduced system of benefits for Group II retirees.

It creates a new retirement system for Group II employees, police and fire. This change is not new to the legislature and in fact has been repeatedly dismissed. It is a change advocated by those who have sought to reduce retiree benefits for years. There is no cost savings in this change. It treats one employee differently from a co-worker even though they are both expected to perform the same job with the same level of competence and professionalism. It requires them to work longer and receive less compensation.

Prior legislatures have killed this move by wide margins. Changes made to the structure of the system and to retiree benefits should be made cautiously and for reasons other than making some �feel good.� Rather, decisions should be based on fiscally sound data and reasoning. Public employees - the everyday people who teach local children and respond to calls for help - make life-altering decisions based on what they will receive for benefits after a career in public service. Retired public employees depend on a stable and modest retirement income, healthcare subsidy, and cost of living adjustment to make ends meet. Any change that does not take into account all of the potential ramifications of that change, particularly one that has no positive financial impact on the system, should be carefully studied.

The retirement system provides the essential tools for recruiting and retaining a skilled workforce�educators, first responders, and other public servants�to provide vital services for the citizens of New Hampshire. The creation of this new system will have a direct impact on the recruitment and retention of employees. The taxpayers cannot afford to lose a high-quality and experienced workforce.

2. House Bill 1645 removes retirement incentives for Group I retirees that the Retirement Commission did not want removed.

Removing language from the definition of income included as compensation used to determine a retiree�s monthly pension benefit is detrimental to educators and their employers if the result is the loss of retirement incentives paid out to reduce district payrolls.

The passing of legislation such as this raises concerns over the violation of contract clause in the constitution as well as changing benefits promised and paid for by teachers, firefighters, police and other public employees. Retirement is a shared employee and employer responsibility, and must be done in a fiscally responsible manner. Instead of raising money for litigation, cities and towns should look at ways to fulfill their obligations to public employees and ensure services continue for the people of New Hampshire.

The Retirement Commission recommended this change because the Retirement System said it would affect those members who are �bought out� of their contracts in order to avoid a termination fight. Since then, some supporters of the bill have said all retirement incentives are excluded by this change. Group I educators will see a significant reduction in their benefit if this is the case.

It is doubtful this recommendation would have been included in the commission report if this were the case. School districts and locals negotiate retirement incentives as a way to manage the payroll of a district. More experienced educators take advantage of this incentive, which in turn, allows school districts to replace them with employees at a lower pay scale. The Retirement System told the commission that consideration for the impact of these incentives are already considered and budgeted into the benefit formula and that the impact of this change only affected a select few cases.

3. House Bill 1645 changes the composition of the board of trustees despite the long-term success of the board with its current structure.

Reorganizing the board of trustees is another worn-out tactic used by those who have consistently sought to reduce retiree benefits. The board, without legislation that authorizes the benefit, grants no benefit of any nature that a retiree receives.

A review of trustee meeting minutes indicates that in very few cases have the trustees been divided on significant issues considered by the board. The reality is that legislative representatives supported board decisions as often as employee trustees supported them.

Currently, there are three employer representatives on the board, one recommended by the Local Government Center and the two legislative appointees.

Calls for the inclusion of public trustees with investment experience without clearly defining credentials or type of experience. This section causes concern over the liberal definition that could be used by the appointing authority (i.e. the Governor).

4. House Bill 1645 freezes the healthcare subsidy without considering new information about the need to impose such a freeze.

The medical subsidy is too important to make benefit or funding changes without accurate and complete information. Since the commission dissolved, new information about the funding and legal status of the system has come to light.

Group I members face the most immediate crisis and that is still three years away. A great deal of groundwork has been done so that any group looking at the subsidy would not have to start from scratch. It can use this information and gather whatever else it needs to address this issue fairly and objectively.

If the legislature does not agree that more accurate information is available, then the change contained in HB 1645 that freezes the benefit should be applied only to Group I at this time. If a freeze is imposed, it should be temporary. The legislature should then review performance of the subsidy and its funding stability with an eye toward its availability long-term for all members in the closed group.

Changes the funding of the Medical Subsidy by employers from 25% to the normal costs of the benefit. One of the important components of a 401(h) sub-trust is to continue to collect contributions until the money runs out or the benefit is fully funded. HB 1645 creates a situation that makes it almost unachievable to reach full funding.

5. House Bill 1645 eliminates cost of living adjustments that retirees rely on.

We support a 2.5% cost of living adjustment this year and the COLA Study Commission to resolve other matters.

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Memorandum from State Representative Neil Kurk to the House Joint Committees of ED&A and Finance