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Sunday, November 13, 2011

Release of top 500 pension earners fuels more retirement debate

CONCORD – The names of the people who earn the top 500 public pensions in the state were released last week.

Now what?

Will public confirmation that there are more than 20 police, fire and government executives pulling in six-figure yearly pensions spur the Republican-led Legislature to further action on retirement reform next year?

Or will these lucrative examples become the rallying cry in response from those same supportive lawmakers if public employee union leaders target many of them for defeat in November 2012?

One thing is certain: This fight is far from over.

And the battle over the next wave of retirement reform next year could be even more bitter and emotional than the 2001 version that drew Statehouse crowds in the hundreds on both sides on more than one occasion.

State Rep. Ken Hawkins, R-Bedford, was a leader of the House contingent last spring that produced, along with the Senate, the most sweeping changes in public retirement laws in two decades.

Hawkins plans to retire from Statehouse politics next year, and he would like nothing better than to end it with one more crowning achievement.

That is to put all new public employees into a new retirement plan by the end of 2012.

N.H. Retirement 2.0 would be a defined contribution plan in which the only fixed certainty would be what employees would donate from every paycheck.

Their pension amount would be based on how well their own investments performed.

The current system is a defined benefit that not only sets what employees pay, but also delivers a pension decades later at a predetermined amount.

“This is by no means going to be an easy exercise,” Hawkins said. “It’s complicated, and I’m confident we’re going to have a lot of concerns and questions raised once this gets to a public hearing.

“But I believe most taxpayers like it because it would function like their own 401(k) does today. And I do feel that employees would come to realize even greater pension amounts than they get today.”

Not surprisingly, union leaders don’t share this view and are bracing for an all-out effort to defeat this seismic change.

“They are going too fast,” said David Lang, president of the Professional Fire Fighters of New Hampshire. “This is not well thought out, and the fact is, it could put the entire existing retirement system in jeopardy not far down the road.”

For more than a decade, the reform push has come from the House, where until last year, Hawkins and allies beat their heads against a granite wall in a state Senate where unions held significant influence.

The November 2010 elections changed all that, as 19 Republican senators got swept into office, led by Majority Leader Jeb Bradley, R-Wolfeboro, who put retirement reform near the top of the 2011 agenda.

The massive new law raised how much all employees had to contribute toward their pension, required new law enforcement employees to work five years longer to qualify for the benefit and converted the system’s board of trustees from one that was union dominated to one in which public employers and state officials have the voting majority.

It also took the extraordinary step of cutting what taxpayers pay to cover for pensions over the next two years. The system’s actuarial expert said that will push $100 million in costs off to later years.

This time, it’s the Senate taking the lead, with Fenton Groen, R-Rochester, co-chairing a study committee on the issue and writing the defined contribution bill for 2012.

Groen said the new system would be more stable than the existing one.

“Workers would have a predictable and reliable retirement plan … not as susceptible to us messing with it,” Groen said.

Sen. Ray White, R-Bedford, an insurance executive who represents Merrimack, and Sen. Jim Luther, R-Hollis, a financial consultant, are also expected to play leading roles.

Senate Democratic Leader Sylvia Larsen, of Concord, was the lone opponent on the study committee that issued its report by a 5-1 vote last week.

“This should not be an experiment using the future retirements of employees, teachers, firefighters and police,” Larsen said. “We owe it to them to be as accurate as possible. Their retirement depends on it. The majority did not publicly bring in any experts to look at their potential plan.”

All new public employees whose employers are members of the New Hampshire Retirement System would have to enroll in what is known as a 414(h) plan.

Employees would contribute at the same rates as existing workers do to their defined benefit pensions and employers would contribute to the plan, as well as to premiums for long-term disability coverage and life insurance.

Workers would handle all investment decisions, but couldn’t take money out of their plans prior to retirement. Once they retired, at least 50 percent of the money couldn’t be withdrawn, but would be maintained in a retirement annuity.

“We don’t want folks going out buying lakefront homes, new cars and the rest with their pension and then ending up on welfare,” Hawkins said.

Larsen and union leaders maintain, however, that the existing system could get weaker financially once it’s closed to new enrollment and the membership shrinks as people retire year after year.

Groen has said the two plans will even themselves out as the new plan gets bigger over time.

“There is no indication that this can legally or in an actuarial way be done,” Larsen said. “In that case, the impact on cities’ and towns’ employer rates will rise astronomically.”

This isn’t the only reform plan on the boards for next year, either.

Hawkins wants to make public employers contribute to the retirement system for any part-time employee they hire who is already collecting a public pension.

“There’s just too much incentive for communities to take on these retired police chiefs or firefighters and slip them into so-called part-time employment,” Hawkins said.

The Telegraph reported last July on one such significant local case, as Hudson’s assistant town administrator, Paul Pearson, was a retired police officer.

He was restricted to 230 eight-hour days a year so his pension wouldn’t be in jeopardy and Hudson wouldn’t have to contribute to the Retirement System.

“Nobody who has been looking at the system was surprised at the top 500; many of those numbers were already out there in one form or another,” Hawkins said.

“If we can take these next steps, it would go a long way toward finally getting some financial control over public retirement.”

Kevin Landrigan can reached at 321-7040 or klandrigan@nashuatelegraph.com. Also follow Landrigan on Twitter (@KLandrigan), and don’t forget The Telegraph’s interactive live feed at www.nashuatelegraph.com/topics/livefeed.