House approves ending guaranteed public pensions
CONCORD – A plan to end the 45-year history of guaranteed public pensions and replace them with 401-K style portfolios for new hires cleared the House of Representatives Thursday.
House GOP leaders pressed ahead with this aggressive move by Nov. 1 to a defined contribution plan less than a day after the state Senate voted to punt on the issue and create a 17-person commission to study it. Last year, the Republican-led Legislature raised the retirement age for future public safety workers and made all employees contribute more to their pensions.
The state’s retirement plan and companion medical subsidy for some pensioners faced an unfunded liability in excess of $4.1 billion and a plan that was only 67 percent paid for.
State Rep. Neal Kurk, R-Weare, said all the changes to date still have allowed unacceptably high rates paid for by local property taxpayers who employed retirees.
“This state faces a very significant problem with respect to public pensions,” Kurk sad. “Despite these improvements, public sector pension plans are unaffordable for taxpayers. They cannot continue as they are now.”
Currently, all public employees are guaranteed a pension amount when they leave that’s only adjusted by salary increases, overtime and other pay benefits that can boost it. This would give future employees a pension account that they would control and would only deliver a pension based on the investor performance of that portfolio.
Rep. Kenneth Hawkins, R-Bedford, chairs a House special committee on retirement reform that brought in experts from Utah, a pioneering state in the innovation.
“We have worked very, very hard on this issue and we will continue to perfect what will be a uniquely New Hampshire program,” Hawkins said.
Rep. Jeff Goley, D-Manchester, pointed out the New Hampshire Municipal Association has warned this conversion in the short run will dramatically increase what public employers have to pay.
“This will create a $222 million downshift to local communities if this passes,” Goley said.
The House voted 197-104 to pass the bill, HB 1460.
David Lang, president of the Professional Association of Firefighters, said this would increase the unfunded liability of the system by $1.2 billion over time.
This would create two retirement plans – one for existing workers and one for new ones – and would force investment managers to pursue a more conservative strategy that would yield less profit for the system, Lang said.
“It’s going to increase the employer contribution rates,” Lang said. “This will have the direct and opposite effect than those who want to do this are anticipating.
“If we were starting off with a new pension system, you could make an argument for a defined contribution system. Now you can’t. You’ve got a 45-year pension system with unfunded liabilities and you are putting the old one in jeopardy and the new one on shaky ground once you create it.”
Kurk resisted the Senate call for caution and more analysis an approach Lang called “forward thinking.”
“If we stop this now, we will be forced to study this and only take action next year. That means we lose a year of potential savings for our taxpayers,” Kurk said.
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