The soundness of a retirement plan is measured in terms of its ability to pay the accrued benefits for its contributing members and retirees.

The total asset of the New Hampshire Retirement System (NHRS) is $7.5 billion and the present value of pension obligations for its past and present members and retirees is $12.6 billion. Therefore the "unfunded liability" is 5.1 billion and the NHRS is funded at 60 percent of the amount projected to pay its obligations.

The NHRS has set a goal of being 100 percent funded in 2039, resulting in a $23 million pension cost to Nashua taxpayers in 2017. This represents 8 percent of Nashua’s total budget and 11 percent of local property taxes. Nashua’s annual cost to cover its past and present employees and retirees is about $6 million; the remainder is for financing the "unfunded liability."

Given the underperforming investment earnings of 1 percent in 2016 (7.75 percent was projected), coupled to no reduction in the plan’s benefits, the pension cost can be expected to further increase in the years following 2017 to meet the 100 percent funding goal.

The requirement for 100 percent funding is based on the arguable premise that if New Hampshire should go bankrupt the independently managed NHRS will remain fully funded. It is like having all your credit card payments fully funded in a bank account. Many financial managers consider 70-to-80 percent funding adequate for a defined pension plan.

For example, Nashua’s Public Works employee pension fund (wholly separate from the NHRS) is funded at 80 percent, and no one demands a higher level of funding, or considers this fund at risk. Funding NHRS at 80 percent would lower Nashua’s pension payment in 2017 by about $8 million.

The risk against NHRS investment underperforming against prediction falls entirely on the taxpayers. Furthermore, the state stopped contributing to the cost in 2012 , leaving the local taxpayers to fund entirely the employer share of police, firefighter and teacher pensions. Most troubling, the local taxpayers, not the employees, bear the entire responsibility to finance the "unfunded liability," which represents about 75 percent of Nashua’s pension payment.

Compounding the taxpayers burden, prior to 2012 the NHRS negligently mismanaged its trust fund by diverting $900 million into a "special account" for benefits other than pensions, such as cost-of-living adjustments and medical subsidies, instead of covering the unfunded liability. Currently 10,000 retirees receive a medical subsidy in addition to their pension, also contributed by the taxpayers.

The NHRS reports that its average annual pension for retirees is $21,000. But the average police annual pension is $36,000 and the average firefighter is $39,000. This also masks employees with a lengthy service record who contrive to maximize their benefits by packing their highest regular salary with "unpaid" sick leave and "unpaid" vacation plus overtime and special pay.

Examples of recent Nashua retirees who received pension payments in 2016 in excess of their highest regular salary:

Former Fire Chief Brian Morrissey receives an annual pension of $140,000 (highest salary $124,000)

Former Police Chief John Seusing receives an annual pension of $139,000 (highest salary $131,000)

Former Deputy Fire Chief Michael O’Brien receives an annual pension of $121,000 (highest salary $93,000)

A number of questions must be raised.

Why the enormous financial burden on taxpayers to attain 100 percent funding in 2039? Why not delay to a later year to reach for 100 percent funding?

Why not reduce funding to 80 percent, thus lowering but not "liquidating" the unfunded liability?

Why not convert from the NHRS defined pension plan to a defined contribution plan, such as a 401K-based plan?. The employees take on the risk of investment, but many prefer these plans for they need not wait to reach age 65 to receive benefits.

Clearly the heavy financial burden on Nashua taxpayers to pay $23 million into the NHRS fund in 2017 must be actively challenged by the city’s Statehouse delegation. The NHRS must be restructured with a more affordable annual cost to the taxpayers.

Fred S. Teeboom is a former alderman-at-large, author of Nashua’s spending cap and founder of the New Hampshire Holocaust Memorial.