About the New Hampshire Retirement System

This summary is intended to provide a basic overview of the New Hampshire Retirement System (NHRS, the retirement system) for members, lawmakers, public officials, media, and other interested parties. Links to related supplemental information are listed at the end of each section.

OVERVIEW | MEMBERSHIP | GOVERNANCE | FUNDING | INVESTMENTS | CONTRIBUTION RATES | PENSION BENFITS | OTHER POST-EMPLOYMENT BENEFITS | MEMBER SERVICES

The New Hampshire Retirement System was established in 1967 as a contributory, defined benefit plan.  The plan provides lifetime pension benefits that are determined at retirement under formulas prescribed by law; the pension benefit is not based on investment returns or contributions.

The retirement system provides service, early, disability, and vested deferred retirement benefits, as well as pre- and post-retirement death benefits. It also provides a post-retirement Medical Subsidy to eligible members and beneficiaries. 

NHRS does not provide health insurance for retirees or their beneficiaries.

Benefit formulas and eligibility requirements are set by state law (RSA 100-A).  The retirement system is also governed by administrative rules, policies adopted by the NHRS Board of Trustees, and the Internal Revenue Code. 

NHRS benefits are funded by member contributions, employer contributions, and net investment returns.   Investment returns have historically provided the bulk of funding for pension benefits. 

The retirement system trust fund stood at $5.9 billion at the close of the fiscal year ending June 30, 2011, up about $993 million from the previous year. 

The retirement system realized a 23.0 percent return on its assets in fiscal year 2011, which exceeded the median return seen by other public pension plans for the same period. 

NHRS paid out $520 million in pension benefits to 27,130 retirees or their beneficiaries in fiscal year 2011, which makes the retirement system one of the largest payrolls in the state.  In addition to pension benefits, NHRS paid out $60 million in post-retirement Medical Subsidy allowances.

For more information:

Member benefit information
Retiree benefit information
2011 Annual Reports

RSA 100-A
NHRS Administrative Rules
NHRS Policies

NHRS has approximately 84,600 members.  There are 49,738 active members, who, along with their participating employers, contribute into the retirement system.  The remaining members are either pension beneficiaries or former members no longer working in NHRS-eligible positions.  Some of these non-contributing former members are “vested,” meaning they have earned the right to a future pension based on their previous service or age; others are not vested.  To be vested, a member must have a minimum of 10 years of creditable service or be in service beyond the NHRS normal retirement age.

Retirement system members are state, county and municipal employees, teachers, police officers, and firefighters.  The membership consists of two groups, Group I (Employee and Teacher) and Group II (Police and Fire). 

Group I members make up 89 percent of the total active membership (52 percent Employee, 37 percent Teacher).

Group II members make up 11 percent of the total active membership (8 percent Police, 3 percent Fire).

The law governing the retirement system allows elected officials, officials appointed for fixed terms, unclassified state employees, and employees of the General Court who are eligible for membership in the retirement system to choose whether or not to join (some limitations apply).  For all others working in NHRS-eligible positions, membership in the retirement system is mandatory.

The membership breakdown at the close of fiscal year 2011 was:

• 49,738 active, contributing members.

• 27,130 pension recipients.

• 1,496 members no longer working in NHRS-eligible positions who are “vested,” meaning they have earned the right to a future benefit.

• 6,272 members no longer working in NHRS-eligible positions who are not vested.  (Regardless of vesting status, former workers may keep their accumulated contributions with the retirement system, or they may withdraw them.)

NHRS has 474 participating employers – the State of New Hampshire, individual communities, school districts, counties, and others. Not every political subdivision in New Hampshire participates in the retirement system for its Employee members, although most do.  Participation is mandatory for Police, Fire, and Teacher members.

Fiscal Year 2011 Membership Snapshot

Membership Trends, 2002-2011

NHRS has a unique status in state government. It is not a state agency under the executive branch; it is a component unit of the state governed by statute and overseen by a Board of Trustees. Trustees are fiduciaries bound by law to act solely in the interests of the pension plan.  In addition to the trustees, the retirement system’s executive director, fund managers, and consultants are fiduciaries.

The 13-member NHRS Board of Trustees consists of:

• Four non-members, including two members who serve as chair and vice-chair. Dr. Lisa Shapiro is the current chair.

• One member each representing the Employee, Teacher, Police, and Fire membership groups.

• One member each representing state, county, municipal, and school employers.

• The state treasurer.

An executive director appointed by the Board of Trustees oversees the day-to-day operation of the retirement system.  George Lagos is the executive director.

Article 36-a of the New Hampshire State Constitution prescribes that retirement system funds are to be used for the “exclusive purpose of providing for such (retirement and related benefits) and shall not be encumbered for, or diverted to, any other purposes.”

The retirement system’s role is to provide information and factual analysis on the impact of proposed legislation.  Neither NHRS staff nor the Board of Trustees take a position for or against any changes to RSA 100-A proposed by the Legislature unless the proposal would violate the Internal Revenue Code or conflict with the board’s fiduciary obligations. 

While the Legislature must approve the retirement system budget, NHRS administrative expenses are paid out of the retirement trust fund, not the General Fund.

For more information:
NHRS Board of Trustees

NHRS benefits are funded by member contributions, employer contributions, and net investment returns.   Investment returns historically provide the majority of funding for pension benefits. 

The retirement system trust fund stood at $5.9 billion at the close of the fiscal year ending June 30, 2011, up about $993 million from the previous year. 

NHRS is currently 57.4 percent funded.  This means that the actuarial value of the retirement system’s assets is 57.4 percent of the projected amount needed to pay for current and accrued benefits for retirees and members.

To be considered healthy, pension plans should be at least 80 percent funded.  Some of the unfunded liability is related to investment performance in the past decade, however, a significant portion of the funding gap is the result of two public policy factors: First, a flawed funding methodology in effect from 1991-2007 that led to the long-term underpayment of employer contributions; second, the diversion of roughly $900 million in investment earnings into the Special Account over roughly the same period.

Despite the unfunded liability, retirement benefits for members of NHRS are secure and guaranteed in the state constitution.  Funds are available to pay present benefits and a funding mechanism is in place to pay down the unfunded liability over a period of decades.  

Investments

NHRS pursues an investment strategy designed to meet its long-term funding requirements.  The Board of Trustees, with research and input from NHRS investment staff, outside experts, and a recommendation from the Independent Investment Committee, set an investment policy that includes asset allocation targets and acceptable ranges. 

The Independent Investment Committee, which was established on Jan. 1, 2009, manages investments based on the trustees’ policies, continuously monitors and evaluates performance, and makes determinations regarding the hiring and retention of fund managers. 

The goal is to meet or exceed the retirement system’s assumed rate of return over the long term, while at the same time managing the risk, return and liquidity of the portfolio.  The current assumed rate of return is 7.75 percent.

The retirement system realized a 23.0 percent return on its assets in fiscal year 2011; this performance was consistent with the returns seen by other public pension plans.  The one-year, three-year, five-year, 10-year, and 20-year returns for the periods ended June 30, 2011, were 23.0%, 4.4%, 4.7%, 5.2%, and 8.5% respectively.

For more information:
Investment Strategy
Funding and Allocation
Quarter-end Investment Report
Annual financial reports and annual investment reports

Rates

Members: Member rates are set by statute and changed effective July 1, 2011.  Group I (Employee and Teacher) members contribute 7 percent of their salary to the retirement system.  Group II (Police and Fire) members contribute 11.55 percent and 11.80 percent, respectively, of their salary to the retirement system.  Note: Police and Fire members are not eligible for Social Security.

Employers: While member contributions are broken down by Group I and Group II, employer contributions are assessed at five different rates, one each for State Employees, Political Subdivision Employees, Teachers, Police, and Fire. Employer rates are set by the NHRS Board of Trustees every two years after a biennial actuarial valuation is conducted.  The valuation is a model of expected liabilities based on reasonable actuarial assumptions, including the rates of investment return and payroll growth, eligibility for the various classes of benefits, and the projected life expectancies of members and retirees. State law requires that NHRS Trustees use this valuation to set employer contribution rates at a level necessary to keep the retirement system on track to meet its constitutional long-term obligations. The rates for fiscal years 2012 and 2013 were set by trustees in September, 2010, and recertified per HB2 (Chapter 224, laws 2011) effective August 1, 2011. The rates for 2014-15 will be set in the fall of 2012 based on the actuarial valuation of June 30, 2011.

For more information:
Current employer rates
Historical employer rates, 1970-2011
Actuarial Valuations

Pension Benefits

The retirement system provides service, early, disability, and vested deferred retirement benefits. 

In fiscal year 2011, the average annual NHRS pension benefit was $18,959. The highest annual pension benefit is $135,916.  The lowest annual pension benefit is $66.

The average annual pension benefit by member classification as of June 30, 2011, is:

Group I

• Employee: $12,474 (13,487 pension recipients)

• Teacher: $21,321 (9,427 pension recipients)

Group II

• Police: $33,876 (2,880 pension recipients)

• Fire: $35,599 (1,336 pension recipients)

About 85 percent of NHRS retirees receive service or early retirement pensions. Service, early, and vested deferred retirement pension benefits are calculated based on three factors: years of creditable service, average final compensation (AFC) – which is the average of a member’s three or five highest-paid years (depending on vested status January 1, 2012) – and a benefit factor that is different for members of Group I and Group II.

For more information:
Member benefit information
Retiree benefit information

Other Post-Employment Benefits (OPEB)

Medical Subsidy: The Medical Subsidy is a payment made by NHRS directly to the eligible retiree’s former employer or their health insurance administrator that goes toward the cost of health insurance for the qualified retired member and qualified spouse.  The Medical Subsidy is not a health insurance plan.

Group I (Employee and Teacher) members who are not yet retired are not eligible for the Medical Subsidy.  Some active Group II (Police and Fire) members who meet statutory eligibility requirements will qualify for the Medical Subsidy at retirement.

There are 10,577 pension recipients or beneficiaries currently receiving a Medical Subsidy.  Of those, 7,184 are age 65 or older.

Cost-of-living adjustments (COLA): COLAs and/or other Temporary Supplemental Allowances (TSAs) for NHRS retirees are subject to legislative approval. COLA amounts are a percentage of a retiree’s pension; TSAs are one-time, lump sum payments based on specific criteria. If approved, COLAs and TSAs typically become effective July 1 of each year.

COLA History 1997-2010

Other Benefits: NHRS provides certain pre- and post-retirement death benefits to the beneficiaries of eligible members.

NOTE ON HEALTH INSURANCE: A common misconception about NHRS is that it provides health insurance for retirees.  This is not the case. 

NHRS-participating employers – with the exception of the state itself – must allow retiring members to continue to participate in the employer’s group health insurance plan. Employers are not required to pay any of the cost of coverage under RSA 100-A, although some may. In most cases, a retiree must elect whether or not to continue coverage upon retirement.

Some state members, depending on their date of hire, length of service, and membership classification, may be eligible for post-retirement health care coverage through the state under a law (RSA 21-I:30) that is separate from the retirement system. NHRS does not administer this benefit.

Member Services

NHRS leadership and the Board of Trustees are committed to meeting the retirement system’s long-term obligations and making decisions based on the best interests of all stakeholders.

The retirement system has worked diligently in recent years to improve member service through increased employer, member, and retiree outreach and education.  In addition, NHRS is constantly working to improve its website, www.nhrs.org. 

For more information:

Member Service Policy