HB 1587: Average Final Compensation Calculation for Certain Group II Members

Legislation takes effect August 14

Jun 20, 2022
  • Members

For Immediate Release: June 20, 2022
Contact:  public_relations@nhrs.org

CONCORD, NH – Legislation enacted in 2022 will modify the calculation of compensation paid in excess of the full base rate of pay under the definition of Average Final Compensation for Group II (Police and Fire) members who commenced service prior to July 1, 2011, and who had not attained vested status prior to January 1, 2012.

The bill was signed by the Governor on June 15, 2022, and takes effect August 14, 2022.

Since January 1, 2012, employers have been required to report earnable compensation as either "base pay” or “compensation over base” (COB) for all Group I and Group II members not vested prior to that date. COB includes, but is not limited to, overtime, attendance stipends, military differential pay, and extra or special duty pay (i.e. “detail pay”). Under changes to RSA 100-A: 1, XVIII (average final compensation, or AFC) made in 2011, the percentage of COB used in the AFC calculation is the lesser of the percentage of COB in the high 5 years of earnable compensation or the percentage of COB in the remainder of the member's career, excluding the high 5 years.

HB 1587 (Chapter 184, Laws of 2022) changes the AFC calculation for affected Group II members so that the percentage of COB used in the pension calculation is the lesser of the percentage of COB in the high 5 years or the percentage of COB in the remainder of the member's career, including the high 5 years.

Depending on the distribution of compensation over base pay paid since 2012, some affected Group II members may see an increase in their AFC calculation, while other members may not see any change. As of June 30, 2021, there were 1,824 active Group II members who would be affected by this bill.

Implementation of HB 1587 requires significant computer programming and NHRS is unable to accept requests for benefit estimates under the revised formula until the law takes effect.

The bill does not change the calculation for Group I (Employee and Teacher) members and Group II members vested prior to January 1, 2012, or hired on or after July 1, 2011.

The bill does not require employers to change the way they report monthly wages and contributions.

The projected benefit increases associated with this bill will be pre-funded by the state and will not impact FY 24-25 employer contribution rates.

Full text of HB 1587: http://www.gencourt.state.nh.us/bill_status/billinfo.aspx?id=1750

About NHRS

NHRS provides retirement, disability, and death benefits to its eligible members and their beneficiaries.  The State of New Hampshire and more than 460 local government employers participate in NHRS for their employees, teachers, firefighters, and police officers.  NHRS has approximately 48,500 active members and 41,000 benefit recipients. NHRS administers a defined benefit plan qualified as a tax-exempt entity under sections 401(a) and 501(a) of the Internal Revenue Code.

#  #  #