NHRS Trustees Adopt Revised Actuarial Assumptions

Changes are expected to slightly decrease 2026-27 employer contribution rates; Assumed rate of investment return is unchanged

Jun 12, 2024
  • NHRS

For Immediate Release: June 12, 2024

Contact: Marty Karlon, Director of Communications & Legislative Affairs, (603) 410-3594; public_relations@nhrs.org

CONCORD, NH – The Board of Trustees of the New Hampshire Retirement System (NHRS, the retirement system) voted June 11, 2024, to adopt revised actuarial assumptions based on the results of a four-year experience study conducted by its consulting actuary, Gabriel, Roeder, and Smith (GRS).

The new assumptions, which better reflect the retirement system’s actual and anticipated experience, will be used in the actuarial valuation for the fiscal year ending June 30, 2023. By statute, this valuation will be used by the Board in August to certify employer contribution rates for fiscal years (FY) 2026 and 2027.

In addition to adjustments to demographic assumptions – such as retirement and disability rates, withdrawals, merit and longevity salary increases, and mortality – the actuary recommended increasing the payroll growth assumption for employees, police, and fire from 2.75 percent to 3 percent to reflect price inflation growth over the past four years. Additionally, the payroll growth assumption for teachers was increased from 2.25 percent to 2.50 percent; the assumption for teachers is lower to account for the long-term decline in New Hampshire’s school-age population.

Overall, the changes to actuarial assumptions approved this year are expected to slightly decrease FY 26-27 employer contribution rates from the current FY 24-25 rates.

Actuaries conduct experience studies on a regular basis to assess the extent to which their assumptions reflect plan experience. New Hampshire law requires the retirement system’s actuary to conduct an experience study at least once every five years. Per Board policy, NHRS conducts an experience study every four years to remain in sync with the statutorily required certification of employer contribution rates every two years.

GRS calculates NHRS’ funded ratio, unfunded actuarial accrued liability (UAAL), and employer contribution rates based on assumptions about many future events, such as the age when members will retire, their rate of salary growth, how long they will live after retirement, and how much the plan’s investments will earn. These assumptions are based on detailed statistical models in accordance with Actuarial Standards of Practice. However, they are not facts; no one can predict future events. When the assumptions don’t match the actual experience, there can be an actuarial gain or loss. Put simply, gains reduce employer contribution rates, losses increase employer contribution rates.

The New Hampshire Constitution (Part I, Article 36-a) requires NHRS Trustees to set actuarially sound employer contribution rates and requires employers to annually pay those rates in full. Employer rates are calculated every two years to reflect the cost of benefits as they accrue as well as pay down existing unfunded liabilities. The retirement system’s unfunded liability is the difference between current assets and the value of benefits already accrued. This unfunded liability – most of which is being paid off through 2039 – accounts for more than two-thirds of current employer rates.

 For the first time since 2005, the actuary did not recommend reducing the assumed rate of investment return, which is currently 6.75 percent. Of all the assumptions used to estimate the cost of a public pension plan, none has a larger effect on the plan’s employer contribution rates than the investment return assumption. This is because, over time, earnings from investments account for most of the retirement system’s revenues.

According to July 2023 data compiled by the National Association of State Retirement Administrators (NASRA) in its review of the nation’s largest public pension funds, the average assumed rate of return was 6.91 percent.

See full experience study:

About NHRS

NHRS provides retirement, disability, and death benefits to its eligible members and their beneficiaries. The State of New Hampshire and nearly 460 local government employers participate in NHRS for their employees, teachers, firefighters, and police officers. NHRS has approximately 48,500 active members and 43,500 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.

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