Employer Notice: Payment of Employer Contributions

Members are not permitted to make employer contributions under RSA 100-A:16

Dec 16, 2014
  • Employers
  • Employer Notices

For Immediate Release: July 27, 2012
Contact:  NHRS Employer Services, 603-410-3681 or [email protected]

CONCORD, N.H. – The New Hampshire Retirement System (NHRS, the retirement system) recently received a question from a participating employer regarding whether members can pay both the member contributions due under RSA 100-A:16, I, and the employer contributions due under RSA 100-A:16, II and III. The retirement system is issuing this notice to participating employers to reiterate that members are not permitted to make employer contributions under RSA 100-A:16.

Any employers that have contracts or personnel policies that allow members to pay employer contributions should contact NHRS for further guidance. If, in the course of a future employer compliance audit, NHRS identifies such provisions, the additional time in which the provision was in effect increases any potential adverse impact.


NHRS pays an individual benefit based on three sources of income: member contributions made during a member’s career on Earnable Compensation; employer contributions made during a member’s career on the member’s Earnable Compensation; and investment earnings on the sum of those contributions held in trust.
When the NHRS receives contributions deducted from the compensation of members, RSA 100-A:16, I(a) requires it to place the money in the Member Annuity Savings Fund. In turn, RSA 100-A:16, I(aa) requires each employer to deduct the proper amount of Earnable Compensation applicable to such member.  That subparagraph states that “each employer . . . shall cause to be deducted…the percentage of earnable compensation applicable to such member.”  The New Hampshire Supreme Court has held that the use of the word “shall” indicates the provisions of a statute are mandatory, Ruell v. N.H. Real Estate Appraiser Board, 163 N.H. 34, 41(2011).  

The proper amount of member contributions applicable to individual member groups is specified in RSA 100-A:16, I(a). There is no authorization in RSA 100-A:16 or elsewhere in RSA 100-A that permits employers to deduct more than the applicable member contribution rate from a member’s Earnable Compensation.

When the NHRS receives employer contributions, RSA 100-A:16, II requires it to place the money in the State Annuity Accumulation Fund. RSA 100-A:16, II(c) requires employers to pay “a percentage of the earnable compensation of its members to be known as the ‘normal contribution’ and an additional amount to be known as the ‘accrued liability contribution’ . . .”  RSA 100-A:16, III(c) requires the Board of Trustees to certify “the percentage rates of contribution due the [retirement] system from each employer, and shall assess upon each such employer such percentages of the earnable compensation of members in its employ, and it shall be the duty of the treasurer or other disbursing officer of each such employer to pay to the board of trustees such portion of the annual amount so assessed at such times and in such manner as the board of trustees may prescribe.”  (Emphasis added.)  RSA 100-A:16, III(c) uses the word “shall,” thereby making employer contributions mandatory from the employer.

Potential Impact on Earnable Compensation

Earnable Compensation otherwise includible for a benefit calculation under RSA 100-A cannot be recognized as such until the proper amount of contributions is received from the appropriate party: i.e., from the member for the member’s share and from the employer for the employer’s share. Pursuant to NHRS Administrative Rule Ret. 304.08 (a), “The retirement system shall rescind any service credit or earnable compensation credit previously granted a member for a time period for which the retirement system has not received the required member or employer contributions due in accordance with RSA 100-A:16, I(a) and III(c).”

Potential Impact on NHRS’ Qualified Status

The Internal Revenue Service has issued a determination letter that NHRS is a qualified plan under Internal Revenue Code (Code) Section 401(a) and that the related trust is exempt from tax under Code Section 501(a). Continued qualification of NHRS and the tax-exempt status of the trust are dependent, in part, upon NHRS’ following the terms of the plan (RSA 100-A) in its operation. As noted above, permitting members to pay employer contributions violates RSA 100-A:16, II(c). Such a violation could jeopardize NHRS’ qualified status under the Code and the tax-exempt status of the trust, resulting in adverse tax consequences to the trust as well as all NHRS members, retirees, and their beneficiaries.

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