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Public pensions in New Hampshire

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New Hampshire public pensions
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Pension system
Number of pension systems 2
State pension systems: New Hampshire Retirement System
New Hampshire Judicial Retirement System
System type: Defined benefit plan
Pension health (2012)[1]
Fund value: $5,861,896,000
Estimated liabilities: $10,421,426,000
Unfunded liabilities : $4,559,530,000
Percent funded: 56.2%
Percent funded change: Decrease.svg2.35% (from 2010)[2]
Percent funded rank: 45[3]
Pension fund members (2012)
Total members: 85,492
Active members: 48,625
Other members: 36,867
Other state pension information
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Public pensions
State public pension plans
Public pension health by state
New Hampshire public pensions are the state mechanism by which state and local government employees in New Hampshire receive retirement benefits. Two pension systems administer benefits to the state's eligible retirees, the New Hampshire Retirement System and the Judicial Retirement Plan.

According to the United States Census Bureau, the state has two locally-administered pension systems.[4]

A 2012 report from the Pew Center on the States noted that New Hampshire’s pension system was funded at 59 percent at the close of fiscal year 2010, well below the 80 percent funding level experts recommend. Consequently, Pew designated the state's pension system as cause for "serious concern."[5]

The system currently has an unfunded liability of over $4.5 billion and a funding ratio of 56.2 percent.


Pension plans

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).[6]

  • 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).

In fiscal year 2012, according to Actuarial Valuation Reports, the state had a total of at least 48,625 active members in its retirement plans (membership totals for the Judicial Retirement Plan could not be found). Our membership figures divide plan participants into two broad categories: active and other. Active members are current employees contributing to the pension system. Other members include retirees, beneficiaries and other inactive plan participants (usually terminated employees entitled to benefits but not yet receiving them).[7]

The following data was collected from Actuarial Valuation Reports, which measured fund status as of June 30, 2012 . Valuation reports are annual reports produced by outside consultants, using unaudited data provided by the pension systems themselves, in order to determine what employers in the system should contribute in the coming year to maintain or improve the fiscal health of the pension funds.

The Government Accountability Office (GAO) and Pew Research Centers cite a percent funded ratio of 80 percent as the minimum threshold for a healthy fund, though the American Academy of Actuaries suggests that all pension systems "have a strategy in place to attain or maintain a funded status of 100 percent or greater."[8][9] The column "SBS figure" refers to a market liability calculation of the fund by the nonprofit organization State Budget Solutions. This analysis uses a rate of return of 3.225 percent, which is based upon the 15-year Treasury bond yield. The organization calls this a "risk-free" rate of return, which would make it easier for states to hit their pension requirements in the future. Since 2006, all private sector corporate pension plans have incorporated market costs into their funding schemes.[10]

Basic pension plan information -- New Hampshire Retirement System
Plans Current value Percentage funded Unfunded liabilities Membership
State figure SBS figure[11] State figure SBS figure[11]
New Hampshire Retirement System[12] $5,817,882,000 56.1% N/A[13] $4,543,718,000 N/A[13] 48,625 active members
Judicial Retirement Plan as of January 2010[14] $44,014,000 73.6% $15,812,000 N/A
TOTALS $5,861,896,000 56.2% 30% $4,559,530,000 $13,889,971,000 48,625 active members

Annual Required Contribution

Annual Required Contributions (ARC) are calculated annually and are a sum of two different costs. The first component is the "normal cost," or what the employer owes to the system in order to support the liabilities gained in the previous year of service. The second component is an additional payment in order to make up for previous liabilities that have not yet been paid for.

According to a report by the Pew Center on the States, between 1999 and 2008, New Hampshire paid 75.12 percent of its annual required contribution.[15][16]

On June 25, 2012, the Government Accounting Standards Board (GASB) approved a plan to reform the accounting rules for state and local pension funds. These revised standards were set to take effect in fiscal years 2013 and 2014.[17] As a result, ARCs were removed as a reporting requirement. Instead, plan administrators and accountants will use an actuarially determined contribution or a statutory contribution for reporting purposes.[18]

ARC historical data[19][14]
Fiscal year New Hampshire Retirement System Judicial Retirement Plan
Annual Required Contribution (ARC) Percentage contributed Annual Required Contribution (ARC) Percentage contributed
2011 $280,124,000 100% $2,357,000 100%
2010 $268,061,000 100% $1,905,000 100%
2009 $252,321,000 75% $1,244,000 100%

Historical funding levels

Historical pension plan data - New Hampshire
Year Value of assets Accrued liability Unfunded liability Funded ratio
2008 $5,352,635,006 $7,876,247,352 $2,523,612,346 67.96%
2010 $5,277,852,359 $9,013,758,346 $3,735,905,987 58.55%
Change from 2008-2010 -$74,782,647 $1,137,510,994 $1,212,293,641 -9.41%

Rate of return

NHRS presumes a 7.75 percent return rate on its pension investments.[19] The pension board voted to to lower the rate to 7.75 percent from 8.5 percent in 2011, but the state legislature delayed the change to New Hampshire cities and towns from having to make additional contributions to the fund.[20]


According to a 2012 analysis by the Pew Center for the States, most state pension plans assume an 8 percent rate of return on investments.[21] Critics assert that this assumption is unrealistic, citing changing market conditions and significantly lower investment returns across the board over the past several years.[22] When states lower the rate of return in an effort to predict investment earnings accurately, it increases the current plan liabilities, thereby lowering the percent funded ratio and causing the ARC to increase. This is because future plan liabilities are discounted based on the rate of return, so smaller expected investment returns result in larger actuarially accrued liabilities.[23] For example, on September 21, 2012, the Illinois Teachers Retirement System voted to lower its rate of return from 8.5 percent to 8.0 percent. This change increased the state's fiscal year 2014 ARC from $3.07 billion to $3.36 billion.[24] Similarly, when California's CalPERS reduced its projected annual rate of return from 7.75 percent to 7.5 percent in March 2012, it cost the state an additional $303 million for fiscal year 2013.[25]

The 2008 financial crisis had a devastating effect on pension plans nationwide and resulted in slower economic growth and increased market volatility. In light of this, some market strategists find the 8 percent assumption to be overly ambitious. Stanford University Finance Professor Joshua Rauh stated that using past investment performance in this economic climate was "dangerously optimistic."[26] Advocates for a lower assumed rate of return argue that the standard assumptions could cause pension fund managers to engage in more risky investments and imprudent stewardship of public funds. Further, if pension plans were using more conservative assumptions, such as the 3 or 4 percent assumed rate of return used in the private sector, and the plans grew more quickly than expected, the fund would have a surplus and smaller future ARCs, which would be preferable to using optimistic assumptions and potentially being caught with larger-than-expected deficits.[27][28][29][30][31]

On the other hand, traditional public pension plan advocates argue that the dip observed in recent years is not sufficient proof of a long-term, downward trend in investment returns. According to Chris Hoene, executive director at the California Budget Project, "The problem with [the market rate] argument is there isn’t significant evidence other than the short term blip during the economic crisis that there’s been that shift. It’s a speculative argument coming out of a very deep recession."[26]

The National Association of State Retirement Administrators compiled data on the median annualized rate of return for public pensions for the 1-, 3-, 5-, 10-, 20-, and 25-year periods ending in 2013. While the median annualized rate of return failed to meet the 8 percent assumption that most public pensions assume over the 5- and 10-year periods, it was just shy (7.9 percent) over the 20-year period, and it exceeded 8 percent for the 1-, 3-, and 25-year periods. It is important to note that the NASRA data is reporting the median returns, indicating that even though median annualized returns exceeded 8 percent in the 25-year period, the investment portfolios for half of the examined public pension funds failed to meet an 8 percent assumed rate of return.[32]

In September 2013, the nonprofit organization State Budget Solutions published an analysis of state pension funding levels. In its calculations, State Budget Solutions used a 3.2 percent rate of return, the 15-year Treasury bond yield as of August 21, 2013, to discount plan liabilities.

The research found that in all states combined, state public employee pension plans have only 39 percent of the assets they need to cover their promised payments—a $4.1 trillion gap. According to the report, New Hampshire's public pension plans were 30% funded, making it the 44th most funded state.[33]

Moody's report on adjusted pension liabilities

On June 27, 2013, Moody's Investor Service released its report on adjusted pension liabilities in the states. The Moody's report ranked states "based on ratios measuring the size of their adjusted net pension liabilities (ANPL) relative to several measures of economic capacity." In its calculations of net pension liabilities, Moody's employed market-determined discount rates (5.67 percent for New Hampshire) instead of the state-reported assumed rates of return (8.50 percent for New Hampshire).[34]

The report's authors found that adjusted net pension liabilities varied dramatically from state to state, from 6.8 percent (Nebraska) to 241 percent (Illinois) of governmental revenues in fiscal year 2011.[34]

The adjusted net pension liability for New Hampshire's pension systems in fiscal year 2011 was ranked the 44th highest in the nation.[34] The following table presents key state-specific findings from the Moody's report, as well as the state's national rank with respect to each indicator.

Adjusted net pension liabilities (ANPL) relative to key economic indicators - New Hampshire
Governmental revenue* Personal income State GDP Per capita
State findings 56.4% 4.5% 4.3% $2,086
National ranking 21st 28th 27th 27th
*Moody's uses governmental revenues as reported in each state's consolidated annual financial reports; this includes not only state-generated revenue, but federal funds, as well.[34]


A February 2012 lawsuit, Professional Firefighters of New Hampshire, et al. v. State of New Hampshire, challenged whether the legislature may withdraw more from the paychecks of veteran public employees to support pension reform. Merrimack County Superior Court held that it is illegal for the legislature to increase contributions for all employees who had worked for at least 10 years. The ruling declared legal the Legislature’s ability to impact new hires, including raising the retirement age and reducing their ability to pad future pension amounts. At this point, it unclear whether the Attorney General will appeal.

Pension fund management fees

See also: Public pension fund management fees

In July 2013, the Maryland Public Policy Institute (MPPI) and the Maryland Tax Education Foundation released a report detailing the fees paid for the management of state pension systems. According to MPPI, the 10 state pension funds that paid the most in management fees relative to net assets experienced lower returns over a five-year period than the 10 state pension funds that paid the least in management fees. For example, in fiscal year 2012 South Carolina's pension system paid approximately $296.1 million in total management fees (1.31 percent of total net assets at the beginning of the fiscal year) and its five-year rate of return was 1.46 percent. By contrast, Alabama's pension system paid roughly $13.3 million in management fees (0.05 percent of total net assets) and its five-year rate of return was 7.53 percent.[35]

The table below presents the information collected by MPPI for New Hampshire and surrounding states. For each state's pension system, total net assets are listed (both for the beginning and end of the fiscal year in question), as well as the total amount paid in management fees. In addition, the rates of return for the pension systems are presented. Compared to surrounding states, New Hampshire had the lowest total net assets.

Public pension fund management fees, 2011-2012
State Fiscal year Total net assets at the beginning of the year Total net assets at the end of the year Total management fees Management fees as a percentage of total net assets at the beginning of the year Five-year rate of return for the pension fund
New Hampshire 2012 $5,891,179,000 $5,774,343,000 $22,908,000 0.39% 1.80%
Maine 2012 $11,051,692,821 $10,766,866,860 $24,300,000 0.22% 1.50%
Massachusetts 2012 $50,245,766,000 $48,867,807,000 $252,070,837 0.50% 0.11%
Rhode Island 1
Vermont 2012 $3,470,318,417 $3,450,571,044 $14,304,023 0.41% 2.30%
1"Three states— Hawaii, Nevada and Rhode Island—were excluded because they hadn’t published CAFRs for fiscal years ending December 31, 2011 or later. West Virginia was excluded because its June 30, 2012 CAFR lacked sufficient disclosure."[35]
Source: Maryland Public Policy Institute, "Wall Street Fees, Investment Returns, Maryland 49 Other State Pension Funds," July 1, 2013


Enacted reforms


NH H 342

This bill, enacted June 4, 2013, related to reporting of compensation paid to retired members of the retirement system and required retirement system employers to report to the retirement system all compensation paid to retired members of the retirement system. It also required the retirement system to notify retired members of the retirement system of the annual limitations on hours for part-time employment.[36]


NH S 83

This bill enabled municipalities and school districts to create other post-employment benefits trusts and defined other post-employment benefits to mean employee benefits other than pensions that are received after employment ends, including medical, disability, or other health benefits. It also set forth requirements for deposits to funds under such trusts and earnings on those deposits.[36]

Proposed reforms


NH H 1306

This bill would have required retirement system employers to make contributions based on the unfunded accrued liability and medical benefits employer share for retired members employed on a part-time basis.[36]

Local public pensions

See also: Local government public pensions

According to the United States Census Bureau, the state has two locally-administered pension systems.[4]


See also: Public pension disclosure and Governmental Accounting Standards Board
  • Pension data is available on the NHRS website, including annual reports, actuarial valuations, trust fund assets and balances, and investment strategies.[37] However, RSA 100-A, the law that governs New Hampshire's pensions, does not explicitly state that pension data is public information, though it does require an independent committee to conduct audits.[38]
  • In 2011, the state Supreme Court ruled that pension information and the names of recipients are public information.[39]
  • Pension fund performance data is available in the yearly Comprehensive Annual Financial Reports.[12]
  • No pay-to-play laws have been enacted on a state level, and so pension agents, lobbyists, and investment managers have no restrictions on donating money or resources for elections and campaigns.
  • The Independent Investment Committee oversees the pension funds, and an independent auditor examines every Comprehensive Annual Financial Report.[40]

Recent news

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See also

Additional reading

External links


  1. Figures below are compiled by adding up all state pension plans
  2. This figure is derived by calculating the percent difference between the current year's funding level and the system's percent funded from the prior year.
  3. Rank is relative to the 50 state pension programs. "1" refers to the healthiest pension plan while "50" would be the least well-funded plan.
  4. 4.0 4.1 "Public Employee Retirement Systems State- and Locally-Administered Pensions Summary Report: 2010," United States Census Bureau, April 30, 2012
  5. "The Widening Gap Update,” Pew Center on the States, accessed October 17, 2013
  6. New Hampshire Retirement System, "Plan Details," accessed November 27, 2013
  7. Organisation for Economic Co-operation and Development, "Pensions Glossary," accessed November 27, 2013
  8. United States Government Accountability Office Report to the Committee on Finance, U.S. Senate, "State and Local Government Retiree Benefits: Current Status of Benefit Structures, Protections, and Fiscal Outlook for Funding Future Costs," September 2007. accessed October 23, 2013
  9. American Academy of Actuaries, "Issue Brief: The 80% Pension Funding Standard Myth," July 2012. accessed October 23, 2013
  10. Governing Magazine, " Is There a Plot Against Pensions?" October 14, 2013
  11. 11.0 11.1 State Budget Solutions, "Promises Made, Promises Broken - The Betrayal of Pensioners and Taxpayers," accessed September 20, 2013
  12. 12.0 12.1 12.2 New Hampshire Retirement System, "Comprehensive Annual Financial Report 2012," accessed November 7,2013
  13. 13.0 13.1 Analysis only available for system totals and not individual funds.
  14. 14.0 14.1 14.2 State of New Hampshire, "2012 Comprehensive Annual Financial Report," accessed November 27, 2013
  15. Pew Center on the States, "The Trillion Dollar Gap: New Hampshire," February 18, 2010
  16. Government Accounting Standards Board, "Annual Required Contribution (ARC)," accessed October 17, 2013
  17. Reuters, "Little-known U.S. board stokes hot pension debate," July 10, 2012
  18. State Budget Solutions, "GASB's ineffective public pension reporting standards set to take effect," June 5, 2013
  19. 19.0 19.1 New Hampshire Retirement System, "2012 Actuarial Valuation," accessed November 7, 2013
  20. The Wall Street Journal, "Pensions Wrestle With Return Rates," October 2011
  21. "The Widening Gap Update,” Pew Center on the States, accessed October 17, 2013
  22. The New York Times "Public Pensions Faulted for Bets on Rosy Returns," May 27, 2012
  23. Benefits Magazine "Public Pension Funding 101: Key Terms and Concepts," April 2013. accessed October 23, 2013
  24. Crain's Chicago Business "State teachers pension board lowers expected rate of return," September 21, 2013. accessed October 23, 2013
  25. Huffington Post "California Pension Funds Expect Lower Investment Return," March 14, 2012. accessed October 23, 2013
  26. 26.0 26.1 Governing "Expert: Governments Are Masking Their Pension Liabilities ," October 25, 2013. accessed October 25, 2013
  27. The Washington Post "Kansas’s pension funding gap just grew by $1 billion," September 6, 2013. accessed October 25, 2013
  28. Topeka Capital-Journal "KPERS' unfunded liability rises to $10.2B," September 4, 2013. accessed October 25, 2013
  29. Wall Street Journal "Pensions Wrestle With Return Rates," October 10, 2011. accessed October 23, 2013
  30. The Courant "Promising Too Much On Public Pensions," August 10, 2012. accessed October 23, 2013
  31. Business Wire "NCPERS 2013 Survey: Public Pension Plans Report Increasing Confidence, Lower Costs, Growing Returns," October 22, 2013. accessed October 25, 2013
  32. National Association of State Retirement Administrators "Issue Brief: Public Pension Plan Investment Return Assumptions," October 2013. accessed October 23, 2013
  33. State Budget Solutions, "Promises Made, Promises Broken - The Betrayal of Pensioners and Taxpayers," accessed September 20, 2013
  34. 34.0 34.1 34.2 34.3 Moody's Investor Service, "Adjusted Pension Liability Medians for US States," June 27, 2013
  35. Cite error: Invalid <ref> tag; no text was provided for refs named report
  36. 36.0 36.1 36.2 National Conference of State Legislatures, "Pensions and Retirement State Legislation Database," accessed October 29, 2013
  37. New Hampshire Retirement System, "Investments," accessed November 27, 2013
  38. New Hampshire General Court, "Title VI: Public Officers and Employees: Chapter 100-A: New Hampshire Retirement System," accessed November 27, 2013
  39. New Hampshire Union Leader, "List NHRS fought to keep secret reveals six-figure pensions for police, firefighters," November 8, 2011
  40. New Hampshire Retirement System, "Independent Investment Committee," accessed November 27, 2013