Problems with Public Employee Pensions

Currently I am retired and receive a pension from the NHRS, and my wife will shortly do the same. I have several comments and a question that I was not able to ask on the program this morning.

1. Every NH teacher I know already has the option to set up a 403(b)(7) plan, the public sector equivalent of the 401k. I was surprised to hear your guests repeatedly refer to 401k plans since teachers, the majority of participants in the NHRS, simply do not have them. The most the state could do is to offer to match teacher contributions to these already existing defined contribution plans.

2. If the state lost large amounts in the recent stock market turndown, that tells me we need new investment management. I am a small investor and I didn't lose one dime during that period by simply switching to money market funds for the duration. If I could figure out what was about to happen back in 2001 and knew enough to go back into the market in March 2003, why didn't the financial wizards at NHRS know enough to do the same?

3. Your guests gave many assurances of financial integrity at the state retirement system, but I am not so sanguine myself. The service office in Concord, I know, is swamped with work, and frequently makes mistakes lately. The mistakes are usually corrected quickly, but one wonders who is minding the store.

4. Now the question, one that adds perspective to my comment #3: Why did the state legislature, with very little publicity, authorize outright purchases by current participants in the system (i.e. pre-retirement members of NHRS) of non-qualified service time, up to five years, in July 2006? Previous to that time, no participant could do any such thing, and even those who were allowed to purchase some time from out of state teaching experience or because of military service, were not granted credit toward the health insurance subsidy; those who choose the five year non-qualified buy, on the other hand, receive every benefit just as though they had actually served those five years.

There is another detail that is curious about this July 2006 change in the law. Such a purchase would cost around $25,000 to $30,000 out of pocket after-tax dollars, and this is allowed under the law. The law as amended in 2006 also allows, however, the participant to roll over money now sitting in a 403(b) or 457 (but not an IRA) plan for the non-qualified service purchase without tax consequences. In fact, one of the reasons the Concord office at NHRS is now swamped with work is precisely the paperwork occasioned by this change in the law; many teachers and state workers took advantage of the opportunity since it seriously affects their eventual monthly retirement check.

Was this an indication of a short-term cash flow problem at NHRS? I can't think of anything else to explain this dramatic change in policy. Whose idea was it? Was it an attempt to raid 403(b) plans the legislature knew many teachers had been funding for years? And, why was it done so secretly? Teachers and others in the system had to learn of the change basically through word of mouth; even the NHRS website didn't carry the story till long after the change.

Laura, I think you may need to revisit this question in the future and to have on board someone with the financial credentials needed to ask hard questions of legislators, those administering the system, and employees at NHRS. To date the only thing I have been able to get is a shrug of the shoulders and puzzled looks. Everyone seems to be in the dark about the real reason prompting this strange legislative change.

Kate McGovern
To clear up one of Rep. Wendelboe's comments that might have alarmed 50,000 public employees - their money is NOT forfeited if they pass away before collecting it as a pension. All employee contributions, plus credited interest are returned to the employees' beneficiary(ies) or estate. Or, depending upon the death benefit options, the beneficiary(ies) may be paid lifetime pensions. Listeners can check out the NHRS website, if they have questions. www.nhrs.org