The leaders of a special panel that reviewed the state’s pension system say the retirement benefit as a whole is already on the road to recovery.
But they also told the House Finance Committee that the retiree medical benefit system is in much worse shape.
They reported things are so bad that teachers and local government employees who don’t retire by this July will no longer be eligible for medical coverage.
New Hampshire Public Radio’s David Darman has more.
The numbers in the state’s retirement system can be a bit numbing.
But consider this: local governments and the state pay 50 million dollars a year to subsidize retiree health benefits.
And that’s for only half of the 20,000 retirees.
Economist Lisa Shapiro, who headed part of the special retirement panel, says some active employees can never earn the benefit.
And if you’re a police officer or a firefighter, you had to be hired by 2000. So there are folks who have been on the job, police and fire local for five, six seven years who are sitting on trucks or sitting with people next to them and they are entitled to this subsidy when they retire and the newer employees are not.
The panel found that to continue paying the medical benefit, the state and local governments are on the hook for more than 800 million dollars in future years.
There’s very little money in the system to pay for that amount right now.
So Shapiro told the Finance Committee members that the panel recommends that a new retirement health fund be created.
She says both employers and employees should contribute to it.
Shapiro says making a change makes good sense for the state and for local governments.
If the health care subsidy program isn’t restructured and managed in way that gets control of it, then costs will go up by another 40 percent, in other words a total of 50 percent. So there’s really a looming issue here on the health care side.
Despite that troubling news about retirement health care, they reported better news about cost of living raises.
Last year, retirees had to lobby hard to get state lawmakers to sign off on a two and a half percent cost of living allowance, or COLA.
The special committee told lawmakers they thought COLAS could be funded through the existing pension system.
Lisa Shapiro says that the committee proposes current employees pay an extra 2 percent of their salaries into the retirement system to fund COLA s after retirement.
But she said when retirees begin collecting the raises would depend on how long they’ve worked.
Our recommendation is to work with the actuaries so that two percent buys you two percent, so that you’re putting aside two percent and when you start receiving that depends on some additional work with the actuaries through the legislative process if the legislature chooses to move forward with the recommendation to go to pre funded COLAs.
Special panel officials also told the House Finance Committee that they’d looked at how the retirement system had operated in past years.
It’s no secret that the pension has been severely underfunded, after stock market losses several years ago and inadequate funding by cities, towns and counties.
Committee chairman William Bartlett told lawmakers that he was satisfied that more competent management was now in charge of the pension.
But he told lawmakers the panel thought more oversight would be needed.
One of the first recommendations that we discussed and worked on was the fact that we needed experienced people with expertise to advise the board. Most funds around the country are set up with investment advisors and most of them are carrying professional people, professional auditors, professional investment people who have their hand on the pulse.
The House Finance Committee is now set to take a long look at the Special Retirement Panel’s analysis and recommendations.
There’s no telling how long that might take.
But the panel has certainly left lawmakers with a lot to consider.
