MANCHESTER, N.H. — Public workers hired after July 1 are not likely to see six-figure retirement incomes like those reported recently because changes lawmakers made in the New Hampshire Retirement System will prevent it.
Information released last week on the system’s top 500 beneficiaries showed 19 received more than $100,000 annually in 2010: 14 police officers, four firefighters and one school superintendent.
Police and fire chiefs were among the highest earners, but so were lesser-ranked police officers who received large severance packages that included unused sick and vacation time and “detail work” outside of regular working hours.
For new hires after July 1, the new formula will not allow severance pay, buy-out packages, pay for unused sick or vacation leave, and end-of-career longevity pay to boost pensions.
For the new hires, benefits will be determined by using a five-year average instead of a three-year average of the highest earning years, plus the length of time in the system.
The formula change was one of many made in retirement system law this legislative session. Most of the changes affect people hired after July 1 and to a lesser extent those with fewer than 10 years in the retirement system. Vested employees, those with 10 or more years in the system, will see few changes in their benefits.
Changes in the benefit formula, or in the retirement age or length of service to attain full benefits, will not go into effect until Jan. 1 for public workers in the system prior to July 1. There is a five-year phase-in for workers with fewer than 10 years of service who were in the system June 30.
However, all workers have to pay a higher percentage of their earnings into retirement — about 2 percent more — and non-cash compensation and fringe benefits will no longer be used to determine a retiree’s pension. The changes will reduce the pensions of non-vested employees and require them to work longer in order to receive full benefits.
The police and firefighters in Group 2 will see different changes than do the educators and state, county and municipal workers in Group 1.
The Group 2 members do not contribute to Social Security, but contribute a greater percentage of their earnings to the system than Group 1 members do. In return, they receive a higher benefit at a younger retirement age.
Police and firefighters are not included in the Social Security System unless a state agrees to include them under a “218 Agreement” with Social Security, which New Hampshire does not do. Police and firefighters do pay Medicare taxes, however.
Also, Group 2 members receive a reduced Social Security pension if they work enough quarters in the private sector to qualify for retirement benefits under the federal program.
Under the new law, Group 2 members will have to work longer to receive full benefits. The change increases the years of service from 20 to 25 and raises retirement age from 45 to 52.5. Group 1 members can retire with full benefits after 30 years of service, but the retirement age has been raised from 60 to 65 years old.
The changes also took a stab at addressing “double dipping,” whereby a worker retires and collects a pension and then takes another government position.
The first change limits the number of hours a retiree may work without having to rejoin the system and stop collecting a pension. The law restricts the part-time work to 32 hours a week, or 1,300 hours a year provided it is not within a continuous five-month period.
For example, the town of Brookline hired retired state police Officer William Quigley III to be a part-time police chief. That allowed Quigley to continue to collect his pension without him or the town contributing to the retirement system. Under the new law, if Quigley worked more than 32 hours, he would have to give up his pension and again contribute to the system, as would the town.
Another change requires unclassified state workers — mostly commissioners, deputy or assistant commissioners and division heads — who receive a pension from the state retirement system and take a position after July 1 to become contributing members to the system again and to stop receiving a pension.
A retiree in an unclassified position before July 1 continues to be exempt from the new provision. For example, Corrections Commissioner William Wrenn receives a pension after retiring as a police officer, including his years as Hampton police chief.
Without the exemption under the new law, he would have to discontinue his pension and rejoin the system. However, because he was appointed before July 1, he can continue to receive his pension and also collect his salary as commissioner without rejoining the retirement system.
(c)2011 The New Hampshire Union Leader (Manchester, N.H.)
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