SNAPSHOT: New Hampshire Retirement System. Key Facts. Overview

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SNAPSHOT: New Hampshire Retirement System Overview The New Hampshire Retirement System was established in 1967, consolidating the previous four retirement systems in the state. The system provides retirement, disability, and survivor benefits for all full-time state employees, public school teachers and administrators, police officers, firefighters, and some employees of political subdivisions. A defined benefit (DB) pension is a retirement plan that typically offers a modest but stable monthly retirement income that lasts the remainder of the retiree s life. Public sector pensions usually employ a shared financing model whereby both employees and employers contribute to the pension fund over time to manage costs. In contrast, private sector pensions are almost always funded solely by the employer. Defined benefit (DB) pension benefits often are a function of an employee s years of service and salary at the end of one s career. The benefits are financed by a combination of employer contributions, employee contributions, and investment earnings. Contributions typically are pooled among all employees and invested, with investment decisions made by professional asset managers overseen by trustees. Key Facts Teachers and general employees contribute 7% of salary to the fund. Employers contribute 8.99% to the fund on behalf of teachers. Each dollar invested by New Hampshire taxpayers in the pension supported $7.84 in total economic activity in the state. Education employees make up about 37% of the active membership in the New Hampshire

Key New Hampshire Data 1 The chart below summarizes the key data for the New Hampshire Retirement System, as of June 30, 2012: Total active employees Total retirees and beneficiaries Employer contribution rates Employee contribution rates Average annual service retirement benefit Actuarial value of assets Funded ratio Unfunded actuarial accrued liability Percent of ARC contributed Teachers 18,161 9,956 8.99% The Economic Impact of New Hampshire Pensions 2 Expenditures made by retirees of state and local government provide a steady economic stimulus to New Hampshire communities and the state economy. Within the state of New Hampshire, 2012 expenditures stemming from state and local pensions supported: 9,091 jobs that paid $433.4 million in wages and salaries $1.3 billion in total economic output $163.4 million in federal, state, and local tax revenues Total NHRS 48,625 28,454 8.48% (state and local employees); 15.98% (police); 18.92% (fire) 7.0% (state and local employees); 11.55% (police); 11.8% (fire) $12,591 (general employees) Each dollar paid out in pension benefits supported $1.84 in total economic activity in New Hampshire. 7.0% $21,320 $5.8 billion 56.1% $4.5 billion 100% (2012); 100% (2011); 100% (2010); 75% (2009*); 75% (2008*); 100% (2007); 100% (2006); * In 2008 and 2009, 25% of all employer pension contributions were transferred to the other post-employment benefit plans, in accordance with state statute. Each dollar invested by New Hampshire taxpayers in these plans supported $7.84 in total economic activity in the state. 1 All data, unless otherwise noted, as of June 30, 2012. 2 Boivie, I. 2012. Pensionomics 2012: Measuring the Economic Impacts of DB Pension Expenditures. Washington, DC: National Institute on Retirement Security. AARP in the States New Hampshire Retirement System 2

New Hampshire Retirement System By the Numbers The following provides a snapshot of key data relative to the New Hampshire The system provides retirement benefits for state employees, public school teachers and administrators, police officers, and firefighters in New Hampshire. The system provides a defined benefit (DB) pension, a retirement plan that typically offers a modest but stable monthly retirement income that lasts the remainder of a retiree s life. $7.84 The total economic activity in the state for each dollar invested by New Hampshire taxpayers in the New Hampshire $1.3 billion Total economic output in New Hampshire created in 2009 when public sector retirees spent their pension income. $163.4 million Federal, state and local tax revenues generated by spending of New Hampshire public pension income. 9,091 Jobs created from pension income spending by New Hampshire state and local government retirees. $21,320 Average annual pension income for a retired teacher in New Hampshire. 7.0 Percentage of salary that employees contribute from every paycheck to their pension benefit to share the funding responsibility. Nationally, the median employee contribution rate is 5%. 45 Percentage of pre-retirement income replaced by the defined benefit (DB) plan for a newly hired teacher employee with 30 years of service. A replacement ratio of 80% from all income sources is considered adequate for a secure retirement. 82 The number of teachers retained each year solely due to the defined benefit (DB) plan. 48,625 Total active members of the New Hampshire $923,988 Teacher turnover cost savings generated by the retention effect of the defined benefit (DB) pension. All data come from either the New Hampshire Retirement System or the National Institute on Retirement Security.

SNAPSHOT: Pensions for New Hampshire Teachers Overview As early as the turn of the 20th century, American legislators seemed to understand the importance of teacher quality to students education. A 1917 report on public education noted that, A school teacher s work is personal, direct, and positive. It works for the good or the ill of each pupil. 1 Key Facts Employees contribute 7% of salary out of each paycheck to the pension fund. The average teacher s retirement benefit is $21,320 per year, or $1,777 per month. The system covers 18,161 active school employees and 9,956 retired school employees and beneficiaries. Teachers are paid 14.3% less than comparable private sector workers. The pension replaces 45% of preretirement income for a newly hired teacher with 30 years of service. Most experts find that a replacement ratio of 80% or more, from all income sources, is adequate for a secure retirement. Defined benefit (DB) pension plans were first introduced for teachers in the United States to help with the recruitment of high quality educators, and as an incentive to keep those educators in the teaching profession. By 1916, some form of retirement plan was available to public schoolteachers in 33 states. It was thought that such a retirement system might serve two purposes: 1) bringing more diverse, and highly qualified teachers into the profession; and 2) creating a more productive workforce that actually saves public employers money, as one dollar in pension benefits was seen as worth more than a dollar in salary. 2 All public school teachers in New Hampshire have pension coverage through the New Hampshire The system covers 18,161 active employees of public educational institutions, and 9,956 retired school employees and beneficiaries. Employees contribute 7.0% out of each of their paychecks to the pension fund. The average teacher s retirement benefit is $21,320 per year, or $1,777 per month. The pension replaces 45% of pre-retirement income for a teacher with 30 years of service hired since 2011. Most experts find that a replacement ratio of 80% or more, from all income sources, is adequate for a secure retirement.

Teachers Receive Lower Compensation Public employees receive lower wages than their private sector counterparts. Even after accounting for pensions and other benefits, on average, state and local workers receive 7% less than those in the private sector. 3 More specifically, teachers are paid 14.3% less than comparable private sector workers and this pay gap has increased in the last decade. 4 Teacher pensions play an important role in offsetting the financial impact of lower salaries. Research shows that pensions are reliable and relieve retirement anxiety. Some 82% of Americans indicated that those with pensions are more likely to have a secure retirement, and 82% believe all workers should have access to a pension plan. 5 Pensions Help Retain Quality Teachers in New Hampshire 6 Better teachers are experienced teachers. DB pensions help to retain highly productive teachers longer, as compared with individual defined contribution (DC) accounts. Moreover, the cost of teacher turnover is quite high, both in terms of financial cost and loss of productivity to the school district. In New Hampshire: The cost of turnover in New Hampshire is $11,318 per teacher. 82 teachers are retained each year due to the defined benefit (DB) plan. The defined benefit (DB) pension system saved $923,988 in teacher turnover costs in 2003 in school districts across the state. About NRTA NRTA: AARP s Educator Community is a national umbrella organization for the nation s largest network of retired educators. For nearly 65 years, NRTA has worked with state and local Retired Educators Associations (REAs) across the country on areas of mutual interest in advocacy and community outreach. Collectively, NRTA and REAs engage and advocate on behalf of nearly one-million retired educators. Our shared priorities are to protect earned pension benefits and to assure access to affordable retiree healthcare. Additionally, NRTA helps inspire and honor the work of REA volunteers through NRTA s With our Youth! national recognition program. 1, 2 Graebner, W. 1978. Retirement in education: The economic and social functions of the teachers pension. History of Education Quarterly, 18(4), 397-417. 3 Heywood, J., and K. Bender. 2010. Out of Balance: Comparing Public and Private Sector Pay over Twenty Years. Washington, DC: National Institute on Retirement Security. 4 Allegretto, S., S. Corcoran, and L. Mishel. 2008. Teachers Pay Continues to Slide. Washington, DC: Economic Policy Institute. 5 Oakley, D, and K. Kenneally. 2013. Pensions and Retirement Security 2013: A Roadmap for Policy Makers. Washington, DC: National Institute on Retirement Security. 6 Boivie, I. 2011. The Three Rs of Teacher Pension Plans: Recruitment, Retention, and Retirement. Washington, DC: National Institute on Retirement Security. AARP in the States Snapshot: Pensions for New Hampshire Teachers 2