Move to replace guaranteed pensions with 401k plans loses steam with Democratic-led Legislature
Thursday, November 15, 2012
CONCORD – Caught in a sea change in the House of Representatives, a Republican-led push to move the state to a 401(k)-style pension plan is unlikely to gain any traction in the new Democratic Legislature, according to lawmakers from both parties.
Last week, members of a special House committee, charged with reviewing the state’s pension system, voted along party lines to recommend the move to a defined contribution plan, which would bring to an end to the state’s guaranteed pension system for public workers,
Supporters of the plan, who met for months to study the matter, were hopeful the plan would lead to a new proposal to be considered over the coming legislative session.
But after last week’s election, in which Democrats regained a majority in the House of Representatives, the proposal isn’t likely to move forward, both parties acknowledged Wednesday.
Incoming Gov. Maggie Hassan has stated her opposition to defined contribution plans, and a similar plan proposed last year failed to pass the Republican-led Senate.
“It’s fairly evident that the Democrats don’t share the view that this is a necessary move,” said state Rep. Greg Hill, R-Northfield, who served on the special committee.
Putting it more succinctly, “There’s just no way,” added state Rep. David Campbell, a Nashua Democrat and committee member, who is in the running to be the new House speaker.
“From the pensioners’ standpoint, it’s just too much risk,” Campbell said. “And from the state of New Hampshire’s standpoint, it’s just too much cost.”
Supporters of Defined Contribution plans contend the new system, which would apply first to new hires, would help stabilize employees’ retirement accounts, while saving the state billions.
“It would be a more predictable amount of money on the part of the state, and I think it would also shift some of the risk from the taxpayers, who are on the hook,” Hill said Wednesday.
State labor unions and opposing legislators disagreed, arguing the move would not only subject retirement accounts to the whims of the market, but it would cost the state billions to implement.
The New Hampshire Retirement System currently faces an unfunded liability of $4.3 billion, but estimates reviewed by the special committee indicate the new defined contribution plan could increase the liability by as much as $1.2 billion, according to union groups and other opponents.
“This just digs the hole deeper,” said David Lang, president of the state firefighters union. “From a financial point of view, it’s probably the poorest choice we’ve seen with respect to changing the retirement system.”
Looking forward, legislators will likely push the proposal to the House floor in the coming term. But with Democrats holding a majority, the matter isn’t likely to receive serious consideration.
Rather, lawmakers should continue to look to less wholesale reforms to save costs and salvage the retirement system, both legislators and union leaders said.
The Legislature has been working in recent years to adjust the system before it goes bankrupt. Among other changes, lawmakers voted last year to eliminate construction details and other extra shifts funded by a third party from the pension calculation.
“They can continue to tinker with it, but the best way to help the retirement system is to make a commitment and keep with the changes they made a few years ago,” said Rick Trombly, interim director of the state chapter of the National Education Association.
“We need to do something,” countered Hill, of the special House committee. “Quite frankly, I’m a little saddened by the idea that we weren’t able to do something now. … In pensions, the earlier you make a move, the better off you are. It gets pretty darn expensive.”
Jake Berry can be reached at 594-6402 or firstname.lastname@example.org. Also, follow Berry on Twitter (Telegraph_JakeB).