Salem Observer : retirement

State retirement changes force some in Salem to leave now

Salem Editor — Wed, 07 May 2008 18:36:00 GMT

Town Clerk Barbara Lessard was one of many town employees across the state to announce her retirement this year, citing the state of the New Hampshire retirement system as a reason for doing so.

After putting in 23 years of service as town clerk, Lessard, 63, said she wanted to make sure she would retain her medical subsidy, a benefit that is in flux with the current $2.7 billion shortfall in the state’s retirement system.

The potential loss of that subsidy due to a lack of funding and the end of her three-year term as town clerk made her decide not to run for the position again, which after three years would put her retirement at age 66.

“Everything seemed to be all in a row,” said Lessard shortly after announcing her retirement in February.

The state House of Representatives and Senate are currently bandying versions of legislation that aim to repair the retirement system for current retirees and make it sustainable for future retirees, but finding a compromise that will appease taxpayers, employers and employees has proven difficult.

There are about 70,000 current employees and retirees in the state’s retirement system, classified into one of two groups: Group I, which includes town office employees and teachers; and Group II, which includes public safety employees.

The problems with the retirement system started when it was discovered that the method used to transfer money from the corpus retirement fund into a special account for medical subsidies was flawed, and resulted in the over-estimation of what was actually in the fund.

Legislators must determine a way to dig out of the $2.7 billion hole.

The House responded to the shortfall by drafting HB 1645, which garnered support from many towns across the state but was unappealing to employees. The bill, which the Senate decided not to pass in its original form, would have taken away some of the retirement benefits for Group I employees, including an annual 8 percent increase in medical subsidy payments and transfer $250 million into the pension fund.

For new Group II employees, the House bill would raise the minimum retirement age to 50 rather than 45 and extend the time required to retire to 25 years instead of 20.

The House bill would also change the make-up of the New Hampshire Retirement System Board of Trustees by cutting it from 14 members to 12, which would include financial and accounting professionals.

The Senate is looking closely at the bill – along with labor unions and municipalities – and has proposed some amendments which went through the final approval in the Senate Executive Departments and Administration Committee on Monday, May 2.

The Senate’s version would not change the age or time requirements for Group II employees to retire; would freeze the 8 percent increase in medical subsidy payments until 2012, at which time a 4 percent yearly increase would go into effect; and further would leave the composition of the board of trustees as is.

Salem School District Superintendent Michael Delahanty said the district has some teachers who have announced retirement because of the July 1, 2008, deadline established for those who want to retain the current benefits offered through the retirement system.

“There are people who are making their decision based on the (medical) subsidy expiring, or not being available to anyone retiring after June 2008,” Delahanty said. He added for some, the availability or lack thereof of the medical subsidy was a make or break factor.

“We have two or three teachers who may have delayed their retirement if they were sure they medical subsidy would be available beyond June of 2008,” Delahanty said.

There has been some discussion at the state level on pushing that deadline to 2009, Delahanty said, but added he’s uncertain whether such a bill would pass.

The Local Government Center provided towns and school districts with a funding calculator that would allow them to figure out how doing nothing about the state of the retirement system would compare financially to the changes proposed in HB 1645.

According to that calculator, Salem taxpayers would shoulder a $762,408 additional burden to pay for retirement benefits if nothing is done about the retirement system.

The passage of the House bill would reduce that impact to $29,473. The Senate’s version, if passed, would result in a slightly bigger number.

Costly exit – Salem retirement costs double this year due to state program

Salem Editor — Wed, 25 Jul 2007 19:18:00 GMT

BY MATT HERSH

A now defunct state pilot program is at the root of Salem’s retirement costs being almost double what was budgeted.

The town will have to pay as much as $675,662 to employees planning to retire over the summer and in the fall, according to Finance Director Jane Savastano. The town only budgeted $350,000.

“We’re going to have to come up with the money from other places in our budget,” she said.

At the Monday, July 16, Board of Selectmen meeting, Savastano said the town will be obligated to pay retiring employees for leftover sick leave, vacation time and holidays. The state’s pension program pays for the retirement benefits.

The number of employees retiring this year is significantly higher than in past years, Savastano said. Twenty will leave by the end of 2007, but officials only planned for eight to 10.

The reason for this high number of retirees is a state program commonly known as service crediting, which allowed municipal employees with five or more years of experience with any given town to “buy” additional years of experience.

These purchased years allow people to retire early with full benefits from the state.

The state ended the program this year, and the last opportunity to purchase experience was June 30.

But now Salem and other communities in the state are scrambling to make up the financial difference caused by the program.

At a meeting in May, Town Manager Henry LaBranche said the state might not have taken the impact to municipalities into consideration when they enacted the service crediting program.

Savastano said there may be some solace in the fact that all of the retiring employees were at a pay level higher than new employees will be at when they start. This may help offset some of the costs, she said.

“I’m hopeful that there will be some savings in regular pay and health benefits because people will come in at an entry level,” she said.

Town officials have been planning for this financial hit for several months, during which the number of retirees continued to grow.

Savastano said she’s confident that the number won’t grow any higher, but it’s still going to take some work to find the money.

“It’s going to be tight but hopefully we’ll be able to make it up,” she said.

Early retirement will cost town

Salem Editor — Wed, 16 May 2007 18:31:00 GMT

BY MATT HERSH

A state retirement plan may end up costing Salem thousands of dollars in unanticipated separation costs.

The legislation, commonly known as service crediting, allows municipal employees with five or more years experience with any given town to “buy” additional years of experience. These purchased years allow people to retire early with full benefits from the state.

This translates to extra costs this year for Salem because the town must pay retiring employees what they are owed for vacation time and sick leave, according to Finance Director Jane Savastano.

Normally these costs would be dispersed over several years as employees continued to fulfill their contracts. But now, 17 employees have decided to purchase experience and retire early.

At least 14 are expected to retire within the next two months.

This surge in the number of retirees has pushed expenses far past the amount of money set aside at Town Meeting.

In March, $350,000 was approved to offset these costs but Savastano said the town is going to need about $578,000.

As the town prepares to begin its annual budget process, Savastano said the number of retiring employees may contribute to a higher overall figure.

Still, Savastano said the town may be able to recoup some of the expenses when they hire new employees. Several retirees get paid more than a new employee would, she said.

“I’m hoping it will at least offset the costs somewhat,” she said.

When Savastano presented the figures to selectmen at their Monday, May 14 meeting, officials commented about the state’s retirement offerings.

“They may have been thinking about it at the state level and not the municipal level,” Town Manager Henry LaBranche said about the legislation’s impacts. “We’re seeing the fiscal impact.”

Though the town will have to incur the extra costs this year, Savastano said the state is doing away with service crediting in July and employees will no longer have the option of purchasing experience.