Service Credit Formulas Updated for Prior Military Service, Employer Oversight

Jul 31, 2019
  • Employers
  • Members

For Immediate Release: July 15, 2019
Contact: Marty Karlon, Public Information Officer, (603) 410-3594; [email protected]

CONCORD, NH – House Bill 675 (Chapter 38, Laws of 2019) modified the statutory cost calculation methodologies for the purchase of service credit in the New Hampshire Retirement System (NHRS, the retirement system) for active service in the armed forces prior to NHRS membership and in cases of employer enrollment oversight. The law took effect July 14, 2019.

These changes will impact a limited pool of members who may be or will become eligible for these types of service purchases. From FY 15-18, the average number of completed service purchases for employer oversight has been 12.5 per year, and about double that for prior military service.

Under state law (RSA 100-A), there are several specific types of service credit that a member may be eligible to purchase. (For details, see: https://www.nhrs.org/members/plan-details/service-credit) Prior to 2014, the cost of most service purchases was calculated under statutory formulas based on current salary and contribution rates, which may have overstated or understated the actuarial cost. The service purchase provisions were amended generally in 2014 so that the cost for most types of service credit is now calculated based on the “full actuarial cost.” When the 2014 changes were enacted, the formulas for employer oversight service credit and prior military service credit were not amended.

HB 675 – which was requested by NHRS – applies the full actuarial cost method to the prior military service credit calculation, bringing it in line with most other service purchase types. 

HB 675 also changed the statutory formula for calculating the cost of employer oversight, which is the only type of service purchase that is not fully funded by the member. In this context, “oversight” means that the employer, through its own fault and not the fault of the employee, failed to properly or timely enroll the member in the retirement system. Under previous law, the formula for calculating the cost of employer oversight may have assessed a greater share of the oversight cost to members than they would have contributed had they been properly enrolled. Under the new employer oversight formula contained in HB 675, the member will be charged the actual amount of contributions that he or she would have paid during the oversight period. The employer for which the oversight occurred is now responsible for paying the current employer rate multiplied by the earnable compensation attributable to the oversight period.  

About NHRS

NHRS provides retirement, disability, and death benefits to its eligible members and their beneficiaries.  The State of New Hampshire and nearly 470 local government employers participate in NHRS for their employees, teachers, firefighters, and police officers. NHRS has approximately 48,000 active members and 37,000 pension recipients. NHRS administers a defined benefit plan qualified as a tax-exempt entity under sections 401(a) and 501(a) of the Internal Revenue Code. 

#  #  #