New Hampshire Retirement System reports progress toward funding target but warns on return assumptions
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Summary
NH Retirement System (NHRS) officials told lawmakers the system is on a multi‑decade path to full funding and credited recent investment performance, but noted lower assumed rates of return raised liabilities and stressed the need for continued contribution discipline.
Jan Goodwin, executive director of the New Hampshire Retirement System, told the House Finance Division I on Feb. 12 that NHRS’s funded ratio has climbed to 68.6% as of the June 30, 2024 valuation and that the system is on a scheduled path to extinguish its unfunded liability by 2039 under current projections.
Nut Graf: NHRS leadership said the system’s funded ratio improved after recent investment returns and policy choices, but trustees reduced the plan’s assumed rate of return in several steps over the past decade; lower discount rates push liabilities higher and increase employer contribution requirements. NHRS officials urged steady employer contributions and said the board favors reaching 100% funding even though that will require continued payments to amortize past deficits.
NHRS Chief Investment Officer Reynald Levesque and Chief Financial Officer Marie Mullen summarized the system’s asset performance and actuarial basis. Goodwin said assets were roughly $12.3 billion as of June 30 and $12.9 billion as of Nov. 30, 2024. Levesque reported net investment returns that exceed many peers over longer horizons — a 25‑year net return near 6.3% — and reiterated that the board and the system’s actuary set a forward‑looking assumed return of 6.75% after polling consultants and modeling asset‑class expectations. Levesque told the committee that the assumed return is a forward estimate, not a historical average, and that the board uses consultant input to set expectations consistent with the portfolio’s allocation.
Goodwin walked lawmakers through changes since 2010: the board reduced the assumed investment return in multiple steps (the actuarial discount rate affects present‑value liability calculations), and the 2011 actuarial methodology change (entry‑age normal) increased measured liabilities relative to the previous method. She summarized benefit changes enacted in recent years, including ad hoc cost‑of‑living adjustments the legislature has funded when passed and statutory changes affecting eligibility and benefit multipliers. NHRS said a 2017 policy moved new additions to unfunded liability onto a 20‑year closed amortization schedule while pre‑2017 liabilities remain on a longer schedule, producing the projected path to 2039 for full funding if actuarial assumptions hold.
On contribution rates, NHRS staff explained employer rates contain three elements: normal cost (the ongoing cost of benefits), amortization of the unfunded liability (the largest share), and any post‑retirement medical subsidy contribution. Goodwin and Mullen said the board certified lower employer rates for the 2026–27 biennium because recent investment performance improved the actuarial results and because the actuary’s experience study did not require additional reductions in discount assumptions this cycle.
NHRS reported ongoing operational projects including a pension application upgrade, enhanced fee transparency for investment managers, and a five‑year strategic plan for the investment office focused on talent retention and systems upgrades. Mullen described employer reporting improvements implemented after the pension administration system upgrade, including employer relationship managers and listening sessions to smooth reporting and payments.
Ending: NHRS officials said the system’s path to 100% funding is deliberate and long term. Goodwin told the committee trustees view 100% funding as the prudent target despite the cost of accelerating amortization: reaching full funding reduces future employer contribution volatility and long‑term taxpayer exposure, NHRS said.
