The state should ensure that excessive resources are not committed to funding teachers' pension systems.
As of June 30, 2015, the most recent date for which an actuarial valuation is available, New Hampshire's pension system for teachers is 55.3 percent funded, an increase of 1.3 percentage points since NCTQ's last report. Its current pension debt exceeds $11,600 per pupil throughout the state. It also has a 22-year amortization period. This means that if the plan earns its assumed rate of return and makes its full actuarially determined contribution payments, it would take the state 22 years to pay off its unfunded liabilities. While its amortization period meets regulatory benchmarks, New Hampshire's funding level is too low. The state's system is not financially sustainable according to actuarial benchmarks.
In addition, New Hampshire commits excessive resources toward its teachers' retirement system. The current employer contribution rate of 15.67 percent is too high, in light of the fact that districts must also contribute 6.2 percent to Social Security. While this rate allows the state to pay off liabilities within a 22-year period, it does so at a high cost, precluding New Hampshire from spending those funds on other, more immediate means to retain talented teachers. The mandatory employee contribution rate to the defined benefit plan of 7 percent is reasonable.
New Hampshire Retirement System, Actuarial Valuation Report (draft), as of June 30, 2015.
Ensure that the pension system is financially sustainable.
The state would be better off if its system was over 95 percent funded to allow more protection during financial downturns. However, New Hampshire should consider ways to improve its funding level without raising the contributions of school districts and teachers. In fact, the state should work to decrease employer contributions. Committing excessive resources to pension benefits can negatively affect teacher recruitment and retention and crowd out funding for other areas in education.. Improving funding levels necessitates, in part, systemic changes in the state's pension system. The goals on pension flexibility and pension neutrality provide suggestions for pension system structures that are both sustainable and fair.
New Hampshire was helpful in providing information that enhanced this analysis.