Legislative Alerts and Calls to Action
In addition to the legislative activity presented in the weekly Legislative Bulletin, NHMA also issues legislative alerts when timely notice to members is required, and immediate action by members is critical for legislative success. When NHMA issues a Legislative Alert or Call to Action via email, content is published simultaneously to this page.
Pension Alert, May 11, 2012
Changes Proposed for Retirement Payments Will Affect All Municipalities
No doubt you have read about "spiking" with regard to employer retirement costs, and you may have thought "that doesn't apply to my municipality." That may have been accurate for earlier legislative action, but the House will soon be asked to adopt an amendment to SB 228.
The amendment to SB 228 would require a spiking penalty on any end of career payment to retiring employees and will likely result in all local government employers paying thousands of dollars in spiking penalties.
Municipal employers must pay certain accrued benefits, such as unused vacation time, when an employee retires. Some employment contracts—including collective bargaining agreements and individual contracts—call for other end of career payments, such as severance, longevity, and unused sick time. These payments are included in the calculation of a retiree's pension amount, and it has always been lawful to make these payments. The increase in pension amounts attributable to these payments are already accounted for in the employer rates set by the NHRS. Rate reductions, if any, from the new spiking assessments are likely to be minimal.
Using an example provided to the House Special Pension Committee, an end of career payment of $15,000 would increase the pension amount by $2,500 per year for a 30-year employee retiring at age 60 with an average final compensation of $50,000—and would result in a spiking assessment on the employer of approximately $25,000!
Every end of career payment is likely to trigger a penalty assessment, costing municipalities (and schools and counties) and thus taxpayers enormous sums—for doing something that has always been legal. Municipalities have been reducing and eliminating non-mandatory end of career payments, but when they are contained in collective bargaining agreements, that takes time.
As passed by the Senate, SB 228 repeals the spiking provision. That makes sense.
Please contact your state Representatives before Tuesday and tell them to reject the committee amendment and any floor amendments to SB 228, and to pass SB 228 as passed by the Senate—repealing the spiking provision once and for all.
For more information see the May 11 Legislative Bulletin and contact the Government Affairs Staff at at 800.852.3358 or email us.