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Senate OKs limits on public retirees who 'double-dip'

State House Bureau

January 18. 2018 10:10PM

CONCORD — As part of an effort to close a $5 billion hole in the state retirement fund, a bill passed the Senate 17-7 Thursday to impose new restrictions on public-sector employees who retire, then go back to work in part-time government jobs.

A similar measure has already passed the House, based largely on the recommendations of the Decennial Retirement Commission, which convened last summer to make recommendations “to ensure the long-term viability of the New Hampshire Retirement System.”

Under HB 561, as amended by the Senate, employees who retire and begin drawing retirement income from the state would be restricted to 1,300 hours of work in a calendar year for any other public-sector agency — state, local or county — that pays into the retirement system.

That adds up to about 25 hours a week, compared to the current limit of 32 hours a week. The Decennial Commission had recommended a limit of 1,040 hours a year, or 20 hours a week on average.

Retirees who exceed 32 hours in public sector employment will be considered back at work, will have their pension suspended and will have to resume contributions into the retirement system.

There is a provision in the Senate amendment that allows retirees to work up to 1,600 hours a year or 30 hours a week in public employment, but with a surcharge to the employer and employee.

The change, if signed into law by Gov. Chris Sununu, is designed to prevent what has come to be known as “double-dipping” by public-sector employees who announce their retirement, begin to receive full retirement benefits and almost immediately go back to work part-time for another government agency.

The new employer gets a seasoned worker and the worker gets additional income to supplement their retirement. But the state stops receiving contributions into the retirement system from the employee and the employer.

That pattern poses a threat to the financial viability of the retirement system, which already has an unfunded liability to future retirees of $5 billion, according to the supporters of HB 561.

They point out that a large number of public-sector employees, now working part-time, are not paying into the retirement system but are drawing from it, as the practice called “double-dipping” by some has become more widespread over the years.

Retiring at a young age

Participants in the retirement system include state employees, county employees and local police, fire and school teachers. Teachers and state and local employees pay 7 percent of wages into the state retirement system and 6.25 percent into Social Security and Medicare, while public safety personnel like police and fire pay only into the state retirement system.

Police and fire personnel, who can retire as young as 45 if they have been in the system for at least 25 years, are in a particularly advantageous position when it comes to continuing work after retirement.

“If we don’t tighten up this 32-hour loophole, more and more opportunities are going to exist for current positions to be reclassified at 32 hours or less to avoid retirement system contributions,” said Senate Majority Leader Jeb Bradley, R-Wolfeboro, in a heated Senate debate on the issue.

“This will lead to disparities between towns that hire full-time and towns that hire 32-hours or less. This amendment is a difficult compromise that protects the viability of the retirement system and the taxpayers in the state.”

Counties and towns in particular have come to rely on part-time employment of retired public safety professionals, even for positions like police chief, to save money and to deal with a shrinking labor pool of qualified personnel.

“This hurts the towns; it hurts the counties; it hurts the Department of Corrections,” said Sen. John Reagan, R-Deerfield, who put up strong but unsuccessful opposition to the bill.

“We’re jealous because retirees are making more money than we think they should, or more money than we earn, and we think we should correct that by punishing them,” he said. “But nothing in this amendment will do a thing to improve the financial condition of the retirement system.”

‘Grievous situation’

Sen. Lou D’Allesandro, D-Manchester, pointed out that the average pension for public sector retirees in the state is only $39,000, and it’s not unreasonable that they should seek part-time work after retirement, although he voted for the bill.

“The grievous situation is created when the $100,000 person retires, then takes a job at $90,000,” he said. A handful of such situations has drawn intense public scrutiny to the issue.

For example, Michael Magnant retired as Portsmouth police chief with a $116,705 pension in 2009, the same year he went to work as town administrator in Rye, ostensibly at 32 hours a week, for $70,000 a year, and continues on the job today.

Hampton Police Chief James Sullivan retired with a $113,371 pension in 2016, and soon after went to work as Hampton’s assistant town manager at 32 hours a week, with an annual salary of $84,720.

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