Fosters – Fenniman Retirement Package Spurs N.H. Reforms
DOVER — Large retirement payouts made notorious by former Dover Police Chief William Fenniman continue to reverberate not only locally, but also in Concord as legislators revamp rules for the state retirement system.
Beginning Monday, as part of the recently passed state Omnibus Retirement Bill, employers who use the state retirement system must pay into the system any portion of an employee’s retirement package that exceeds 125 percent of that employee’s average base pay during the three consecutive years with the greatest compensation.
The new provision applies to any employee who retires who does not have a previous contract with the employer or whose contract has been renegotiated after the Sept. 1 deadline.
Before the provision was included, all employers participating in the state retirement system equally shared the burden of large retirement payouts, regardless of where they were issued.
On its face, the concept of protecting the system as a whole from the decisions of one seems appealing, but critics argue the provision could potentially cost municipalities millions more in payments to the retirement system.
“Theoretically it makes a lot of sense,” Local Government Center General Counsel Maura Carroll said. “But if they already paid into the system for overtime or anything else that is included (in the portion of the retirement package that exceeds the base salary provision), then essentially the employer paid twice.”
Mayor Scott Myers said the idea of double paying could potentially occur when an employee cashes out banked leave, which the city already accounted for in its previous payments into the state retirement system.
And although contracts allowing for unlimited banked leave have become a thing of the past for most Dover employees, who are limited in the amount of unused leave time they can carry over from year to year, Myers said there are still several remaining “key” city employees who have been with the city long enough to have their contracts grandfathered in.
In addition, Myers said, the formula does not account for overtime, which is sometimes uncontrollable by the city in cases of public safety emergencies and extreme weather events.
But the provision does hold some protection for municipalities who had their employees under contract before the deadline. Under the exception, any employee who was previously under contract will not fall under the provision unless the contract is renegotiated after the deadline.
Under this exception, Myers said, none of the city’s department heads, who are often some of the top earners, will fall under the provision because all department heads are already under contract.
In addition, department heads in the city are no longer unionized, so contracts will not be renegotiated after the deadline, as is the case with most city employees, whose three-year contracts expired this summer.
But Myers said he has heard through the grapevine the same is not true for other municipalities, which have been scrambling to get their existing employees under contract before the deadline.
Myers added that although the bulk of the city’s employees will soon enter into new contracts following collective bargaining negotiations, the city did not try to rush those negotiations to finish before the deadline.
“That would have only bought us some time,” Myers said.
And to further complicate the anticipated effects of the new provision, neither the New Hampshire Retirement System nor the state Legislature have determined if employers must pay the balance in annual payments or one lump, which could have significant impacts on local governments’ abilities to budget for retirement announcements that may come after the budget is passed.
“The lump sum (payment) could be devastating,” Myers said, adding that if the employee has significant accrued time and overtime, the city could be forced to pay upward of an additional $1 million to the retirement system.
“If it is in excess of $1 million, then we’re talking some serious reductions or projects not happening or capital outlay not happening,” Myers said.
And although an annual payment could still run the city in the tens of thousands of dollars, Myers said the immediate impact would be a lot more palatable for a community like Dover, which has more than a $100 million budget this year.
“I don’t want to dismiss it as being small, but it’s probably something that could be absorbed into a budget,” Myers said.
In an effort to provide employers with insight into how much extra they may be paying, the New Hampshire Retirement System has provided a retirement calculator on its website, www.nhrs.org.
According to the calculations provided on the NHRS website, a hypothetical retiring employee with an average base salary of $49,000, but an annual final compensation, which includes overtime and leave pay, of $99,333, will require its employer to pay an additional $501,816 into the system.
Myers said the figures on the website are not unreasonable, and the city cannot, and should not, expect employees to forego the common practice of boosting their last years of employment with accrued leave to secure a more favorable pension.
“If I were working under that scenario I would be doing the exact same thing,” Myers said. “It’s within the rules of the system. The rules of the system need to be tweaked, but this is not the best way to go about it. It penalizes what may have happened 20 years ago (during contract negotiations).”
Myers said he would support the provision if it factored in mandatory overtime, such as call backs for firefighters, even if voluntary overtime was not included.
He also said he would support the provision if the deadline was set for any new employees, rather than applying retroactively. Fenniman retirement package spurs N.H. reforms