LONDONDERRY — With the state backing out of retirement fund obligations, the Town Council asked Sen. Sharon Carson, R-Londonderry, to explain any options and paths the town may take.
Since the state has not been contributing to retirement funds as once promised, taxpayers must pick up the cost.
“This is clearly a broken system,” Council Chairman John Farrell said. “The legislative side seems to be the obstacle at this point.”
This problem is not recent, nor is it because of any recent legislative action. The state retirement system has been flawed since the late 1980s and early 1990s, officials said.
At that time, the economy was more stable and better benefits were promised to government employees. Now that people are earning less and the economy is in a slump, the state cannot afford to pay for expensive benefits, Carson said.
In last year’s budget, 12 percent of a police officer’s salary was going toward retirement. This year, nearly 25 percent is going toward retirement funds, and next year it is expected to be more than 30 percent. More than 27 percent of a firefighter’s salary is contributed toward retirement funding this year. Retirement funds take up about 2 1/2 percent of the town budget, Councilor Tom Freda said.
“How do you expect us to keep paying an additional 50 percent into retirement plans each year?” Freda asked Carlson. “The payout keeps getting pushed to us.”
Because of the deep-rooted problems in the state’s retirement system, there is no overnight solution, said Martin Karlon of the New Hampshire Retirement Fund.
The state could not do a defined contribution to the retirement fund as other states have done, because the amount the state owes to the fund is already too high, Karlon said.
Another factor is the age of retirement. Residents are working later into their lives, contributing more into their retirement fund, Carlson said.
“It’s almost malpractice to hire town employees rather than the private sector at this point,” Freda said.
There have been about 60 recent legislative changes to the New Hampshire Retirement Fund to prevent anything like this happening in the future. In addition, new employees hired by the town will not have the same medical benefits as current ones, saving the town money, Carlson said.