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Judge rejects law seeking to reform state pensions

New Hampshire Union Leader

February 02. 2012 7:18PM

CONCORD - The ink was barely dry yesterday on a Merrimack County Superior Court decision making it illegal to withdraw more from paychecks of veteran public employees to support their pensions before talk of a possible appeal began.

The decision, handed down by Merrimack County Superior Court Judge Richard McNamara, deals a blow to the state retirement reform law passed last spring - and could cost the New Hampshire retirement system at least an estimated $25 million a year.

The ruling declared legal the Legislature's changes that affected all new hires, including raising the retirement age and reducing their ability to pad future pension amounts. The judge agreed it is against the law to increase contributions for all employees who had worked for at least ten years.

On Thursday, members of the Legislature who helped craft the law were already pondering an appeal, though not ready to commit to such a course of action.

'We're disappointed with the decision, but it's a little early to say we have decided to appeal,' said Senate Majority Leader Jeb Bradley, R-Wolfeboro, who along with Rep. Ken Hawkins, R-Bedford, crafted the retirement reform law. 'All involved need time to digest the decision, and I believe we have 30 days to decide if we want to appeal. It's too early to speculate on that right now.'

If such an appeal is pursued by the Attorney General, a coalition comprised of the state's five largest public employee labor unions vows to stay on the offensive.

'We are committed to the cause,' said Attorney Glen Milner of Molan, Milner and Krupski PLLC, who argued against the reform law on behalf of the coalition. 'This is very important to the 50,000 active, and 25,000 retired members of the retirement system.'

Bradley confirmed that early estimates that the decision could cost the overall retirement system $25 million a year, at a minimum, are accurate.

The reform law was written in the hopes of reducing the $4.7 billion unfunded liability of the New Hampshire Retirement System. That total dollar amount includes over $3.5 billion from the pension account, as well as over $1 billion contained in a medical subsidy that supports the cost of health insurance for public retirees who retired prior to 2003.

A major component of the reform law was hiking the amount that all public employees contribute from their salary to support the state's retirement pension account. Those changes were projected to bring in about $100 million over the next two years, thereby reducing pension costs for employers or what is passed on to state and local taxpayers.

Milner argued that it was against the law to increase the contributions for all employees who had worked for at least a year. Judge McNamara agreed.

'We felt that was unconstitutional, and the judge agreed with us,' said Milner. 'We are very pleased with the decision. We argued that entering the retirement system represents a contract with a vested employee, and that raising the contribution level represented a violation of that contract.'

'The Legislature has been deliberating retirement reform for several years now,' said Bradley. 'The longer it takes to put these reforms in place, the longer it will take to reduce the unfunded liability of the New Hampshire retirement system. And that's not good for the state, for employers, retirees or taxpayers.'

Milner wasn't happy with all aspects of the decision. McNamara's ruling said the Legislature had the ability to raise the retirement age, as well as use older data when calculating pension rates over the next two years, to keep them low.

Milner said he intends to pursue further an argument regarding the definition of a 'vested' employee - which if successful, could increase the pool of employees (as well as the financial hit to the reform law) vastly.

'There's still work to be done,' said Milner. 'The ruling considers a vested employee to be someone who was worked for 10 years. We feel someone becomes a vested employee after the probationary period of their hiring has passed. We are prepared to challenge that.'

David Lang, president of the Professional Fire Fighters of New Hampshire, referred all calls for comment to Milner.

Gov. John Lynch's office declined to comment on the ruling.

New firefighters and police officers hired after last July 1 will now have to work 25 years and reach age 50 before they can collect a pension. Previously, they were eligible to retire after 20 years and begin collecting at age 45.

'We didn't achieve all we wanted, but we were able to make changes,' said Bradley.

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