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Home My WebLink AboutNew Hampshire Retirement System - Public Financial Report NHRS Summary Annual Financial Report FY 2021 2 The New Hampshire Retirement System plays an important role in the long-term economic well-being of the state’s public employees, teachers, police offi cers, and ﬁ reﬁ ghters. NHRS strives to meet this responsibility through a commitment to our mission, vision, and values. OUR MISSION To provide secure retirement beneﬁ ts and superior service. OUR VISION NHRS will fulﬁ ll our role as ﬁ duciary of the trust and deliver retirement beneﬁ ts to our members and beneﬁ ciaries through a commitment to value, innovation and excellence. OUR VALUES Security – Providing promised beneﬁ ts and guarding the conﬁ dentiality of personal information. Excellence – Striving to exceed expectations through innovation, accountability, and teamwork. Respect – By recognizing the uniqueness and importance of our stakeholders, our co-workers, and ourselves, we foster collaboration and cooperation. Value – Committing to be a trusted and eff ective ﬁ duciary by always acting in the best interest of our membership. Integrity – Acting in an ethical, honest, and professional manner in all our interactions. Communication – Providing responsive, accurate, and timely information to our stakeholders. Empathy – Being aware of the feelings of others and how our actions aff ect them enables us to be responsive to the needs of all we encounter. Mission, Vision, and Values The members of the New Hampshire Retirement System Board of Trustees are appointed and serve pursuant to RSA 100-A:14. Public Members Timothy Lesko, Chair Scott Christensen Maureen Kelliher Robert Maloney Employee Members Sue Hannan, Teacher William Hart, Police Andrew Martineau, Fire Germano Martins, Employee Employer Members Christopher Coates, NH Assoc. of Counties Ken Merriﬁ eld, State of New Hampshire Scott Myers, NH Municipal Assoc. Donald M. Roy, NH School Boards Assoc. Ex Offi cio Member Monica Mezzapelle, State Treasurer The members of the New Hampshire Retirement System Independent Investment Committee are appointed and serve pursuant to RSA 100-A:14-b. Maureen Kelliher, Chair Christine Clinton Scott Hammond Daniel LaPlante Timothy Lesko Michael McMahon NH Retirement System Board of Trustees Independent Investment Committee Executive Director Jan Goodwin About this report About NHRS NHRS Summary Annual Financial Report FY 2021 The New Hampshire Retirement System (NHRS, the retirement system) is pleased to present the Summary Annual Comprehendsve Financial Report (“Summary ACFR”) for the ﬁ scal year ended June 30, 2021. This report is presented in conformity with Generally Accepted Accounting Principles and is intended to provide an overview of NHRS ﬁ nancial, investment, funding, accounting, and demographic information in an easy-to-understand format. NHRS was established in 1967 as a contributory, deﬁ ned beneﬁ t plan. The plan provides lifetime pension beneﬁ ts that are determined at retirement under formulas prescribed by law; the pension beneﬁ t is not calculated based on investment returns or contributions. The retirement system provides service retirement, early retirement, disability retirement, and vested deferred retirement beneﬁ ts, as well as pre- and post- retirement death beneﬁ ts. It also provides eligible retirees and beneﬁ ciaries with other post-employment beneﬁ ts (OPEB). This beneﬁ t consists of a post- retirement Medical Subsidy, which is a payment made by NHRS to an eligible retired member’s former employer toward the cost of the retired member’s health insurance premium. Beneﬁ t formulas and eligibility requirements are set by state law (RSA 100-A). The retirement system is also governed by administrative rules, policies adopted by the Board of Trustees, and the Internal Revenue Code. Retirement system members are state, county and municipal employees, teachers, police offi cers, and ﬁ reﬁ ghters. The membership consists of two groups, Group I (Employee and Teacher) and Group II (Police and Fire). NHRS has 48,582 active, contributing members. Group I members make up 88 percent of the total active membership. Group II members make up 12 percent of the total active membership. The retirement system has 40,974 beneﬁ t recipients and 9,375 retirees and/or beneﬁ ciaries receiving a post-retirement Medical Subsidy. Beneﬁ ts are funded by member contributions, employer contributions, and net investment returns. Investment returns have historically provided the majority of funding for pension beneﬁ ts. NHRS has 461 active, participating employers – the State of New Hampshire, counties, individual communities, school districts, and others. Not every political subdivision participates in the retirement system for its employees, although most do. Participation is mandatory for police, ﬁ re, and teacher employers. 3 Learn more The information included in this report is taken from the retirement system’s more detailed Annual Comprehensive Financial Report (ACFR), which is prepared in accordance with Generally Accepted Accounting Principles. Copies of the ACFR, the Summary ACFR, and the NHRS Comprehensive Annual Investment Report (CAIR) may be viewed or downloaded at www.nhrs.org. NHRS Summary Annual Financial Report FY 2021 The year in review… Financial Highlights • Plan net position at June 30, 2021, stood at $11.574 billion, an increase of $2,439.6 million (26.7%) from the prior year’s net position. • Net investment income during ﬁ scal year 2021 was $2,628.4 million, a $2,527.0 million (2,492%) increase over the prior ﬁ scal year. The net investment income for ﬁ scal year 2021 reﬂ ects a time-weighted return for the total fund during the year of 29.4% compared to a time-weighted investment return of 1.1% for the ﬁ scal year ended June 30, 2020. • The total contributions received during the ﬁ scal year were $744.2 million. For ﬁ scal year 2020, total contributions received were $721.2 million. • Employer contributions for ﬁ scal year 2021 increased to $507.3 million (3.2%) compared with employer contributions in ﬁ scal year 2020 of $491.5 million. The increase in employer contributions in ﬁ scal year 2021 was primarily due to growth in covered payroll. • Member contributions were $236.9 million in ﬁ scal year 2021, an increase of 3.1% over ﬁ scal year 2020 member contributions of $229.7 million. The increase in member contributions is primarily due to an increase in earnable compensation for contributing members. Overall member normal contributions increased by $7.1 million (3.1%) over the prior ﬁ scal year. Voluntary member contributions increased by $0.1 million (2.6%) over ﬁ scal year 2020. • Beneﬁ ts paid during ﬁ scal year 2021 were $903.7 million, an increase of 4.7% over the beneﬁ ts paid in ﬁ scal year 2020 of $863.5 million. The increase in beneﬁ ts paid in ﬁ scal year 2021 is primarily due to an increase in the number of retirees and increased average beneﬁ t levels for those new retirees, as well as a cost-of-living adjustment granted to retirees and beneﬁ cairies with a retirement date on or before July 1, 2014. Legislative Changes Legislation was enacted in the 2021 session which: • Required the quarterly reports of the retirement system’s Independent Investment Committee (IIC) to the Board of Trustees to include a description of investment fees. This legislation also required these reports to be available on the NHRS website. Major Initiatives NHRS faces many issues common to other public employee retirement plans. As part of its proactive response to these challenges, the retirement system strives to create a culture of constant improvement. Some of the signiﬁ cant accomplishments during ﬁ scal year 2021 were: • Created an internal Contact Center to handle all incoming telephone calls, emails, faxes, and in-person interactions, with the objective of improving the service we provide to our members, retirees, beneﬁ ciaries, and other stakeholders. • Continued design and testing related to a multi-year upgrade to core pension administration system, which remains on schedule. • Achieved investment performance for FY 2021 of 29.4% which placed NHRS in the top quartile of the peer universe of public pension plans; the three-year, ﬁ ve-year, 10-year, 20-year, and 25-year returns for the periods ended June 30, 2021, were 11.4%, 11.3%, 9.3%, 7.2%, and 7.9%, respectively. All returns are net of fees. • Initiated outreach program for employers and policymakers on the FY 22-23 contribution rate impact from new actuarial assumptions. • Maintained and expanded various cyber-security enhancements designed to protect the security of our system and member/retiree personal information. • Remained fully operational despite disruptions related to the coronavirus (COVID-19) pandemic. • Earned a Certiﬁ cate of Achievement for Excellence in Financial Reporting for the Annual Comprehensive Financial Report (ACFR). • Issued the June 30, 2020, GASB 68 and 75 reports with unmodiﬁ ed (clean) opinions. 4 Cash Receivables Investments Other Assets NHRS Summary Annual Financial Report FY 2021 The Condensed Statements of Fiduciary Net Position provide a summary of what NHRS owns (assets) and what it owes (liabilities) as of the end of the ﬁ scal year. Other Liabilities Condensed Comparative Statements of Fiduciary Net Position: Combined Pension and OPEB Plans Total Assets As of June 30, 2021 As of June 30, 2020 Amount Increase (Decrease) Percent Increase (Decrease) Total Assets ($ in millions) 5 $ 297.1 102.4 11,206.6 4.5 $ 231.7 99.2 8,826.2 2.8 $ 65.4)) (((((3.2)) 2,380.4)) 1.7)) 28.2%)) 3.2%)) 27.0%)) 60.7%)) $11,610.6 $9,159.9 $ 2,450.7 26.8% 36.9 43.0%)11.1)25.8 Net Position Restricted for Pension and OPEB Total Liabilities $ 36.9 43.0%$ 11.1$ 25.8 $11,573.7 $9,134.1 $ 2,439.6 26.7% $ 40.2)) (3.4)) (((0.1)) 0.0)) ADDITIONS: Employer Contributions Member Contributions Net Investment Income (Loss) The Condensed Statements of Changes in Plan Net Position provide a summary of the ﬂ ow of money into (additions) and out of (deductions) the plan throughout the ﬁ scal year. Total Changes in Net Position As of June 30, 2021 As of June 30, 2020 Amount Increase (Decrease) Percent Increase (Decrease) Condensed Comparative Statements of Changes in Plan Net Position: Combined Pension and OPEB Plans ($ in millions) Total Deductions from Net Position $ 507.3 236.9 2,628.4 $ 491.5 229.7 101.4 $ 15.8) 7.2) 2,527.0) 3.2%) 3.1%) 2,492.1%) DEDUCTIONS: Beneﬁ ts Paid Refunds of Contributions Administrative Expense Other Deductions Total Additions to Net Position $ 3,372.6 $ 822.6 $ 2,550.0 310.0% 4.7%)) (14.6%)) 1.2%)) 0.0%)) $ 863.5 23.3 8.5 0.8 $ 903.7 19.9 8.6 0.8 3,419.2%$ 2,513.1$ (73.5) $ 2,439.6 4.1%$ 36.9 $ 896.1$ 933.0 * Referred to as “Net Assets Available for Beneﬁ ts” prior to FY 2013 NHRS Summary Annual Financial Report FY 2021 6 Investment Performance Investment returns are reported net of investment expenses and are measured against a total fund custom index. The total fund custom index (see below) is a blend consisting of major market indices in proportion to the retirement system’s asset allocation; this index changes as strategies and objectives evolve over time. The retirement system’s assumed rate of investment return is 6.75%. The results of the plans’ investment program for the period ended June 30, 2021, are as follows: • For ﬁ scal year 2021, the total fund investment return of 29.4% outperformed the total fund custom index return of 24.3%. For this period, the individual asset classes generated the following performance: domestic equity 46.8%; non-U.S. equity 33.4%; ﬁ xed income 5.9%; real estate 15.9%; and alternative investments 39.4%. • The three-year, ﬁ ve-year, 10-year, 20-year, and 25-year returns for the periods ended June 30, 2021, were 11.4%, 11.3%, 9.3%, 7.2%, and 7.9%, respectively. All returns are net of fees. Annualized Current Year 2021 3-Year 5-Year 10-Year 29.4% 24.3% 9.3% 9.5% 11.3% 11.1% 11.4% 12.0% 20-Year History of Time-Weighted* Total NHRS Fund Annual Returns Source: Callan * Time-weighted return measures the growth or loss of market value from beginning to end of a given period with no consideration for cash ﬂ ows that occur during the period. * For June 30, 2021, the total fund custom index consisted of: 30.0% S&P 500 Index (U.S. Equity); 20% MSCI All Country World Ex-U.S. Index (Non-U.S. Equity); 25% Barclays Capital Universal Bond Index (Fixed Income); 10.0% NCREIF NFI-ODCE Index – Net of Fee (Real Estate); and 15.0% Alternative Assets Blended Benchmark* (Alternative Investments). *This benchmark consists of: (1) Two-thirds S&P 500 Index + 3%; and (2) One-third S&P LSTA Leveraged Loan 100 Index. Actual Asset Allocation Versus Target Asset Allocation Diversiﬁ cation of Investments An asset allocation is designed to diversify an investment portfolio to minimize risk and maximize performance. The New Hampshire Retirement System Board of Trustees, with research and input from NHRS investment staff , outside experts, and a recommendation from the Independent Investment Committee (IIC), set an investment policy that includes asset allocation targets and acceptable ranges. The IIC manages investments based on the Trustees’ policies; continuously monitors and evaluates performance; and makes determinations regarding the hiring and retention of fund managers. The actual and target asset allocations as of June 30, 2021, for NHRS are shown on the charts below. Domestic Equity is primarily made up of stocks in U.S. companies. Non-U.S. Equity contains stocks of foreign companies. Fixed Income includes bonds and cash with the objectives of providing current income and preserving capital. Real Estate is primarily made up of investments in commingled real estate funds and real estate limited partnerships. Alternative Investments primarily include private equity and private debt limited partnerships that are not traded in the public market. More detailed information regarding the NHRS investment portfolio can be found in the Annual Comprehensive Financial Report and the Comprehensive Annual Investment Report, which are available at: https://www.nhrs.org/funding-and-investments/reports-valuations Actual Asset Allocation as of June 30, 2021 Target Asset Allocation as of June 30, 2021 NHRS Summary Annual Financial Report FY 2021 7 NHRS Summary Annual Financial Report FY 2021 8 Actuarial Funding Progress The primary measure of a beneﬁ t plan’s progress is its funded status, or funded ratio, which compares the assets available to the beneﬁ ts that must be paid. As of June 30, 2021, the funded ratio for the pension plan was 64.2%. This means that the actuarial value of the retirement system’s assets is 64.2% of the projected amount needed to pay for both current retirees and the accrued beneﬁ t for future retirees. The OPEB plan, more commonly known as the Medical Subsidy, had a funded ratio at June 30, 2021, of 7.2%. This low funded ratio is because OPEB is funded, pursuant to statute, at the minimum necessary to remain solvent (see note below the OPEB graph). The OPEB beneﬁ t covers a retiree population that is ﬁ xed and the beneﬁ t is no longer available for the majority of current active members. ▪The unfunded actuarial accrued liability for the Pension Plan was $5,722.9 million at June 30, 2021. ▪The actuarial value of assets available to pay pension beneﬁ ts was $10,268.3 million at June 30, 2021. ▪The funded ratio of the Pension Plan was 64.2% at June 30, 2021. ▪The unfunded actuarial accrued liability for the OPEB Plan was $569.8 million at June 30, 2021. ▪The value of assets available to pay OPEB beneﬁ ts was $44.4 million at June 30, 2021. ▪The funded ratio of the OPEB Plan was 7.2% at June 30, 2021. Beginning in FY 2010, the OPEB plans have been funded by allocating the lesser of 25% of all employer contributions made in accordance with RSA 100-A:16 or the percentage of employer contributions determined by the actuary to be the minimum rate necessary to maintain the beneﬁ ts provided. Since FY 2010, the minimum rate necessary was the lesser of the two options. OPEB Plan - 10-year Funded Ratio History OPEB Highlights Pension Highlights Note: Funded ratio impacted by reduction to assumed rate of investment return and other adjustments to actuarial assumptions eff ective in FY 2015 and FY 2019. Pension Plan - 10-year Funded Ratio History NHRS Summary Annual Financial Report FY 2021 Employee Teacher Police Fire Total Active Members Average Age Average Service Average Annual Pay Retired Members Average Age Average Annual Pension Total Membership Active Retired Terminated - Vested One-Person Coverage Two-Person Coverage Number of Retirees Pre-65 Post-65 Post-65Pre-65 OPEB PLANS (Medical Subsidy) PENSION PLAN 9 48.9 10.7 $52,974 72.4 $14,572 24,558 20,046 1,415 41.1 12.8 $85,702 38.8 10.6 $78,237 45.6 13.2 $66,088 46.5 11.7 $61,195 71.4 $21,306 67.0 $42,948 64.9 $38,192 72.6 $22,731 48,582 40,974 2,730 1,709 1,816 27 4,184 4,427 143 18,131 14,685 1,145 9,375 4606527,675588 Fiscal Year 2021 Member and Retiree Data Historical Member and Retiree Data Active Members 2012-21 Retirees and Beneﬁ ciaries 2012-21 Pension Beneﬁ ts by NH County NHRS Summary Annual Financial Report FY 2021 10 Coos $21.3 million Grafton $43.2 million Carroll $25.9 million Hillsborough $161.7 million Cheshire $32.7 million Rockingham $124.7 million Merrimack $132.0 million Strafford $50.1 million Sullivan $18.6 million Belknap $54.0 million New Hampshire Retirement System beneﬁ ts help support the state economy. In ﬁ scal year 2021, NHRS paid more than $850 million in pension beneﬁ ts to retirees or their beneﬁ ciaries. Nearly 80 percent of those dollars were paid to N.H. residents. These pension beneﬁ ts are spent in the local community. This spending ripples through the economy, as one person’s spending becomes another person’s income, creating a multiplier eff ect. KEY NHRS FY 2021 data; created with mapchart.net Contact Information New Hampshire Retirement System 54 Regional Drive, Concord, NH 03301-8507 Telephone: (603) 410-3500 • Toll Free: (877) 600-0158 • Fax: (603) 410-3501 Email: info@nhrs.org • Website: www.nhrs.org Hours of Operation Monday–Friday 8:00 a.m. to 4:00 p.m. Financial Accounting Data In addition to actuarial funding data provided in this Summary report, the retirement system’s more detailed Annual Comprehensive Financial Report (ACFR) also includes ﬁ nancial accounting data required under Governmental Accounting Standards Board (GASB) statements No. 67, which deals with ﬁ nancial reporting for pension plans, and No. 74, which deals with ﬁ nancial reporting of OPEB beneﬁ ts, i.e. the Medical Subsidy. The GASB information is for accounting purposes only and does not impact employer contribution rates or the statutory funding plan in place to pay down the NHRS unfunded liability. To view the ACFR, see: https://www.nhrs.org/funding-and-investments/reports-valuations For additional information on GASB reporting, see: https://www.nhrs.org/employers/employer-resources/gasb NHRS Summary Annual Financial Report FY 2021 11