Is A Contributory Defined Benefit Pension Plan
The New Hampshire Retirement System (NHRS) is a Contributory Defined Benefit pension that provides a guaranteed, lifetime monthly benefit upon your retirement. Contributions to NHRS are mandatory for full-time employee members and contribution rates are set by state law.
In general, you become vested in the NHRS when you have at least 10 years of creditable service. The amount of your monthly benefit is calculated based on a formula that includes your years of creditable service and an average of your three or five highest-paid years.
Both you and your employer make regular contributions to NHRS however employer contributions are not credited to your individual member account. As a result, if you terminate employment and opt to withdraw or roll over your account, you’ll only receive the contributions you made and interest earned on your contributions.
In addition to your pension, your NHRS employer may provide you with access to a defined contribution plan, such as a 403(b) or 457, to save even more for your retirement. Also note an ‘Additional Contributions’ provision existed for NHRS members who signed up before the program was repealed in 2004.
The NHRS Is Split Into Group I and Group II
Group I is for State, County and Municipal employees and Teachers. Members contribute 7% of their salary to the retirement system. The retirement age for Group I is age 60, if you started service prior to July 1, 2011. Or, age 65, if you started service on or after July 1, 2011. Approximately 90% of NHRS members fall under Group I.
Group II is for Police Officers and Firefighters. Police Officers contribute 11.55% of their salary to the retirement system while Firefighters contribute 11.8%. Generally, the eligible retirement age for Group II members can range from 45 to 60 years old depending upon the requirements determined by which tier they fall under:
- Tier 1:Hired and vested before January 1, 2012
- Tier 2: Not vested prior to January 1, 2012 but hired prior to July 1, 2011
- Tier 3: Hired on or after July 1, 2011
What Group I Members Need To Know When They Turn 65
Prior to 1988, the NHRS linked Group I pension benefits to Social Security benefits. As a result, Group I members might see a pension reduction from 10% to 50% at age 65 depending upon their service time, age at retirement, and how much of their compensation exceeded the maximum amount of taxable Social Security earnings. (This provision did not apply to Group II Police and Firefighters who do not participate in Social Security.)
In 1988, the state legislature unlinked Group I pension benefits from Social Security but left a recalculation provision in place that reduces pension benefits for Group I members by approximately 10% when they turn age 65.
How long do I need to work before I am vested in NHRS?
Generally, the vesting requirement for NHRS-eligible employees is 10 years of creditable service.
What is the NHRS retirement Age?
The retirement age for Group I (Employees and Teachers) is age 60, if you started service prior to July 1, 2011. Or, age 65, if you started service on or after July 1, 2011.
The retirement age for Group II (Police and Firefighters) can range from 45 to 60 years old depending upon the requirements determined by which tier they fall under. See General NHRS Overview for tier details.
Do I have to pay Federal Income Taxes on NHRS retirement benefit?
Yes, once you retire and start receiving NHRS retirement benefits as income, those payments become subject to Federal taxes.
Will my NHRS retirement benefits be reduced by Social Security Benefits I receive?
Not technically. However, New Hampshire state law includes a pension recalculation provision that reduces pension benefits for Group I members by approximately 10% at age 65. See General NHRS Overview for details.