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Bar Journal - June 1, 2001

New Hampshire Judicial Pension Issues - Problems and Proposals



In normal times the issue of judicial retirement benefits would be of concern primarily to judges and to the General Court, which must appropriate the sums required to fund these benefits in conjunction with other spending priorities. However, these are not normal times. Like virtually every other aspect of the New Hampshire judiciary, the judicial retirement system has of late come under increasing scrutiny from various quarters. In the 1999 legislative session, a proposal was advanced to supplement, and eventually replace, the current non-contributory defined benefit pension program with a contributory defined contribution plan similar to the 401(k) and 403(b) annuity plans common in the private and nonprofit sectors.1  Although not enacted, this proposal generated significant interest and concern within the judiciary.

In the summer of 2000, the New Hampshire judicial retirement system was drawn into the spotlight during the legislative hearings that led to the impeachment of Supreme Court Chief Justice David A. Brock. At one point, consideration was given to a scenario under which Justice Brock would agree to resign from the Court as an alternative to impeachment.2  A major barrier to this approach was the fact that under the current judicial retirement program Justice Brock had not yet accrued any pension rights, despite his many years of service on the bench.3  A solution was proposed that would have provided a pension to Justice Brock were he to resign from the Court.4  However, apart from issues of policy and principle, the proposal foundered on technical grounds when Manchester attorney Alan P. Cleveland, a recognized expert in the pension field, testified that such an ad hoc arrangement for the benefit of one or more justices could jeopardize the viability of the entire judicial pension system for federal tax purposes.5 

This article will provide a brief overview of the current New Hampshire judicial retirement system and a proposal for restructuring the system in several key respects, both to address issues raised during the recent controversy surrounding the New Hampshire judiciary and to resolve ongoing concerns regarding the tax status and fiscal integrity of the system.


The statutory provisions governing judicial retirement benefits in New Hampshire cover all full-time justices of the Supreme, Superior, district and probate courts.6  The respective provisions pertinent to justices of these courts are essentially identical, and provide for the following benefits:

  1. Retirement. A Justice may retire and receive an annual pension for the remainder of his life equal to 75 percent of the currently effective annual salary of the office from which he is retired, provided that he has (a) reached age 70 and served as a Justice for at least seven years, or (b) reached age 65 and served as a Justice for at least 10 years.7 

  1. Disability. A Justice who is unable to perform his duties because of permanent disability may receive the same benefits as he would have received had he retired at full retirement age.8 
  2. Death. If a Justice dies in office, his spouse is entitled to receive a survivorship benefit equal to one-half of the currently effective annual salary of the office held by the deceased Justice, for life or until the spouse remarries. If there is no surviving spouse or upon remarriage of the surviving spouse, the survivorship benefit is payable to any children of the deceased Justice who are under age 18, and they are entitled to continue to receive that benefit until the youngest child reaches age 18. If more than one surviving child qualifies for benefits, the survivorship benefit is divided equally among them. Similar survivorship benefits are payable upon the death of a Justice after retirement.9 

At one time the New Hampshire judicial retirement system (originally limited to Supreme and Superior Court justices) was considered a tax-qualified plan pursuant to the provisions of §401(a) et seq. of the Internal Revenue Code ("Code"). Qualified status confers a number of tax benefits on plan sponsors and participants, as well as the plan itself.10  Of greatest relevance in the context of a governmental retirement plan is that a participant in a qualified plan is only taxed on the value of his or her benefits if and when he or she receives them, rather than at some earlier date (e.g., when the benefits are accrued, vested or funded).11  At the request of the New Hampshire Supreme Court, the author’s firm secured a favorable determination letter from the Internal Revenue Service ("IRS") dated April 17, 1979, ruling that the New Hampshire judicial retirement plan was a qualified plan under the then-current provisions of the Code. However, this determination was predicated upon a 1977 IRS pronouncement that stayed the application to governmental plans of certain requirements applicable to qualified plans generally, which would have caused plans maintained by many state and local governments to lose their qualified status.12 

In 1989, the author met with several Supreme Court justices concerning the status of the judicial retirement plan for federal tax purposes. By that time it was clear that due to subsequent statutory and regulatory developments the state and the judges could no longer rely on the 1979 determination letter as evidence of the program’s tax-qualified status. Significant changes would be required in order to permit the plan to retain (or regain) qualified status, changes which might be neither politically nor administratively feasible, nor particularly palatable from the justices’ standpoint.13  Accordingly, the matter was not pursued further at that time.

Since the New Hampshire judicial retirement system is no longer eligible for tax-qualified status under Code §401(a) et seq., the continued tax-favored treatment of benefits accrued under the system depends solely upon §252 of the Tax Equity and Fiscal Responsibility Act of 1982 ("TEFRA"), which provides special grandfathered status for "qualified state judicial plans" meeting the following requirements:

  1. the plan must have been in continuous existence since December 31, 1978;
  2. all judges eligible to benefit under the plan must be required to participate and to contribute the same fixed percentage of their basic regular rate of judicial compensation (although in the case of the New Hampshire plan this percentage is currently zero);
  3. under the plan no judge may have an option as to contributions or benefits, the exercise of which would affect the amount of his or her includible compensation for federal tax purposes (as in the 401(k) or 403(b) annuity plans prevalent in the private and nonprofit sectors);
  4. the retirement payments of a judge under the plan must be a percentage of the compensation of judges of that state holding similar positions; and
  5. the plan during any year may not pay benefits with respect to any participant that exceed the limitations of §415(b) of the Code (currently, the lesser of $140,000 per annum or 100 percent of average annual compensation for the three consecutive calendar years of service during which the participant’s aggregate compensation was the highest).14 

At present, the New Hampshire judicial retirement program apparently satisfies the requirements for grandfather protection under §252 of TEFRA, although the potential does exist for violating at least some of these requirements, either by amending the applicable statutes or simple inadvertence (e.g., through the interaction of the Code §415(b) benefit limitations and the statutory benefit formula).15  Since the tax-advantaged status of the current program is critical to the participants and hangs by such a tenuous statutory thread (§252 of TEFRA), any changes in the current judicial retirement system should be made only after careful study. The tax consequences of any such change should be confirmed by means of a determination letter or private letter ruling issued by the IRS. This was the substance of attorney Cleveland’s testimony in the summer of 2000 in connection with the Brock impeachment hearing.16  Somewhat earlier, a similar conclusion was reached by Russell A. Gaudreau, Jr., of the Boston firm of Ropes & Gray, in a May 5, 1999 letter to Eileen Fox, counsel to the Supreme Court.17 


Subsequent to the 2000 impeachment hearings, the chair of the House Finance Committee, Representative Neal Kurk, asked attorney Cleveland to assist the committee in designing a new proposal for a revised judicial retirement system.18  While the committee’s original intent was simply to create a program similar to the New Hampshire state employee's retirement system, Mr. Cleveland instead proposed a somewhat different type of defined benefit program. The program would be designed to satisfy the qualification requirements of §401(a) of the Internal Revenue Code and would be funded on an actuarially sound basis (as opposed to the current plan, which is funded on a "pay-as-you-go" basis).

Given the justifiable concern regarding the tax and other consequences of any substantive changes to the current retirement program, it was initially proposed that the new plan would apply only to judges appointed after its effective date, with all incumbent Justices continuing to receive their benefits under the current program only. However, as discussed below, the proposal that ultimately emerged featured a "wrap-around" plan providing benefits to all judges, reduced by the amount of any benefits payable under the current program. Judges appointed after the effective date of the new program would participate only in that program. Under this proposal, the existing program would thus be gradually phased out until such time as no active or retired judges (or their spouses or children) were accruing or receiving benefits under that program.

Ideally, the first step in designing a new judicial retirement plan would involve formulating the state’s basic philosophy concerning judicial retirement benefits, with particular reference to the following issues:

  1. What incentives does the state wish to provide to encourage qualified individuals to accept judicial appointments and to remain on the bench?
  2. Should judges be required to contribute to the funding of their retirement benefits and if so, on what basis?

For example, it might be desirable to adopt a program in which the justice accrues a percentage of his or her ultimate projected retirement benefit on an annual basis, with full benefits accruing over a period commensurate with the typical individual’s projected career span as a judge, subject to vesting provisions that would guarantee the justice a non-forfeitable interest in his accrued benefit after an appropriate minimum period of service. In this regard judicial pension reform proposals are closely linked to judicial term limits and related issues.

As to the latter issue, most public sector employees, including those in New Hampshire, are required to contribute to the cost of funding their retirement benefits, and in the private and nonprofit sectors employees are being encouraged to assume a greater share of this burden via 401(k) plans and 403(b) annuity programs. In view of other urgent demands on scarce public resources it is arguably appropriate that judges should be asked to do likewise.

Whatever proposals emerge, if the existing program is to remain in place, even on a transitional basis, at minimum the same should be amended to preclude any violation of the conditions of §252 of TEFRA (e.g., with respect to the Code §415(b) benefit limitations). As noted above, a private letter ruling should be sought and secured from the IRS before any such amendment is enacted, or its effectiveness should be conditioned upon the issuance of a favorable ruling subsequent to enactment. Obviously, it would also be prudent to secure a ruling or determination letter from the IRS with respect to any new plan that may be adopted as an adjunct to (and eventual replacement for) the existing program.

In the 2001 legislative session, Representative Kurk and others introduced HB 560-FN-A.19  This bill would add a new RSA Chapter 100-C, establishing a contributory defined benefit judicial pension plan effective July 1, 2001. The new program would be the sole retirement plan for judges appointed after its effective date.20  Judges currently on the bench would participate both in the new plan and the current program, with benefits under the new plan being reduced by the amount of any benefits payable under the current program.21  Participation would be mandatory for all full-time Supreme, Superior, district and probate court judges.22 

In contrast to the current statutory provisions governing judicial pensions, which are brief to the point of terseness, the proposed RSA Chapter 100-C establishes a detailed program similar in many respects to other governmental retirement plans, such as the New Hampshire Retirement System. The bill contains detailed rules for determining creditable service for the purpose of accruing benefits under the plan.23  A judge with 20 years of service may retire with a pension equal to 75 percent of his or her final year’s salary.24  A judge who has reached age 55 with at least ten years of service may receive a reduced pension equal to his or her number of years of service multiplied by 3.75 percent of his or her final year’s salary, up to a maximum of 75 percent of salary.25  A judge who has completed 10 years of service and leaves the bench for reasons other than retirement or death can either (a) receive a deferred retirement benefit based on the judge’s service and final year’s salary and his or her age at the time retirement benefit payments begin, or (b) secure a refund, with interest, of his or her contributions to the plan, as discussed below.26  The plan also provides for death and disability benefits generally similar to those afforded under the current program.27 

The new program would be administered by a five-member board of trustees.28  The board is granted broad powers to carry out its administrative and fiduciary duties, including extensive reporting and disclosure requirements and insuring that the plan is funded on an actuarially sound basis through a combination of public funds and member contributions.29 

Under this proposal, a judge age 55 with 12 years of service could retire immediately and, if his or her final annual salary prior to retirement was $120,000, receive a pension of $54,000 per year for life (12 years x 3.75% per year x $120,000).30  Under the current system, of course, the judge would be entitled to no pension at this point. Alternatively, the judge could leave service at age 55 and choose to begin his or her pension at some later date, in which case the pension would be actuarially increased based upon the judge’s age at the time benefits actually commenced (to reflect the fact that benefits will be paid over a shorter period of time).31  Finally, if for some reason neither of these options appeals to the judge, he or she may simply apply for a refund of his or her own contributions to the program (as discussed below) with interest.32 (Seemingly, however, this last option would seldom be the best choice for anyone who has accrued the minimum ten years of service required to qualify for an immediate or deferred pension.)

If this same judge were to remain on the bench until age 63 (at which point he or she would have completed 20 years of creditable service), he or she would be eligible for an unreduced pension equal to 75 percent of his or her final annual salary or, in this case, $90,000 (75% X $120,000).33  By contrast, under the current system this judge would receive no pension unless he or she remained on the bench for two more years, until age 65.34  The deferred retirement option noted above would also remain available.

Note that while the normal retirement benefit (75 percent of final salary) is superficially similar to the current system, it differs in that the benefit is tied to a percentage of salary for the final year of service (similar to the usual method in private sector plans), while the current system provides a measure of inflation protection by fixing the annual benefit at three-fourths of the currently effective salary for the office from which the judge was retired.35 On the other hand, the proposal provides for cost of living adjustments to benefits if and to the extent that the funding status of the plan trust fund so permits.36 

In contrast to the current system, the new program contemplated by HB 560 would be funded by contributions by both the state and by the participating judges. In essence, the state’s contribution would be the amount necessary to fund the plan on an actuarially sound basis, once the required employee contributions are taken into account.37  Employee contributions would be made at a rate to be determined by the Legislature, initially fixed at 7.5 percent of pay.38  The contributory aspect of the plan is arranged to permit the required contributions to be made on a pre-tax basis (somewhat like a 401(k) plan, but without the elective aspect).39  Importantly, however, the proposal affords limited paycheck protection for incumbent judges, essentially providing that the required employee contributions cannot reduce any judge’s pay below its level as of the date the new plan became effective, plus accumulated cost-of-living adjustments.40 

HB 560 was reviewed by the New Hampshire Bar Association Legislation Committee, where concerns were noted as to the following points:

  1. The 10-year minimum service period generally required to qualify for a pension under the new system would address, at least to a degree, a situation similar to that which arose in Justice Brock’s case.41  The new program would thus constitute an improvement over the current system in terms of providing at least some retirement benefits to judges who have served for significant periods of time, thereby facilitating, if necessary, the timely retirement of judges whose usefulness on the bench has been diminished or compromised. However, this program does not mesh well with most of the proposals which surfaced in the 2001 legislative session for term limits, periodic judicial performance reviews and the like, most of which contemplated a 5-to-8-year term or review cycle.42  Under federal pension laws (which do not apply to governmental plans) accrued benefits must become fully vested after five to seven years,43  although typically as the employee’s period of service lengthens his or her accrued benefits increase. The interrelationship of these issues demonstrates the wisdom of evaluating them (and, indeed, the full range of judicial reform proposals) on a unified basis, rather than piecemeal.
  2. As noted above, any new judicial retirement program should be established subject to a condition precedent or subsequent that a favorable ruling or determination letter be sought and received by the state from the IRS concerning the plan’s tax-qualified status and, in this case, that the existing plan (to the extent the same will continue to cover all judges appointed prior to the effective date of the program) will not be adversely affected.

Apart from the above, it was the sense of the committee that judicial pensions are a policy decision for the Legislature, as long as the system is not restructured in a way that is plainly punitive or confiscatory insofar as the judges (particularly incumbent judges) are concerned.

HB-560-FN-A was referred to the House Executive Department and Administration Committee. After a hearing the committee unanimously voted to recommend the bill for adoption, with certain amendments. On March 22, 2001, the bill as amended was approved by the House on a voice vote and referred to the Finance Committee, where it remains as of this writing.44  The amended bill would cap the retirement benefit of a judge retiring at age 55 at 70 percent of the maximum allowance for a judge retiring with 20 years of service (i.e., 70% x 75%, or 52.5%, of final annual salary). This cap would increase by 3 percent for each year of service after age 55, so that (e.g.) a judge retiring at age 60 would receive a maximum allowance of 70% + (5 x 3%) x 75%, or 63.75 percent, of final annual salary, and a judge retiring at or after age 65 would receive the full maximum allowance of 75 percent of average final salary, assuming 20 or more years of service.45 

A satisfactory resolution of the judicial pension issue is obviously of concern primarily to the judges themselves. However, the Bar can continue to provide useful input from the technical standpoint concerning this issue. More importantly, to the extent that pension issues directly or indirectly impact areas of paramount concern to the Bar, such as insuring that the New Hampshire judiciary is comprised of highly qualified, mature and experienced individuals, the Bar has a legitimate role to play in informing and shaping the policy debate on this issue.


1. See HB 735-FN-A, as amended by the House of Representatives (1999 Session), and note 17, infra, and accompanying text.
2. Boston Globe, July 7, 2000; Metro/Region section, p. B-3.
3. Justice Brock was then age 64. Although he had completed 24 years of service on the bench, because he had not reached age 65 he was not yet entitled to a pension under RSA 490:2. See note 7, infra, and accompanying text.
4. Manchester Union Leader ("MUL"), July 12, 2000, Section A, p. 1. HB 1500-FN would have provided Justice Brock with the same pension as he would have received under RSA 490:2 had he reached age 65 prior to his resignation, provided he resigned after his impeachment by the House of Representatives and prior to the beginning of his trial by the Senate.
5. Id., and the author’s telephone conversation with Alan P. Cleveland, Esquire, on November 14, 2000.
6. RSA 490:2 (Supreme Court), RSA 491:2 (Superior Court), and RSA 502-A:6-a (full-time District Court and, per RSA 547:2-a, Probate Court judges).
7. RSA 490:2, II; RSA 491:2, II, and RSA 502-A:6-a, III.
8. RSA 490:2, I; RSA 491:2, I, and RSA 502-A:6-a, II.
9. RSA 490:2, III-IV; RSA 491:2, III-IV; and RSA 502-A:6-a, IV-V.
10. Employer contributions to a qualified plan are generally tax-deductible when made. The plan itself is normally tax-exempt and plan participants and beneficiaries are not taxed until plan benefits are actually paid to them. Internal Revenue Code of 1986, as amended (26 U.S.C.S.) ("IRC") §§401(a), 402(a), 404 and 501(a).
11. IRC §402(a).
12. In IRS News Release IR-1869 (August 10, 1977), C.C.H. Pension Plan Guide 17,016E, the Service stated that issues concerning, inter alia, discrimination relating to state and local governmental retirement plans would not be raised pending an IRS review of these matters, and that pending completion of the review the IRS would resolve these issues in favor of the taxpayer or governmental unit.
13. For example, as discussed infra, it might be necessary to fund the plan on an actuarially sound basis through a trust fund, which given financial realities might in political terms require contributions on the part of the judges.
14. See §252 of the Tax Equity and Fiscal Responsibility Act of 1982, P.L. 97-248 ("TEFRA"), C.C.H. Pension Plan Guide, 13,979B, which exempted judicial retirement plans meeting these requirements from the provisions of Code §457, which generally applies to certain deferred compensation plans of state and local governments and tax-exempt organizations which are not eligible for qualified treatment under Code §401(a) et seq.
15. For example, if the salaries of incumbent judges ever were to equal or exceed 133% of the then-current dollar limitation under Code §415(b) (currently $140,000), under the current retirement system (which fixes retirement benefits at 3/4 of active judge’s salaries), benefits to retired judges could exceed the §415(b) limitation.
16. Id., at note 5, supra.
17. Letter furnished to the author by Attorney Cleveland. HB 735-FN-A, then under consideration, would have established a contributory tax-qualified defined contribution retirement plan administered by the Administrative Office of the Courts ("AOC"), including a state matching contribution with respect to the judges’ contributions. This plan would have been the sole retirement program for judges appointed after the July 1, 1999 effective date. Although a judge appointed before that date could choose to enter the new plan, he or she would have been required to forfeit all rights under the current plan in order to do so. Subsequently, the House amended HB 735-FN to elaborate the matching contribution formula and to permit judges on the bench prior to the plan effective date to participate in the new plan without sacrificing their benefits under the current program, although their benefits under the latter plan would have been capped based upon the judge’s salary as of the date he or she chose to enter the new plan, and not at the date of retirement.
18. Telephone conversation with Attorney Cleveland, Id., at note 5.
19. Co-sponsors:  Rep. Almy (Grafton 14); Rep. Stone (Rockingham 7); Sen. Francoeur (Dist. 14); and Sen. Pignatelli (Dist. 13).
20. HB 560-FN-A; §§2-5 and §1 (Proposed RSA 100-C:3).
21. HB 560-FN-A; §1 (Prop. RSA 100-C:2, III).
22. Id., Prop. RSA 100-C:3.
23. Id., Prop. RSA 100-C:4.
24. Id., Prop. RSA 100-C:5, II.
25. Id., Prop. RSA 100-C:5, I - II.
26. Id., Prop. RSA 100-C:8-9.
27. Id., Prop. RSA 100-C:6-7.
28. Id., Prop. RSA 100-C:12.
29. Id., Prop. RSA 100-C:12-15.
30. Id., Prop. RSA 100-C:5, II.
31. Id., Prop. RSA 100-C:8.
32. Id., Prop. RSA 100-C:9.
33. Id., Prop. RSA 100-C:5, II.
34. See note 7, supra, and accompanying text.
35. Id.; compare Prop. RSA 100-C:5.
36. Id.; Prop. RSA 100-C:18.
37. Id.; Prop. RSA 100-C:14.
38. Id.; Prop. RSA 100-C:15.
39. Id.
40. Id.
41. Given his age (64) and accumulated service in the summer of 2000, had RSA 100-C then been in effect Justice Brock would have been eligible for a pension equal to 75% of his final year’s salary at that time of $106,649, or $79,986, equivalent to what he would have received per RSA 490:2 had he then reached age 65 or what he would have received had HB-1500-A (see note 4, supra) been enacted and had he resigned as provided in that bill.
42. See, e.g., CACR 10 (5 year judicial terms); CACR 16 (review of judges every 8 years); HB 457-FN (5 year reviews); . SB 86 (10 year reviews).
43. IRC §411(a)(2).
44. New Hampshire General Court, 157th Session Web site, N.H. General Court Bill Status, HB 560 Docket (
45. HB-560-FN-A, as amended by the House, RSA 100-C:5, III (new paragraph), ( Under this amendment Justice Brock would have received an annual pension equal to 72.75% (97% x 75%) of his final year’s salary, or $77,587, $2,399 less than as discussed at Note 41, supra.

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