HB 41

                                1  HOUSE BILL 41
                                2     57TH LEGISLATURE - STATE OF NEW MEXICO - SECOND SESSION, 2026
                                3  INTRODUCED BY
                                4  Cynthia Borrego and Elizabeth "Liz" Stefanics
                                5    and Joseph L. Sanchez and D. Wonda Johnson and Charlotte Little
                                6
                                7
                                8
                                9
                                10  AN ACT
                                11   RELATING TO PUBLIC EMPLOYEE PENSIONS; PROVIDING A TEMPORARY,
                                12   ADDITIONAL, NON-COMPOUNDING PAYMENT TO RETIRED MEMBERS UNDER
                                13   THE PUBLIC EMPLOYEES RETIREMENT ACT; MAKING AN APPROPRIATION.
                                14
                                15   BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:
                                16        SECTION 1.    Section 10-11-118 NMSA 1978 (being Laws 2020,
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                                17   Chapter 11, Section 61) is amended to read:
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                                18        "10-11-118.    COST-OF-LIVING ADJUSTMENTS--QUALIFIED PENSION
                                19   RECIPIENT--DECLINING INCREASE.--
                                20  A.   As used in this section:
                                21  (1)   "cost-of-living adjustment hurdle rate"
                                22   means the investment rate of return required to fund a cost-of-
                                23   living adjustment in excess of one-half percent, as determined
                                24   by the association's actuaries;
                                25  (2)   "funded ratio" means the ratio of the
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                                1    actuarial value of the assets of the fund to the actuarial
                                2    accrued liability of the association for payments from the
                                3    fund, as determined by the association's actuaries;
                                4  (3)   "preceding calendar year" means the full
                                5    calendar year preceding the July 1 on which pensions are being
                                6    adjusted; and
                                7  (4)   "smoothed investment rate of return" means
                                8    a calculation made by spreading the difference between the
                                9    expected actuarial value in investment income and the actual
                                10   market value investment income over a smoothing period, as
                                11   determined by the association's actuaries.
                                12  B.    A qualified pension recipient is eligible for a
                                13   cost-of-living pension adjustment.     A qualified pension
                                14   recipient is:
                                15  (1)   a normal retired member who has been
                                16   retired for at least two full calendar years from the effective
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                                17   date of the latest retirement prior to July 1 of the year in
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                                18   which the pension is being adjusted;
                                19  (2)   a normal retired member who has attained
                                20   the age of sixty-five years and has been retired for at least
                                21   one full calendar year from the effective date of the member's
                                22   latest retirement prior to July 1 of the year in which the
                                23   pension is being adjusted;
                                24  (3)   a disability retired member who has been
                                25   retired for at least one full calendar year from the effective
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                                1    date of the latest retirement prior to July 1 of the year in
                                2    which the pension is being adjusted;
                                3  (4)   a survivor beneficiary who has received a
                                4    survivor pension for at least two full calendar years; or
                                5  (5)   a survivor beneficiary of a deceased
                                6    retired member who otherwise would have been retired at least
                                7    two full calendar years from the effective date of the latest
                                8    retirement prior to July 1 of the year in which the pension is
                                9    being adjusted.
                                10  C.   [Except as provided in Subsections F, G and H of
                                11   this section] During fiscal years [2021, 2022 and 2023] 2027
                                12   and 2028, a qualified pension recipient shall receive an
                                13   annual, non-compounding, additional payment.     The amount of the
                                14   payment shall be determined each fiscal year by multiplying the
                                15   amount of annual pension payments, inclusive of all cost-of-
                                16   living adjustments prior to that fiscal year [2021], by two
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                                17   percent.
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                                18  D.   Beginning May 1, 2023 and no later than each May
                                19   1 thereafter, the retirement board shall certify to the
                                20   association the:
                                21  (1)   funded ratio as of June 30 of the
                                22   preceding calendar year; and
                                23  (2)   smoothed investment rate of return as of
                                24   June 30 of the preceding calendar year.
                                25  E.   Except as provided in Subsections F, G and H of
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                                1    this section, beginning July 1, 2023 and each July 1
                                2    thereafter, immediately following the retirement board's
                                3    certification of the funded ratio and smoothed investment rate
                                4    of return, the cost-of-living adjustment to a qualified pension
                                5    recipient payable pursuant to the Public Employees Retirement
                                6    Act shall be determined as an amount equal to the smoothed
                                7    investment rate of return on the actuarial value of assets on
                                8    June 30 of the preceding calendar year less the cost-of-living
                                9    adjustment hurdle rate, as determined by the association's
                                10   actuaries, multiplied by the funded ratio on June 30 of the
                                11   preceding calendar year or five-tenths percent, whichever is
                                12   greater, and subject to the following conditions:
                                13  (1)   if the funded ratio of the fund is less
                                14   than one hundred percent on June 30 of the preceding calendar
                                15   year, the amount of the adjustment made pursuant to this
                                16   subsection shall not exceed three percent;
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                                17  (2)   if the funded ratio of the fund is equal
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                                18   to or greater than one hundred percent on June 30 of the
                                19   preceding calendar year, the adjustment made pursuant to this
                                20   subsection shall not exceed five percent;
                                21  (3)   notwithstanding the provisions of this
                                22   subsection, a qualified pension recipient shall receive a
                                23   minimum annual cost-of-living adjustment of five-tenths
                                24   percent; and
                                25  (4)   the amount of increase shall be determined
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                                1    by multiplying the amount of pension, inclusive of all prior
                                2    adjustments, by the cost-of-living adjustment as determined by
                                3    this subsection.
                                4  F.   For a normal retired member who worked for at
                                5    least twenty-five years under one or more applicable coverage
                                6    plans and whose annual pension benefit, after all previous
                                7    annual cost-of-living adjustments, is equal to an amount not
                                8    greater than twenty-five thousand dollars ($25,000), the
                                9    pension benefit shall be increased by two and one-half percent
                                10   each July 1.    The amount of the increase shall be determined by
                                11   multiplying the amount of pension, inclusive of all prior
                                12   adjustments, by two and one-half percent.
                                13  G.   For a disability retired member whose annual
                                14   pension benefit, after all previous annual cost-of-living
                                15   adjustments, is equal to an amount not greater than twenty-five
                                16   thousand dollars ($25,000), the pension benefit shall be
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                                17   increased by two and one-half percent each July 1.   The amount
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                                18   of the increase shall be determined by multiplying the amount
                                19   of pension, inclusive of all prior adjustments, by two and one-
                                20   half percent.
                                21  H.   For a normal retired member who has attained the
                                22   age of seventy-five years prior to July 1, 2020, the pension
                                23   benefit shall be increased by two and one-half percent each
                                24   July 1.   The amount of the increase shall be determined by
                                25   multiplying the amount of pension, inclusive of all prior
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                                1    adjustments, by two and one-half percent.
                                2  I.    A qualified pension recipient may decline an
                                3    increase in a pension by giving the association written notice
                                4    of the decision to decline the increase at least thirty days
                                5    prior to the date the increase would take effect."
                                6  SECTION 2.   APPROPRIATION.--Seventy million dollars
                                7    ($70,000,000) is appropriated from the general fund to the
                                8    public employees retirement association for expenditure in
                                9    fiscal year 2027 and subsequent fiscal years to provide
                                10   adequate funding to cover the cost of the temporary,
                                11   additional, non-compounding payments.   Any unexpended balance
                                12   remaining at the end of a fiscal year shall not revert to the
                                13   general fund.
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