HB 242

                                1  HOUSE BILL 242
                                2     57TH LEGISLATURE - STATE OF NEW MEXICO - SECOND SESSION, 2026
                                3  INTRODUCED BY
                                4      Alan T. Martinez and Cynthia Borrego and Joseph L. Sanchez
                                5  and Tara L. Lujan
                                6
                                7
                                8
                                9
                                10  AN ACT
                                11   RELATING TO PUBLIC EMPLOYEE PENSIONS; PROVIDING A TEMPORARY
                                12   COST-OF-LIVING ADJUSTMENT FOR CERTAIN RETIRED MEMBERS; MAKING
                                13   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, for a qualified pension recipient [shall receive an
                                13   annual, non-compounding, additional payment] who has attained
                                14   the age of sixty-five prior to July 1 of the fiscal year in
                                15   which the adjustment is being made, the pension benefit shall
                                16   be increased by one and sixty-eight hundredths percent each
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                                17   July 1 of those fiscal years.     The amount of the payment shall
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                                18   be determined by multiplying the amount of annual pension
                                19   payments, inclusive of all [cost-of-living adjustments] prior
                                20   [to fiscal year 2021, by two] adjustments by one and sixty-
                                21   eight hundredths percent.     A qualified pension recipient shall
                                22   be entitled to a pension adjustment pursuant to only one
                                23   subsection of this section.
                                24  D.   Beginning May 1, 2023 and no later than each May
                                25   1 thereafter, the retirement board shall certify to the
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                                1    association the:
                                2  (1)   funded ratio as of June 30 of the
                                3    preceding calendar year; and
                                4  (2)   smoothed investment rate of return as of
                                5    June 30 of the preceding calendar year.
                                6  E.   Except as provided in Subsections C, F, G and H
                                7    of this section, beginning July 1, 2023 and each July 1
                                8    thereafter, immediately following the retirement board's
                                9    certification of the funded ratio and smoothed investment rate
                                10   of return, the cost-of-living adjustment to a qualified pension
                                11   recipient payable pursuant to the Public Employees Retirement
                                12   Act shall be determined as an amount equal to the smoothed
                                13   investment rate of return on the actuarial value of assets on
                                14   June 30 of the preceding calendar year less the cost-of-living
                                15   adjustment hurdle rate, as determined by the association's
                                16   actuaries, multiplied by the funded ratio on June 30 of the
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                                17   preceding calendar year or five-tenths percent, whichever is
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                                18   greater, and subject to the following conditions:
                                19  (1)   if the funded ratio of the fund is less
                                20   than one hundred percent on June 30 of the preceding calendar
                                21   year, the amount of the adjustment made pursuant to this
                                22   subsection shall not exceed three percent;
                                23  (2)   if the funded ratio of the fund is equal
                                24   to or greater than one hundred percent on June 30 of the
                                25   preceding calendar year, the adjustment made pursuant to this
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                                1    subsection shall not exceed five percent;
                                2  (3)   notwithstanding the provisions of this
                                3    subsection, a qualified pension recipient shall receive a
                                4    minimum annual cost-of-living adjustment of five-tenths
                                5    percent; and
                                6  (4)   the amount of increase shall be determined
                                7    by multiplying the amount of pension, inclusive of all prior
                                8    adjustments, by the cost-of-living adjustment as determined by
                                9    this subsection.
                                10  F.   For a normal retired member who worked for at
                                11   least twenty-five years under one or more applicable coverage
                                12   plans and whose annual pension benefit, after all previous
                                13   annual cost-of-living adjustments, is equal to an amount not
                                14   greater than twenty-five thousand dollars ($25,000), the
                                15   pension benefit shall be increased by two and one-half percent
                                16   each July 1.     The amount of the increase shall be determined by
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                                17   multiplying the amount of pension, inclusive of all prior
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                                18   adjustments, by two and one-half percent.
                                19  G.   For a disability retired member whose annual
                                20   pension benefit, after all previous annual cost-of-living
                                21   adjustments, is equal to an amount not greater than twenty-five
                                22   thousand dollars ($25,000), the pension benefit shall be
                                23   increased by two and one-half percent each July 1.     The amount
                                24   of the increase shall be determined by multiplying the amount
                                25   of pension, inclusive of all prior adjustments, by two and one-
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                                1    half percent.
                                2  H.   For a normal retired member who has attained the
                                3    age of seventy-five years prior to July 1, 2020, the pension
                                4    benefit shall be increased by two and one-half percent each
                                5    July 1.   The amount of the increase shall be determined by
                                6    multiplying the amount of pension, inclusive of all prior
                                7    adjustments, by two and one-half percent.
                                8  I.   A qualified pension recipient may decline an
                                9    increase in a pension by giving the association written notice
                                10   of the decision to decline the increase at least thirty days
                                11   prior to the date the increase would take effect."
                                12        SECTION 2.    APPROPRIATION.--Ten million dollars
                                13   ($10,000,000) is appropriated from the general fund to the
                                14   public employees retirement association for expenditure in
                                15   fiscal years 2027 and 2028 to provide a cost-of-living increase
                                16   of one and sixty-eight hundredths percent beginning July 1,
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                                17   2026 for normal retired members over the age of sixty-five.
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                                18   Any unexpended balance remaining at the end of fiscal year 2028
                                19   shall not revert to the general fund.
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