LESC bill analyses are available on the New Mexico Legislature website ( www.nmlegis.gov). Bill analyses are
prepared by LESC staff for standing education committees of the New Mexico Legislature. LESC does not assume
any responsibility for the accuracy of these reports if they are used for other purposes.
LEGISLATIVE EDUCATION STUDY COMMITTEE
BILL ANALYSIS
57th Legislature, 1st S ession, 2025
Bill Number HB454 Sponsor Baca/Garrat
Tracking Number .230135.2 Committee Referrals HEC/HAFC
Short Title Educational Retirement Changes
Original Date 2/27/2025
Analyst Montoya Last Updated
BILL SUMMARY
Synopsis of Bill
House Bill 454 (HB454) would amend the Educational Retirement Act (Section 22-11-31 NMSA 1978), by granting retired Educational Retirement Board (ERB) members receiving an annuity
payment an annual, non- compounding disbursement for FY26 and FY27. HB454 proposes a
calculation for determining the amount of these annual disbursements , which would include
multiplying the member’s annual annuity payment, including all cost-of-living adjustments
(COLA) applied before that fiscal year, by 2 percent. HB454 contains an effective date of June 20, 2025.
FISCAL IMPACT
HB454 would appropriate $60 million from the general fund to ERB for expenditure in FY26 and
subsequent fiscal years to support the proposed annual payments contained in the bill. Any
unexpended or unencumbered balance remaining at the end of a fiscal year shall not revert to the
general fund.
The House Appropriations and Finance Committee Substitute for House Bills 2 and 3 (HB2/HAFCS) does not contain an appropriation to implement the provisions of HB454. According to analysis of HB454 provided by ERB, the proposed $60 million dollar appropriation would consist of $29 million in total distributions for FY26, and $31 million in total
distributions for FY27 to achieve the two proposed annual annuity payments. SUBSTANTIVE ISSUES
ERB Membership. According to ERB’s 2024 Annual Comprehensive Financial Report
2024
Annual Comprehensive Financial Report, as of June 30, 2024 there were 172 .7 thousand ERB
members, 55.7 thousand of which were retirees and beneficiaries currently receiving benefits. See
Figure 1: ERB Plan Membership for more detail. As of June 30, 2024, ERB reports there were
220 employers participating in the ERB system. These employers consisted of charter schools,
HB454 – Page 2
public schools, state agencies, universities and colleges, and special schools. See Figure 2: ERB
Participating Employers for greater detail.
Figure 1: ERB Plan Membership
As of June 30, 2024
Status Count
Active Working Members 62,970
Retirees and Beneficiaries Currently Receiving Benefits 55,706
Inactive Vested Members 13,480
Inactive Non-Vested Members 40,524
TOTAL 172,680
Source: ERB
Figure 2: ERB Participating Employers
As of June 30, 2024
Employer Count
Charter Schools 100
Public School Districts 89
State Agencies 11
Universities and Colleges 16
Special Schools 4
TOTAL 220
Source: ERB
Pension Benefit Calculation. A member’s retirement benefit is calculated using a formula that
factors in three components: the final average salary (FAS), years of service credit, and a 0.0235 multiplier. The FAS is determined by averaging the member’s highest salaries over either the last five fiscal years of service or any other consecutive five- year period, whichever is greater. The
final benefit is the product of these three elements.
Cost-of-Living Adjustment. All retired members and beneficiaries receiving benefits receive an
automatic COLA on July 1 following the later of either the year they retire, or the year they reach
age 65 (for Tier 1 and Tier 2) or age 67 (for Tier 3 and Tier 4). See Figure 3: ERB Membership Tiers for more detail on membership tiers. As of July 1, 2013, COLAs were temporarily reduced
until the ERB plan reaches a funded ratio of 100 percent. As of June 30, 2024, the funded ratio
was 64.8 percent and is projected to reach a funded ratio of 100 percent by 2047. The COLA
reduction is based on the median retirement benefit, excluding disability retirements. Retirees with benefits at or below the median and at least 25 years of service will see a 10 percent COLA
reduction, resulting in an average COLA of 1.5 percent. Once funding exceeds 90 percent, the
reduction decreases to 5 percent, with an average COLA of 1.7 percent. Members on a disability
retirement receive a COLA starting July 1 of the third full year after retirement. Regular retirees who can prove their retirement was due to disability may also qualify for a COLA beginning in the third full year of retirement.
Figure 3: ERB Membership Tiers
Tiers Criteria for Membership
Tier 1 Employees who became members prior to July 1, 2010.
Tier 2 Employees who became members on or after July 1, 2010, but prior to July 1, 2013.
Tier 3 Employees who became members on or after July 1, 2013, but prior to July 1, 2019.
Tier 4 Employees who became members on or after July 1, 2019.
Source: ERB
HB454 – Page 3
ADMINISTRATIVE IMPLICATIONS
HB454 is expected to have minimal costs for ERB regarding accounting and distribution of the
two annual payments being proposed.
RELATED BILLS
Related to Senate Bill 75, Educational Retirement Changes, which proposes changes to the ERB
system, including investing unclaimed member contributions, ensuring annuity adjustments for
disabled members over 60, extending the service credit payment deadline to 90 days, and allowing
information sharing with the Public Employees Retirement Board for administration.
Related to Senate Bill 133, Educational Retirees Returning to Work, which would raise the
maximum salary a retired member can earn without suspending retirement benefits when returning
to work, increasing the threshold from $15 thousand to $25 thousand. It would also extend the
current 36 month return- to-work (RTW) period to 60 months.
Related to Senate Bill 421, Educational Retirement Board Changes, which would amend the
Education Retirement Board Act by allowing ERB to purchase, acquire, or hold real property, and
build or own a building and make related improvements on said property.
Related to House Bill 96, PERA Member Temporary Payment, which proposes additional
payments to PERA members receiving a pension for FY26 and FYY27 and includes a $66 million
appropriation.
Related to House Bill 251, Ed. Retirement Beneficiary Changes, which proposes additional
beneficiary designation options for retired ERB members.
Related to House Bill 254, Ed. Retirees Returning to Work Time Period, which would extend the
current 36 month RTW period to 60 months.
SOURCES OF INFORMATION
• LESC Files
• Educational Retirement Board (ERB)
• New Mexico Higher Education Department (NMHED)
• Public Employees Retirement Association (PERA)
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