Actuarial Fiscal Note

Retirement Systems Impacted by Legislation:

State Police Plan B

FUND(S):

2162

Sources of Revenue:

General Fund

Legislation creates:

Neither Program nor Fund

Actuarial Note Summary

Impact this measure will have on the liabilities and contributions associated with the retirement system(s).

    The improvements contained in this bill meet the requirements of Tax Reform provisions under 15-2A-22 (a) & (c) for both active and retiree improvements.

    The bill provides the following improvements:
    1. Active members unreduced retirement is modified to the earlier of age 50 and 25 years of service, age 52 and 20 years of service or age 62 and 10 years of service.
    2. Active and retired members on partial duty disability shall have their disability recalculated at age 50 and increased if more or continue unchanged for life if the recalculation would result in a decreased benefit.
    3. Dependent survivor scholarship benefit limitation is increased from $7,500 to $45,000.

    The liabilities and contribution costs of the bill are summarized as follows:
    1. The Normal Cost is increased by 0.80% of active payroll, $134,000 for FY2008.
    2. The Unfunded Actuarial Accrued Liabilities (UAAL) for retired members increases by $145,000. The UAAL is amortized over six years at $30,000 per year for FY2008-2013.
    3. The UAAL for active members increases by $1,549,000. The UAAL is amortized over ten years at $218,000 per year for FY2008-2017.

Fiscal Detail of Actuarial Impact

Impact on current benefit costs, prior service benefit costs and ongoing contribution requirements following full implementation.

Impact On	Following Full Implementation
Impact On	Increase in Unfunded Actuarial Accrued Liability	Initial Impact on Annual Contribution Requirement of System(s)	Contribution Increase as a Percentage of Annual Payroll
Total Annual Costs	$1,694,000.00	$382,000.00	2.00 %
Normal Cost of System	N/A	$134,000.00	0.00 %
Past Service Liabilities	$1,694,000.00	$248,000.00	1.00 %
Fiscal Year Past Service Amortization Period Ends	N/A	FY2017	N/A

Explanation of above Actuarial estimates:

    The increases in Normal Cost and Actuarial Accrued Liabilities is based on the July 1, 2006 Actuarial Valuation for Plan B projected to July 1, 2007 effective date. All increases are amortized as required under Pension Reform resulting in the highest payments in the first 6 years, then intermediate payments for 4 more years with Normal Cost only thereafter.

    The expected contributions for the next 11 years are:

    FY2008 - $382,000 or 2.29% of pay.
    FY2009 - $388,000 or 2.23% of pay.
    FY2010 - $394,000 or 2.16% of pay.
    FY2011 - $401,000 or 2.10% of pay.
    FY2012 - $409,000 or 2.04% of pay.
    FY2013 - $416,000 or 1.99% of pay.
    FY2014 - $394,000 or 1.80% of pay.
    FY2015 - $403,000 or 1.75% of pay.
    FY2016 - $412,000 or 1.71% of pay.
    FY2017 - $421,000 or 1.67% of pay.
    FY2018 - $213,000 or 0.80% of pay.

    Contributions for FY2018 and after are Normal Cost only.

    The funded percentage of Plan B is expected to be reduced from 91.6% to 87.8% due to the improvements.

    The additional FY2008 contribution requirement of $382,000 exceeds the currently available excess expected contribution of $291,000 based on the current employer contribution rate of 12% of base payroll. The contribution for FY2008 would need to be increased by 0.6% of pay to 12.6% and could be reduced after the amortization period expires. If the employer contribution rate is not increased, then alternative funding of approximately $91,000 per year would be required. The employer contribution rate is set by the CPRB Board based on actuarial requirements and need not be addressed in the legislation.

Analysis of Impact on Public Pension Policy:

    The increases provided for are generally consistent with plans covering law enforcement officers.

    The employer contribution rate for the Plan is set by the CPRB Board based on actuarial requirements allowing the plan’s contributions to meet the funding targets under GASB 25 and 2005 West Virginia Pension Reform. The actuarial analysis would include any other sources of contributions other than member and employer contributions. No action is required in the bill.

    The bill does contain certain drafting inconsistencies in the Early Retirement provisions. All age references for Early Retirement should be changed to age 50 instead of age 52 and age 55 as currently drafted for early retirement prior to age 50 with 25 years of service.

Fiscal Note Summary

Effect this measure will have on costs and revenues of state government.

Fiscal Note Detail

Effect of Proposal	Fiscal Year
Effect of Proposal	2007 Increase/Decrease (use"-")	2008 Increase/Decrease (use"-")	Fiscal Year (Upon Full Implementation)
1. Estmated Total Cost	0	382,000	388,000
Personal Services	0	0	0
Current Expenses	0	0	0
Repairs and Alterations	0	0	0
Assets	0	0	0
Other	0	382,000	388,000
2. Estimated Total Revenues	0	0	0

Explanation of above Fiscal Note estimates (include possible long-range effect):

Memorandum

Person submitting Fiscal Note: Harry W. Mandel, MAAA, MSPA, Board Actuary
Email Address: HMandel@wvadmin.gov