Actuarial Fiscal Note
Retirement Systems Impacted by Legislation:
Public Employees Retirement System
FUND(S):
PERS 2510
Sources of Revenue:
General Fund,Other Fund local governments
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).
This Bill as drafted meets the requirements of 2005 Pension Reform Legislation. The retiree increase is within the limitations of Section 5-10-22h(a) and the active increase is allowable under Section 5-10-22h(c).
The bill provides that the minimum disability benefit for PERS members of 20% of pay following age 65 be increased to 50% of pay for all current and future disability retirees. The increase therefore impacts both active and retired PERS members.
For active members, the Normal Cost increases by 0.04% of payroll, or $463,000 for FY2008. The Unfunded Actuarial Accrued Liabilities for active members increases by $2,842,000. This increase in the UAAL must be amortized over 10 years at $399,000 per year for FY2008-FY2017.
For current retirees, the UAAL increases by $30,901,000. This increase in UAAL must be amortized over 6 years at $6,350,000 per year for FY2008-FY2013.
The FY2008 total contribution increase of $7,212,000 represents a 0.62% of payroll contribution increase. The current employer contribution rate of 10.5% is sufficient to provide funding for the increased PERS funding requirement.
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 |
| 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 |
$33,743,000.00 |
$7,212,000.00 |
0.00 % |
| Normal Cost of System |
N/A |
$463,000.00 |
0.00 % |
| Past Service Liabilities |
$33,743,000.00 |
$6,749,000.00 |
0.00 % |
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 reflect the increased minimum disability benefits for both current and expected future disability retirees under PERS. Amounts are based on July 1, 2006 Actuarial Valuation data and liabilities run by Buck Consultants. An effective date for funding of July 1, 2007 has been assumed. It is assumed that no prior benefit payments will be effected, and that the new minimum applies to benefit payments following the effective date only.
Due to the difference in funding duration for active and retiree improvements, the contributions will be high for the next 6 years, reduce for the following 4 years and then level out at 0.04% of payroll for years 11 and after. The estimated contributions over the next 11 years are:
FY2008 - $7,212,000
FY2009 - $7,228,000
FY2010 - $7,245,000
FY2011 - $7,262,000
FY2012 - $7,280,000
FY2013 - $7,299,000
FY2014 - $968,000
FY2015 - $988,000
FY2016 - $1,009,000
FY2017 - $1,030,000
FY2018 - $653,000
Analysis of Impact on Public Pension Policy:
The bill provides level disability retirement benefits for life by removing the reduction in the minimum benefit at age 65. It is assumed that only benefit payments following the effective date of the bill will be increased.
Fiscal Note Summary
Effect this measure will have on costs and revenues of state government.
This Bill as drafted meets the requirements of 2005 Pension Reform Legislation. The retiree increase is within the limitations of Section 5-10-22h(a) and the active increase is allowable under Section 5-10-22h(c).
The bill provides that the minimum disability benefit for PERS members of 20% of pay following age 65 be increased to 50% of pay for all current and future disability retirees. The increase therefore impacts both active and retired PERS members.
For active members, the Normal Cost increases by 0.04% of payroll, or $463,000 for FY2008. The Unfunded Actuarial Accrued Liabilities for active members increases by $2,842,000. This increase in the UAAL must be amortized over 10 years at $399,000 per year for FY2008-FY2017.
For current retirees, the UAAL increases by $30,901,000. This increase in UAAL must be amortized over 6 years at $6,350,000 per year for FY2008-FY2013.
The FY2008 total contribution increase of $7,212,000 represents a 0.62% of payroll contribution increase. The current employer contribution rate of 10.5% is sufficient to provide funding for the increased PERS funding requirement.
Fiscal Note Detail
| Effect of Proposal |
Fiscal Year |
2008
Increase/Decrease
(use"-") |
2009
Increase/Decrease
(use"-") |
Fiscal Year
(Upon Full
Implementation) |
| 1. Estmated Total Cost |
7,212,000 |
7,228,000 |
7,228,000 |
| Personal Services |
0 |
0 |
0 |
| Current Expenses |
0 |
0 |
0 |
| Repairs and Alterations |
0 |
0 |
0 |
| Assets |
0 |
0 |
0 |
| Other |
7,212,000 |
7,228,000 |
7,228,000 |
| 2. Estimated Total Revenues |
0 |
0 |
0 |
Explanation of above Fiscal Note estimates (include possible long-range effect):
The increases in normal cost and actuarial accrued liabilities reflect the increased minimum disability benefits for both current and expected future disability retirees under PERS. Amounts are based on July 1, 2006 Actuarial Valuation data and liabilities run by Buck Consultants. An effective date for funding of July 1, 2007 has been assumed. It is assumed that no prior benefit payments will be effected, and that the new minimum applies to benefit payments following the effective date only.
Due to the difference in funding duration for active and retiree improvements, the contributions will be high for the next 6 years, reduce for the following 4 years and then level out at 0.04% of payroll for years 11 and after. The estimated contributions over the next 11 years are:
FY2008 - $7,212,000
FY2009 - $7,228,000
FY2010 - $7,245,000
FY2011 - $7,262,000
FY2012 - $7,280,000
FY2013 - $7,299,000
FY2014 - $968,000
FY2015 - $988,000
FY2016 - $1,009,000
FY2017 - $1,030,000
FY2018 - $653,000
Memorandum
The bill provides level disability retirement benefits for life by removing the reduction in the minimum benefit at age 65. It is assumed that only benefit payments following the effective date of the bill will be increased.
Person submitting Fiscal Note: Harry W. Mandel, MAAA, MSPA, EA, Board Actuary
Email Address: Harry.W.Mandel@wv.gov