Actuarial Fiscal Note
Retirement Systems Impacted by Legislation:
Teachers Retirement System
FUND(S):
TRS 2601
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 provides for a one time increase to certain annuitants as of July 1, 2008 equal to the lessor of the annual CPI or 3%. Eligible annuitants are those who are at least age 62 and have been retired for 5 or more years on the increase date. Disability annuitants do not have the age requirement.
Based on an expected increase limited to 3%, the UAAL for TRS would increase by $64,271,000. Amortization under TRS is based on six year level dollar amortization, which is $13,206,000 per year for FY2009 through FY2014. The initial year is 1.51% of payroll. The contribution will directly increase the State contribution under the School Aid Formula.
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 |
$64,271,000.00 |
$13,206,000.00 |
1.51 % |
| Normal Cost of System |
N/A |
$0.00 |
0.00 % |
| Past Service Liabilities |
$64,271,000.00 |
$13,206,000.00 |
1.51 % |
Fiscal Year Past Service
Amortization Period Ends |
N/A |
FY2014 |
N/A |
Explanation of above Actuarial estimates:
The increase in the UAAL is calculated based on the July 1, 2007 actuarial valuation retiree data and assumptions. The valuation assumes a 3% annual CPI increase rate and therefore the 3% maximum increase has been assumed.
Analysis of Impact on Public Pension Policy:
The increase in the UAAL due to this increase to retirees of $64,271,000 is allowable under 2005 Pension Reform limitations under Section 18-7A-28e(a) which is $71,427,000 as of July 1, 2007 (the limit applicable to this bill).
Clarification as to the period over which the CPI should be measured should be added to the bill. It is recommended that a date be set so that the amount of the increase can be calculated on July 1, 2008 without delay due to the delay in the publishing of CPI statistics by the federal government. An annual cut off of March 31, 2008 is recommended. Also, which CPI rate should also be specified.
Fiscal Note Summary
Effect this measure will have on costs and revenues of state government.
This bill provides for a one time increase to certain annuitants as of July 1, 2008 equal to the lessor of the annual CPI or 3%. Eligible annuitants are those who are at least age 62 and have been retired for 5 or more years on the increase date. Disability annuitants do not have the age requirement.
Based on an expected increase limited to 3%, the UAAL for TRS would increase by $64,271,000. Amortization under TRS is based on six year level dollar amortization, which is $13,206,000 per year for FY2009 through FY2014. The initial year is 1.51% of payroll. The contribution will directly increase the State contribution under the School Aid Formula.
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 |
0 |
13,206,000 |
13,206,000 |
| Personal Services |
0 |
0 |
0 |
| Current Expenses |
0 |
0 |
0 |
| Repairs and Alterations |
0 |
0 |
0 |
| Assets |
0 |
0 |
0 |
| Other |
0 |
13,206,000 |
13,206,000 |
| 2. Estimated Total Revenues |
0 |
0 |
0 |
Explanation of above Fiscal Note estimates (include possible long-range effect):
The increase in the UAAL is calculated based on the July 1, 2007 actuarial valuation retiree data and assumptions. The valuation assumes a 3% annual CPI increase rate and therefore the 3% maximum increase has been assumed.
Memorandum
The increase in the UAAL due to this increase to retirees of $64,271,000 is allowable under 2005 Pension Reform limitations under Section 18-7A-28e(a) which is $71,427,000 as of July 1, 2007 (the limit applicable to this bill).
Clarification as to the period over which the CPI should be measured should be added to the bill. It is recommended that a date be set so that the amount of the increase can be calculated on July 1, 2008 without delay due to the delay in the publishing of CPI statistics by the federal government. An annual cut off of March 31, 2008 is recommended. Also, which CPI rate should also be specified.
Person submitting Fiscal Note: Harry W. Mandel, MAAA, MSPA, EA, Board Actuary
Email Address: Harry.W.Mandel@wv.gov