Actuarial Fiscal Note
Retirement Systems Impacted by Legislation:
Teachers Retirement System
FUND(S):
TRS 2601
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).
This Bill as drafted violates WV Statutes under 2005 Pension Reform Legislation. Section 18-7A-28e ( c ) prohibits benefit increases to either active members or death benefits to beneficiaries of active members prior to June 30, 2034. Passage of any increase would require amendment of 2005 Pension Reform Legislation restrictions which could adversely impact the independent credit rating agencies rating of the State.
An actuarial cost analysis is being provided for this bill at the request of the Bill sponsors. Such actuarial analysis is for the benefits under TRS only, and assumes that legislation allowing this increase would be added by amendment of the 2005 Pension Reform legislation. This analysis does not attempt to estimate the impact on the State’s credit rating or the financial impact on the State of West Virginia due to this change.
Under the Bill, subsidized death benefits are provided for beneficiaries of members who die while working and prior to retirement in the form of a 100% survivor annuity as if the member retired with unreduced benefits. The Bill reduces the current requirement of the member having attained the age of 50 plus having completed 25 or more years of service by removing the age 50 eligibility requirement. This effectively eliminates the rule of 75 and attained age 50 eligibility requirement currently in the Plan. The bill provides not only benefits for future deaths, but is retroactively effective. The retroactive effective date impacts only 1 of 13 possible beneficiaries (2008) by further restricting the retroactive eligibility to those who have not taken the prior death benefit amount under the Plan.
The bill will increase the UAAL under TRS by $576,000. This will require a new 10 year amortization payment of $81,000 annually through FY2019. The Normal Cost will increase by 0.01% of payroll, or $83,000 for FY2010.
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 |
$576,000.00 |
$164,000.00 |
0.02 % |
| Normal Cost of System |
N/A |
$83,000.00 |
0.01 % |
| Past Service Liabilities |
$576,000.00 |
$81,000.00 |
0.01 % |
Fiscal Year Past Service
Amortization Period Ends |
N/A |
FY2019 |
N/A |
Explanation of above Actuarial estimates:
The actuarial calculations are based on a study by Buck Consultants from the July 1, 2007 Actuarial Valuation data and assumptions for future benefits. Retroactive benefit costs were determined from a survey of possible retroactive cases and resulting in 1 beneficiary who will be eligible for $150,000 of additional benefits.
It is noted that this analysis assumes that all applicable deaths have been reported to CPRB for the retroactive period. Any under reporting of deaths could result in additional benefit costs if such claims are made under the retroactive portion of the bill after passage.
This analysis further assumes that the remaining 12 beneficiaries will not challenge the retroactive portion of this bill which excludes them from benefits due to having taken their death benefit payment currently provided. If challenged, additional liabilities of around $1,800,000 to $2,200,000 could result.
Analysis of Impact on Public Pension Policy:
This Bill as drafted violates WV Statutes under 2005 Pension Reform Legislation. Section 18-7A-28e ( c ) prohibits benefit increases to either active members or death benefits to beneficiaries of active members prior to June 30, 2034. Passage of any increase would require amendment of 2005 Pension Reform Legislation restrictions which could adversely impact the independent credit rating agencies rating of the State.
This bill as drafted provides retroactive provisions that are discriminatory in nature by not allowing all possible similarly situated beneficiaries from claiming a benefit through an artificial distribution restriction. The bill further circumvents the rule of 75 eligibility for unreduced benefits.
This bill should also be reported to budgeting for a financial impact analysis on the State of West Virginia directly due to amendment of 2005 Pension Reform restrictions.
Fiscal Note Summary
Effect this measure will have on costs and revenues of state government.
This Bill as drafted violates WV Statutes under 2005 Pension Reform Legislation. Section 18-7A-28e ( c ) prohibits benefit increases to either active members or death benefits to beneficiaries of active members prior to June 30, 2034. Passage of any increase would require amendment of 2005 Pension Reform Legislation restrictions which could adversely impact the independent credit rating agencies rating of the State.
An actuarial cost analysis is being provided for this bill at the request of the Bill sponsors. Such actuarial analysis is for the benefits under TRS only, and assumes that legislation allowing this increase would be added by amendment of the 2005 Pension Reform legislation. This analysis does not attempt to estimate the impact on the State’s credit rating or the financial impact on the State of West Virginia due to this change.
Under the Bill, subsidized death benefits are provided for beneficiaries of members who die while working and prior to retirement in the form of a 100% survivor annuity as if the member retired with unreduced benefits. The Bill reduces the current requirement of the member having attained the age of 50 plus having completed 25 or more years of service by removing the age 50 eligibility requirement. This effectively eliminates the rule of 75 and attained age 50 eligibility requirement currently in the Plan. The bill provides not only benefits for future deaths, but is retroactively effective. The retroactive effective date impacts only 1 of 13 possible beneficiaries (2008) by further restricting the retroactive eligibility to those who have not taken the prior death benefit amount under the Plan.
The bill will increase the UAAL under TRS by $576,000. This will require a new 10 year amortization payment of $81,000 annually through FY2019. The Normal Cost will increase by 0.01% of payroll, or $83,000 for FY2010.
Fiscal Note Detail
| Effect of Proposal |
Fiscal Year |
2009
Increase/Decrease
(use"-") |
2010
Increase/Decrease
(use"-") |
Fiscal Year
(Upon Full
Implementation) |
| 1. Estmated Total Cost |
0 |
164,000 |
165,000 |
| Personal Services |
0 |
0 |
0 |
| Current Expenses |
0 |
0 |
0 |
| Repairs and Alterations |
0 |
0 |
0 |
| Assets |
0 |
0 |
0 |
| Other |
0 |
0 |
0 |
| 2. Estimated Total Revenues |
0 |
0 |
0 |
Explanation of above Fiscal Note estimates (include possible long-range effect):
The actuarial calculations are based on a study by Buck Consultants from the July 1, 2007 Actuarial Valuation data and assumptions for future benefits. Retroactive benefit costs were determined from a survey of possible retroactive cases and resulting in 1 beneficiary who will be eligible for $150,000 of additional benefits.
It is noted that this analysis assumes that all applicable deaths have been reported to CPRB for the retroactive period. Any under reporting of deaths could result in additional benefit costs if such claims are made under the retroactive portion of the bill after passage.
This analysis further assumes that the remaining 12 beneficiaries will not challenge the retroactive portion of this bill which excludes them from benefits due to having taken their death benefit payment currently provided. If challenged, additional liabilities of around $1,800,000 to $2,200,000 could result.
Memorandum
This Bill as drafted violates WV Statutes under 2005 Pension Reform Legislation. Section 18-7A-28e ( c ) prohibits benefit increases to either active members or death benefits to beneficiaries of active members prior to June 30, 2034. Passage of any increase would require amendment of 2005 Pension Reform Legislation restrictions which could adversely impact the independent credit rating agencies rating of the State.
This bill as drafted provides retroactive provisions that are discriminatory in nature by not allowing all possible similarly situated beneficiaries from claiming a benefit through an artificial distribution restriction. The bill further circumvents the rule of 75 eligibility for unreduced benefits.
This bill should also be reported to budgeting for a financial impact analysis on the State of West Virginia directly due to amendment of 2005 Pension Reform restrictions.
Person submitting Fiscal Note: Harry W. Mandel, Board Actuary, MAAA, MSPA, EA
Email Address: harry.w.mandel@wv.gov