Actuarial Fiscal Note


Retirement Systems Impacted by Legislation:

Public Employees Retirement System / Teachers Retirement System

FUND(S):

2510; 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).


    The bill provides a “one time” additional payment to certain retirees and beneficiaries under PERS and TRS.
    
    For PERS, the estimated increase in the UAAL is $600,000. This is well below the retiree increase limitation under section 5-10-22h(a) of $46,770,000 and therefore is not restricted by 2005 Pension Reform. Six year amortization payments to fund the UAAL is $123,000 per year for FY2010 through FY2015.
    
    For TRS, the estimated increase in the UAAL is $1,148,000. This is below the retiree increase limitation under section 18-7A-28e(a) of $82,686,000 and therefore is not restricted by 2005 Pension Reform. Six year amortization payments to fund the UAAL is $236,000 per year for FY2010 through FY2015.
    
    On a combined basis, the bill increases the total UAAL by $1,748,000. Annual contributions totaling $359,000 for FY2010 through FY2015 will be required to fund the UAAL over 6 years as required under 2005 Pension Reform.



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 $1,748,000.00 $359,000.00 0.00 %
Normal Cost of System N/A $0.00 0.00 %
Past Service Liabilities $1,748,000.00 $359,000.00 0.00 %
Fiscal Year Past Service
Amortization Period Ends
N/A FY2015 N/A


Explanation of above Actuarial estimates:


    The bill provides a single one time payment of $600 to all retirees under PERS and TRS who retired with 20 years of more of service credits and who have a retirement benefit of $7,500 or less. Beneficiaries of deceased retirees are entitled on a pro rata basis if the retiree would have met the requirement.
    
    Counts of eligible retirees and beneficiaries were taken from the July 1, 2008 Actuarial Valuation data. Total payments from each plan were calculated from the counts of eligible retirees and beneficiaries. The total payment on July 24, 2009 was treated as the UAAL for cost purposes with 6 year amortization amounts commencing in FY2010.

Analysis of Impact on Public Pension Policy:


    Generally, 13th check types of increases are provided by and funded out of excess interest returns above the actuarially assumed rate of return out of the trust fund of the plan providing the increase. This was the case with the July 2008 one time payment. Excess interest earnings are not available this year. Funding from general revenues will be required to pay for this increase.



Fiscal Note Summary


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


    The bill provides a “one time” additional payment to certain retirees and beneficiaries under PERS and TRS.
    
    For PERS, the estimated increase in the UAAL is $600,000. This is well below the retiree increase limitation under section 5-10-22h(a) of $46,770,000 and therefore is not restricted by 2005 Pension Reform. Six year amortization payments to fund the UAAL is $123,000 per year for FY2010 through FY2015.
    
    For TRS, the estimated increase in the UAAL is $1,148,000. This is below the retiree increase limitation under section 18-7A-28e(a) of $82,686,000 and therefore is not restricted by 2005 Pension Reform. Six year amortization payments to fund the UAAL is $236,000 per year for FY2010 through FY2015.
    
    On a combined basis, the bill increases the total UAAL by $1,748,000. Annual contributions totaling $359,000 for FY2010 through FY2015 will be required to fund the UAAL over 6 years as required under 2005 Pension Reform.



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 0 359,000 359,000
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 bill provides a single one time payment of $600 to all retirees under PERS and TRS who retired with 20 years of more of service credits and who have a retirement benefit of $7,500 or less. Beneficiaries of deceased retirees are entitled on a pro rata basis if the retiree would have met the requirement.
    
    Counts of eligible retirees and beneficiaries were taken from the July 1, 2008 Actuarial Valuation data. Total payments from each plan were calculated from the counts of eligible retirees and beneficiaries. The total payment on July 24, 2009 was treated as the UAAL for cost purposes with 6 year amortization amounts commencing in FY2010.



Memorandum


    Generally, 13th check types of increases are provided by and funded out of excess interest returns above the actuarially assumed rate of return out of the trust fund of the plan providing the increase. This was the case with the July 2008 one time payment. Excess interest earnings are not available this year. Funding from general revenues will be required to pay for this increase.



    Person submitting Fiscal Note: Harry W. Mandel, Board Actuary, MAAA, MSPA, EA
    Email Address: harry.w.mandel@wv.gov