Actuarial Fiscal Note
Retirement Systems Impacted by Legislation:
PERS and TRS
FUND(S):
PERS 2510; TRS 2601
Sources of Revenue:
General Fund,Other Fund Addl local govts
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).
For PERS, the bill provides a bonus payment of $600 to retirees with 20 or more years of service at retirement and an annual pension of $7,200 or less. The bonus payments to certain beneficiaries are reduced based on the benefit option percentage being paid. Bonus payments totaling $494,000 are expected to be paid to 838 retirees and beneficiaries. This amount is within the allowable limitations under 2005 Pension Reform for PERS retiree benefits of $49,302,000. Required 6 year amortization of the bonus payment is $102,000 annually for FY2011-2016.
For TRS, the bill provides a bonus payment of $600 to retirees with 20 or more years of service at retirement and an annual pension of $7,200 or less. The bonus payments to certain beneficiaries are reduced based on the benefit option percentage being paid. Bonus payments totaling $919,000 are expected to be paid to 1,555 retirees and beneficiaries. This amount is within the allowable limitations under 2005 Pension Reform for TRS retiree benefits of $86,079,000,000. Required 6 year amortization of the bonus payment is $189,000 annually for FY2011-2016.
The total impact of the bill is an increase in the Unfunded Actuarial Accrued Liabilities of $1,413,000. Funding is required over 6 years at a total of $291,000 annually.
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 |
$1,413,000.00 |
$291,000.00 |
0.01 % |
Normal Cost of System |
N/A |
$0.00 |
0.00 % |
Past Service Liabilities |
$1,413,000.00 |
$291,000.00 |
0.01 % |
Fiscal Year Past Service Amortization Period Ends |
N/A |
FY2016 |
N/A |
Explanation of above Actuarial estimates:
The number of eligible retirees and beneficiaries were derived from the July 1, 2009 actuarial valuation data for PERS and TRS. Actual eligible beneficiaries cannot be determined until the July 1, 2010 benefit date based on retirees and beneficiaries at that time. Some differences are expected due to deaths of older retirees who generally are those with 20 years of service meeting the $7,200 annual benefit cap. A limited number of new retirees are expected to be eligible since a 20 year retiree with an average annual pay of above $18,000 will not qualify for the bonus payment.
Based on the expected total bonus payments, the contributions for PERS and TRS combined will increase by $291,000 for FY2011 through FY2016.
Analysis of Impact on Public Pension Policy:
Since the retiree bonus payment is a one time payment totaling $1,413,000 during July of 2010, special funding of this increase through a one time appropriation should be considered.
Fiscal Note Summary
Effect this measure will have on costs and revenues of state government.
For PERS, the bill provides a bonus payment of $600 to retirees with 20 or more years of service at retirement and an annual pension of $7,200 or less. The bonus payments to certain beneficiaries are reduced based on the benefit option percentage being paid. Bonus payments totaling $494,000 are expected to be paid to 838 retirees and beneficiaries. This amount is within the allowable limitations under 2005 Pension Reform for PERS retiree benefits of $49,302,000. Required 6 year amortization of the bonus payment is $102,000 annually for FY2011-2016.
For TRS, the bill provides a bonus payment of $600 to retirees with 20 or more years of service at retirement and an annual pension of $7,200 or less. The bonus payments to certain beneficiaries are reduced based on the benefit option percentage being paid. Bonus payments totaling $919,000 are expected to be paid to 1,555 retirees and beneficiaries. This amount is within the allowable limitations under 2005 Pension Reform for TRS retiree benefits of $86,079,000,000. Required 6 year amortization of the bonus payment is $189,000 annually for FY2011-2016.
The total impact of the bill is an increase in the Unfunded Actuarial Accrued Liabilities of $1,413,000. Funding is required over 6 years at a total of $291,000 annually.
Fiscal Note Detail
Effect of Proposal |
Fiscal Year |
2010 Increase/Decrease (use"-") |
2011 Increase/Decrease (use"-") |
Fiscal Year (Upon Full Implementation) |
1. Estmated Total Cost |
0 |
291,000 |
291,000 |
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 number of eligible retirees and beneficiaries were derived from the July 1, 2009 actuarial valuation data for PERS and TRS. Actual eligible beneficiaries cannot be determined until the July 1, 2010 benefit date based on retirees and beneficiaries at that time. Some differences are expected due to deaths of older retirees who generally are those with 20 years of service meeting the $7,200 annual benefit cap. A limited number of new retirees are expected to be eligible since a 20 year retiree with an average annual pay of above $18,000 will not qualify for the bonus payment.
Based on the expected total bonus payments, the contributions for PERS and TRS combined will increase by $291,000 for FY2011 through FY2016.
Memorandum
Since the retiree bonus payment is a one time payment totaling $1,413,000 during July of 2010, special funding of this increase through a one time appropriation should be considered.
Person submitting Fiscal Note: Harry W. Mandel, MAAA, MSPA, EA
Email Address: harry.w.mandel@wv.gov