Fiscal/Actuarial Note
Date Requested:February 10, 2011
Time Requested:01:09 PM
Agency: Consolidated Public Retirement Board
CBD Number: Version: Bill Number: Resolution Number:
2011R2546 Introduced HB3097
CBD Subject: EX-US MILITARY PERSONNEL
Retirement Systems Impacted by Legislation:
Public Employees Retirement System
FUND(S)
2510
Sources of Revenue
You must select Revenue Source(s)!
Other Fund State and Local Govts
Does the proposed legislation create:
You must make a selection(s)!
Neither Program nor Fund

    This Bill as drafted violates WV Statutes under 2005 Pension Reform Legislation.
    
    The benefit improvements to active members of PERS as provided under the bill is prohibited under Code Section 5-10-22h while PERS funded percentage is under 85%. As of the July 1, 2010 Actuarial Valuation applicable to this legislative session, the PERS funded percentage is 74.6%.
    
    See the Pension Committee chairman for details.
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 $999,999,999.00 $999,999,999.00 99.99 %
Normal Cost of System N/A $999,999,999.00 99.99 %
Past Service Liabilities $999,999,999.00 $999,999,999.00 99.99 %
Fiscal Year Past Service
Amortization Period Ends
N/A N/A
Explanation of above estimates
    The bill removes the “armed conflict” requirement for free military service to be credited under PERS at retirement for pension benefit purposes. The additional military service that can be credited as free military service results in higher pension benefits than would currently be payable.
    
    Due to the Pension Reform restriction, the Board Actuary has not priced the actuarial impact on the PERS Normal Cost nor Actuarial Accrued Liabilities at this time.
Analysis of Impact on Public Pension Policy
    The additional free military service granted under the bill would increase the employer contribution rate under PERS, currently 14.5% effective July 1, 2011. This results in the cost of “veterans benefits” being funded by PERS employers instead of the taxpayers of the State of West Virginia. Consideration should be given to provide WV State level funding for veterans benefits through general revenue funding for military service benefits.
    
    The bill provides for a shift in pension policy regarding free military service. Currently, free military service is provided for “armed conflict” service only, implying that the risk of serving in combat is the primary factor in granting free military service. This bill eliminates the risk of serving in combat as a requirement to provide this benefit.
Fiscal Note Summary

Explain in a clear and concise manner what effect this measure will have on costs and revenues of state government.

    This Bill as drafted violates WV Statutes under 2005 Pension Reform Legislation.
    
    The benefit improvements to active members of PERS as provided under the bill is prohibited under Code Section 5-10-22h while PERS funded percentage is under 85%. As of the July 1, 2010 Actuarial Valuation applicable to this legislative session, the PERS funded percentage is 74.6%.
    
    See the Pension Committee chairman for details.

Fiscal Note Detail
Show over-all effect in Item 1 and 2 and, in Item 3, give an explanation of Breakdown by fiscal year, including long-range effect.
Effect of Proposal Fiscal Year
2011
Increase/Decrease
(use"-")
2012
Increase/Decrease
(use"-")
Fiscal Year
(Upon Full
Implementation)
1. Estmated Total Cost 999999999 999999999 999999999
Personal Services
Current Expenses
Repairs and Alterations
Assets
Other
2. Estimated Total Revenues
3. Explanation of above estimates (including long-range effect):
    The bill removes the “armed conflict” requirement for free military service to be credited under PERS at retirement for pension benefit purposes. The additional military service that can be credited as free military service results in higher pension benefits than would currently be payable.
    
    Due to the Pension Reform restriction, the Board Actuary has not priced the actuarial impact on the PERS Normal Cost nor Actuarial Accrued Liabilities at this time.


Memorandum
    The additional free military service granted under the bill would increase the employer contribution rate under PERS, currently 14.5% effective July 1, 2011. This results in the cost of “veterans benefits” being funded by PERS employers instead of the taxpayers of the State of West Virginia. Consideration should be given to provide WV State level funding for veterans benefits through general revenue funding for military service benefits.
    
    The bill provides for a shift in pension policy regarding free military service. Currently, free military service is provided for “armed conflict” service only, implying that the risk of serving in combat is the primary factor in granting free military service. This bill eliminates the risk of serving in combat as a requirement to provide this benefit.
Person Submitting Fiscal Note
Harry W. Mandel, Board Actuary, MAAA, MSPA, EA
Email
harry.w.mandel@wv.gov