Fiscal/Actuarial Note
Date Requested:February 15, 2013
Time Requested:01:56 PM
Agency: Consolidated Public Retirement Board
CBD Number: Version: Bill Number: Resolution Number:
2013R1075 Introduced HB2275
CBD Subject: REINSTATE SERVICE CREDIT
Retirement Systems Impacted by Legislation:
Public Employees Retirement System
FUND(S)
PERS 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

    The bill provides for a window from July 1, 2013 through June 1, 2014 during which PERS members may elect to repurchase previously forfeited service. This window would apply to members who failed to repurchase the forfeited service under the normal repurchase provisions of PERS.
    
    The benefit created under the window will not directly impact the Normal Cost nor Actuarial Accrued Liabilities of PERS.
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 $0.00 $0.00 0.00 %
Normal Cost of System N/A $0.00 0.00 %
Past Service Liabilities $0.00 $0.00 0.00 %
Fiscal Year Past Service
Amortization Period Ends
N/A N/A
Explanation of above estimates
    The repurchase window will not increase either the Normal Cost nor Actuarial Accrued Liabilities under PERS.
    
    Possible costs are dependent on usage of the window. Since the window still requires the repayment of previously withdrawn contributions, the benefit is the same as the benefit normally provided under standard repayment provisions. Each repurchase is expected to result in an actuarial loss of the employer paid liabilities. Such losses could be in the range of $1,000 to $25,000 per electing member.
Analysis of Impact on Public Pension Policy
    PERS provides a set period of time following rehire for the repurchase of previously withdrawn service. The actuarial loss due to employer paid liabilities are therefore currently covered under the normal PERS repurchase provisions. The set time period is intended to prevent the adverse selection by members of the repurchase.
    
    The window provides the opportunity for members who elected not to repurchase to change their minds. This opportunity results in “adverse selection” of the member against the Plan.
Fiscal Note Summary

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

    The bill provides for a window from July 1, 2013 through June 1, 2014 during which PERS members may elect to repurchase previously forfeited service. This window would apply to members who failed to repurchase the forfeited service under the normal repurchase provisions of PERS.
    
    The benefit created under the window will not directly impact the Normal Cost nor Actuarial Accrued Liabilities of PERS.

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
2013
Increase/Decrease
(use"-")
2014
Increase/Decrease
(use"-")
Fiscal Year
(Upon Full
Implementation)
1. Estmated Total Cost 0 0 0
Personal Services
Current Expenses
Repairs and Alterations
Assets
Other
2. Estimated Total Revenues
3. Explanation of above estimates (including long-range effect):
    The repurchase window will not increase either the Normal Cost nor Actuarial Accrued Liabilities under PERS.
    
    Possible costs are dependent on usage of the window. Since the window still requires the repayment of previously withdrawn contributions, the benefit is the same as the benefit normally provided under standard repayment provisions. Each repurchase is expected to result in an actuarial loss of the employer paid liabilities. Such losses could be in the range of $1,000 to $25,000 per electing member.


Memorandum
    PERS provides a set period of time following rehire for the repurchase of previously withdrawn service. The actuarial loss due to employer paid liabilities are therefore currently covered under the normal PERS repurchase provisions. The set time period is intended to prevent the adverse selection by members of the repurchase.
    
    The window provides the opportunity for members who elected not to repurchase to change their minds. This opportunity results in “adverse selection” of the member against the Plan.
Person Submitting Fiscal Note
Harry W. Mandel, MAAA, MSPA, EA, Board Actuary
Email
harry.w.mandel@wv.gov