Fiscal/Actuarial Note
Date Requested:February 17, 2013
Time Requested:01:53 PM
Agency: Consolidated Public Retirement Board
CBD Number: Version: Bill Number: Resolution Number:
2013R1688 Introduced HB2425
CBD Subject: CALCULATED VALUE TO BE PAID TO ANNUITY
Retirement Systems Impacted by Legislation:
PERS and TRS
FUND(S)
PERS 2510; TRS 2601
Sources of Revenue
You must select Revenue Source(s)!
Other Fund State & 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.
    
    For PERS, Section 5-10-22h(a) prohibits any retiree benefit increase that exceeds 1% of AAL. The current limitation is $57,357,000.
    
    For TRS, Section 18-7A-28e ( a ) prohibits increases to retired members in excess of 1% of the AAL. The current limitation is $97,125,000.
    
    Based on actuarial studies of a similar increase, both PERS and TRS limitations are exceeded under the terms of the bill.
    
    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 $999,999.00 $999,999.00 99.00 %
Normal Cost of System N/A $0.00 0.00 %
Past Service Liabilities $999,999.00 $999,999.00 99.00 %
Fiscal Year Past Service
Amortization Period Ends
N/A N/A
Explanation of above estimates
    Retirees and beneficiaries receiving retirement benefits on July 1, 2013 would receive an annual increase of $24.00 time years of benefit service, payable monthly under their current benefit option. Since increased benefits are for retirees only, there is no increase in the Normal Cost for either plan.
    
    The benefit increase was projected to exceed the increase limitations for a retiree increase under both PERS and TRS as limited under 2005 Pension Reform. Exact costs were not calculated for this increase.
Analysis of Impact on Public Pension Policy
    The retiree benefit increase provided under the bill exceeds 2005 Pension Reform limitations. The bill would require an amendment to Pension Reform to be allowable. Any changes to Pension reform should be carefully considered from a fiscal and political impact basis.
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.
    
    For PERS, Section 5-10-22h(a) prohibits any retiree benefit increase that exceeds 1% of AAL. The current limitation is $57,357,000.
    
    For TRS, Section 18-7A-28e ( a ) prohibits increases to retired members in excess of 1% of the AAL. The current limitation is $97,125,000.
    
    Based on actuarial studies of a similar increase, both PERS and TRS limitations are exceeded under the terms of the bill.
    
    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
2013
Increase/Decrease
(use"-")
2014
Increase/Decrease
(use"-")
Fiscal Year
(Upon Full
Implementation)
1. Estmated Total Cost 0 9999999 9999999
Personal Services
Current Expenses
Repairs and Alterations
Assets
Other 0 9999999 9999999
2. Estimated Total Revenues 0
3. Explanation of above estimates (including long-range effect):
    Retirees and beneficiaries receiving retirement benefits on July 1, 2013 would receive an annual increase of $24.00 time years of benefit service, payable monthly under their current benefit option. Since increased benefits are for retirees only, there is no increase in the Normal Cost for either plan.
    
    The benefit increase was projected to exceed the increase limitations for a retiree increase under both PERS and TRS as limited under 2005 Pension Reform. Exact costs were not calculated for this increase.


Memorandum
    The retiree benefit increase provided under the bill exceeds 2005 Pension Reform limitations. The bill would require an amendment to Pension Reform to be allowable. Any changes to Pension reform should be carefully considered from a fiscal and political impact basis.
Person Submitting Fiscal Note
Harry W. Mandel, MAAA, MSPA, EA, Board Actuary
Email
harry.w.mandel@wv.gov