Actuarial Fiscal Note
Retirement Systems Impacted by Legislation:
PERS and TRS
FUND(S):
PERS 2510; TRS 2601
Sources of Revenue:
Other Fund State & 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).
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 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 |
$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 Actuarial 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
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
Effect of Proposal |
Fiscal Year |
2013 Increase/Decrease (use"-") |
2014 Increase/Decrease (use"-") |
Fiscal Year (Upon Full Implementation) |
1. Estmated Total Cost |
0 |
9,999,999 |
9,999,999 |
Personal Services |
0 |
0 |
0 |
Current Expenses |
0 |
0 |
0 |
Repairs and Alterations |
0 |
0 |
0 |
Assets |
0 |
0 |
0 |
Other |
0 |
9,999,999 |
9,999,999 |
2. Estimated Total Revenues |
0 |
0 |
0 |
Explanation of above Fiscal Note estimates (include possible 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 Address: harry.w.mandel@wv.gov