Fiscal/Actuarial Note
Date Requested:February 19, 2013
Time Requested:01:27 PM
Agency: Consolidated Public Retirement Board
CBD Number: Version: Bill Number: Resolution Number:
2013R1915 Introduced HB2525
CBD Subject: TEACHERS RETIREMENT
Retirement Systems Impacted by Legislation:
Teachers Retirement System
FUND(S)
TRS 2601
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 annual retiree benefit increases each July based on the annual CPI for the year. Retiree or beneficiary must be age 60 and retired for 5 or more years to be eligible for CPI increase. Benefit applies to active members who will become eligible following retirement.
    
    TRS Section 18-7A-28e prohibits an active benefit increase until TRS is fully funded. Based on estimates for inactive members, the retiree increase in the bill will exceed the retiree increase limitation.
    
    Based on the analysis, the benefits under this bill exceed the limitations provided in 2005 Pension Reform legislation.
    
    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 provides annual CPI retiree benefit increases for retirees age 60 with 5 or more years retired. The CPI cola based increase will result in a significant increase in both the Active Member Normal Cost plus the Unfunded Actuarial Accrued Liabilities. Amounts are estimated to be well in excess of 2005 Pension Reform limitations.
Analysis of Impact on Public Pension Policy
    Bill would add COLA benefits to TRS which is a significant increase in the value of benefits.
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 annual retiree benefit increases each July based on the annual CPI for the year. Retiree or beneficiary must be age 60 and retired for 5 or more years to be eligible for CPI increase. Benefit applies to active members who will become eligible following retirement.
    
    TRS Section 18-7A-28e prohibits an active benefit increase until TRS is fully funded. Based on estimates for inactive members, the retiree increase in the bill will exceed the retiree increase limitation.
    
    Based on the analysis, the benefits under this bill exceed the limitations provided in 2005 Pension Reform legislation.
    
    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 999999999 999999999
Personal Services
Current Expenses
Repairs and Alterations
Assets
Other 999999999 999999999
2. Estimated Total Revenues
3. Explanation of above estimates (including long-range effect):
    The bill provides annual CPI retiree benefit increases for retirees age 60 with 5 or more years retired. The CPI cola based increase will result in a significant increase in both the Active Member Normal Cost plus the Unfunded Actuarial Accrued Liabilities. Amounts are estimated to be well in excess of 2005 Pension Reform limitations.


Memorandum
    Bill would add COLA benefits to TRS which is a significant increase in the value of benefits.
Person Submitting Fiscal Note
Harry W. Mandel, MAAA, MSPA, EA, Board Actuary
Email
harry.w.mandel@wv.gov