Actuarial Fiscal Note

Date Requested:February 21, 2017
Time Requested:11:56 AM
Agency: Municipal Pensions Oversight Board
CBD Number: Version: Bill Number: Resolution Number:
2634 Introduced HB2603
CBD Subject: Retirement

Retirement Systems Impacted by Legislation:

Municipal Policemen's and Firemen's Pension & Relief Funds

FUND(S):

Municipal funds

Sources of Revenue:

Other Fund

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 will only affect those municipal policemen's and municipal firemen's pension and relief funds that are funded at 125% or more. The bill would allow for municipalities with these funds funded at 125% or over to not have to pay normal cost into the fully funded pension plans. Active members of the funds would continue to pay the 7% or 9.5% of their pay to the plans regardless of funded status.
    Should the funded status be below 125%, the municipality would have to pay normal cost into the fund regardless of how well funded the plan is. The Municipal Pensions Oversight Board's actuary, Gabriel Rhoeder Smith and Co. has recommended this legislation for over five years. For FY2017 there are not any municipal policemen's or firemen's pension plans that are funded at over 125%, however there are two plans funded consistently over 100%, Oak Hill Policemen's Pension being 118% funded and Welch Policemen's Pension being at 108%.



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 $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 0 N/A


Explanation of above Actuarial estimates:


    Any plan fully funded at 125% or more does not have any actuarial accrued liabilities. Normal cost can increase and decrease depending upon how many active member and how many retired members. Fiscal impact for normal cost will vary in future years depending on whether the plan is open or closed, the number of active members, retirees, beneficiaries, disability retirees, etc. However, a municipality could only skip the normal cost payment if the plan was funded at 125% or better.

Analysis of Impact on Public Pension Policy:


    A municipality may have additional revenue to expend on public safety should the normal cost not be required to be paid for a specific year. The municipality would have to have secured a statement from the MPOB's actuary that the normal cost was not necessary for a particular fiscal year.



Fiscal Note Summary


Effect this measure will have on costs and revenues of state government.


    There will not be any impact to the cost or revenue of state government.
    
    The municipality involved may have an increase in revenue for the fiscal year if it is not required to pay the normal cost of the pension plan.



Fiscal Note Detail


Effect of Proposal Fiscal Year
2017
Increase/Decrease
(use"-")
2018
Increase/Decrease
(use"-")
Fiscal Year
(Upon Full
Implementation)
1. Estmated Total Cost 0 0 0
Personal Services 0 0 0
Current Expenses 0 0 0
Repairs and Alterations 0 0 0
Assets 0 0 0
Other 0 0 0
2. Estimated Total Revenues 0 0 0


Explanation of above Fiscal Note estimates (include possible long-range effect):


    No cost to state government.



Memorandum


    This bill if passed would only have a fiscal impact on municipalities with municipal policemen's or firemen's pension and relief funds that are fully funded at 125% or greater. Those municipalities would have the option of not paying normal cost into their respective pension plan for that fiscal year. Those dollars could be used by city council for other municipality needs that year.



    Person submitting Fiscal Note: Blair Taylor, Executive Direcor MPOB
    Email Address: blair.m.taylor@wv.gov