Actuarial Fiscal Note


Retirement Systems Impacted by Legislation:

Public Employees Retirement System

FUND(S):

PERS 2510

Sources of Revenue:

General 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).


    The bill allows for the temporary or per diem basis re-employment of certain retirees who are retired from senior status employees of the Supreme Court of Appeals. Such temporary or per diem basis employment is limited to a maximum of $20,000 in earnings. Such temporary or per diem employment will be exempt from the suspension of benefits requirement of PERS and will not require continued PERS contributions.
    
    Although the bill will not cause the PERS actuaries to immediately change the retirement usage assumptions of PERS, the long term impact of increasing the retirement/re-employment availability is expected to result in earlier retirements than current retirement usage under PERS. This increased usage is minimized due to the relatively small number of employees impacted by the provisions. The change will increase the long term costs of PERS slightly over the future. For the present, since the assumptions will not be changed, no actuarial impact is being reported.



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 N/A


Explanation of above Actuarial estimates:


    The current retirement usage assumptions will not be modified due to the bill. As a result, neither the Normal Cost nor the Actuarial Accrued Liabilities will be increased due to the bills provisions.
    
    Continue employment after retirement without suspension of benefits will result in changes in behavior in electing retirement in future years. Such changes in behavior will be recognized in future experience studies and will eventually result in increases in the cost of PERS.

Analysis of Impact on Public Pension Policy:


    The re-employment of retirees without suspension of benefits set public pension policy to encourage earlier retirement which in the long term will increase both the Normal Cost and Actuarial Accrued Liabilities for PERS. The amounts of the increases cannot be determined at this time and is dependent on usage, increases in the earnings limitations and possible anti-discrimination issues that could result in a widening of the eligible class of retirees. From a pension standpoint, re-hire of retirees spreads unknown costs into the future. It additionally prevents those needing employment in the state from securing jobs in favor of those “double dipping” their pensions and re-employment salaries.



Fiscal Note Summary


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


    The bill allows for the temporary or per diem basis re-employment of certain retirees who are retired from senior status employees of the Supreme Court of Appeals. Such temporary or per diem basis employment is limited to a maximum of $20,000 in earnings. Such temporary or per diem employment will be exempt from the suspension of benefits requirement of PERS and will not require continued PERS contributions.
    
    Although the bill will not cause the PERS actuaries to immediately change the retirement usage assumptions of PERS, the long term impact of increasing the retirement/re-employment availability is expected to result in earlier retirements than current retirement usage under PERS. This will increase the long term costs of PERS over the future. For the present, since the assumptions will not be changed, no actuarial impact is being reported.



Fiscal Note Detail


Effect of Proposal Fiscal Year
2008
Increase/Decrease
(use"-")
2009
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):


    The current retirement usage assumptions will not be modified due to the bill. As a result, neither the Normal Cost nor the Actuarial Accrued Liabilities will be increased due to the bills provisions.
    
    Continue employment after retirement without suspension of benefits will result in changes in behavior in electing retirement in future years. Such changes in behavior will be recognized in future experience studies and will eventually result in increases in the cost of PERS.
    
    Administrative cost to administer the re-hire exceptions are covered under the normal administrative charges currently in place for PERS.



Memorandum


    The re-employment of retirees without suspension of benefits set public pension policy to encourage earlier retirement which in the long term will increase both the Normal Cost and Actuarial Accrued Liabilities for PERS. The amounts of the increases cannot be determined at this time and is dependent on usage, increases in the earnings limitations and possible anti-discrimination issues that could result in a widening of the eligible class of retirees. From a pension standpoint, re-hire of retirees spreads unknown costs into the future. It additionally prevents those needing employment in the state from securing jobs in favor of those “double dipping” their pensions and re-employment salaries.



    Person submitting Fiscal Note: Harry W. Mandel, MAAA, MSPA, EA, Board Actuary
    Email Address: Harry.W.Mandel@wv.gov