Actuarial Fiscal Note
Retirement Systems Impacted by Legislation:
Public Employees Retirement System and Teachers Retirement System
FUND(S):
PERS 2510 / TRS 2601
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).
This Bill as drafted violates WV Statutes under 2005 Pension Reform Legislation.
For PERS, the Bill violates Section 5-10-22h(a) which restricts any retiree increases to a maximum of 1% of the Actuarial Accrued Liabilities of the Plan. The current limitation based on the July 1, 2008 PERS Actuarial Valuation is $46,770,000. The improvement in the Bill increases the PERS Unfunded Actuarial Accrued Liabilities by $60,226,000 ($12,375,000 annual contribution for 6 years).
For TRS, the Bill violates Section 18-7A-28e( a ) which restricts any retiree increases to a maximum of 1% of the Actuarial Accrued Liabilities of the Plan. The current limitation based on the July 1, 2008 TRS Actuarial Valuation is $82,686,000. The improvement in the Bill increases the TRS Unfunded Actuarial Accrued Liabilities by $125,359,000 ($25,759,000 annual contribution for 6 years).
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 |
$185,585,000.00 |
$38,134,000.00 |
0.01 % |
| Normal Cost of System |
N/A |
$0.00 |
0.00 % |
| Past Service Liabilities |
$185,585,000.00 |
$38,134,000.00 |
0.01 % |
Fiscal Year Past Service
Amortization Period Ends |
N/A |
FY2015 |
N/A |
Explanation of above Actuarial estimates:
For both PERS and TRS, the Bill provides a retiree increase effective July 1, 2009 to all retirees who have been retired at least 5 years on the increase date and their beneficiaries of 5% of their current benefit, limited to the first $30,000 of annual retirement benefit.
The improvement increases the Unfunded Actuarial Accrued Liabilities in each plan. The amount of the increase was determined from the July 1, 2008 Actuarial Valuation data.
The improvement exceeds the 2005 Pension Reform limitations for each Plan for a retiree benefit increase. Cost shown apply a six year amortization schedule as required under 2005 Pension Reform.
Analysis of Impact on Public Pension Policy:
The bill as drafted violates the 2005 Pension Reform restrictions for retiree increases for each plan. To be allowable, the Bill would need to be amended to either modify or eliminate the 2005 Pension Reform provisions. This change would be contrary to public pension policy set when the 2005 Pension Reform was passed by the WV legislature.
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, the Bill violates Section 5-10-22h(a) which restricts any retiree increases to a maximum of 1% of the Actuarial Accrued Liabilities of the Plan. The current limitation based on the July 1, 2008 PERS Actuarial Valuation is $46,770,000. The improvement in the Bill increases the PERS Unfunded Actuarial Accrued Liabilities by $60,226,000 ($12,375,000 annual contribution for 6 years).
For TRS, the Bill violates Section 18-7A-28e( a ) which restricts any retiree increases to a maximum of 1% of the Actuarial Accrued Liabilities of the Plan. The current limitation based on the July 1, 2008 TRS Actuarial Valuation is $82,686,000. The improvement in the Bill increases the TRS Unfunded Actuarial Accrued Liabilities by $125,359,000 ($25,759,000 annual contribution for 6 years).
See the Pension Committee chairman for details.
Fiscal Note Detail
| Effect of Proposal |
Fiscal Year |
2009
Increase/Decrease
(use"-") |
2010
Increase/Decrease
(use"-") |
Fiscal Year
(Upon Full
Implementation) |
| 1. Estmated Total Cost |
0 |
38,314,000 |
38,134,000 |
| 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):
For both PERS and TRS, the Bill provides a retiree increase effective July 1, 2009 to all retirees who have been retired at least 5 years on the increase date and their beneficiaries of 5% of their current benefit, limited to the first $30,000 of annual retirement benefit.
The improvement increases the Unfunded Actuarial Accrued Liabilities in each plan. The amount of the increase was determined from the July 1, 2008 Actuarial Valuation data.
The improvement exceeds the 2005 Pension Reform limitations for each Plan for a retiree benefit increase. Cost shown apply a six year amortization schedule as required under 2005 Pension Reform.
Memorandum
The bill as drafted violates the 2005 Pension Reform restrictions for retiree increases for each plan. To be allowable, the Bill would need to be amended to either modify or eliminate the 2005 Pension Reform provisions. This change would be contrary to public pension policy set when the 2005 Pension Reform was passed by the WV legislature.
Person submitting Fiscal Note: Harry W. Mandel, Board Actuary, MAAA, MSPA, EA
Email Address: harry.w.mandel@wv.gov