Actuarial Fiscal Note

Retirement Systems Impacted by Legislation:

Deputy Sheriff Retirement System

FUND(S):

DSRS 2150

Sources of Revenue:

Other Fund Local Governments

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 will increase the benefits to active members when they retire after the effective date.

    The bill will increase the Unfunded Actuarial Accrued Liabilities by $3,238,000. This will increase the required amortization payment by 0.61% of payroll, or $226,000 the first year. The Employer Normal Cost percentage will increase by 0.62% of payroll, or $232,000 the first year.

    The total first year increase of $458,000 is 1.23% of payroll. Future contributions will remain at 1.23% of payroll and will increase as a dollar amount as payroll increases.

    It should be noted that if adopted, the employer contribution rate for DSRS should be increased to 11.75% of payroll from the current 10.5% limitation. The current 10.5% contribution rate is not sufficient to fund the improved plan benefits.

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
Impact On	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	$3,238,000.00	$458,000.00	1.23 %
Normal Cost of System	N/A	$232,000.00	0.62 %
Past Service Liabilities	$3,238,000.00	$226,000.00	0.61 %
Fiscal Year Past Service Amortization Period Ends	N/A	FY2029	N/A

Explanation of above Actuarial estimates:

    The bill modifies the retirement formula so that benefits will be based on the highest 36 consecutive months average compensation. Currently benefits are based on the highest 5 consecutive years average compensation. This change will only impact those members retiring after the effective date.

    Cost were calculated based on the average increase in benefits of 4.83% expected to result from the higher final average pay. That increase was applied to the July 1, 2008 Actuarial Valuation for DSRS to determine the amounts of the increase. The increase impacts both the employer Normal Cost percentage for current benefits and the Unfunded Actuarial Accrued Liabilities for service prior to the improvement date for current active members. The UAAL is amortized as a level percentage of payroll through FY2029.

Analysis of Impact on Public Pension Policy:

    The benefit increase results in a 1.23% of pay increase in the annual contribution requirement. That increase indicates that the current employer contribution rate of 10.5% should be increased to 11.75% to maintain the current funding standards.

    The funding for DSRS is not currently sufficient to support the increased benefits. Due to investment losses in the DSRS trust fund since July 1, 2008, DSRS may additionally require a significant increase in the employer contribution percentage effective July 1, 2010.

Fiscal Note Summary

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

DSRS is a local governmental plan. Benefits do not have an impact of state government costs or liabilities.

Fiscal Note Detail

Effect of Proposal	Fiscal Year
Effect of Proposal	2009 Increase/Decrease (use"-")	2010 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):

Not applicable - DSRS is a Local Governmental plan.

Memorandum

Not applicable - DSRS is a Local Governmental plan.

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