Actuarial Fiscal Note
Retirement Systems Impacted by Legislation:
Public Employees Retirement System / Teachers Retirement System
FUND(S):
2510 / 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).
For PERS, the Bill satisfies 2005 Pension ReformSection 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 $19,930,000 ($4,095,000 annual contribution for 6 years).
For TRS, the Bill satisfies 2005 Pension Reform 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 $41,038,000 ($8,432,000 annual contribution for 6 years).
The amounts are based on an interpretation of the bill to only provide a 3% increase to retirees and beneficiaries receiving benefits as of the effective date when such retirees or beneficiaries attain age 70. Those currently over age 70 and those not receiving benefits prior to the effective date will not receive an increase at age 70.
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 |
$60,968,000.00 |
$12,527,000.00 |
0.01 % |
| Normal Cost of System |
N/A |
$0.00 |
0.00 % |
| Past Service Liabilities |
$60,968,000.00 |
$12,527,000.00 |
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 or beneficiary an increase of 3% in the month the retiree attains or would have attained age 70. Only retirees and beneficiaries receiving benefit prior to the effective date of the Bill are eligible to receive the increase. Future retirees after the effective date of the bill and those over age 70 on the effective date will not be eligible for the increase.
The improvement meets 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 should be reviewed and language clarified to conform to the interpretations of the language as disclosed in this Actuarial Note. If a more liberal interpretation were applied, such as coverage of future retirees, then the bill would violate 2005 Pension Reform and not be allowable as drafted.
Fiscal Note Summary
Effect this measure will have on costs and revenues of state government.
For PERS, the Bill satisfies 2005 Pension ReformSection 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 $19,930,000 ($4,095,000 annual contribution for 6 years).
For TRS, the Bill satisfies 2005 Pension Reform 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 $41,038,000 ($8,432,000 annual contribution for 6 years).
The amounts are based on an interpretation of the bill to only provide a 3% increase to retirees and beneficiaries receiving benefits as of the effective date when such retirees or beneficiaries attain age 70. Those currently over age 70 and those not receiving benefits prior to the effective date will not receive an increase at age 70.
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 |
12,527,000 |
12,527,000 |
| 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 or beneficiary an increase of 3% in the month the retiree attains or would have attained age 70. Only retirees and beneficiaries receiving benefit prior to the effective date of the Bill are eligible to receive the increase. Future retirees after the effective date of the bill and those over age 70 on the effective date will not be eligible for the increase.
The improvement meets 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 should be reviewed and language clarified to conform to the interpretations of the language as disclosed in this Actuarial Note. If a more liberal interpretation were applied, such as coverage of future retirees, then the bill would violate 2005 Pension Reform and not be allowable as drafted.
Person submitting Fiscal Note: Harry W. Mandel, Board Actuary, MAAA, MSPA, EA
Email Address: harry.w.mandel@wv.gov