Actuarial Fiscal Note


Retirement Systems Impacted by Legislation:

Volunteer Firefighters

FUND(S):

Local trust fund

Sources of Revenue:

Other Fund Local government

Legislation creates:

A New Program,A New Fund



Actuarial Note Summary

Impact this measure will have on the liabilities and contributions associated with the retirement system(s).


    This bill provides an individual retirement plan be set up for each volunteer fire department in WV. Contributions are set in the bill at $2,000 annually with no benefit pay outs for 5 years.
    
    Based on the benefit of $400 per month commencing in 5 years, the actuarial funding for each plan will be based on the number of firefighters eligible to retire as follows:
    
    No Retirees - funding based on volunteer group.
    1 Retiree - 14% funded or less depending on remaining volunteer group.
    2 Retirees - 7% funded or less depending on remaining volunteer group.
    3 Retirees - 5% funded or less depending on remaining volunteer group.
    
    To be properly funded, each plan should complete an actuarial valuation to determine the required annual funding for the plan. Based on the above benefit costs and administrative fees for maintaining records and completing actuarial valuation reports, annual funding requirements are expected to range from $15,000 to $150,000 per year per plan.



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 $999,999,999.00 $999,999,999.00 99.99 %
Normal Cost of System N/A $999,999,999.00 99.99 %
Past Service Liabilities $999,999,999.00 $999,999,999.00 99.99 %
Fiscal Year Past Service
Amortization Period Ends
N/A N/A


Explanation of above Actuarial estimates:


    The above estimates are based on the basic plan design of providing $400 per month for life to a volunteer firefighter with 20 years of volunteering starting at age 60. Cost are actuarially based on the volunteer group and cannot be accurately completed for each volunteer department without full census data for each department.
    
    Funded levels shown are based on 1, 2, or 3 eligible retirees at the end of the 5 year holding period.

Analysis of Impact on Public Pension Policy:


    The bill provides for an unrealistic plan design for the funding called for in the bill. The annual contribution of $2,000 provides unrealistic benefit funding with no provision for administrative and actuarial fees required to properly run such plans.



Fiscal Note Summary


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


    This bill provides for retirement plans for local volunteer fire departments and are not plans to be covered by the State of West Virginia.
    
    To the extent that the bill provides an unrealistic funding level, the state should be concerned that potential unfunded liabilities in future years will require a state bailout of the plans.



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 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):


    Local government plans for volunteer firefighter. Not state funded.
    



Memorandum


    Local government plans for volunteer firefighter. Not state funded.
    



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