Actuarial Fiscal Note


Retirement Systems Impacted by Legislation:

Public Employees Retirement System

FUND(S):

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).


    This Bill as drafted violates WV Statutes under 2005 Pension Reform Legislation. Section 5-10-22h ( c ) prohibits increases in active member benefits unless PERS is at least 85% funded on the latest actuarial valuation date. As of July 1, 2008, PERS funded percentage was 84.2% therefore failing the funded level test. See the Pension Committee chairman for details. Amendment of 2005 Pension Reform to allow the change could adversely impact the State’s credit rating.
    
    The bill expands the armed conflicts currently restricting active military service credits to include Granada, Lebanon and Panama Canal. Dates provided for such conflicts exceed the scope normally considered. The addition of the armed conflicts will increase the UAAL and Normal Cost for PERS due to military service.
    
    The actuary has not completed a cost analysis of the amount of the increase since the change violate 2005 Pension Reform.



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 actuary has not calculate the increase in the UAAL nor the Normal Cost for the additional Armed Conflict service being provided under the bill.

Analysis of Impact on Public Pension Policy:


    This Bill as drafted violates WV Statutes under 2005 Pension Reform Legislation. Section 5-10-22h ( c ) prohibits increases in active member benefits unless PERS is at least 85% funded on the latest actuarial valuation date. As of July 1, 2008, PERS funded percentage was 84.2% therefore failing the funded level test. Failure to restrict benefits as provided under 2005 Pension Reform could have an adverse impact on the financial credit rating of the State of West Virginia.



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. Section 5-10-22h ( c ) prohibits increases in active member benefits unless PERS is at least 85% funded on the latest actuarial valuation date. As of July 1, 2008, PERS funded percentage was 84.2% therefore failing the funded level test. See the Pension Committee chairman for details. Amendment of 2005 Pension Reform to allow the change could adversely impact the State’s credit rating.
    
    The bill expands the armed conflicts currently restricting active military service credits to include Granada, Lebanon and Panama Canal. Dates provided for such conflicts exceed the scope normally considered. The addition of the armed conflicts will increase the UAAL and Normal Cost for PERS due to military service.
    
    The actuary has not completed a cost analysis of the amount of the increase since the change violate 2005 Pension Reform.



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 0 999,999,999 999,999,999
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 actuary has not calculate the increase in the UAAL nor the Normal Cost for the additional Armed Conflict service being provided under the bill.



Memorandum


    This Bill as drafted violates WV Statutes under 2005 Pension Reform Legislation. Section 5-10-22h ( c ) prohibits increases in active member benefits unless PERS is at least 85% funded on the latest actuarial valuation date. As of July 1, 2008, PERS funded percentage was 84.2% therefore failing the funded level test. Failure to restrict benefits as provided under 2005 Pension Reform could have an adverse impact on the financial credit rating of the State of West Virginia.



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