Actuarial Fiscal Note

Retirement Systems Impacted by Legislation:

PERS and TRS

FUND(S):

PERS 2510; TRS 2601

Sources of Revenue:

General Fund,Other Fund Addl Local Govts

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 provides a bonus payment of $1,000 to retirees as of July 1, 2009. The bonus payments to certain beneficiaries are reduced based on the benefit option percentage being paid. Bonus payments totaling $20,960,000 are expected to be paid to 21,406 retirees and beneficiaries. This amount is within the allowable limitations under 2005 Pension Reform for PERS retiree benefits of $49,302,000. Required 6 year amortization of the bonus payment is $4,307,000 annually for FY2011-2016.

    For TRS, the bill provides a bonus payment of $1,000 to retirees as of July 1, 2009. The bonus payments to certain beneficiaries are reduced based on the benefit option percentage being paid. Bonus payments totaling $28,807,000 are expected to be paid to 29,152 retirees and beneficiaries. This amount is within the allowable limitations under 2005 Pension Reform for TRS retiree benefits of $86,079,000. Required 6 year amortization of the bonus payment is $5,919,000 annually for FY2011-2016.

    The total retirement impact of the bill is an increase in the Unfunded Actuarial Accrued Liabilities of $49,767,000. Funding is required over 6 years at a total of $10,226,000 annually.

    The bill additionally provides a bonus payment to certain active public employees. That bonus payment does not impact the retirement plans so is not included in the Actuarial Note. Amounts are reflected in the Fiscal Note portion of this report.

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	$49,767,000.00	$10,226,000.00	0.38 %
Normal Cost of System	N/A	$0.00	0.00 %
Past Service Liabilities	$49,767,000.00	$10,226,000.00	0.38 %
Fiscal Year Past Service Amortization Period Ends	N/A	FY 2016	N/A

Explanation of above Actuarial estimates:

    The number of eligible retirees and beneficiaries were derived from the July 1, 2009 actuarial valuation data for PERS and TRS.

    Based on the expected total bonus payments, the contributions for PERS and TRS combined will increase by $10,226,000 for FY2011 through FY2016. A special appropriation of $49,767,000 is required to retire the liability in a single payment.

Analysis of Impact on Public Pension Policy:

The retiree bonus payment is a one time payment totaling $49,767,000. Special appropriation funding of this increase through a one time appropriation from budget surplus is anticipated by the Bill.

Fiscal Note Summary

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

    For PERS, the bill provides a bonus payment of $1,000 to retirees as of July 1, 2009. The bonus payments to certain beneficiaries are reduced based on the benefit option percentage being paid. Bonus payments totaling $20,960,000 are expected to be paid to 21,406 retirees and beneficiaries. This amount is within the allowable limitations under 2005 Pension Reform for PERS retiree benefits of $49,302,000. Required 6 year amortization of the bonus payment is $4,307,000 annually for FY2011-2016.

    For TRS, the bill provides a bonus payment of $1,000 to retirees as of July 1, 2009. The bonus payments to certain beneficiaries are reduced based on the benefit option percentage being paid. Bonus payments totaling $28,807,000 are expected to be paid to 29,152 retirees and beneficiaries. This amount is within the allowable limitations under 2005 Pension Reform for TRS retiree benefits of $86,079,000. Required 6 year amortization of the bonus payment is $5,919,000 annually for FY2011-2016.

    The total retirement impact of the bill is an increase in the Unfunded Actuarial Accrued Liabilities of $49,767,000. Funding is required over 6 years at a total of $10,226,000 annually.

    The bill additionally provides a bonus payment to certain active public employees. It is anticipated that bonus payments will be made to approximately 60,386 public employees, teachers, service personnel and state police officers for a lump sum cost of $60,386,000.

    If funded from surplus in FY2010, the single lump sum payment totals $110,153,000.

Fiscal Note Detail

Effect of Proposal	Fiscal Year
Effect of Proposal	2010 Increase/Decrease (use"-")	2011 Increase/Decrease (use"-")	Fiscal Year (Upon Full Implementation)
1. Estmated Total Cost	110,153,000	0	0
Personal Services	0	0	0
Current Expenses	0	0	0
Repairs and Alterations	0	0	0
Assets	0	0	0
Other	110,153,000	0	0
2. Estimated Total Revenues	0	0	0

Explanation of above Fiscal Note estimates (include possible long-range effect):

    The number of active members, eligible retirees and beneficiaries were derived from the July 1, 2009 actuarial valuation data.

    A special appropriation of $110,153,000 is required to fund the liability in a single payment in FY2010.

Memorandum

The active employee and retiree bonus payment is a one time payment totaling $110,153,000. Special appropriation funding of this increase through a one time appropriation from budget surplus is anticipated by the Bill.

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