Actuarial Fiscal Note
Retirement Systems Impacted by Legislation:
Teachers Retirement System
FUND(S):
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).
This Bill as drafted violates WV Statutes under 2005 Pension Reform Legislation. Section 18-7A-28e. It increases the actuarial value of the current spouse survivor option by allowing the benefits to revert to a life only benefit upon divorce or death of the spouse within 5 years of the benefit commencement date.
See the Pension Committee chairman for details.
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 bill provides that the current Survivor Annuity option provisions be modified so that the Survivor Annuity payment is reset to the Life Only Annuity Option within 5 years of retirement upon the death of the spouse or divorce. The bill does not provide for the additional costs of the benefit option changes through additional actuarial reductions of the current and future Survivor Annuity options.
The increased benefits under TRS to both active members and certain retired members is not allowable under the Pension Reform of 2005.
Analysis of Impact on Public Pension Policy:
Survivor option benefits are “paid for” through the actuarial reduction of the life only benefit so that the actuarial present value of the Survivor Option is equal to the life benefit option on a prospective basis. By allowing the benefit reduction to be undone, the actuarial reduction currently in place is less than the reduction required under the five year “pop” to life only option.
If a “pop” survivor benefit is the objective, then a new pop option should be added to TRS which would effectively increase the actuarial reduction for the Survivor Annuity thereby transferring the cost of the Pop to the member. Such a change would need to be prospective for new retirees only.
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 18-7A-28e. It increases the actuarial value of the current spouse survivor option by allowing the benefits to revert to a life only benefit upon divorce or death of the spouse within 5 years of the benefit commencement date.
See the Pension Committee chairman for details.
Fiscal Note Detail
| Effect of Proposal |
Fiscal Year |
2011
Increase/Decrease
(use"-") |
2012
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 bill provides that the current Survivor Annuity option provisions be modified so that the Survivor Annuity payment is reset to the Life Only Annuity Option within 5 years of retirement upon the death of the spouse or divorce. The bill does not provide for the additional costs of the benefit option changes through additional actuarial reductions of the current and future Survivor Annuity options.
The increased benefits under TRS to both active members and certain retired members is not allowable under the Pension Reform of 2005.
Memorandum
Survivor option benefits are “paid for” through the actuarial reduction of the life only benefit so that the actuarial present value of the Survivor Option is equal to the life benefit option on a prospective basis. By allowing the benefit reduction to be undone, the actuarial reduction currently in place is less than the reduction required under the five year “pop” to life only option.
If a “pop” survivor benefit is the objective, then a new pop option should be added to TRS which would effectively increase the actuarial reduction for the Survivor Annuity thereby transferring the cost of the Pop to the member. Such a change would need to be prospective for new retirees only.
Person submitting Fiscal Note: Harry W. Mandel, Board Actuary, MAAA, MSPA, EA
Email Address: harry.w.mandel@wv.gov