Actuarial Fiscal Note

Retirement Systems Impacted by Legislation:

Public Employees Retirement System / Teachers Retirement System

FUND(S):

PERS 2510 / TRS 2601

Sources of Revenue:

General Fund,Other Fund State and 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).

    The benefits provided under the Bill for certain PERS and TRS retirees have been checked against the limitations under 2005 Pension Reform. The requirement for PERS under Section 5-10-22h and TRS under Section 18-7A-28e are both exceeded and the benefits therefore are not allowable under 2005 Pension Reform for retired members.

    The bill provides for a one time permanent increase of 5% to retirees effective July 1, 2011. Retirees must be retired for 5 or more years to be eligible. Beneficiaries of deceased retirees are eligible if the member would have been retired for 5 or more years.

    For PERS, there are an estimated 17,632 eligible retirees. The increase in UAAL is $101,364,000 and exceeds the 2005 Pension Reform limit of $53,258,000. The required six year amortization payment is $20,828,000 per year from FY2012 through FY2017. An increase in the employer contribution rate from 14.5% to 16.0% is required.

    For TRS, there are an estimated 24,102 eligible retirees. The increase in UAAL is $197,855,000 and exceeds the 2005 Pension Reform limit of $89,043,000. The required six year amortization payment is $40,655,000 per year from FY2012 through FY2017

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	$299,219,000.00	$61,483,000.00	2.14 %
Normal Cost of System	N/A	$0.00	0.00 %
Past Service Liabilities	$299,219,000.00	$61,483,000.00	2.14 %
Fiscal Year Past Service Amortization Period Ends	N/A	FY2017	N/A

Explanation of above Actuarial estimates:

    The actuarial estimates of the bill are based on the July 1, 2010 Actuarial Valuation reports for PERS and TRS with liabilities projected to July 1, 2011.

    There is no increase in Normal Cost since active members are not included in the increased benefits. The value of the 5% benefit increase for life for retirees who are retired for 5 or more years is the basis for the increase of $299,219,000 of Actuarial Accrued Liabilities. The AAL must be amortized over 6 years from July 1, 2011 through June 30, 2017 at $61,483,000 annually.

Analysis of Impact on Public Pension Policy:

The bill should amend the effective date of the 5% increase to July 1, 2011 instead of the July 1, 2010 date stated in the title.

Fiscal Note Summary

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

Fiscal Note Detail

Effect of Proposal	Fiscal Year
Effect of Proposal	2011 Increase/Decrease (use"-")	2012 Increase/Decrease (use"-")	Fiscal Year (Upon Full Implementation)
1. Estmated Total Cost	0	61,483,000	61,483,000
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):

Memorandum

The bill should amend the effective date of the 5% increase to July 1, 2011 instead of the July 1, 2010 date stated in the title.

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