Actuarial Fiscal Note

Date Requested:February 17, 2025
Time Requested:04:10 PM

1104	Introduced	HB2522
Agency:	Consolidated Public Retirement Board
CBD Number:	Version:	Bill Number:	Resolution Number:
CBD Subject:	Retirement

Retirement Systems Impacted by Legislation:

Plan B 2393

FUND(S):

Special Fund

Sources of Revenue:

Creates New Expense

Legislation creates:

Plan B

Actuarial Note Summary

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

    The purpose of HB 2522 is to lower the COLA start age from age 63 to age 60 for retirees from the West Virginia State Police Retirement System (Plan B). The COLA would apply to current retirees and future retirees, prospectively.

    Measured as of July 1, 2024, HB 2522 would increase the actuarial accrued liability for Plan B by approximately $5.380 million ($2.047 million for In Pay participants and $3.333 million for actives and deferred vested participants). Amortizing the In Pay liability increase over 6 years on a level dollar basis would increase the FY 2025 annual recommended employer contribution for Plan B by approximately $418,000, or 0.99% of Plan B 2025 payroll. Amortizing the active and deferred vested liability increase over 10 years on a level dollar basis would increase the FY 2025 annual recommended employer contribution for Plan B by approximately $464,000, or 1.10% of Plan B 2025 payroll.

    Also measured as of July 1, 2024, HB 2522 would increase the Plan B employer normal cost by about $136,000 or 0.32% of Plan B 2025 payroll. Therefore, the total Plan B annual recommended employer contribution would increase by approximately $1.018 million, or 2.41% of Plan B 2025 payroll, due to HB 2522.

    The actual Plan B employer contribution rate for FY 2025 is 34% of base payroll and would not change due to HB 2522.

    The analysis was prepared by Gallagher Benefit Services Inc. (Gallagher) and was peer reviewed by the CPRB Actuary. Gallagher provided the following actuarial disclosures:

    The results in this analysis were developed by Gallagher for the West Virginia Consolidated Retirement Board staff using generally accepted actuarial principles and techniques in accordance with all applicable Actuarial Standards of Practice (ASOPs). The purpose of the analysis is to provide a sensitivity analysis based on July 1, 2024 valuation results for Plan B showing the estimated impact of select changes to plan provisions. Use of this analysis for any other purpose may not be appropriate and may result in mistaken conclusions due to failure to understand applicable assumptions, methodologies, or inapplicability of the information for that purpose. Because of the risk of misinterpretation of actuarial results, you should ask Gallagher to review any statement you wish to make on the results contained in this Actuarial/Fiscal Note. Gallagher will accept no liability for any such statement made without prior review by Gallagher. No third-party recipient should rely upon Gallagher’s work product absent involvement of Gallagher or without prior approval by Gallagher.


    Unless where otherwise noted, the data, assumptions, methods and plan provisions used are the same as those to be disclosed in the upcoming July 1, 2024 valuation for Plan B. ASOPs 27 and 35 require the actuary to disclose the information and analysis used to support the actuary’s determination that the assumptions selected by a party other than the actuary do not significantly conflict with what, in the actuary’s professional judgment, are reasonable for the purpose of the measurement. Based on the actuaries’ review of the assumptions used, including consistency with other assumptions used in the valuation, the actuaries believe the assumptions, in the actuaries’ professional judgment, are reasonable for the purpose of the measurement.

    Elizabeth Wiley is a Member of the American Academy of Actuaries who meets the Qualification Standards of the American Academy of Actuaries to render the actuarial opinions contained in the analysis of this Actuarial/Fiscal Note and she is available to answer questions regarding the analysis.

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	$5,380,000.00	$1,018,000.00	2.41 %
Normal Cost of System	N/A	$136,000.00	0.32 %
Past Service Liabilities	$5,380,000.00	$882,000.00	2.09 %
Fiscal Year Past Service Amortization Period Ends	N/A	2034	N/A

Explanation of above Actuarial estimates:

    Measured as of July 1, 2024, HB 2522 would increase the actuarial accrued liability for Plan B by approximately $5.380 million ($2.047 million for In Pay participants and $3.333 million for actives and deferred vested participants). Amortizing the In Pay liability increase over 6 years on a level dollar basis would increase the FY 2025 annual recommended employer contribution for Plan B by approximately $418,000, or 0.99% of Plan B 2025 payroll. Amortizing the active and deferred vested liability increase over 10 years on a level dollar basis would increase the FY 2025 annual recommended employer contribution for Plan B by approximately $464,000, or 1.10% of Plan B 2025 payroll.

    Also measured as of July 1, 2024, HB 2522 would increase the Plan B employer normal cost by about $136,000 or 0.32% of Plan B 2025 payroll. Therefore, the total Plan B annual recommended employer contribution would increase by approximately $1.018 million, or 2.41% of Plan B 2025 payroll, due to HB 2522.

Analysis of Impact on Public Pension Policy:

Fiscal Note Summary

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

    The purpose of HB 2522 is to lower the COLA start age from age 63 to age 60 for retirees from the West Virginia State Police Retirement System (Plan B). The COLA would apply to current retirees and future retirees, prospectively.

    The analysis was prepared by Gallagher Benefit Services Inc. (Gallagher) and was peer reviewed by the CPRB Actuary.

    Measured as of July 1, 2024, HB 2522 would increase the actuarial accrued liability for Plan B by approximately $5.380 million ($2.047 million for In Pay participants and $3.333 million for actives and deferred vested participants). Amortizing the In Pay liability increase over 6 years on a level dollar basis would increase the FY 2025 annual recommended employer contribution for Plan B by approximately $418,000, or 0.99% of Plan B 2025 payroll. Amortizing the active and deferred vested liability increase over 10 years on a level dollar basis would increase the FY 2025 annual recommended employer contribution for Plan B by approximately $464,000, or 1.10% of Plan B 2025 payroll.

    Also measured as of July 1, 2024, HB 2522 would increase the Plan B employer normal cost by about $136,000 or 0.32% of Plan B 2025 payroll. Therefore, the total Plan B annual recommended employer contribution would increase by approximately $1.018 million, or 2.41% of Plan B 2025 payroll, due to HB 2522.

    The actual Plan B employer contribution rate for FY 2025 is 34% of base payroll and would not change due to HB 2522.

    The analysis was prepared by Gallagher Benefit Services Inc. (Gallagher) and was peer reviewed by the CPRB Actuary. Gallagher provided the following actuarial disclosures:

    The results in this analysis were developed by Gallagher for the West Virginia Consolidated Retirement Board staff using generally accepted actuarial principles and techniques in accordance with all applicable Actuarial Standards of Practice (ASOPs). The purpose of the analysis is to provide a sensitivity analysis based on July 1, 2024 valuation results for Plan B showing the estimated impact of select changes to plan provisions. Use of this analysis for any other purpose may not be appropriate and may result in mistaken conclusions due to failure to understand applicable assumptions, methodologies, or inapplicability of the information for that purpose. Because of the risk of misinterpretation of actuarial results, you should ask Gallagher to review any statement you wish to make on the results contained in this Actuarial/Fiscal Note. Gallagher will accept no liability for any such statement made without prior review by Gallagher. No third-party recipient should rely upon Gallagher’s work product absent involvement of Gallagher or without prior approval by Gallagher.


    Unless where otherwise noted, the data, assumptions, methods and plan provisions used are the same as those to be disclosed in the upcoming July 1, 2024 valuation for Plan B. ASOPs 27 and 35 require the actuary to disclose the information and analysis used to support the actuary’s determination that the assumptions selected by a party other than the actuary do not significantly conflict with what, in the actuary’s professional judgment, are reasonable for the purpose of the measurement. Based on the actuaries’ review of the assumptions used, including consistency with other assumptions used in the valuation, the actuaries believe the assumptions, in the actuaries’ professional judgment, are reasonable for the purpose of the measurement.

    Elizabeth Wiley is a Member of the American Academy of Actuaries who meets the Qualification Standards of the American Academy of Actuaries to render the actuarial opinions contained in the analysis of this Actuarial/Fiscal Note and she is available to answer questions regarding the analysis.

Fiscal Note Detail

Effect of Proposal	Fiscal Year
Effect of Proposal	2025 Increase/Decrease (use"-")	2026 Increase/Decrease (use"-")	Fiscal Year (Upon Full Implementation)
1. Estmated Total Cost	1,038,000	1,018,000	1,018,000
Personal Services	0	0	0
Current Expenses	20,000	0	0
Repairs and Alterations	0	0	0
Assets	0	0	0
Other	1,018,000	1,018,000	1,018,000
2. Estimated Total Revenues	0	0	0

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

In addition to the increase in the Plan B annual recommended employer cost of $1.018 million, or 2.41% of payroll for FY 2025, there is a one-time $20,000 expense to set up the administrative software to change the COLA start age from age 63 to age 60 for current retirees and future retirees, prospectively.

Memorandum

    This Actuarial/Fiscal Note is being submitted by the Consolidated Public Retirement Board. It has been reviewed by the CPRB Actuary. Both the Board and the CPRB Actuary are available upon request for questions.

    For the appropriate actuarial disclosures, see the July 1, 2024 funding valuation report for Plan B, expected to be published in March 2025.


    In particular, future actuarial measurements may differ significantly from current measurements due to System experience differing from that anticipated by the economic and demographic assumptions, changes expected as part of the natural operation of the methodology used for these measurements, and changes in system provisions or applicable law or regulations. An analysis of the potential range of such future differences is beyond the scope of the request addressed here.

    Regarding Actuarial Standards of Practice 51, the risk assessment for Plan B may be affected by allowing the COLA to begin at age 60 for retirees to the extent that the higher contributions necessitated by its addition may not be covered.

    Actuarial Standard of Practice No. 56 provides guidance to actuaries when performing actuarial services with respect to designing, developing, selecting, modifying, using, reviewing, or evaluating models. The CPRB uses third-party software in the performance of annual actuarial valuations and projections.

    Kenneth Woodson Jr., the CPRB Board Actuary, is a Fellow of the Society of Actuaries and a Member of the American Academy of Actuaries. He meets the Qualification Standards of the American Academy of Actuaries to render the actuarial opinions contained in this Actuarial/Fiscal Note.

Person submitting Fiscal Note: Kenneth M. Woodson Jr.
Email Address: kenneth.m.woodson@wv.gov