Date Requested:February 18, 2005
Time Requested:11:35 AM
Agency: Consolidated Public Retirement Board
CBD Number: Version: Bill Number: Resolution Number:
2005R792 Intro HB2390
CBD Subject: Disability Benefits Reduced at 65
FUND(S)
PERS - Account 2510
Sources of Revenue
General Fund
Legislation creates:
Neither Program nor Fund

Fiscal Note Summary

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

    Actuarial Note Regarding Pension Legislation
    
    The Bill amends PERS to provide that disability benefits may not be less than 50% of final average salary for life. It eliminates the disability benefit reduction at age 65 for those with under 25 years of service.
    
    The Bill increases the Unfunded Actuarial Accrued Liability for PERS by $47,926,000. The Normal Cost for current benefits earned increases by about 0.04% of payroll, or $568,000 for FY 2006. Based on the PERS target of Normal Cost plus 30 year amortization of the UAAL, the FY 2006 contribution increase due to the Bill is $4,482,000. This represents an increase of 0.36% of pay in PERS. The employer contribution rate should be increased from 10.5% to 10.86% to pay for the improvement.
    
    PERS currently requires an additional 0.01% of payroll to meet the current funding target of Normal Cost plus 30 year amortization. It is recommended that if the Bill is passed, that it be amended to increase the employer contribution rate from 10.5% of pay to 10.87% of pay. This will require PERS employers to contribute an additional $4,607,000 for FY 2006 to maintain PERS current sound funding position following the improvement.

Fiscal Note Detail
Over-all effect
Effect of Proposal Fiscal Year
2005
Increase/Decrease
(use"-")
2006
Increase/Decrease
(use"-")
Fiscal Year
(Upon Full
Implementation)
1. Estmated Total Cost 0 4,482,000 4,510,000
Personal Services 0 0 0
Current Expenses 0 0 0
Repairs and Alterations 0 0 0
Assets 0 0 0
Other 0 4,482,000 4,510,000
2. Estimated Total Revenues 0 0 0
3. Explanation of above estimates (including long-range effect):
    The Bill eliminates the current possible reduction at age 65 from the minimum 50% of pay to the accrued benefit at disability. The improvement only impacts PERS members who become disabled prior to completing 25 years of service.
    
    An analysis of current PERS disability retirees shows that over 2,200 retirees have less than 25 years of total service and will be benefitted by the Bill. The average total service at disability is 16.5 years, of which only 12.4 years are contributory and the remaining 4.1 years are military and leave conversions.
    
    The fiscal analysis is based on the July 1, 2002 actuarial valuation impact of the legislation, projected forward to the current year based on the July 1, 2004 actuarial valuation results.


Memorandum
Person submitting Fiscal Note:
Amy Langenbrunner
Email Address:
ALangenbrunner@wvadmin.gov
    The Bill provides increases to PERS members who are disabled prior to completing 25 years of service. Long service, loyal, PERS members who become disabled after completing 25 years of service are not provided any additional benefits and are ignored by the Bill.