|Date Requested:March 02, 2005
Time Requested:12:58 PM
| FUND(S) |
TRS fund 2601
Sources of Revenue
Legislation creates:Neither Program nor Fund
Effect this measure will have on costs and revenues of state government.
| Actuarial Note Regarding Pension Legislation
The Bill provides a retiree increase of $1,000 per year to all retirees as of June 30, 2005 commencing June 1, 2005.
(Note: Retiree date is after the increase date. Bill also provides an increase to all future retirees effective June 1, 2005. The provisions of the Bill have been interpreted to include only retirees as of June 30, 2005 and exclude future retirees from the increase. The Bill’s intent has been interpreted to have the increase ongoing in future years to current retirees, not additional increase for future retirees, currently active members payable 6/1/2005.)
TRS UAAL is increased by $213,475,000. The current amortization of retiree increases under TRS is 7 year level dollar amortization in the School Aid Formula. The increase in the SAF for FY2006 through FY2012 is $38,873,000 per year.
|Effect of Proposal||Fiscal Year|
|1. Estmated Total Cost||0||38,883,000||38,873,000|
|Repairs and Alterations||0||0||0|
|2. Estimated Total Revenues||0||0||0|
3. Explanation of above estimates (including long-range effect):
The Bill provides for a $1,000 annual increase in retirement benefits to retirees as of June 30, 2005 payable starting June 1, 2005.
For TRS, the increased UAAL must be amortized over 7 years under the SAF. The increase represents the additional contributions necessary through FY 2012 to pay for the retiree increase. Expenses include implementation of the increase.
As drafted, the Bill provides a similar increase effective June 1, 2005 for all future retirees. Since future retirees are currently active members of PERS, it would effectively require PERS to begin paying all active PERS members $1,000 per year. The Internal Revenue Code prohibits in-service distributions to active members, and such payments would disqualify PERS. It has been assumed that the benefit is intended for retirees as of June 30, 2005 only, and applicable to that group payable annually in future years.
| The Bill must be amended to properly describe the benefit to be provided.
TRS is currently subject to legislation regarding the possible issuance of Pension Obligation Bonds. The retiree increase may be subject to faster amortization requirements under the terms of the bond sale enabling legislation. If the current 5 year amortization requirement were to apply to this improvement, then the TRS contribution would increase the SAF by an additional $12,017,000, up to $50,890,000 per year for FY2006 through FY2010.