|Date Requested:March 11, 2005
Time Requested:12:50 PM
| FUND(S) |
Plan A fund 2161 and Plan B fund 2162
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 increases all pay classifications for State Police troopers by 18%.
State Police troopers are provided pension benefits through either Plan A or Plan B. Both plans provide for an actuarial assumption of annual salary increases ranging from 6.00% to 4.75% depending on service. These rates include a component for inflationary salary increases of 3.00% annually. Since the 18% contained in the bill exceeds the salary scale assumption, the pension plans will experience an actuarial loss.
For Plan A, the actuarial loss is expected to increase the annual contribution requirement by $608,000. Since benefits are career pay based, the pay increase only impacts future benefits through retirement, but does not increase benefits for prior years of service.
For Plan B, the benefits are final average pay based and so the actuarial loss impacts both past and future years benefits. The UAAL is expected to increase by approximately $3.029,000. Targeted amortization for Plan B is through FY2029, an requires an additional annual payment of $263,000. The Normal Cost for FY 2006 is expected to increase by $438,000 for a total contribution increase for FY2006 of $701,000. This amount represents 4.9% of Plan B payroll. Currently, the employer contribution rate of 12% of payroll exceeds the contribution target by 1.9% of payroll. The employer contribution rate should be increased to 15.0% of payroll to cover the costs of this bill.
For FY2006, the total increase in State Police pension costs is $1,309,000. The Normal Cost component will increase annually by expected payroll growth. For FY2007, the requirement increases to $1,322,000 and will grow at that rate through FY2029 when the UAAL will be fully funded.
This Actuarial Note provided pension related costs of the Bill only. Salary costs and payroll costs are not reflected in this Actuarial Note. Those costs should be added to the pension costs provided to determine the total financial impact of the Bill.
|Effect of Proposal||Fiscal Year|
|1. Estmated Total Cost||0||1,309,000||1,322,000|
|Repairs and Alterations||0||0||0|
|2. Estimated Total Revenues||0||0||0|
3. Explanation of above estimates (including long-range effect):
This Actuarial Note only covers the increase in Plan A and Plan B benefit costs resulting from the salary rate increases will in excess of the salary scale assumption for each plan.
In years where inflationary salary increases are not provided, lower than expected salary increases will result in actuarial gains in those years. Gains in future years due to a lack of future inflationary salary increases would help offset the losses generating the costs provided herein.