|Date Requested:March 21, 2005
Time Requested:01:18 PM
| FUND(S) |
State Police Plan B - Account 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 clarifies provisions of Plan B in regard to detailed provisions required to determine retirement and other benefits in the day to day administration of the Plan.
Bill provides three benefit improvements:
1. Reduction in retirement eligibility from 55/20 to the earlier of 50/25 or 52/20. Early retirement available after 25 years reduced from age 50.
2. Duty disability recalculation at 50 may not reduce the benefit being paid.
3. Increase in the child scholarship lifetime limit per child from $7,500 to $45,000.
The Normal Cost increase is 0.94% of payroll, or $152,000 for FY 2006.
The Unfunded Actuarial Accrued Liability increases by $692,000 as of 7/1/2005. The funded percentage of Plan B is reduced from 90.0% funded to 88.4% funded. The 30 year amortization payment for FY 2006 is $57,000.
The Scholarship benefit is not funded as part of the Actuarial Accrued Liabilities. Based on recent Scholarship claims, there is a 60%-to 70% chance of receiving a new claim in any year. This cost has been estimated at two-thirds of the limit for a new claim, or $30,000 per year in additional benefit cost.
For FY 2006, the additional cost increase under the Bill totals $239,000, or 1.48% of payroll. For FY 2007 through FY 2025, the expected growth in Plan B active membership is expected to increase the cost of the Bill each year to $569,000 by FY 2025.
If Plan B funding is to be maintained at current levels on current benefits, then an increase in contribution rates of 1.25% - 1.50% would be required. Based on the July 1, 2004 Actuarial Valuation for Plan B, expected contributions exceeded the Plan B funding target by 1.9% of payroll. The benefit improvement would not require the contribution rate to be increased to meet the 30 year funding target.
|Effect of Proposal||Fiscal Year|
|1. Estmated Total Cost||0||239,000||250,000|
|Repairs and Alterations||0||0||0|
|2. Estimated Total Revenues||0||0||0|
3. Explanation of above estimates (including long-range effect):
The cost reflected in the Actuarial Note reflect newly adopted actuarial assumptions for Plan B first approved by the CPRB Board for application to the July 1, 2004 Actuarial Valuation. The changes in assumptions increased the value placed on certain existing benefits by about $1,113,000. These changes offset some of the costs associated with the increases in benefits included in this Bill under the prior actuarial assumptions.
Costs for the Scholarship benefit were included as a an additional annual cost based on expected applications under the benefit. Usage was based on historical Plan A experience.
The reduction in retirement age eligibility costs are highly dependent on expected retirements. The cost analysis applied newly adopted July 1, 2004 Experience Study Plan A retirement usage rates to the Plan B calculations.
Disability costs were calculated separately from the retirement age changes and added to the retirement costs.
| The $45,000 limitation on Scholarship benefits should be reasonable to cover all costs allowable under benefit provisions over a four year study term at either WVU or MU. The limitation is therefore reasonable to meet the costs at most W.V. universities.
The disability recalculation/reduction provisions in the bill seems to exclude non-duty disabilities from the reduction protection. It is unclear if this was intentional. Primary disability costs are associated with duty disabilities and costs reflect the reduction protection for all benefits.