|Date Requested:March 23, 2005
Time Requested:12:43 PM
| FUND(S) |
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 authority to the CPRB to implement a late charge payable by participating employers in CPRB administered retirement systems when such employers fail to deposit member and employer contributions in a timely manner. Such late charge shall be based on estimated lost earnings due to the delay in the deposits, or a reasonable minimum fee if greater to process the delayed contributions. Late charges collected by the CPRB shall be deposited in the same manner as contributions for the retirement system for which they were generated.
Currently, late deposits of contributions delay investments past their actuarial assumed dates of deposit. This results in investment interest losses to the plans. Investment losses must be made up by all employers participating in a plan. Late charges will require the employer making the late deposit to bear the full cost of funding the investment loss to the plan, thereby reducing the current costs to other employers.
It is the objective of the late charge to encourage all employers to deposit all contributions in a timely manner and reduce the costs of all plans by eliminating the investment losses associated with late deposits. Investment losses are estimated based on 2004 late deposits into the Public Employees Retirement System. Costs also include administrative expenses associated with collection efforts for agencies that do not deposit their contributions in a timely manner.
The estimated annual cost savings on investment losses based on 2004 experience is $146,000. Expenses are estimated at $10,000 for an annual cost savings of $156,000 if all employers make deposits on a timely basis.
|Effect of Proposal||Fiscal Year|
|1. Estmated Total Cost||0||-156,000||-156,000|
|Repairs and Alterations||0||0||0|
|2. Estimated Total Revenues||0||0||0|
3. Explanation of above estimates (including long-range effect):
The Bill authorizes the CPRB to promulgate rules to implement a late charge payable by employers who fail to deposit member and employer contributions on a timely basis. Charges are to be based on amounts necessary to recover investment earnings losses due to the late contributions.
The cost savings in the bill will result if all employers are encouraged to deposit all contributions in a timely manner to avoid the late charges. Employers who still make late deposits will be required to bear the full costs associated with the late deposits directly. Other employers will no longer be required to contribute toward those costs as part of their regular contribution requirements.
|The Bill provides CPRB the authority to promulgate rules to implement such late charges. Due to the time necessary to promulgate rules, implementation of the late charges will be delayed which results in a delay of the cost savings.|