|Date Requested:February 22, 2011
Time Requested:11:08 AM
| FUND(S) |
collections from the additional fire and casualty insurance premium tax
Sources of Revenue
|Other Fund Municipal Pens SecurityFd|
Legislation creates:Neither Program nor Fund
Effect this measure will have on costs and revenues of state government.
| The actuary providing services to the Municipal Pensions Oversight Board currently uses assumptions jointly decided upon by the State and the actuary. Should SB544 become law, the assumptions would be modified to add to the valuation for plans using the “alternative funding method” the actuary would assess the advantages of changing to the “optional funding method” or the “conservation funding method.” The cost of providing the actuarial studies to the Oversight Board and the 53 municipal pension and relief funds would not change dramatically once the actuary built the assumption and related calculations into its profile for providing actuarial valuations to WV’s 53 municipal plans. The one time estimated cost for implementing this provision by an actuary into its cost modeling is $60,000. The total increase for FY2012 is $60,000 which is the cost to program the actuarial assumption into an actuary’s cost modeling program that will be run for the 53 municipal pension and relief funds.
The ongoing actuarial valuation cost to the Oversight Board with this addition is negligible to the final annual contract cost.
SB544 also re-directing 10 basis points of the “additional fire and casualty insurance premium tax” for a period of 3 fiscal years starting on July 1, 2011 from the Teachers Retirement System Reserve Fund to the Municipal Pensions Security Fund to be distributed to those municipal policemen’s or firemen’s pension and relief funds which have closed their plans to new members and adopted either the optional or conservation method of financing.” During FY2010, a total of $2.56 million was collected and transferred to the Teachers Retirement System Reserve Fund. Collections in the first two quarters of FY2011 indicate similar collections are expected in FY2011. These funds would be directed to the closed municipal pension plans using the optional funding method or the conservation funding method.
Prior to 1990, these 10 basis points were directed to the municipal policemen’s and firemen’s pension and relief funds. In the third extraordinary session of 1990 the Legislature passed Committee Substitute for HB311 which re-directed these 10 basis points from the municipal policemen’s and firemen’s pension and relief funds to the Teachers Retirement System Reserve Fund. This bill directs these funds back to the original recipients, municipal policemen’s and firemen’s pension and relief funds, for a period of three fiscal years.
The total increase in revenue for FY2012 is approximately $2.50 million. Expenditures of the same $2.50 million in payments to municipal pension and relief funds based upon the closure of the plan to new members would occur the following September 1, i.e. FY2013. This would occur for 3 years of collections FY2012 to FY2014 with distributions occuring each September 1st for FY2013 to FY2015.
|Effect of Proposal||Fiscal Year|
|1. Estmated Total Cost||0||60,000||0|
|Repairs and Alterations||0||0||0|
|2. Estimated Total Revenues||0||0||2,500,000|
3. Explanation of above estimates (including long-range effect):
In FY2012, the $60,000 increased cost in Current Expenses is for a one time contractual increase to create the modeling scenario for municipal plans using the "alternative funding methodology". This cost qwould be absorbed from the existing revenue stream that funds the Municipal Pension Oversight Board, the 65 basis points of the the additional fire and casualty insurance premium tax currently collected by the insurance commission and transferred to the the Municipal Pensions Security Fund. In future years, the cost of using this model in addition to the other models used to determine actuarial soundness is negligible to the Municipal Pensions Oversight Board contract with its actuary.
In FY2013, 2014, and 2015 the distributions of the previous year's collections to muncipal police and fire pension plans which are closed to new members will be done according to an existing formula described in 33-3-14d. These Other expenditures come from the 10 basis points of the existing collections by the Insurance Commission and which would be transferred to the Municipal Pensions Oversight Board for passthrough distributions to closed municipal pension plans.