FISCAL NOTE
FUND(S):
PERS 2510
Sources of Revenue:
General Fund,Other Fund local governments
Legislation creates:
Neither Program nor Fund
Fiscal Note Summary
Effect this measure will have on costs and revenues of state government.
This bill provides for a one time increase to certain annuitants as of July 1, 2008 equal to the lessor of the annual CPI or 3%. Eligible annuitants are those who are at least age 62 and have been retired for 5 or more years on the increase date. Disability annuitants do not have the age requirement.
Based on an expected increase limited to 3%, the UAAL for PERS would increase by $32,162,000. Amortization under PERS is based on six year level dollar amortization, which is $6,609,000 per year for FY2009 through FY2014. The initial year is 0.55% of payroll. The PERS contribution rate is currently sufficient to absorb the increased amount without an increase in the contribution rate.
Fiscal Note Detail
| Effect of Proposal |
Fiscal Year |
2008
Increase/Decrease
(use"-") |
2009
Increase/Decrease
(use"-") |
Fiscal Year
(Upon Full
Implementation) |
| 1. Estmated Total Cost |
0 |
6,609,000 |
6,609,000 |
| Personal Services |
0 |
0 |
0 |
| Current Expenses |
0 |
0 |
0 |
| Repairs and Alterations |
0 |
0 |
0 |
| Assets |
0 |
0 |
0 |
| Other |
0 |
6,609,000 |
6,609,000 |
| 2. Estimated Total Revenues |
0 |
0 |
0 |
Explanation of above estimates (including long-range effect):
The increase in the UAAL is calculated based on the July 1, 2007 actuarial valuation retiree data and assumptions. The valuation assumes a 3% annual CPI increase rate and therefore the 3% maximum increase has been assumed.
Memorandum
The increase in the UAAL due to this increase to retirees of $32,162,000 is allowable under 2005 Pension Reform limitations under Section 5-10-22h(a) which is $44,260,000 as of July 1, 2007 (the limit applicable to this bill).
Clarification as to the period over which the CPI should be measured should be added to the bill. It is recommended that a date be set so that the amount of the increase can be calculated on July 1, 2008 without delay due to the delay in the publishing of CPI statistics by the federal government. An annual cut off of March 31, 2008 is recommended. Also, which CPI rate should also be specified.
Person submitting Fiscal Note: Harry W. Mandel, MAAA, MSPA, EA, Board Actuary
Email Address: Harry.W.Mandel@wv.gov