FISCAL NOTE



FUND(S):

PERS 2510 / TRS 2601

Sources of Revenue:

General Fund

Legislation creates:

Neither Program nor Fund



Fiscal Note Summary


Effect this measure will have on costs and revenues of state government.


This Bill as drafted violates WV Statutes under 2005 Pension Reform Legislation. For PERS, the Bill violates Section 5-10-22h(a) which restricts any retiree increases to a maximum of 1% of the Actuarial Accrued Liabilities of the Plan. The current limitation based on the July 1, 2008 PERS Actuarial Valuation is $46,770,000. The improvement in the Bill increases the PERS Unfunded Actuarial Accrued Liabilities by $60,226,000 ($12,375,000 annual contribution for 6 years). For TRS, the Bill violates Section 18-7A-28e( a ) which restricts any retiree increases to a maximum of 1% of the Actuarial Accrued Liabilities of the Plan. The current limitation based on the July 1, 2008 TRS Actuarial Valuation is $82,686,000. The improvement in the Bill increases the TRS Unfunded Actuarial Accrued Liabilities by $125,359,000 ($25,759,000 annual contribution for 6 years). See the Pension Committee chairman for details.



Fiscal Note Detail


Effect of Proposal Fiscal Year
2009
Increase/Decrease
(use"-")
2010
Increase/Decrease
(use"-")
Fiscal Year
(Upon Full
Implementation)
1. Estmated Total Cost 0 38,314,000 38,134,000
Personal Services 0 0 0
Current Expenses 0 0 0
Repairs and Alterations 0 0 0
Assets 0 0 0
Other 0 0 0
2. Estimated Total Revenues 0 0 0


Explanation of above estimates (including long-range effect):


For both PERS and TRS, the Bill provides a retiree increase effective July 1, 2009 to all retirees who have been retired at least 5 years on the increase date and their beneficiaries of 5% of their current benefit, limited to the first $30,000 of annual retirement benefit. The improvement increases the Unfunded Actuarial Accrued Liabilities in each plan. The amount of the increase was determined from the July 1, 2008 Actuarial Valuation data. The improvement exceeds the 2005 Pension Reform limitations for each Plan for a retiree benefit increase. Cost shown apply a six year amortization schedule as required under 2005 Pension Reform.



Memorandum


The bill as drafted violates the 2005 Pension Reform restrictions for retiree increases for each plan. To be allowable, the Bill would need to be amended to either modify or eliminate the 2005 Pension Reform provisions. This change would be contrary to public pension policy set when the 2005 Pension Reform was passed by the WV legislature.



    Person submitting Fiscal Note: Harry W. Mandel, Board Actuary, MAAA, MSPA, EA
    Email Address: harry.w.mandel@wv.gov