FISCAL NOTE
FUND(S):
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.
The bill as drafted violates 2005 Pension Reform statutes under section 18-7A-28e( c ) which prohibits any increases in active members benefits through FY2034. The bill provides for a six month delay in the buy back contribution payment deadline without increasing the required payment amount for the required actuarial interest. The interest loss is estimated at up to $3,267,000, providing a benefit increase of that amount which is prohibited under 2005 Pension Reform.
If the bill were allowable under 2005 Pension Reform, the expected increase in Unfunded Actuarial Accrued Liabilities under TRS is estimated at $3,267,000. 2005 Pension Reform would require increased annual amortization payments of $460,000 annually from FY2010 through FY2019.
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 |
460,000 |
460,000 |
| 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):
The increase in Unfunded Actuarial Accrued Liabilities results from a loss of actuarial interest at 7.5% annually for the half year period from June 30, 2009 through December 31, 2009. The amount was calculated from the expected accrued make up contribution amount included in the July 1, 2008 Actuarial Valuation Report for TRS.
Memorandum
The Bill provides a benefit increase under TRS prohibited under 2005 Pension Reform statutes and is in direct conflict with the public pension policy established by the West Virginia legislature when 2005 Pension Reform was approved by the legislature.
The bill could be amended to require each member who delays payment past June 30, 2009 to pay the interest required due to the delay at the 7.5% actuarial assumed interest rate. Such provision would increase a payment delayed to December 31, 2009 by 3.75%. Additional administrative costs would be incurred by the Agency to complete the required interest calculations.
Person submitting Fiscal Note: Harry W. Mandel, Board Actuary, MAAA, MSPA, EA
Email Address: harry.w.mandel@wv.gov