FISCAL NOTE
FUND(S):
PERS 2510
Sources of Revenue:
General Fund,Other Fund Add'l 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 as drafted violates WV Statutes under 2005 Pension Reform Legislation.
Section 5-10-22h (c) prohibits increases to active members unless the PERS funded ratio equals or exceeds 85.0%. As of the latest Actuarial Valuation on July 1, 2009, the funded percentage of PERS was 65.9%.
Based on prior actuarial studies, the Bill would be expected to increase PERS Unfunded Actuarial Accrued Liabilities in excess of $100,000,000.
See the Pension Committee chairman for details.
Fiscal Note Detail
| Effect of Proposal |
Fiscal Year |
2010
Increase/Decrease
(use"-") |
2011
Increase/Decrease
(use"-") |
Fiscal Year
(Upon Full
Implementation) |
| 1. Estmated Total Cost |
99,999,999 |
99,999,999 |
99,999,999 |
| 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 Bill provides that up to 5 years of military service can be claimed under PERS for any federal military service. The bill removes the current restriction that free military service is only provided for “armed conflict” service. It further removes all armed conflict references as to conflicts and dates credited.
The modification is expected to greatly increase the amount of military service to be credited under PERS. Based on previous actuarial studies, the increase in Unfunded Actuarial Accrued Liabilities is expected to exceed $100,000,000. A new actuarial study was not completed for this bill.
Memorandum
The Bill as drafted violates the 2005 Pension Reform restrictions for benefit increases under PERS for current and future active members. To be allowable, the Bill would need to amend or modify the 2005 Pension Reform restrictions. Such change would be contrary to public pension policy set when the 2005 Pension Reform statutes were passed by the WV Legislature.
Current PERS employer contribution rate is increasing to 17% from 11% effective July 1, 2010. If the provisions of this Bill are adopted through modification of 2005 Pension Reform statutes, the employer contribution rate would need to be additionally increased significantly above 17% in order to continue meeting PERS actuarially required contribution under current PERS funding policy. The increased Unfunded Actuarial Accrued Liability for the provisions would be subject to 10 year amortization plus Normal Cost increase.
Person submitting Fiscal Note: Harry W. Mandel, Board Actuary, MAAA, MSPA, EA
Email Address: harry.w.mandel@wv.gov