FISCAL NOTE
FUND(S):
PERS 2510 / TRS 2601
Sources of Revenue:
General Fund,Other Fund State and Local Govts
Legislation creates:
Neither Program nor Fund
Fiscal Note Summary
Effect this measure will have on costs and revenues of state government.
The benefits provided under the Bill for certain PERS and TRS retirees have been checked against the limitations under 2005 Pension Reform. The requirement for PERS under Section 5-10-22h and TRS under Section 18-7A-28e are both exceeded and the benefits therefore are not allowable under 2005 Pension Reform for retired members.
The bill provides for a one time permanent increase of 5% to retirees effective July 1, 2011. Retirees must be retired for 5 or more years to be eligible. Beneficiaries of deceased retirees are eligible if the member would have been retired for 5 or more years.
For PERS, there are an estimated 17,632 eligible retirees. The increase in UAAL is $101,364,000 and exceeds the 2005 Pension Reform limit of $53,258,000. The required six year amortization payment is $20,828,000 per year from FY2012 through FY2017. An increase in the employer contribution rate from 14.5% to 16.0% is required.
For TRS, there are an estimated 24,102 eligible retirees. The increase in UAAL is $197,855,000 and exceeds the 2005 Pension Reform limit of $89,043,000. The required six year amortization payment is $40,655,000 per year from FY2012 through FY2017
Fiscal Note Detail
| Effect of Proposal |
Fiscal Year |
2011
Increase/Decrease
(use"-") |
2012
Increase/Decrease
(use"-") |
Fiscal Year
(Upon Full
Implementation) |
| 1. Estmated Total Cost |
0 |
61,483,000 |
61,483,000 |
| 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 actuarial estimates of the bill are based on the July 1, 2010 Actuarial Valuation reports for PERS and TRS with liabilities projected to July 1, 2011.
There is no increase in Normal Cost since active members are not included in the increased benefits. The value of the 5% benefit increase for life for retirees who are retired for 5 or more years is the basis for the increase of $299,219,000 of Actuarial Accrued Liabilities. The AAL must be amortized over 6 years from July 1, 2011 through June 30, 2017 at $61,483,000 annually.
Memorandum
The bill should amend the effective date of the 5% increase to July 1, 2011 instead of the July 1, 2010 date stated in the title.
Person submitting Fiscal Note: Harry W. Mandel, Board Actuary, MAAA, MSPA, EA
Email Address: harry.w.mandel@wv.gov