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.
This Bill as drafted violates WV Statutes under 2005 Pension Reform Legislation. Section 18-7A-28e ( c ) prohibits new benefits being granted to any active members of TRS. See the Pension Committee chairman for details.
The bill opens a new window for a select group of active members to purchase “make up contribution service” from TDC under TRS. Purchasing members must pay a make up contribution of 1.5% of pay plus interest at 7.5%. It is estimated that for the average purchasing member, the actuarial accrued liability under TRS will exceed the make up contribution amount by $50,000. It is estimated that approximately 100 members will take advantage of the new window resulting in an increase in the TRS Unfunded Actuarial Accrued Liabilities of $5,000,000. Based on 10 year amortization, the expected impact on the TRS Actuarially Required Contribution is $703,000 per year.
It is noted that final actuarial costs will be determined based on final usage numbers which could be greater or lower than this estimate.
Fiscal Note Detail
| Effect of Proposal |
Fiscal Year |
2012
Increase/Decrease
(use"-") |
2013
Increase/Decrease
(use"-") |
Fiscal Year
(Upon Full
Implementation) |
| 1. Estmated Total Cost |
0 |
703,000 |
703,000 |
| Personal Services |
0 |
0 |
0 |
| Current Expenses |
0 |
0 |
0 |
| Repairs and Alterations |
0 |
0 |
0 |
| Assets |
0 |
0 |
0 |
| Other |
0 |
703,000 |
703,000 |
| 2. Estimated Total Revenues |
0 |
0 |
0 |
Explanation of above estimates (including long-range effect):
Cost estimates are based on the analysis performed at the original TDC to TRS transfer window.
The estimate of 100 electing members is deemed reasonable based upon the limited eligibility in the Bill. If the member eligibility requirements are expanded to allow additional eligibility, then a significant increase in estimated electing members will greatly increase the costs of the bill.
Memorandum
This Bill as drafted violates WV Statutes under 2005 Pension Reform Legislation. Section 18-7A-28e ( c ) prohibits new benefits be granted to any active members of TRS.
To implement the bill, it must be amended to exempt this specific increase from the 2005 Pension Reform limitations. The fiscal and political impact of such an exemption should be considered by the legislature.
The new election window subjects the benefit process to adverse selection. This issue was specifically considered in the initial legislation which is why a cut off date to make such elections was implemented.
Person submitting Fiscal Note: Harry W. Mandel, Board Actuary, MAAA, MSPA, EA
Email Address: harry.w.mandel@wv.gov