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 reduces certain benefits for new members hired on or after July 1, 2012 in PERS, TRS and State Police Plan B. Since all benefit reductions apply only to newly hired members, there is no impact on the existing Actuarial Accrued Liabilities nor the Normal Cost rate for existing members in the Plans. All cost reductions occur in the form of reduced employer Normal Cost percentage of payroll amounts. Normal Cost amounts are shown in FY2012 payroll basis for comparitive purposes. Both the first year impact and ultimate impact are presented. For PERS, the employer Normal Cost is reduced by 2.48% of payroll. The first year reduction is estimated at $940,000. The ultimate cost savings is estimated at $32,890,000. For TRS, the employer Normal Cost is reduced by 0.73% of payroll. The first year reduction is estimated at $250,000. The ultimate cost savings is estimated at $10,910,000. For Plan B, the employer Normal Cost is reduced by 0.49% of payroll. The first year reduction is estimated at $4,000. The ultimate cost savings is estimated at $117,000.

Fiscal Note Detail

Effect of Proposal	Fiscal Year
Effect of Proposal	2012 Increase/Decrease (use"-")	2013 Increase/Decrease (use"-")	Fiscal Year (Upon Full Implementation)
1. Estmated Total Cost	0	-1,194,000	-43,917,000
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):

Cost savings estimates were developed from July 1, 2010 and July 1, 2011 Actuarial Valuation amounts. Expected new hires were based on the demography of current newly hired members in their first 5 years of employment. Long term membership was assumed to replace existing members over time. All contribution reductions are based upon applying Normal Cost savings to FY2012 annual payroll amounts. Future savings will increase if payroll increases.

Memorandum

The reduced benefits will make recruiting to public service less desirable compared to current benefits. For PERS, members will be funding 6% of payroll while state employers will be contributing a reduced 3.08% of payroll. This effectively makes TRS 67% member funded and 33% employer funded. The impact on TRS and State Police Plan B is less dramatic in that fewer reductions are applied.

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