FISCAL NOTE
FUND(S):
PERS 2510
Sources of Revenue:
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 bill provides for a reduction in the PERS benefit formula for new members first hired July 1, 2013 and after. The final average pay in the formula is reduced from final 3 year average to final 10 year average in the last 15 years.
The Normal Cost and Actuarial Accrued Liabilities for all current member is unchanged.
The Normal Cost for those hired July 1, 2013 and after is expected to be 1.24% of payroll less than the Normal Cost for current members. The savings is dependent on the rate at which new hires enter PERS on and after July 1, 2013.
Fiscal Note Detail
| Effect of Proposal |
Fiscal Year |
2013
Increase/Decrease
(use"-") |
2014
Increase/Decrease
(use"-") |
Fiscal Year
(Upon Full
Implementation) |
| 1. Estmated Total Cost |
0 |
-685,000 |
-2,100,000 |
| Personal Services |
0 |
0 |
0 |
| Current Expenses |
0 |
0 |
0 |
| Repairs and Alterations |
0 |
0 |
0 |
| Assets |
0 |
0 |
0 |
| Other |
0 |
-685,000 |
-2,100,000 |
| 2. Estimated Total Revenues |
0 |
0 |
0 |
Explanation of above estimates (including long-range effect):
The expected reduction 1.24% of annual pay in the Employer Normal Cost is based upon projections from the PERS July 1, 2012 Actuarial Valuation. New hires were projected to be consistent with current average participant demographics. The value of the reduction from Final 3 Year Average Pay to Final 10 Year Average Pay is based on a 4% average salary increase assumption.
Memorandum
This bill reduces the recognition of inflation in the PERS benefit formula. The change provides a 12% reduction in expected benefits for new hires on and after July 1, 2013.
Person submitting Fiscal Note: Harry W. Mandel, MAAA, MSPA, EA, Board Actuary
Email Address: harry.w.mandel@wv.gov