Date Requested: January 26, 2015
Time Requested: 09:44 AM
Agency: Consolidated Public Retirement Board
CBD Number: Version: Bill Number: Resolution Number:
2573 Introduced SB300
CBD Subject: Retirement


FUND(S):

PERS 2510

Sources of Revenue:

Other Fund State and Local Govt

Legislation creates:

Neither Program nor Fund



Fiscal Note Summary


Effect this measure will have on costs and revenues of state government.


    The Bill allows members hired on or after July 1, 2015 to purchaser up to 5 years of military serivce credits on an actuarial cost basis as defined in the bill. The purchase is not required and usage becomes an issue in determining cost projections. The actuarial costs as set forth in the bill shall on the average fund the costs of the years of service being purchased. As a result, the purchase provisions result in a reduction of expected employer Normal Cost for the military service.
    
    Members hired before July 1, 2015 continue to receive up to 5 years of free millitary service credits and does not change the military serivce costs. There is no impact on the current Normal Cost nor Actuarial Accrued Liabilities for those members hired before July 1, 2015.



Fiscal Note Detail


Effect of Proposal Fiscal Year
2015
Increase/Decrease
(use"-")
2016
Increase/Decrease
(use"-")
Fiscal Year
(Upon Full
Implementation)
1. Estmated Total Cost 0 -200,000 -10,000,000
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 provided in this Actuarial Note are based on the Military Service study completed in 2012. Such amounts are consistent with the latest PERS actuarial valuation assummptions and methods. It also reflects the free military service recognition as administered by the CPRB.
    
    The bill eliminates the free military service credits currently provided to those hired before July 1, 2015. The Bill reduces benefit costs by requiring the current free military service be paid for by the member at an actuarially deterimined cost as detailed in the bill. The benefit purcahse is limited to 5 years, and is not required. Time limitations for the purchase of benefits is necessary to minimize adverse selection in the purchase process.
    
    . Savings is realized through the Normal Cost which is expected to decrease as a percent of payrolll. Savings will incease each year as more new hires increase the savings. First year savings are very limited and expected to total about $(200,000). Ultimately the annual savings are expected in the $(10,000,000) range based on 2015 dollars and current usage assumptions..
    



Memorandum


    The bill transfers the costs for up to five years of military service from the employer to the individual member wishing to purchase the service. This only applies to member of PERS first hired July 1, 2015 and after.
    
    The Bill effectively reduces the employer paid benefits to be provided to prior members of the armed forces. The change from free to purchsased serivce years is also expected to reduce the adverse selection of seeking state employment following military service



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