Actuarial Fiscal Note


Retirement Systems Impacted by Legislation:

Public Employees Retirement System

FUND(S):

2510

Sources of Revenue:

General Fund,Other Fund State and Local Govts

Legislation creates:

Neither Program nor Fund



Actuarial Note Summary


Impact this measure will have on the liabilities and contributions associated with the retirement system(s).


    This Bill as drafted violates WV Statutes under 2005 Pension Reform Legislation.
    
    The benefit improvements to active members of PERS as provided under the bill is prohibited under Code Section 5-10-22h while PERS funded percentage is under 85%. As of the July 1, 2010 Actuarial Valuation applicable to this legislative session, the PERS funded percentage is 74.6%.
    
    See the Pension Committee chairman for details.



Fiscal Detail of Actuarial Impact

Impact on current benefit costs, prior service benefit costs and ongoing contribution requirements following full implementation.


Impact On Following Full Implementation
Increase in Unfunded Actuarial Accrued Liability Initial Impact on Annual Contribution Requirement of System(s) Contribution Increase as a Percentage of Annual Payroll
Total Annual Costs $999,999,999.00 $999,999,999.00 99.99 %
Normal Cost of System N/A $999,999,999.00 99.99 %
Past Service Liabilities $999,999,999.00 $999,999,999.00 99.99 %
Fiscal Year Past Service
Amortization Period Ends
N/A N/A


Explanation of above estimates:


    The bill provides for additional periods of free military service to be credited under PERS at retirement for pension benefit purposes. The free military service results in higher pension benefits than would currently be payable.
    
    Due to the Pension Reform restriction, the Board Actuary has not priced the actuarial impact on the PERS Normal Cost nor Actuarial Accrued Liabilities at this time.

Analysis of Impact on Public Pension Policy:


    The additional free military service granted under the bill would increase the employer contribution rate under PERS, currently 14.5% effective July 1, 2011. This results in the cost of “veterans benefits” being funded by PERS employers instead of the taxpayers of the State of West Virginia. Consideration should be given to provide WV State level funding for veterans benefits through general revenue funding for military service benefits.



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.
    
    The benefit improvements to active members of PERS as provided under the bill is prohibited under Code Section 5-10-22h while PERS funded percentage is under 85%. As of the July 1, 2010 Actuarial Valuation applicable to this legislative session, the PERS funded percentage is 74.6%.
    
    See the Pension Committee chairman for details.



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 999,999,999 999,999,999 999,999,999
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 bill provides for additional periods of free military service to be credited under PERS at retirement for pension benefit purposes. The free military service results in higher pension benefits than would currently be payable.
    
    Due to the Pension Reform restriction, the Board Actuary has not priced the actuarial impact on the PERS Normal Cost nor Actuarial Accrued Liabilities at this time.



Memorandum


    The additional free military service granted under the bill would increase the employer contribution rate under PERS, currently 14.5% effective July 1, 2011. This results in the cost of “veterans benefits” being funded by PERS employers instead of the taxpayers of the State of West Virginia. Consideration should be given to provide WV State level funding for veterans benefits through general revenue funding for military service benefits.



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