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).


    The bill provides that mental hygiene commissioners are members of PERS eligible to earn up to 15 years of credited service under PERS. Coverage is automatic and there are no provisions for not being covered under PERS. There are no provisions in respect to who is the employer responsible for employer contributions under PERS since mental hygiene commissioners are not court employees.
    
    Mental Hygiene Commissioners are independent contractors or other private employer entity. They are not public employees of a public employer. As a result, they are governed by ERISA as private pension provisions of federal law.
    
    PERS is a governmental plan and may only cover employees of governmental employers.
    
    If passed and implemented, PERS would cover private employers and be subject to the requirements of ERISA and the private plan funding requirements under the Internal Revenue Code.
    
    Actual cost of becoming a private plan have not been calculated by the actuary.



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 $999,999,999.00 999.99 %
Normal Cost of System N/A $999,999,999.00 999.99 %
Past Service Liabilities $999,999,999.00 $999,999,999.00 999.99 %
Fiscal Year Past Service
Amortization Period Ends
N/A N/A


Explanation of above estimates:


    If PERS were opened to private employer employees by admitting court appointed mental hygiene commissioners to coverage, then PERS would become subject to ERISA and private plan funding rules under the Tax Reform Act of 2006. PERS would then be subject to accelerated funding rules and federal premiums payable to the Pension Benefit Guaranty Corporation for private plan coverage.
    
    PERS would cease to be a governmental plan under the terms of the Internal Revenue Code.

Analysis of Impact on Public Pension Policy:


    This bill should not be passed due to the technical coverage requirements for public employer plans. The bill would convert PERS from a public employer retirement system to a private retirement system.
    
    PERS is a governmental plan for governmental employees and as such is not subject to private employer pension laws. The conversion to a private system would be contrary to the best interests of the State of West Virginia and all public employee members of PERS.



Fiscal Note Summary


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


    The bill provides that mental hygiene commissioners are members of PERS eligible to earn up to 15 years of credited service under PERS. Coverage is automatic and there are no provisions for not being covered under PERS. There are no provisions in respect to who is the employer responsible for employer contributions under PERS since mental hygiene commissioners are not court employees.
    
    Mental Hygiene Commissioners are independent contractors or other private employer entity. They are not public employees of a public employer. As a result, they are governed by ERISA as private pension provisions of federal law.
    
    PERS is a governmental plan and may only cover employees of governmental employers.
    
    If passed and implemented, PERS would cover private employers and be subject to the requirements of ERISA and the private plan funding requirements under the Internal Revenue Code.
    
    Actual cost of becoming a private plan have not been calculated by the actuary.



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):


    If PERS were opened to private employer employees by admitting court appointed mental hygiene commissioners to coverage, then PERS would become subject to ERISA and private plan funding rules under the Tax Reform Act of 2006. PERS would then be subject to accelerated funding rules and federal premiums payable to the Pension Benefit Guaranty Corporation for private plan coverage.
    
    PERS would cease to be a governmental plan under the terms of the Internal Revenue Code.



Memorandum


    This bill should not be passed due to the technical coverage requirements for public employer plans. The bill would convert PERS from a public employer retirement system to a private retirement system.
    
    PERS is a governmental plan for governmental employees and as such is not subject to private employer pension laws. The conversion to a private system would be contrary to the best interests of the State of West Virginia and all public employee members of PERS.



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