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.
    
    Section 5-10-22h(c) prohibits increases to active members when the funded percentage in the last Actuarial Valuation for PERS is under 85%. As of the latest July 1, 2010 Actuarial Valuation for PERS, the funded percentage was 74.6%.
    
    Actuarial costs for the provisions of the Bill were not calculated due to the restriction applicable for the 2011 Legislative Session.
    
    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 benefits under the Bill provide for additional free military service credits including service in the National Guard. These credits would provide an increase in retirement benefits to a subgroup of active PERS members.
    
    An actuarial cost study was not completed since these provisions violate the restrictions for PERS under 2005 Pension Reform. If costs are to be completed at a future date, then a retirement study must be completed by the Actuary to estimate the impact of the additional military service credits.

Analysis of Impact on Public Pension Policy:


    The bill provides expanded free military service credits for certain regular military service and free military service by formula for National Guard service. As drafted, non military members of PERS, both State and local governments, would be forced to fund the additional free military service credits through increased employer contributions. If the legislature wishes to provide expanded military service, the legislature should study providing a military service/national guard service plan through general revenue funding as a distinct and separate plan.



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.
    
    Section 5-10-22h(c) prohibits increases to active members when the funded percentage in the last Actuarial Valuation for PERS is under 85%. As of the latest July 1, 2010 Actuarial Valuation for PERS, the funded percentage was 74.6%.
    
    Actuarial costs for the provisions of the Bill were not calculated due to the restriction applicable for the 2011 Legislative Session.
    
    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 benefits under the Bill provide for additional free military service credits including service in the National Guard. These credits would provide an increase in retirement benefits to a subgroup of active PERS members.
    
    An actuarial cost study was not completed since these provisions violate the restrictions for PERS under 2005 Pension Reform. If costs are to be completed at a future date, then a retirement study must be completed by the Actuary to estimate the impact of the additional military service credits.



Memorandum


    The bill provides expanded free military service credits for certain regular military service and free military service by formula for National Guard service. As drafted, non military members of PERS, both State and local governments, would be forced to fund the additional free military service credits through increased employer contributions. If the legislature wishes to provide expanded military service, the legislature should study providing a military service/national guard service plan through general revenue funding as a distinct and separate plan.



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