Actuarial Fiscal Note


Retirement Systems Impacted by Legislation:

Public Employees Retirement System

FUND(S):

PERS 2510

Sources of Revenue:

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 level disability retirement benefits for life by removing the recalculation in the minimum benefit at age 65. It is assumed that only benefit payments following the effective date of the bill will be increased. Those currently over age 65 on the effective date of the Bill and receiving disability benefits will not be recalculated or adjusted.
    
    The Bill violates 2005 Pension Reform restrictions for active members. The bill would required an amendment to 2005 Pension Reform statutes in order to be allowable. Such change would be contrary to current public pension policy set by the West Virginia Legislature when 2005 Pension Reform was passed.



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 $42,463,000.00 $9,017,000.00 0.58 %
Normal Cost of System N/A $538,000.00 0.04 %
Past Service Liabilities $42,463,000.00 $8,479,000.00 0.54 %
Fiscal Year Past Service
Amortization Period Ends
N/A FY2023 N/A


Explanation of above estimates:


    The increases in normal cost and actuarial accrued liabilities reflect the increased minimum disability benefits for both current and expected future disability retirees under PERS. Amounts are based on a 2007 study run by Buck Consultants updated based on the July 1, 2012 actuarial valuation for PERS. An effective date for funding of July 1, 2013 has been assumed. It is assumed that no prior benefit payments will be effected and that the new minimum applies to benefit payments following the effective date only.
    
    It should be noted that these results are representative for the current year. A July 1, 2012 Study of exact costs by Buck Consultants was not completed since the Bill violated 2005 Pension Reform as applicable in the current year.

Analysis of Impact on Public Pension Policy:


    The bill provides level disability retirement benefits for life by removing the recalculation in the minimum benefit at age 65. It is assumed that only benefit payments following the effective date of the bill will be increased. Those currently over age 65 on the effective date of the Bill and receiving disability benefits will not be recalculated or adjusted.
    
    The Bill violates 2005 Pension Reform restrictions for active members. The bill would required an amendment to 2005 Pension Reform statutes in order to be allowable. Such change would be contrary to current public pension policy set by the West Virginia Legislature when 2005 Pension Reform was passed.



Fiscal Note Summary


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


    The bill provides level disability retirement benefits for life by removing the recalculation in the minimum benefit at age 65. It is assumed that only benefit payments following the effective date of the bill will be increased. Those currently over age 65 on the effective date of the Bill and receiving disability benefits will not be recalculated or adjusted.
    
    The Bill violates 2005 Pension Reform restrictions for active members. The bill would required an amendment to 2005 Pension Reform statutes in order to be allowable. Such change would be contrary to current public pension policy set by the West Virginia Legislature when 2005 Pension Reform was passed.



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 9,017,000 9,425,000
Personal Services 0 0 0
Current Expenses 0 0 0
Repairs and Alterations 0 0 0
Assets 0 0 0
Other 0 9,017,000 9,425,000
2. Estimated Total Revenues 0 0 0


Explanation of above estimates (including long-range effect):


    The increases in normal cost and actuarial accrued liabilities reflect the increased minimum disability benefits for both current and expected future disability retirees under PERS. Amounts are based on a 2007 study run by Buck Consultants updated based on the July 1, 2012 actuarial valuation for PERS. An effective date for funding of July 1, 2013 has been assumed. It is assumed that no prior benefit payments will be effected and that the new minimum applies to benefit payments following the effective date only.
    
    It should be noted that these results are representative for the current year. A July 1, 2012 Study of exact costs by Buck Consultants was not completed since the Bill violated 2005 Pension Reform as applicable in the current year.



Memorandum


    The bill provides level disability retirement benefits for life by removing the recalculation in the minimum benefit at age 65. It is assumed that only benefit payments following the effective date of the bill will be increased. Those currently over age 65 on the effective date of the Bill and receiving disability benefits will not be recalculated or adjusted.
    
    The Bill violates 2005 Pension Reform restrictions for active members. The bill would required an amendment to 2005 Pension Reform statutes in order to be allowable. Such change would be contrary to current public pension policy set by the West Virginia Legislature when 2005 Pension Reform was passed.



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