Actuarial Fiscal Note
Date Requested:February 05, 2015
Time Requested:01:10 PM |
| Agency: |
Consolidated Public Retirement Board |
|---|
| CBD Number: |
Version: |
Bill Number: |
Resolution Number: |
| 1735 |
Introduced |
HB2620 |
|
|---|
| CBD Subject: |
Retirement |
|---|
|
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 impacts members first hired on or after July 1, 2015. It reduces the final average pay applied to determine PERS retirement benefits from a three year average to a 10 year average in the last 15 years of employment. This is effectively a reduction in future benefits for those hired July 1, 2015 and after. The employer Normal Cost is reduced by 1.40% of payroll. Actual saving phases in over time as the nuber of new hires grows each year. The estimated initial year savings is $500,000 with the ultimate savings at $20,000,000 at current pay and inflation.
There is no impact on the current Normal Cost nor Actuarial Accrued Liabilities for those members hired before July 1, 2015.
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 |
$0.00 |
($500,000.00) |
-1.40 % |
| Normal Cost of System |
N/A |
($500,000.00) |
-1.40 % |
| Past Service Liabilities |
$0.00 |
$0.00 |
0.00 % |
Fiscal Year Past Service
Amortization Period Ends |
N/A |
|
N/A |
Explanation of above Actuarial estimates:
The bill reduces benefits under PERS for future hires. Savings is realized through the Normal Cost which is expected to decrease by about 1.4% of payrolll. Savings will incease each year as more new hires increase the savings.
Analysis of Impact on Public Pension Policy:
The Bill effectively lowers benefits by 14 % for newly hired members. Certain adjustments in the PERS vesting provisions should be considered to line up with the longer averaging period.
Fiscal Note Summary
Effect this measure will have on costs and revenues of state government.
The Bill impacts members first hired on or after July 1, 2015. It reduces the final average pay applied to determine PERS retirement benefits from a three year average to a 10 year average in the last 15 years of employment. This is effectively a reduction in future benefits for those hired July 1, 2015 and after. The employer Normal Cost is reduced by 1.40% of payroll. Actual saving phases in over time as the nuber of new hires grows each year. The estimated initial year savings is $500,000 with the ultimate savings at $20,000,000 at current pay and inflation.
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 |
-500,000 |
-20,000,000 |
| 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 Fiscal Note estimates (include possible long-range effect):
The bill reduces benefits under PERS for future hires. Savings is realized through the Normal Cost which is expected to decrease by about 1.4% of payrolll. Savings will incease each year as more new hires increase the savings.
Memorandum
The Bill effectively lowers benefits by 14 % for newly hired members. Certain adjustments in the PERS vesting provisions should be considered to line up with the longer averaging period.
Person submitting Fiscal Note: Harry W. Mandel, Board Actuary, MAAA, MSPA, EA
Email Address: harry.w.mandel@wv,gov