Actuarial Fiscal Note

Date Requested:January 30, 2018
Time Requested:12:03 PM
Agency: Consolidated Public Retirement Board
CBD Number: Version: Bill Number: Resolution Number:
1958 Draft - Comm. Sub. SB341
CBD Subject: Courts

Retirement Systems Impacted by Legislation:

JRS 2140

FUND(S):

General Fund

Sources of Revenue:

Increases Existing Expenses

Legislation creates:

JRS



Actuarial Note Summary


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


    The bill creates a new WV Intermediate Court of Appeals. As it pertains to retirement, the bill places the six new members of this court into the Judges Retirement System. Assuming these new judges are not currently members of JRS (or PERS members eligible for transfer to JRS), they would be members of JRS Tier 2. As a result of the increased membership in JRS, the plan will accumulate additional liability; however, because the plan is currently so well-funded (174.4% as of July 1, 2017), any additional liability would be funded immediately by current plan assets and the plan would not experience any increase in Unfunded Actuarial Accrued Liability (UAAL). Currently, the employer’s contributions to the plan are equal to the expected member contribution. Thus, because of the larger payroll expected in the plan, the employer’s required contribution would increase by $64,000 for the first year in which new judges are entered into the system.



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 $64,000.00 0.63 %
Normal Cost of System N/A $187,000.00 -0.11 %
Past Service Liabilities $0.00 $0.00 0.00 %
Fiscal Year Past Service
Amortization Period Ends
N/A 0000 N/A


Explanation of above estimates:


    Adding an additional 6 members to the Judges Retirement System will necessitate additional contributions each year for those new members based on the Board’s policy requiring the employer to contribute not less than the member contribution each year. In determining potential costs due to this proposed legislation, new entrants of the plan have been assumed to have similar characteristics to the judges who have most recently entered JRS (or PERS, as applicable). One notable exception to this assumption is salary: the bill provides that the Intermediate Court judges will receive a salary of $130,000, which has been assumed for purposes of pricing the pension impact of this legislation. All costs presented in this note are based on the actuarial valuations for funding as of July 1, 2017, but employer costs to the plan will not increase until new judges actually enter into the system.

Analysis of Impact on Public Pension Policy:


    In terms of retirement-related issues addressed by the bill, the proposed legislation simply provides that the six new members of the WV Intermediate Court of Appeals will be participants of JRS. Those new participants are assumed to bring with them no previously accrued liability. Other potential costs should be considered, with questions about cost referred to the Judiciary.



Fiscal Note Summary


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


    The bill creates a new WV Intermediate Court of Appeals. As it pertains to retirement, the bill places the six new members of this court into the Judges Retirement System. Assuming these new judges are not currently members of JRS (or PERS members eligible for transfer to JRS), they would be members of JRS Tier 2. As a result of the increased membership in JRS, the plan will accumulate additional liability; however, because the plan is currently so well-funded (174.4% as of July 1, 2017), any additional liability would be funded immediately by current plan assets and the plan would not experience any increase in Unfunded Actuarial Accrued Liability (UAAL). Currently, the employer’s contributions to the plan are equal to the expected member contribution. Thus, because of the larger payroll expected in the plan, the employer’s required contribution would increase by $64,000 for the first year in which new judges are entered into the system.



Fiscal Note Detail


Effect of Proposal Fiscal Year
2018
Increase/Decrease
(use"-")
2019
Increase/Decrease
(use"-")
Fiscal Year
(Upon Full
Implementation)
1. Estmated Total Cost 0 0 64,000
Personal Services 0 0 0
Current Expenses 0 0 64,000
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):


    Adding an additional 6 members to the Judges Retirement System will necessitate additional contributions each year for those new members based on the Board’s policy requiring the employer to contribute not less than the member contribution each year. In determining potential costs due to this proposed legislation, new entrants of the plan have been assumed to have similar characteristics to the judges who have most recently entered JRS (or PERS, as applicable). One notable exception to this assumption is salary: the bill provides that the Intermediate Court judges will receive a salary of $130,000, which has been assumed for purposes of pricing the pension impact of this legislation. All costs presented in this note are based on the actuarial valuations for funding as of July 1, 2017, but employer costs to the plan will not increase until new judges actually enter into the system.



Memorandum


    In terms of retirement-related issues addressed by the bill, the proposed legislation simply provides that the six new members of the WV Intermediate Court of Appeals will be participants of JRS. Those new participants are assumed to bring with them no previously accrued liability. Other potential costs should be considered, with questions about cost referred to the Judiciary.
    
    This Actuarial/Fiscal Note is being submitted by the Consolidated Public Retirement Board. It has been reviewed by a qualified actuary. Both the Board and the actuary are available upon request for questions.
    .



    Person submitting Fiscal Note: Melody Bailey, Actuarial Analyst, WV CPRB
    Email Address: melody.j.bailey@wv.gov