Actuarial Fiscal Note
Date Requested:February 07, 2018
Time Requested:02:13 PM |
| Agency: |
Consolidated Public Retirement Board |
|---|
| CBD Number: |
Version: |
Bill Number: |
Resolution Number: |
| 2447 |
Introduced |
SB501 |
|
|---|
| CBD Subject: |
County Officials, Retirement |
|---|
|
Retirement Systems Impacted by Legislation:
DSRS 2150
FUND(S):
Other Fund
Sources of Revenue:
local governments Increases Existing Expenses
Legislation creates:
DSRS
Actuarial Note Summary
Impact this measure will have on the liabilities and contributions associated with the retirement system(s).
As written, the bill provides that the multiplier for calculation of benefits in the Deputy Sheriff Retirement System (DSRS) would be increased from 2.25% to 2.75% for all current and prospective retirees. As a result, the Actuarial Accrued Liability of the plan would be expected to increase approximately $40.877 million, increasing the amortization portion of the FY2018 required contribution by employers by approximately $4.956 million. In addition, the Normal Cost of the plan would be expected to increase by 2.06% per year, or roughly $1.066 million for the FY2018 required contribution. Thus, the total increase to the FY2018 contribution, as well as for all years through FY2029, would be expected to increase by Approximately $6.022 million. Because the member contribution rate is set statutorily at 8.5%, the contribution rate for participating employers would necessarily need to increase in order to pay the additional cost. However, current statute limits the employer contribution rate to be no more than 13%, meaning if all actuarial assumptions are met in future year, the increase provided with this bill would not be able to be fully funded.
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 |
$40,877,000.00 |
$6,022,000.00 |
12.06 % |
| Normal Cost of System |
N/A |
$1,066,000.00 |
2.06 % |
| Past Service Liabilities |
$40,877,000.00 |
$4,956,000.00 |
10.00 % |
Fiscal Year Past Service
Amortization Period Ends |
N/A |
2029 |
N/A |
Explanation of above Actuarial estimates:
Because the benefits of current retirees would be recalculated using the new 2.75% multiplier, the current Unfunded Actuarial Accrued Liability of the plan would increase from $2.473 million to approximately $43.350 million. Amortization of that amount of the current amortization period would increase annual costs to the employers by $4.956 million. In addition, because the benefits currently being accrued by active members will be calculated using the higher multiplier, the Normal Cost of the plan is expected to increase by approximately 2.06%.
In total, the annual cost incurred by increasing the multiplier from 2.25% to 2.75% would require an additional $6.022 million per year in contributions. The current employer contribution rate of 12% is not sufficient to meet that requirement. An employer contribution rate of nearly 17.5% would be necessary, and current statute limits the contribution rate of participating employers to 13%. Thus, as written, the plan could not sustain the increase in multiplier without additional funding.
Analysis of Impact on Public Pension Policy:
As written, the costs of the bill would not be sustainable either by the current employee and employer contribution rates, or even by the maximum rates allowed by current law.
Fiscal Note Summary
Effect this measure will have on costs and revenues of state government.
The Deputy Sheriff Retirement System is not a liability of the State, and as such the increased cost to the system due to the proposed legislation would not affect the State’s costs. However, additional costs of approximately $8,000 would be incurred by the CPRB in making the required changes to the computer software used to administer pension benefits. The bill does not provide a source of funding for this additional cost.
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 |
8,000 |
0 |
| Personal Services |
0 |
0 |
0 |
| Current Expenses |
0 |
8,000 |
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 Deputy Sheriff Retirement System is not a liability of the State, and as such the increased cost to the system due to the proposed COLA would not affect the State’s costs. However, additional costs of approximately $8,000 would be incurred by the CPRB in making the required changes to the computer software used to administer pension benefits. The bill does not provide a source of funding for this additional cost.
Memorandum
Additional costs of approximately $8,000 would be incurred by the CPRB in making the required changes to the computer software used to administer pension benefits. The bill does not provide a source of funding for this additional cost.
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