Actuarial Fiscal Note

Date Requested:January 16, 2019
Time Requested:02:08 PM

2278	Introduced	SB316
Agency:	Municipal Pensions Oversight Board
CBD Number:	Version:	Bill Number:	Resolution Number:
CBD Subject:	Municipalities, Retirement

Retirement Systems Impacted by Legislation:

53 individual municipal pension funds

FUND(S):

Other Fund

Sources of Revenue:

Bill does not specify a revenue source

Legislation creates:

53 municipal policemen's and municipal firemen's pension and relief funds

Actuarial Note Summary

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

    Summarize in a clear and concise manner what impact this measure will have on the liabilities and contributions associated with the retirement system(s).

    This bill will prohibit a municipal policemen's pension and relief fund board of trustees or a municipal firemen's pension and relief fund board of trustees or the Municipal Pensions Oversight Board from correcting an error in the computation of a member's pension if the error was created prior to July 7, 2017 and the error resulted in the member receiving an amount greater than allowed in existing State statutes. Every erroneous pension calculation that occurred prior to July 7, 2017 will continue to be paid to the pensioner and at the pensioner's death any eligible beneficiaries until all are deceased.

    Where pensions have been calculated incorrectly and the pensioners benefits have been overstated, the liabilities of the plan are increased. Contributions from the members and the municipality often are used to pay a portion of current benefits instead of going towards paying down unfunded liabilities. The State Of WV also provides an allocation to municipal pension funds that have an unfunded liability. The State allocation is intended to be used to offset current unfunded liabilities. When pension benefits are not corrected to the amount allowed by statute, the liabilities of the plan are increased and the contributions from the municipality must be increased to offset the additional payments to pensioners that are erroneous.

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
Impact On	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	$0.00	0.00 %
Normal Cost of System	N/A	$0.00	0.00 %
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:

    Please explain increases and decreases in Normal Cost and Actuarial Accrued Liabilities, including assumptions and data sources. Please also include a long-range schedule of contributions if fiscal impact is expected to vary in future years.

    It is impossible to calculate the costs of not fixing errors created by pension boards which calculated incorrectly the pensions of retirees who have retired prior to July, 1, 2017 without re-calculating every pension in each of the 53 individual pensions plans. The State does not have access to the data necessary to make these calculations. However, for every pensioner who is receiving more than allowed under current statutes, that pension plan will pay until the pensioner dies and until his/her beneficiary dies too since there is are spousal, dependent child, dependent parent, and dependent sibling benefits allowable in state code. Where the problem exists, and because the state provides a state share for plans which are not fully funded, the state aid will disproportionately continue to be provided due to the calculation errors made by previous boards. Current statute states fully funded pension plans are ineligible to draw state funds for their pensions. Plans which are paying to beneficiaries more than allowed by state code will continue to have unfunded liabilities far into the future.

Analysis of Impact on Public Pension Policy:

    Please identify the direct and indirect expected impact on public pension policy for members covered under the retirement system(s). Also discuss any areas of vagueness, technical defects, and/or any special issues not captured elsewhere on this form.

    This bill as written will in effect create a two tiered system for each plan. Those pensions calculated prior to July 7, 2017 will remain regardless of whether they were calculated correctly or calculated artificially high. For any pension calculated after July 7, 2017 which is calculated incorrectly, the pension must be fixed to the correct amount regardless of whether an over-payment exists or an under-payment exists.

    Current law calculating policemen's and firemen's pensions was put in place by the Legislature on July 1, 1981 in section §8-22-16, specifically now it is enumerated as §8-22-16(d).

Fiscal Note Summary

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

    Summarize in a clear and concise manner what impact this measure will have on costs and revenues of state government.

    All of these 53 plans are municipal policemen's or municipal firemen's pension and relief funds. Each municipality is responsibly for funding the plans using municipal funds, employee payroll portions, and a component of state aid provided the municipality and municipal pension plan meets certain requirements.

    There is a 1% surcharge on fire and casualty insurance premiums collected by the State Insurance Commission which is split three ways. 10 basis points goes to the Teachers Retirement System operated by the CPRB; 25 basis points of the tax goes to volunteer fire companies in WV; and 65 basis points of the tax comes to the Municipal Pensions Oversight Board for distribution to police and fire pension funds provided they meet the statutory requirements to draw down the funds. Those plans which are overpaying their beneficiaries are likely to continue to have unfunded liabilities and therefore qualify for additional state aid from this surcharge revenue. These additional funds being sent to plans overpaying their pensioners cannot be calculated without knowing the total amount of the over-payments.

    The amount of the insurance premium surcharge collected each year is not affected by the decisions of pension boards in the calculations of police and fire pensions.

Fiscal Note Detail

Effect of Proposal	Fiscal Year
Effect of Proposal	2019 Increase/Decrease (use"-")	2020 Increase/Decrease (use"-")	Fiscal Year (Upon Full Implementation)
1. Estmated Total Cost	0	0	0
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):

    Please explain increases and decreases in personal services, current expenses, repairs and alterations, assets, other costs and revenues, including assumptions and data sources and delineation between start-up and ongoing costs. Please also include a long-range schedule of costs and revenues if fiscal impact is expected to vary in future years.

    There is not an impact to annual state revenues or expenditures.

Memorandum

Please identify any areas of vagueness, technical defects, reasons a bill would not have a fiscal impact, and/or any special issues not captured elsewhere on this form.

Person submitting Fiscal Note: Blair Taylor
Email Address: blair.m.taylor@wv.gov