Actuarial Fiscal Note

Date Requested:January 25, 2019
Time Requested:11:17 AM

2046	Introduced	SB233
Agency:	Consolidated Public Retirement Board
CBD Number:	Version:	Bill Number:	Resolution Number:
CBD Subject:	Public Safety

Retirement Systems Impacted by Legislation:

DSRS 2150

FUND(S):

General Fund

Sources of Revenue:

Creates New Expense

Legislation creates:

DSRS

Actuarial Note Summary

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

    SB 233 changes the maximum age to apply for an appointment as deputy sheriff from age 45 to age 50.

    Based on a review of the new entrant profile for the Deputy Sheriff Retirement System (DSRS), we analyzed the employer normal cost for a new deputy sheriff age 45 with a starting salary of $44,000. Based on this review, we would expect the employer normal cost for this new entrant to be approximately 14% of the new deputy’s pay and assuming no actuarial gains or losses in the future we would expect the employer normal cost for this participant to remain at 14% of the deputy’s pay in the future. Note, the employer normal cost of 14% of the deputy’s pay is larger on a percentage basis, than the employer normal cost for the plan which is 5.99% of payroll as of the most recent valuation, July 1, 2018. This new entrant would have no past service as of their employment date and therefore starting out would have no actuarial accrued liability.

    For a new deputy sheriff age 50 with starting salary of $44,000 we would expect an employer normal cost for this new entrant to be about 15.5% of the new deputy’s pay. As before, assuming no actuarial gains or losses in the future we would expect the employer normal cost for this participant to remain at 15.5% of the deputy’s pay in the future. The new entrant would have no past service as of their employment date and therefore starting out would have no actuarial accrued liability.

    Also, from the analysis of the new entrant profile for DSRS we would expect about 4% of all new deputy sheriffs to have a start age between 45 and 50 years of age. Therefore, these older new entrants into DSRS are more expensive on average but the number of older new entrants is small compared to the total number of new entrants in DSRS.

    Overall, if we expect about 4 new entrants per year around age 50, the employer normal cost for these 4 new entrants would be 4x15.5%x44000 or $27,280 and as a percent of the total payroll for DSRS would be about .05%. We expect pay to increase over time, so we expect the employer normal cost to increase over time, however, the percentage of pay would remain the same over time if the actuarial assumptions are realized as expected. The 4 new entrants mentioned above would be in addition to the usual new entrants at age 45 instead of replacing the new entrants at age 45.

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	$27,280.00	0.05 %
Normal Cost of System	N/A	$27,280.00	0.05 %
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:

    SB 233 would not increase the initial unfunded actuarial accrued liability because the new hires would not have past service at their start date.

    Going forward, we do not expect the change in maximum entry age from age 45 to age 50 to materially impact the funding of DSRS due to the small number of new entrants age 50.


    Estimates given are based on actuarial results as of July 1, 2018, using the same assumptions and plan provisions from the July 1, 2017 funding valuation report, except the benefit multiplier increased from 2.25% to 2.50%. These estimates are based on assumptions of future events, which may not materialize. Future measurements may differ significantly due to plan experience differing from that anticipated by these assumptions, by the natural operation of the methodology used for these measurements, or by changes to plan provisions.

Analysis of Impact on Public Pension Policy:

    SB 233 would not increase the initial unfunded actuarial accrued liability because the new hires would not have past service at their start date.
    Going forward, we do not expect the change in maximum entry age from age 45 to age 50 to materially impact the funding of DSRS due to the small number of new entrants age 50.


    Estimates given are based on actuarial results as of July 1, 2018, using the same assumptions and plan provisions from the July 1, 2017 funding valuation report, except the benefit multiplier increased from 2.25% to 2.50%. These estimates are based on assumptions of future events, which may not materialize. Future measurements may differ significantly due to plan experience differing from that anticipated by these assumptions, by the natural operation of the methodology used for these measurements, or by changes to plan provisions.

Fiscal Note Summary

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

DSRS is not funded through State contributions, therefore, SB 233 would not impact State funding.

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	27,280	27,280
Personal Services	0	0	0
Current Expenses	0	27,280	27,280
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):

Memorandum

This Actuarial/Fiscal Note is being submitted by the Consolidated Public Retirement Board. It has been reviewed by the CPRB Actuary. Both the Board and the CPRB Actuary are available upon request for questions.

Person submitting Fiscal Note: Kenneth M. Woodson Jr., Board Actuary, CPRB
Email Address: kenneth.m.woodson.wv.gov