Actuarial Fiscal Note
Date Requested:January 25, 2024
Time Requested:08:31 AM |
| Agency: |
Consolidated Public Retirement Board |
|---|
| CBD Number: |
Version: |
Bill Number: |
Resolution Number: |
| 1848 |
Introduced |
SB408 |
|
|---|
| CBD Subject: |
Retirement |
|---|
|
Retirement Systems Impacted by Legislation:
TRS 2600
FUND(S):
Special Fund
Sources of Revenue:
Legislation creates:
TRS
Actuarial Note Summary
Impact this measure will have on the liabilities and contributions associated with the retirement system(s).
The purpose of SB 408 is to allow retired teachers to serve as substitute teachers for 180 days during the academic year without reducing their retirement benefits and the bill allows them to contribute to TRS while serving as a substitute teacher.
This bill would violate the West Virginia Statute §18-7A-28e (c), known as “2005 Pension Reform”, which prohibits the increase of existing benefits or the creation of new benefits for active members of the Teachers’ Retirement System until the limitation sunsets on July 1, 2034.
Under current West Virginia State Law, a retired participant can be employed as a substitute teacher for a total of 140 days each year without reducing their retirement benefit, however, if they work more than 140 days in a given year, their retirement benefit would be reduced to the minimum guaranteed benefit during that year of reemployment. By allowing retired teachers to substitute teach up to 180 days without reducing their retirement benefit, the bill would create a new benefit for active TRS participants.
In addition, SB 408 allows substitute teachers to work over half of the school year and receive their retirement benefit unadjusted, which may violate the IRS in-service distribution rule and could possibly lead to the TRS defined benefit plan being disqualified by the IRS.
SB 408 could change the demographic experience of TRS because teachers would be encouraged to retire earlier than currently assumed because they could return to almost full-time employment as a teacher and continue to receive their retirement benefit unadjusted. This change in retirement age may increase the Unfunded Actuarial Accrued Liability and Normal Cost for TRS.
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 |
$999,999,999.00 |
$999,999,999.00 |
9.99 % |
| Normal Cost of System |
N/A |
$999,999,999.00 |
9.99 % |
| Past Service Liabilities |
$999,999,999.00 |
$999,999,999.00 |
9.99 % |
Fiscal Year Past Service
Amortization Period Ends |
N/A |
9999 |
N/A |
Explanation of above Actuarial estimates:
SB 408 would violate the West Virginia Statute §18-7A-28e (c), known as “2005 Pension Reform”, which prohibits the increase of existing benefits or the creation of new benefits for active members of the Teachers’ Retirement System until the limitation sunsets on July 1, 2034.
Note, the value $999,999,999 displayed above does not indicate an actuarial cost associated with the Bill, it only indicates the Bill violates West Virginia “2005 Pension Reform”.
Analysis of Impact on Public Pension Policy:
SB 408 would violate the West Virginia Statute §18-7A-28e (c), known as “2005 Pension Reform”, which prohibits the increase of existing benefits or the creation of new benefits for active members of the Teachers’ Retirement System until the limitation sunsets on July 1, 2034.
Fiscal Note Summary
Effect this measure will have on costs and revenues of state government.
The purpose of SB 408 is to allow retired teachers to serve as substitute teachers for 180 days during the academic year without reducing their retirement benefits and the bill allows them to contribute to TRS while serving as a substitute teacher.
This bill would violate the West Virginia Statute §18-7A-28e (c), known as “2005 Pension Reform”, which prohibits the increase of existing benefits or the creation of new benefits for active members of the Teachers’ Retirement System until the limitation sunsets on July 1, 2034.
Under current West Virginia State Law, a retired participant can be employed as a substitute teacher for a total of 140 days each year without reducing their retirement benefit, however, if they work more than 140 days in a given year, their retirement benefit would be reduced to the minimum guaranteed benefit during that year of reemployment. By allowing retired teachers to substitute teach up to 180 days without reducing their retirement benefit, the bill would create a new benefit for active TRS participants.
In addition, SB 408 allows substitute teachers to work over half of the school year and receive their retirement benefit unadjusted, which may violate the IRS in-service distribution rule and could possibly lead to the TRS defined benefit plan being disqualified by the IRS.
SB 408 could change the demographic experience of TRS because teachers would be encouraged to retire earlier than currently assumed because they could return to almost full-time employment as a teacher and continue to receive their retirement benefit unadjusted. This change in retirement age may increase the Unfunded Actuarial Accrued Liability and Normal Cost for TRS.
Fiscal Note Detail
| Effect of Proposal |
Fiscal Year |
2024
Increase/Decrease
(use"-") |
2025
Increase/Decrease
(use"-") |
Fiscal Year
(Upon Full
Implementation) |
| 1. Estmated Total Cost |
999,999,999 |
999,999,999 |
999,999,999 |
| Personal Services |
999,999,999 |
999,999,999 |
999,999,999 |
| Current Expenses |
999,999,999 |
999,999,999 |
999,999,999 |
| Repairs and Alterations |
999,999,999 |
999,999,999 |
999,999,999 |
| Assets |
999,999,999 |
999,999,999 |
999,999,999 |
| Other |
999,999,999 |
999,999,999 |
999,999,999 |
| 2. Estimated Total Revenues |
999,999,999 |
999,999,999 |
999,999,999 |
Explanation of above Fiscal Note estimates (include possible long-range effect):
This bill would violate the West Virginia Statute §18-7A-28e (c), known as “2005 Pension Reform”, which prohibits the increase of existing benefits or the creation of new benefits for active members of the Teachers’ Retirement System until the limitation sunsets on July 1, 2034.
Note, the value $999,999,999 displayed above does not indicate an actuarial cost associated with the Bill, it only indicates the Bill violates West Virginia “2005 Pension Reform”.
Memorandum
This bill would violate the West Virginia Statute §18-7A-28e (c), known as “2005 Pension Reform”, which prohibits the increase of existing benefits or the creation of new benefits for active members of the Teachers’ Retirement System until the limitation sunsets on July 1, 2034.
For the appropriate actuarial disclosures, see the July 1, 2023, funding valuation report for TRS, expected to be published in March 2024.
In particular, future actuarial measurements may differ significantly from current measurements due to System experience differing from that anticipated by the economic and demographic assumptions, changes expected as part of the natural operation of the methodology used for these measurements, and changes in system provisions or applicable law or regulations.
Kenneth Woodson Jr., the CPRB Board Actuary, is a Fellow of the Society of Actuaries and a Member of the American Academy of Actuaries. He meets the Qualification Standards of the American Academy of Actuaries to render the actuarial opinions contained in this Actuarial/Fiscal Note.
Person submitting Fiscal Note: Kenneth M. Woodson Jr.
Email Address: kenneth.m.woodson@wv.gov