Actuarial Fiscal Note

Date Requested:January 31, 2024
Time Requested:12:00 PM

3100	Introduced	HB4883
Agency:	Consolidated Public Retirement Board
CBD Number:	Version:	Bill Number:	Resolution Number:
CBD Subject:	Governor -- Bills Requested By

Retirement Systems Impacted by Legislation:

TRS 2600 and Plan B 2393

FUND(S):

Special Fund

Sources of Revenue:

Creates New Expense

Legislation creates:

TRS and Plan B

Actuarial Note Summary

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

    HB 4883 would provide a $1,400 per year salary increase for service personnel, which depending on pay grade would be an annual increase between 3.6% and 6.3% in salary. For teachers, HB 4883 would provide a $2,460 per year salary increase and depending on years of experience and the academic degree received, would be an annual increase between 3.90% and 6.70% in salary.

    The increase in salaries provided by HB 4883 would increase the actuarial accrued liability for TRS by approximately $178.802 million. The unfunded liability would be amortized on a level dollar basis for the remaining amortization period (until June 30, 2034) leading to an increase in the TRS annual amortization amount of $26.67 million. The change in the TRS employer normal cost from the salary increases would increase the TRS annual employer contribution by an additional $3.731 million. Therefore, the total increase to the TRS employer contribution in the first year as a result of salary increases would be approximately $30.401 million.
    The SAF is approximately 90% of the TRS total actuarially required contribution, therefore, the corresponding increase in the School Aid Formula from the proposed salary increases would be about $27.361 million.

    HB 4883 would increase the TRS employer contribution rate from 20.21% of payroll to approximately 20.78% of payroll.

    HB 4883 would provide a $2,900 per year salary increase for members from Plan B, which depending on rank would be an annual increase between 3.70% and 5.71% in salary.

    The increase in salaries provided by HB 4883 would increase the actuarial accrued liability (AAL) for Plan B by approximately $11.493 million. Amortizing this increase over fifteen years on a level dollar basis would increase the Plan B annual recommended employer contribution by approximately $1.238 million. HB 4883 would also increase the Plan B employer normal cost by $278,000. Therefore, the total increase in the Plan B annual recommended employer contribution would be $1.516 million.

    HB 4883 would increase the Plan B employer contribution rate from 34.0% of base payroll to approximately 36.0% of base payroll.

    Estimates given are based on actuarial results as of July 1, 2023, using the same assumptions and plan provisions from the July 1, 2023 funding valuations. These estimates are based on assumptions of future events, which may not materialize.

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	$190,295,000.00	$31,917,000.00	1.55 %
Normal Cost of System	N/A	$4,009,000.00	0.20 %
Past Service Liabilities	$190,295,000.00	$27,908,000.00	1.35 %
Fiscal Year Past Service Amortization Period Ends	N/A		N/A

Explanation of above Actuarial estimates:

    HB 4883 would provide a $1,400 per year salary increase for service personnel, which depending on pay grade would be an annual increase between 3.6% and 6.3% in salary. For teachers, HB 4883 would provide a $2,460 per year salary increase and depending on years of experience and the academic degree received, would be an annual increase between 3.90% and 6.70% in salary.

    The increase in salaries provided by HB 4883 would increase the actuarial accrued liability for TRS by approximately $178.802 million. The unfunded liability would be amortized on a level dollar basis for the remaining amortization period (until June 30, 2034) leading to an increase in the TRS annual amortization amount of $26.67 million. The change in the TRS employer normal cost from the salary increases would increase the TRS annual employer contribution by an additional $3.731 million. Therefore, the total increase to the TRS employer contribution in the first year as a result of salary increases would be approximately $30.401 million.

    The SAF is approximately 90% of the TRS total actuarially required contribution, therefore, the corresponding increase in the School Aid Formula from the proposed salary increases would be about $27.361 million.

    HB 4883 would increase the TRS employer contribution rate from 20.21% of payroll to approximately 20.78% of payroll.

    HB 4883 would provide a $2,900 per year salary increase for members from Plan B, which depending on rank would be an annual increase between 3.70% and 5.71% in salary.

    The increase in salaries provided by HB 4883 would increase the actuarial accrued liability (AAL) for Plan B by approximately $11.493 million. Amortizing this increase over fifteen years on a level dollar basis would increase the Plan B annual recommended employer contribution by approximately $1.238 million. HB 4883 would also increase the Plan B employer normal cost by $278,000. Therefore, the total increase in the Plan B annual recommended employer contribution would be $1.516 million.

    HB 4883 would increase the Plan B employer contribution rate from 34.0% of base payroll to approximately 36.0% of base payroll.

    Estimates given are based on actuarial results as of July 1, 2023, using the same assumptions and plan provisions from the July 1, 2023 funding valuations. These estimates are based on assumptions of future events, which may not materialize.

Analysis of Impact on Public Pension Policy:

Fiscal Note Summary

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

    HB 4883 would provide a $1,400 per year salary increase for service personnel, which depending on pay grade would be an annual increase between 3.6% and 6.3% in salary. For teachers, HB 4883 would provide a $2,460 per year salary increase and depending on years of experience and the academic degree received, would be an annual increase between 3.90% and 6.70% in salary.

    The increase in salaries provided by HB 4883 would increase the actuarial accrued liability for TRS by approximately $178.802 million. The unfunded liability would be amortized on a level dollar basis for the remaining amortization period (until June 30, 2034) leading to an increase in the TRS annual amortization amount of $26.67 million. The change in the TRS employer normal cost from the salary increases would increase the TRS annual employer contribution by an additional $3.731 million. Therefore, the total increase to the TRS employer contribution in the first year as a result of salary increases would be approximately $30.401 million.

    The SAF is approximately 90% of the TRS total actuarially required contribution, therefore, the corresponding increase in the School Aid Formula from the proposed salary increases would be about $27.361 million.

    HB 4883 would increase the TRS employer contribution rate from 20.21% of payroll to approximately 20.78% of payroll.

    HB 4883 would provide a $2,900 per year salary increase for members from Plan B, which depending on rank would be an annual increase between 3.70% and 5.71% in salary.

    The increase in salaries provided by HB 4883 would increase the actuarial accrued liability (AAL) for Plan B by approximately $11.493 million. Amortizing this increase over fifteen years on a level dollar basis would increase the Plan B annual recommended employer contribution by approximately $1.238 million. HB 4883 would also increase the Plan B employer normal cost by $278,000. Therefore, the total increase in the Plan B annual recommended employer contribution would be $1.516 million.

    HB 4883 would increase the Plan B employer contribution rate from 34.0% of base payroll to approximately 36.0% of base payroll.

    Estimates given are based on actuarial results as of July 1, 2023, using the same assumptions and plan provisions from the July 1, 2023 funding valuations. These estimates are based on assumptions of future events, which may not materialize.

Fiscal Note Detail

Effect of Proposal	Fiscal Year
Effect of Proposal	2024 Increase/Decrease (use"-")	2025 Increase/Decrease (use"-")	Fiscal Year (Upon Full Implementation)
1. Estmated Total Cost	0	31,917,000	31,917,000
Personal Services	0	0	0
Current Expenses	0	31,917,000	31,917,000
Repairs and Alterations	0	0	0
Assets	0	0	0
Other	0	0	0
2. Estimated Total Revenues	0	0	0

Explanation of above Fiscal Note estimates (include possible long-range effect):

    HB 4883 would provide a $1,400 per year salary increase for service personnel, which depending on pay grade would be an annual increase between 3.6% and 6.3% in salary. For teachers, HB 4883 would provide a $2,460 per year salary increase and depending on years of experience and the academic degree received, would be an annual increase between 3.90% and 6.70% in salary.

    The increase in salaries provided by HB 4883 would increase the actuarial accrued liability for TRS by approximately $178.802 million. The unfunded liability would be amortized on a level dollar basis for the remaining amortization period (until June 30, 2034) leading to an increase in the TRS annual amortization amount of $26.67 million. The change in the TRS employer normal cost from the salary increases would increase the TRS annual employer contribution by an additional $3.731 million. Therefore, the total increase to the TRS employer contribution in the first year as a result of salary increases would be approximately $30.401 million.

    The SAF is approximately 90% of the TRS total actuarially required contribution, therefore, the corresponding increase in the School Aid Formula from the proposed salary increases would be about $27.361 million.

    HB 4883 would increase the TRS employer contribution rate from 20.21% of payroll to approximately 20.78% of payroll.

    HB 4883 would provide a $2,900 per year salary increase for members from Plan B, which depending on rank would be an annual increase between 3.70% and 5.71% in salary.

    The increase in salaries provided by HB 4883 would increase the actuarial accrued liability (AAL) for Plan B by approximately $11.493 million. Amortizing this increase over fifteen years on a level dollar basis would increase the Plan B annual recommended employer contribution by approximately $1.238 million. HB 4883 would also increase the Plan B employer normal cost by $278,000. Therefore, the total increase in the Plan B annual recommended employer contribution would be $1.516 million.

    HB 4883 would increase the Plan B employer contribution rate from 34.0% of base payroll to approximately 36.0% of base payroll.

    Estimates given are based on actuarial results as of July 1, 2023, using the same assumptions and plan provisions from the July 1, 2023 funding valuations. These estimates are based on assumptions of future events, which may not materialize.

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.

    For the appropriate actuarial disclosures, see the July 1, 2023 funding valuation reports for TRS and Plan B, 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.

    Regarding Actuarial Standards of Practice 51, the risk assessment for TRS and Plan B may be affected by the salary increases from HB 4883 to the extent that the higher contributions necessitated by the salary increases may not be covered.

    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