Actuarial Fiscal Note

Date Requested:January 21, 2026
Time Requested:04:11 PM

1699	Introduced	HB4657
Agency:	Consolidated Public Retirement Board
CBD Number:	Version:	Bill Number:	Resolution Number:
CBD Subject:	State Personnel

Retirement Systems Impacted by Legislation:

PERS 2501

FUND(S):

Special Fund

Sources of Revenue:

Creates New Expense

Legislation creates:

PERS

Actuarial Note Summary

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

    HB 4657 would allow PERS Tier 2 members, that is, PERS members hired for the first time on or after July 1, 2015, to convert unused sick leave or annual leave into additional benefit service credits, where the conversion rate equals the rate of the PERS Tier 1 members.

    Measured as of July 1, 2025, the HB 4657 would increase the actuarial accrued liability for PERS by approximately $11.64 million. Amortizing this increase over 10 years on a level dollar basis would increase the annual recommended employer contribution for PERS by approximately $1.618 million, or 0.09% of FY 2026 PERS payroll.

    Moreover, HB 4657 would increase the PERS employer normal cost by about $1.778 million per year, or 0.10% of FY 2026 PERS payroll. Therefore, measured as of July 1, 2025, the total FY 2026 PERS annual recommended employer contribution would increase by approximately $3.396 million, or 0.19% of PERS payroll, due to HB 4657.

    As of July 1, 2025, PERS Tier 2 active members represent about 55% of the total active population count. In the future as members leave active status, they will be replaced by PERS Tier 2 members. By Fiscal Year 2054 it is estimated that PERS Tier 2 active members will represent about 99.7% of the total active population. That is, by FY 2054 the active population for PERS will consist almost entirely of PERS Tier 2 active members, which would mean that almost the entire active population of the plan would be reflecting the cost associated with the provisions of HB 4657.

    After FY 2026, the actuarial cost associated with the HB 4657 is expected to increase each year as PERS payroll increases and the cost of the HB 4657, expressed as a percentage of payroll, trends upward.

    As of July 1, 2054, HB 4657 is expected to increase the PERS annual recommended employer cost by $6.23 million or 0.22% of PERS payroll for FY 2054.

    It is important to note that the actuarial costs displayed in this actuarial/fiscal note are based on a middle-of-the-road future path, where all the assumptions are met with no experience gains or losses in the future. The actual cost from the HB 4657 may be different from the expected path results presented in this actuarial/fiscal note.

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	$11,640,000.00	$3,396,000.00	0.19 %
Normal Cost of System	N/A	$1,778,000.00	0.10 %
Past Service Liabilities	$11,640,000.00	$1,618,000.00	0.09 %
Fiscal Year Past Service Amortization Period Ends	N/A	2035	N/A

Explanation of above Actuarial estimates:

Analysis of Impact on Public Pension Policy:

    Measured as of July 1, 2025, HB 4657 would increase the actuarial accrued liability for PERS by approximately $11.64 million. Amortizing this increase over 10 years on a level dollar basis would increase the annual recommended employer contribution for PERS by approximately $1.618 million, or 0.09% of FY 2026 PERS payroll.

    Moreover, HB 4657 would increase the PERS employer normal cost by about $1.778 million per year, or 0.10% of FY 2026 PERS payroll. Therefore, measured as of July 1, 2025, the total FY 2026 PERS annual recommended employer contribution would increase by approximately $3.396 million, or 0.19% of PERS payroll, due to HB 4657.

    After FY 2026, the actuarial cost associated with HB 4657 is expected to increase each year as PERS payroll increases and the cost of HB 4657, expressed as a percentage of payroll, trends upward.

    As of July 1, 2054, HB 4657 is expected to increase the PERS annual recommended employer cost by $6.23 million or 0.22% of PERS payroll for FY 2054.

    It is important to note that the actuarial costs displayed in this actuarial/fiscal note are based on a middle-of-the-road future path, where all the assumptions are met with no experience gains or losses in the future. The actual cost from the HB 4657 may be different from the expected path results presented in this actuarial/fiscal note.

Fiscal Note Summary

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

Fiscal Note Detail

Effect of Proposal	Fiscal Year
Effect of Proposal	2026 Increase/Decrease (use"-")	2027 Increase/Decrease (use"-")	Fiscal Year (Upon Full Implementation)
1. Estmated Total Cost	3,421,000	3,560,000	6,230,000
Personal Services	0	0	0
Current Expenses	25,000	0	0
Repairs and Alterations	0	0	0
Assets	0	0	0
Other	3,396,000	3,560,000	6,230,000
2. Estimated Total Revenues	0	0	0

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

    In addition to the increase in the PERS annual employer cost of $3.396 million, or 0.19% of payroll for FY 2026, there is a one-time $25,000 expense to set up administrative software to allow PERS Tier 2 members to convert unused leave into additional benefit service.

    As of July 1, 2025, PERS Tier 2 active members represent about 55% of the total active population count. In the future as members leave active status, they will be replaced by PERS Tier 2 members. By Fiscal Year 2054 it is estimated that PERS Tier 2 active members will represent about 99.7% of the total active population. That is, by FY 2054 the active population for PERS will consist almost entirely of PERS Tier 2 active members, which would mean that almost the entire active population of the plan would be reflecting the cost associated with the provisions of the HB 4657.

    After FY 2026, the actuarial cost associated with HB 4657 is expected to increase each year as PERS payroll increases and the cost of HB 4657, expressed as a percentage of payroll, trends upward.

    As of July 1, 2054, HB 4657 is expected to increase the PERS annual recommended employer cost by $6.23 million or 0.22% of PERS payroll for FY 2054.

    It is important to note that the actuarial costs displayed in this actuarial/fiscal note are based on a middle-of-the-road future path, where all the assumptions are met with no experience gains or losses in the future. The actual cost from the HB 4657 may be different from the expected path results presented in this actuarial/fiscal note.

    To estimate the PERS annual employer cost for FY 2054, two deterministic asset/liability projections were used, one without the plan provisions of HB 4657 and the other with the plan provisions of HB 4657. The liability projections were provided by Gallagher Benefit Services, Inc. (Gallagher). The CPRB calculated the asset/liability projections based on these liability projections.

    For the deterministic projections used in this actuarial/fiscal note, the new entrant profile was developed based on an analysis of recent new hires in PERS.


    The projection assumptions and the valuation assumptions are the same and are equal to the assumptions from the PERS July 1, 2023, funding valuation report, except for the projection with the plan provisions from HB 4657, where the PERS Tier 2 Unused Leave Load equals the Unused Leave Load from the PERS Tier 1 counterparts. The projections do not include the assumptions from the 2024 PERS Experience Study.

    The data and plan provisions used in the projections are the same data and plan provisions used in the PERS July 1, 2023, funding valuation report, except for the projection with the plan provisions from HB 4657, where the PERS Tier 2 members are allowed to convert unused leave into additional benefit service at a rate equal to the rate of their PERS Tier 1 counterparts.

    Note, asset values in the projections were updated to reflect actual asset amounts through July 1, 2025. However, the liabilities in the projections were provided by Gallagher on February 2, 2024, and were based on the July 1, 2023, valuation data, results and assumptions. Note, the analysis in this actuarial note is not expected to materially change if we update the liability projections using the July 1, 2025, funding valuation results.

    The gain/loss amortization policy used in the projections is:
    (1) Prior to July 1, 2025, include gains or losses in the PERS unfunded actuarial accrued liability (UAAL) and amortize the UAAL by June 30, 2035, using a level dollar amount.
    (2) After June 30, 2025, each gain or loss, determined annually as of June 30th, has a separate amortization base to be amortized over a 15-year period based on a level dollar amortization amount.

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, 2025, funding valuation report for PERS, expected to be published in April 2026.

    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. An analysis of the potential range of such future differences is beyond the scope of the request addressed here.

    Regarding Actuarial Standards of Practice 51, the risk assessment for PERS may be affected by the addition of the Tier 2 conversion option to the extent that the higher contributions necessitated by its addition may not be covered.

    Actuarial Standard of Practice No. 56 provides guidance to actuaries when performing actuarial services with respect to designing, developing, selecting, modifying, using, reviewing, or evaluating models. Gallagher uses third-party software in the performance of annual actuarial valuations and projections.

    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