Actuarial Fiscal Note

Date Requested:February 26, 2024
Time Requested:03:50 PM

1135	Comm. Sub.	HB4734
Agency:	Consolidated Public Retirement Board
CBD Number:	Version:	Bill Number:	Resolution Number:
CBD Subject:	Corrections

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).

    On July 1, 2024, Committee Substitute for HB 4734 would provide a three percent pay increase for full-time employees of the Division of Corrections and Rehabilitation that are employed as non-uniform administrative staff, provided those employees have accumulated three years or more of continuous employment.

    On or after July 1, 2024, individuals who have accumulated less than three years of continuous employment and individuals becoming employed as full-time employees of the Division of Corrections and Rehabilitation that are employed as non-uniform administrative staff shall receive a three percent pay increase after the individual accumulates three years of continuous service.

    The increase in salaries provided by Committee Substitute for HB 4734 would increase the actuarial accrued liability for PERS by approximately $5.181 million. The unfunded liability would be amortized on a level dollar basis for the remaining amortization period (until June 30, 2035) leading to an increase in the PERS annual amortization amount of $639,000. The change in the PERS employer normal cost from the salary increases would increase the PERS annual recommended employer contribution by an additional $92,000. Therefore, the total increase to the PERS annual recommended employer contribution in the first year as a result of salary increases would be approximately $731,000 or 0.0392% of payroll (after the salary increase).

    Estimates given are based on actuarial results as of July 1, 2023, using the same assumptions and plan provisions from the PERS July 1, 2023 funding valuation. 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	$5,181,000.00	$731,000.00	0.04 %
Normal Cost of System	N/A	$92,000.00	0.01 %
Past Service Liabilities	$5,181,000.00	$639,000.00	0.03 %
Fiscal Year Past Service Amortization Period Ends	N/A	2035	N/A

Explanation of above Actuarial estimates:

    The increase in salaries provided by Committee Substitute for HB 4734 would increase the actuarial accrued liability for PERS by approximately $5.181 million. The unfunded liability would be amortized on a level dollar basis for the remaining amortization period (until June 30, 2035) leading to an increase in the PERS annual amortization amount of $639,000. The change in the PERS employer normal cost from the salary increases would increase the PERS annual recommended employer contribution by an additional $92,000. Therefore, the total increase to the PERS annual recommended employer contribution in the first year as a result of salary increases would be approximately $731,000 or 0.0392% of payroll (after the salary increase).

    Estimates given are based on actuarial results as of July 1, 2023, using the same assumptions and plan provisions from the PERS July 1, 2023 funding valuation. 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.

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	731,000	731,000
Personal Services	0	0	0
Current Expenses	0	731,000	731,000
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):

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 report for PERS, 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 PERS is not expected to materially change because of the Committee Substitute for HB 4734.

    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