Actuarial Fiscal Note

Date Requested:February 10, 2022
Time Requested:03:54 PM

2595	Introduced	HB4612
Agency:	Consolidated Public Retirement Board
CBD Number:	Version:	Bill Number:	Resolution Number:
CBD Subject:	Retirement

Retirement Systems Impacted by Legislation:

MPFRS 2390

FUND(S):

Other Fund

Sources of Revenue:

Local Governments Creates New Expense

Legislation creates:

MPFRS

Actuarial Note Summary

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

    HB 4612 would change the service eligibility requirement for a non-duty disability benefit from the Municipal Police Officers and Firefighters Retirement System (MPFRS) from 10 or more years of contributory service to five or more years of contributory service.

    Decreasing the service eligibility requirement for non-duty disability would result in an increase in the MPFRS Actuarial Accrued Liabilities of $60,000, as of July 1, 2021, and the MPFRS employer Normal Cost would increase by 0.10% of payroll. The cost to MPFRS from HB 4612 is not expected to change the contribution rate for members or employers, whose contribution rates would remain at 8.5% of payroll each.

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	$60,000.00	$27,000.00	0.10 %
Normal Cost of System	N/A	$27,000.00	0.10 %
Past Service Liabilities	$60,000.00	$0.00	0.00 %
Fiscal Year Past Service Amortization Period Ends	N/A		N/A

Explanation of above Actuarial estimates:

The cost estimate of reducing the MPFRS eligibility requirement for non-duty disability is based on the MPFRS July 1, 2021, Actuarial Funding Valuation. The cost increase results in no additional amortization payment of the MPFRS unfunded liability, and the MFPRS employer normal cost would increase by 0.10% of payroll. Contribution rates would remain unchanged.

Analysis of Impact on Public Pension Policy:

    As written, the cost of the bill would be sustainable by the current employee and employer contribution rates.

    From the 2017 West Virginia Regular Legislative session, SB 392 was introduced and passed into law, where SB 392 required at least ten years of contributory service for eligibility to receive a non-duty disability under MPFRS. The purpose of SB 392 was to align the MPFRS non-duty disability service eligibility requirement with other defined benefit plans administered by the Consolidated Public Retirement Board (CPRB). In addition, the ten-year contributory service eligibility requirement for non-duty disability was also consistent with the ten-year service eligibility requirement for surviving spouse benefits from the death of a participant receiving disability payments prior to the recalculation date, age 60.

    As written, HB 4612 would have an MPFRS non-duty disability service eligibility requirement that is not consistent with some of the newer defined benefit plans administered by the CPRB and would not be consistent with the ten-year service eligibility requirement for surviving spouse benefits from the death of a participant receiving disability payments prior to the recalculation date, age 60.

Fiscal Note Summary

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

    MPFRS consists of local municipalities and does not cover any state employees. Funding for MPFRS is through member contributions of 8.50% of payroll and employer contributions of 8.50% of payroll.

    MPFRS does not impact the costs or revenues of state government.

    Necessary changes to the CPRB administrative system would be required, with administrative costs estimated at approximately $15,000.

Fiscal Note Detail

Effect of Proposal	Fiscal Year
Effect of Proposal	2022 Increase/Decrease (use"-")	2023 Increase/Decrease (use"-")	Fiscal Year (Upon Full Implementation)
1. Estmated Total Cost	0	15,000	0
Personal Services	0	0	0
Current Expenses	0	15,000	0
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.

    For the appropriate actuarial disclosures, see the July 1, 2021, funding valuation report for MPFRS, expected to be published in March 2022.

    In particular, future actuarial measurements may differ significantly from the current measurements shown in this actuarial/fiscal note due to plan 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 plan provisions, applicable law, and 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. Both the Board and the CPRB Board Actuary are available to answer any questions on the material contained in this actuarial/fiscal note.

Person submitting Fiscal Note: Kenneth M. Woodson Jr.
Email Address: kenneth.m.woodson@wv.gov