Actuarial Fiscal Note

Date Requested:January 19, 2023
Time Requested:06:18 PM

1555	Introduced	SB204
Agency:	Consolidated Public Retirement Board
CBD Number:	Version:	Bill Number:	Resolution Number:
CBD Subject:	Education (K12)

Retirement Systems Impacted by Legislation:

TRS 2600

FUND(S):

Special Fund

Sources of Revenue:

Creates New Expense

Legislation creates:

TRS

Actuarial Note Summary

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

    SB 204 would provide a pay increase for TRS Teachers with less than 8 years of service. The annual increase would range from $328 to $4,393, depending on the academic degree received and the years of service.

    The increase in salaries provided by SB 204 would increase the actuarial accrued liability for TRS by approximately $7.5 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 $1 million. The change in the TRS employer normal cost from the salary increases would increase the TRS annual employer contribution by an additional $600,000. Therefore, the total increase to the TRS employer contribution in the first year as a result of salary increases would be approximately $1.6 million or 0.09% of payroll (including pay increases from SB 204). The School Aid Formula (SAF) appropriation for FY 2024 would increase by approximately $1.1 million due to the salary increases from SB 204.

    Estimates given are based on actuarial results as of July 1, 2022, using the same assumptions and plan provisions from the July 1, 2022 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	$7,500,000.00	$1,600,000.00	0.09 %
Normal Cost of System	N/A	$600,000.00	0.03 %
Past Service Liabilities	$7,500,000.00	$1,000,000.00	0.06 %
Fiscal Year Past Service Amortization Period Ends	N/A	2034	N/A

Explanation of above Actuarial estimates:

Analysis of Impact on Public Pension Policy:

    The increase in salaries provided by SB 204 would increase the actuarial accrued liability for TRS by approximately $7.5 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 $1 million. The change in the TRS employer normal cost from the salary increases would increase the TRS annual employer contribution by an additional $600,000. Therefore, the total increase to the TRS employer contribution in the first year as a result of salary increases would be approximately $1.6 million or 0.09% of payroll (including pay increases from SB 204). The School Aid Formula (SAF) appropriation for FY 2024 would increase by approximately $1.1 million due to the salary increases from SB 204.

    Estimates given are based on actuarial results as of July 1, 2022, using the same assumptions and plan provisions from the July 1, 2022 funding valuations. These estimates are based on assumptions of future events, which may not materialize.

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	2023 Increase/Decrease (use"-")	2024 Increase/Decrease (use"-")	Fiscal Year (Upon Full Implementation)
1. Estmated Total Cost	0	1,600,000	1,600,000
Personal Services	0	0	0
Current Expenses	0	1,600,000	1,600,000
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, 2022 funding valuation report for TRS, expected to be published on March 31, 2023.

    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 salary increases from SB 204 are not expected to material change the risk assessment for TRS.

    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