Actuarial Fiscal Note

Date Requested:February 17, 2023
Time Requested:03:12 PM

3393	Comm. Sub.	SB582
Agency:	Consolidated Public Retirement Board
CBD Number:	Version:	Bill Number:	Resolution Number:
CBD Subject:	Retirement

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).

    The Committee Substitute for SB 582 modifies the length of service an employee of the Legislature must serve to obtain service credits towards retirement in PERS and to purchase retroactive service credits in PERS.

    The Committee Substitute for SB 582 also allows PERS retirants to accept legislative per diems, temporary full-time, or temporary part-time employment from a participating employer in PERS without suspending their retirement annuity provided they do not receive annual compensation more than $25,000.

    More specific the bill:
    • Amends §5-10-2 to modify the definition of Employee as follows “an employee of the Legislature whose term of employment is otherwise classified as temporary and who is employed to perform services required by the Legislature for its regular sessions or during the interim between regular sessions and who has been or is employed during regular sessions or during the interim between regular sessions in five or more consecutive calendar years, as certified by the clerk of the house in which the employee served, is an employee, any provision to the contrary in this article notwithstanding, and is entitled to credited service in accordance with provisions of §5-10-14 of this code”.

    • Amends §5-10-14(a)(1) as follows “for employees of the State Legislature whose term of employment is otherwise classified as temporary and who are employed to perform services required by the Legislature for its regular sessions or during the interim between regular sessions and who have been or are employed during regular sessions or during the interim between regular sessions in five calendar years, service credit of one month shall be awarded for each 10 days employed in the interim between regular sessions, which interim days shall be cumulatively calculated so that any 10 days, regardless of calendar month or year, shall be calculated toward any award of one month of service credit”.

    • Amends §5-10-14(e)(1) as follows:

    o “Employees of the State Legislature whose term of employment is otherwise classified as temporary and who are employed to perform services required by the Legislature for its regular sessions or during the interim time between regular sessions and who have been or are employed during regular sessions or during the interim time between regular sessions in five calendar years, as certified by the clerk of the house in which the employee served, shall receive service credit of six months for all regular sessions served, as certified by the clerk of the house in which the employee served, or shall receive service credit of three months for each regular 30-day session served prior to 1971”.

    o “That employees of the State Legislature whose term of employment is otherwise classified as temporary and who are employed to perform services required by the Legislature for its regular sessions and who have been or are employed during the regular sessions in seven calendar years as either temporary employees or full-time employees or a combination thereof, as certified by the clerk of the house in which the employee served, shall receive a service credit of 12 months for each regular session served, as certified by the clerk of the house in which the employee served”.

    o “Once a legislative employee has been employed during regular sessions for five calendar years or has become a full-time employee of the Legislature, that employee shall receive the service credit provided in this section for all regular and interim sessions and interim days worked by that employee, as certified by the clerk of the house in which the employee served, regardless of when the session or interim legislative employment occurred”.

    • Amends §5-10-14(f) as follows “once a legislative employee becomes a member of the retirement system, he or she may purchase retroactive service credit for any time he or she was employed by the Legislature and did not receive service credit. Any service credit purchased shall be credited as six months for each 60-day session worked, three months for each 30-day session worked or 12 months for each 60-day session for legislative employees who have been employed during regular sessions in
    seven calendar years, as certified by the clerk of the house in which the employee served, and credit for interim employment as provided in this subsection”.

    • Amends §5-10-14(g) as follows:
    o §5-10-14(g) (1), “the five calendar years requirement, the seven calendar years requirement, and the service credit requirements set forth in this section shall be applied retroactively to all periods of legislative employment prior to the passage of this section, including any periods of legislative employment occurring before the five and seven calendar years referenced in this section: Provided, That the employee has not retired prior to the effective date of the amendments made to this section in the 2002 regular session of the Legislature”.

    o §5-10-14(g) (2), “The requirement of five years and the requirement of seven years apply retroactively to all legislative employment prior to the effective date of the 2006 amendments to this section”.

    • Amends §5-10-17(c) as follows: “any employee of the State Legislature whose employment is otherwise classified as temporary and who is employed to perform services required by the Legislature for its regular sessions or during the interim between regular sessions and who has been or is employed during regular sessions or during the interim between sessions in five calendar years, as certified by the clerk of the house of the Legislature in which the employee served, or any member of the legislative body of any other political subdivision shall become a member of the retirement system provided he or she notifies the retirement system in writing of his or her intention to be a member of the system”.

    The bill decreases the length of time an employee of the Legislature must serve to obtain service credits towards retirement and to purchase retroactive service credits, therefore, the bill will increase the actuarial cost for PERS. However, due to the limited number of employees impacted by the bill, the Committee Substitute for SB 582 is not expected to materially change the unfunded actuarial accrued liability (UAAL) or the annual contribution requirement for PERS.

    The Committee Substitute for SB 582 also allows PERS retirants to accept legislative per diems, temporary full-time, or temporary part-time employment from a participating employer in PERS without suspending their retirement annuity provided they do not receive annual compensation in excess of $25,000.

    Costs for “double dipping” benefits of this nature are recognized through earlier retirement usage. Such usage is studied as part of the PERS Experience Studies completed every 5 years. At this point in time, the CPRB Board Actuary will not change the current retirement usage assumption due to this bill, however, consideration of the impact on retirement usage from the Committee Substitute for SB 582 will be reviewed at the next PERS Experience Study, scheduled to be completed by August 2024. Therefore, there is no increase in the PERS unfunded actuarial accrued liability (UAAL) or the contribution requirements of PERS at this time.

    This bill enhances the “double dipping” allowable for PERS retirees who take temporary employment with either the legislature, state agencies or local government agencies. The Committee Substitute for SB 582 limits the level of “double dipping” to $25,000 of temporary wages each year, or about 52% of the average PERS compensation for active members. Allowable “double dipping” could have a long- term impact on retirement usage.

    The annual compensation limit in the West Virginia Statute §5-10-48(c) historically has been approximately 50% of the average salary of PERS active members. As of July 1, 2022, the average salary of PERS active members is $48,300. Based on this metric, the current annual compensation limit in West Virginia Statute §5-10-48(c), $20,000, would be increased to approximately $24,150.

    The legislature should consider its position on “double dipping” when considering the adoption of this bill.

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	$0.00	$0.00	0.00 %
Normal Cost of System	N/A	$0.00	0.00 %
Past Service Liabilities	$0.00	$0.00	0.00 %
Fiscal Year Past Service Amortization Period Ends	N/A	2035	N/A

Explanation of above Actuarial estimates:

    The bill decreases the length of time an employee of the Legislature must serve to obtain service credits towards retirement and to purchase retroactive service credits, therefore, the bill will increase the actuarial cost for PERS. However, due to the limited number of employees impacted by the bill, the Committee Substitute for SB 582 is not expected to materially change the unfunded actuarial accrued liability (UAAL) or the annual contribution requirement for PERS.

    The Committee Substitute for SB 582 also allows PERS retirants to accept legislative per diems, temporary full-time, or temporary part-time employment from a participating employer in PERS without suspending their retirement annuity provided they do not receive annual compensation in excess of $25,000.

    Costs for “double dipping” benefits of this nature are recognized through earlier retirement usage. Such usage is studied as part of the PERS Experience Studies completed every 5 years. At this point in time, the CPRB Board Actuary will not change the current retirement usage assumption due to this bill, however, consideration of the impact on retirement usage from the Committee Substitute for SB 582 will be reviewed at the next PERS Experience Study, scheduled to be completed by August 2024. Therefore, there is no increase in the PERS unfunded actuarial accrued liability (UAAL) or the contribution requirements of PERS at this time.

Analysis of Impact on Public Pension Policy:

    The Committee Substitute for SB 582 allows PERS retirants to accept legislative per diems, temporary full-time, or temporary part-time employment from a participating employer in PERS without suspending their retirement annuity provided they do not receive annual compensation in excess of $25,000.

    Costs for “double dipping” benefits of this nature are recognized through earlier retirement usage. Such usage is studied as part of the PERS Experience Studies completed every 5 years. At this point in time, the CPRB Board Actuary will not change the current retirement usage assumption due to this bill, however, consideration of the impact on retirement usage from the Committee Substitute for SB 582 will be reviewed at the next PERS Experience Study, scheduled to be completed by August 2024. Therefore, there is no increase in the PERS unfunded actuarial accrued liability (UAAL) or the contribution requirements of PERS at this time.

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	0	0
Personal Services	0	0	0
Current Expenses	0	0	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):

    Costs for “double dipping” benefits of this nature are recognized through earlier retirement usage. Such usage is studied as part of the PERS Experience Studies completed every 5 years. At this point in time, the CPRB Board Actuary will not change the current retirement usage assumption due to this bill, however, consideration of the impact on retirement usage from the Committee Substitute for SB 582 will be reviewed at the next PERS Experience Study, scheduled to be completed by August 2024. Therefore, there is no increase in the PERS unfunded actuarial accrued liability (UAAL) or the contribution requirements of PERS at this time.

    Any actual cost impact from the Committee Substitute for SB 582 will be incorporated as part of future experience studies for PERS.

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 PERS, expected to be published on March 31, 2023.

    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.

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