Actuarial Fiscal Note

Date Requested:February 02, 2016
Time Requested:02:36 PM
Agency: Consolidated Public Retirement Board
CBD Number: Version: Bill Number: Resolution Number:
1301 Introduced HB4187
CBD Subject: Retirement, State Personnel

Retirement Systems Impacted by Legislation:

None

FUND(S):

Public Employee Health Insurance Fund

Sources of Revenue:

Other Fund Public Employee Health

Legislation creates:

A New Program,A New Fund



Actuarial Note Summary


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


    This Bill does not increase benefits under the retirement systems administered by the Consolidated Public Retirement Board. The Bill does require the CPRB to calculate and certify the cost savings under PERS and TRS resulting from Tier 2 benefit savings under SB 529 adopted effective in 2015. Cost savings certified by the CPRB are to be appropriated in the general budget and applied to pay for employee health insurance costs under PEIA. Savings are from appropriations in the state budget and are not paid from the retirement plans' assets.
    
    Initial cost savings are estimated as follows:
    
    FY 2018 $ 2,300,000 2023 $22,500,000
     2019 $ 8,800,000 2024 $25,200,000
     2020 $12,700,000 2025 $27,800,000
     2021 $16,200,000 2026 $30,100,000
     2022 $19,500,000 2027 $32,200,000
    
    Required annual appropriation continue to increase annaully until Tier 2 members have replaced all tier 1 members in PERS and TRS. Ultimate annual costs for all Tier 2 members is $53,000,000.
    
    Note that all amounts are in FY2017 dollars and are subject to inflationary growth.
    
    CPRB cost for required administration is estimated at $50,000 to $75,000 annuallyand must be appropriated from the general budget appropriation. They may not be paid from the PERS or TRS trust funds for retirement benefits.



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
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 $2,400,000.00 0.00 %
Normal Cost of System N/A $2,400,000.00 0.00 %
Past Service Liabilities $0.00 $0.00 0.00 %
Fiscal Year Past Service
Amortization Period Ends
N/A N/A


Explanation of above estimates:


    There are no increases in either the Normal Cost nor the Past Service amounts under PERS or TRS.
    
    Savings are projected to increase annually as Tier 2 members replace prior Tier 1 members. Ultilmate costs in 2017 dollars estimated at $53,000,000 annually. CPRB administrative fees to determine the annual savingss is estimated at $50,000 to $75,000.
    
    For annual estimates over the first 10 years see section above.

Analysis of Impact on Public Pension Policy:


    The Bill applies anticipated cost savings due to SB 529 (2015) and requires such savings to provide PEIA health insurance costs. Such costs are not pension related and are new costs for PEIA benefits.



Fiscal Note Summary


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


    This Bill does not increase benefits under the retirement systems administered by the Consolidated Public Retirement Board. The Bill does require the CPRB to calculate and certify the cost savings under PERS and TRS resulting from Tier 2 benefit savings under SB 529 adopted effective in 2015. Cost savings certified by the CPRB are to be appropriated in the general budget and applied to pay for employee health insurance costs under PEIA. Savings are from appropriations in the state budget and are not paid from the retirement plans' assets.
    
    Initial cost savings are estimated as follows:
    
    FY 2018 $ 2,300,000 2023 $22,500,000
     2019 $ 8,800,000 2024 $25,200,000
     2020 $12,700,000 2025 $27,800,000
     2021 $16,200,000 2026 $30,100,000
     2022 $19,500,000 2027 $32,200,000
    
    Required annual appropriation continue to increase annaully until Tier 2 members have replaced all tier 1 members in PERS and TRS. Ultimate annual costs for all Tier 2 members is $53,000,000.
    
    Note that all amounts are in FY2017 dollars and are subject to inflationary growth.
    
    CPRB cost for required administration is estimated at $50,000 to $75,000 annuallyand must be appropriated from the general budget appropriation. They may not be paid from the PERS or TRS trust funds for retirement benefits.



Fiscal Note Detail


Effect of Proposal Fiscal Year
2016
Increase/Decrease
(use"-")
2017
Increase/Decrease
(use"-")
Fiscal Year
(Upon Full
Implementation)
1. Estmated Total Cost 0 0 54,000,000
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 estimates (including long-range effect):


    There are no increases in either the Normal Cost nor the Past Service amounts under PERS or TRS.
    
    Savings are projected to increase annually as Tier 2 members replace prior Tier 1 members. Ultilmate costs in 2017 dollars estimated at $53,000,000 annually. CPRB administrative fees to determine the annual savingss is estimated at $50,000 to $75,000.
    
    For annual estimates over the first 10 years see section above.



Memorandum


    The Bill applies anticipated cost savings due to SB 529 (2015) and requires such savings to provide PEIA health insurance costs. Such costs are not pension related and are new costs for PEIA benefits.



    Person submitting Fiscal Note: Harry W. Mandel, Board Actuary, MAAA, MSPA, EA
    Email Address: harry.w.mandel@wv.gov