Actuarial Fiscal Note
Date Requested:February 12, 2016
Time Requested:03:13 PM |
| Agency: |
Consolidated Public Retirement Board |
|---|
| CBD Number: |
Version: |
Bill Number: |
Resolution Number: |
| 2577 |
Introduced |
SB595 |
|
|---|
| CBD Subject: |
Retirement |
|---|
|
Retirement Systems Impacted by Legislation:
PERS and TRS
FUND(S):
PERS; TRS
Sources of Revenue:
Other Fund State and Local Gov'ts
Legislation creates:
Neither Program nor Fund
Actuarial Note Summary
Impact this measure will have on the liabilities and contributions associated with the retirement system(s).
The Bill provides that certain members of PERS or TRS who have service in the West Virginia National Guard, may elect to purchase up to five years of additional military sevice based on meeting the requirements specified in the Bill.
The purchase premium is calculated based on the actuairial equilvalence definitions found in the Bill. Payment must be in a lump sum or may be amortized over 48 months from the calculation date.
Based on the assumption that the actuarial definitions result in a purchase cost that fully funds the additional service, their is no additional benefit cost to PERS or TRS.
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 |
$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 |
|
N/A |
Explanation of above Actuarial estimates:
The Normal Cost and the unfunded Actuarial Accrued Liabilities under PERS and TRS are not increased since the acturial definitions in the Bill fully fund the additional benefits attributable to the purchased service.
It is noted that PERS and TRS provide a guaranteed interest rate of 7.5% from the date of purchase. They additionally provide the adminstrative costs, both for the purchase and for the administration of the payout of the benefits.
Analysis of Impact on Public Pension Policy:
It is noted that the actuarial equivalence definitions for calculating the lump sum benefit provide for the 7.5% interest rate as currently used for determining actuarial costs for the plans.
The Mortality Assumption is the 1971 Group Annuity Mortality table, 50% percent blended male and female rates applied on a unisex bases. This mortality table is "out of date" at this time and it is suggested that a more modern mortality table be amended into the bill. (For example, the RP-2000 50% blended male and female rates applied on a unisex basis.)
Fiscal Note Summary
Effect this measure will have on costs and revenues of state government.
The Bill provides that certain members of PERS or TRS who have service in the West Virginia National Guard, may elect to purchase up to five years of additional military sevice based on meeting the requirements specified in the Bill.
The purchase premium is calculated based on the actuairial equilvalence definitions found in the Bill. Payment must be in a lump sum or may be amortized over 48 months from the calculation date.
Based on the assumption that the actuarial definitions result in a purchase cost that fully funds the additional service, their is no additional benefit cost to PERS or TRS.
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 |
10,000 |
5,000 |
5,000 |
| Personal Services |
0 |
0 |
0 |
| Current Expenses |
0 |
0 |
0 |
| Repairs and Alterations |
0 |
0 |
0 |
| Assets |
0 |
0 |
0 |
| Other |
10,000 |
5,000 |
5,000 |
| 2. Estimated Total Revenues |
0 |
0 |
0 |
Explanation of above Fiscal Note estimates (include possible long-range effect):
The Normal Cost and the unfunded Actuarial Accrued Liabilities under PERS and TRS are not increased since the acturial definitions in the Bill fully fund the additional benefits attributable to the purchased service.
It is noted that PERS and TRS provide a guaranteed interest rate of 7.5% from the date of purchase. They additionally provide the adminstrative costs, both for the purchase and for the administration of the payout of the benefits.
Memorandum
It is noted that the actuarial equivalence definitions for calculating the lump sum benefit provide for the 7.5% interest rate as currently used for determining actuarial costs for the plans.
The Mortality Assumption is the 1971 Group Annuity Mortality table, 50% percent blended male and female rates applied on a unisex bases. This mortality table is "out of date" at this time and it is suggested that a more modern mortality table be amended into the bill. (For example, the RP-2000 50% blended male and female rates applied on a unisex basis.)
Person submitting Fiscal Note: Harry W. Mandel, Board Actuary, MAAA, MSPA, EA
Email Address: harry.w.mandel@wv.gov