Actuarial Fiscal Note

Date Requested:March 08, 2017
Time Requested:01:09 PM
Agency: Consolidated Public Retirement Board
CBD Number: Version: Bill Number: Resolution Number:
2588 Introduced HB2854
CBD Subject: Retirement

Retirement Systems Impacted by Legislation:

DSRS

FUND(S):

DSRS 2150

Sources of Revenue:

Other Fund Local governments

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 for an annual increase of 1% to the annuity of all retirees of DSRS who are at least age 60, for all disability retirees in DSRS, and all surviving spouses and beneficiaries. The increase is effective every July 1, and is pro-rated for those whose annuity has not been in effect for a full year upon the first increase.



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 $14,241,000.00 $1,847,000.00 3.62 %
Normal Cost of System N/A $544,000.00 1.07 %
Past Service Liabilities $14,241,000.00 $1,303,000.00 2.55 %
Fiscal Year Past Service
Amortization Period Ends
N/A 2029 N/A


Explanation of above Actuarial estimates:


    Cost increases are based on the Actuarial Valuation for Funding completed as of July 1, 2016. The increase in Unfunded Actuarial Accrued Liability of $14,241,000 is amortized through FY2029, resulting in an increase in the required FY2018 payment of $1,303,000. In addition, the Normal Cost of the plan increases by an estimated $544,000. Thus, the total required contribution for FY2018 increases by an estimated $1,847,000. The current employer contribution rate of 12.0% is not sufficient to cover the additional cost of the COLA proposed in the legislation, and so the employer contribution would need to be increased by 0.8% to at least 12.8% in order to properly fund the increased benefit.

Analysis of Impact on Public Pension Policy:


    The DSRS plan does not currently provide any annual COLA to its retirees, nor have there been any ad hoc annuity adjustments for retirees. The State Police Plan A provides an annual annuity increase of 3.75% to all retirees who are at least age 55, all disability retirees, and all surviving spouses and beneficiaries. The State Police Plan B provides an annual annuity increase of 1% to all retirees who are at least age 63, all disability retirees, and all surviving spouses and beneficiaries. The increase is effective every July 1, and is pro-rated for those whose annuity has not been in effect for a full year upon the first increase.



Fiscal Note Summary


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


    The DSRS plan is funded entirely by member and employer contributions, and so the provisions of this bill would not result in any increase in cost to State government.
    
    There would be a potential administrative cost of $13,700 in implementing the annual COLA into the Pension Administration Computer System utilized by CPRB.
    



Fiscal Note Detail


Effect of Proposal Fiscal Year
2017
Increase/Decrease
(use"-")
2018
Increase/Decrease
(use"-")
Fiscal Year
(Upon Full
Implementation)
1. Estmated Total Cost 0 13,700 0
Personal Services 0 0 0
Current Expenses 0 13,700 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):


    The DSRS plan is funded entirely by member and employer contributions, and so the provisions of this bill would not result in any increase in cost to State government.
    
    There would be a potential administrative cost of $13,700 in implementing the annual COLA into the Pension Administration Computer System utilized by CPRB.
    



Memorandum


    The DSRS plan is funded entirely by member and employer contributions, and so the provisions of this bill would not result in any increase in cost to State government.
    
    There would be a potential administrative cost of $13,700 in implementing the annual COLA into the Pension Administration Computer System utilized by CPRB.
    
    This Actuarial/Fiscal Note is being submitted by the Consolidated Public Retirement Board. It has been reviewed by a qualified actuary, and who is available for for questions upon request.
    



    Person submitting Fiscal Note: Melody Bailey, Actuarial Analyst, WVCPRB
    Email Address: melody.j.bailey@wv.gov