Actuarial Fiscal Note
Date Requested:January 17, 2019 Time Requested:01:57 PM |
Agency: |
Consolidated Public Retirement Board |
CBD Number: |
Version: |
Bill Number: |
Resolution Number: |
2244 |
Introduced |
SB341 |
|
CBD Subject: |
Retirement |
---|
|
Retirement Systems Impacted by Legislation:
PERS 2501 and TRS 2600
FUND(S):
General Fund
Sources of Revenue:
Creates New Expense
Legislation creates:
PERS and TRS
Actuarial Note Summary
Impact this measure will have on the liabilities and contributions associated with the retirement system(s).
SB 341 provides a minimum benefit of $750 per month for retired members (or applicable beneficiaries) of PERS and TRS provided the retired member had at least 20 years of service at retirement.
For TRS, if we limit the $750 per month minimum benefit to only participants in pay status with at least 20 years of service, then the increase in actuarial accrued liability will be approximately $24.1 million calculated as of the most recent valuation date, July 1, 2018. Amortizing this liability increase over 6 years on a level dollar basis would increase the annual required contribution for TRS by $5.3 million. SB 341 only impacts inactive TRS participants, so the bill does not change the total normal cost for TRS. Therefore, the additional annual employer cost in the first year would be approximately $5.3 million or 0.38% of payroll.
As of July 1, 2018, the TRS participants affected by SB 341 include 1,086 retirees, 154 disabled retirees, and 655 beneficiaries. For the beneficiaries, 390 are receiving a benefit based on the original retiree benefit form of payment Joint and Survivor 50%. Therefore, these beneficiaries are receiving ½ of the benefit originally paid to the retiree and correspondingly we would expect to use a minimum benefit of $375 per month for this group of beneficiaries. However, SB 341 does not mention a proration for this group of beneficiaries, so we valued this group of beneficiaries with a minimum benefit of $750 per month.
For PERS, if we limit the $750 per month minimum benefit to only participants in pay status with at least 20 years of service, then the increase in actuarial accrued liability will be approximately $19.8 million calculated as of the most recent valuation date, July 1, 2018. Amortizing this liability increase over 6 years on a level dollar basis would increase the annual required contribution for PERS by $4.4 million. SB 341 only impacts inactive PERS participants, so the bill does not change the total normal cost for PERS. Therefore, the additional annual employer cost in the first year would be approximately $4.4 million or 0.32% of payroll.
As of July 1, 2018, the PERS participants affected by SB 341 include 691 retirees, 96 disabled retirees, and 674 beneficiaries. For the beneficiaries, 351 are receiving a benefit based on the original retiree benefit form of payment Joint and Survivor 50%. Therefore, these beneficiaries are receiving ½ of the benefit originally paid to the retiree and correspondingly we would expect to use a minimum benefit of $375 per month for this group of beneficiaries. However, SB 341 does not mention a proration for this group of beneficiaries, so we valued this group of beneficiaries with a minimum benefit of $750 per month.
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 |
$43,900,000.00 |
$9,700,000.00 |
0.35 % |
Normal Cost of System |
N/A |
$0.00 |
0.00 % |
Past Service Liabilities |
$43,900,000.00 |
$9,700,000.00 |
0.35 % |
Fiscal Year Past Service Amortization Period Ends |
N/A |
2025 |
N/A |
Explanation of above Actuarial estimates:
SB 341 would increase the unfunded liability of TRS by $24.1 million and PERS by $19.8 million. Amortizing the unfunded liability over 6 years on a level dollar basis would increase the annual employer contribution by $5.3 million for TRS and $4.4 million for PERS.
Going forward, the increased payments toward amortizing the unfunded liabilities in the plans will remain a part of the annual cost for a 6-year amortization period.
Estimates given are based on actuarial results as of July 1, 2018, using the same assumptions and plan provisions from the July 1, 2017 funding valuation report. These estimates are based on assumptions of future events, which may not materialize. Future measurements may differ significantly due to plan experience differing from that anticipated by these assumptions, by the natural operation of the methodology used for these measurements, or by changes to plan provisions.
Analysis of Impact on Public Pension Policy:
For the beneficiaries who are receiving a benefit based on the original retiree benefit form of payment Joint and Survivor 50%, we would expect to use a pro-rata minimum benefit of $375 per month for this group of beneficiaries. However, SB 341 does not mention a proration for this group of beneficiaries, so we valued this group of beneficiaries with a minimum benefit of $750 per month.
If we value this group of beneficiaries based on the pro-rata minimum benefit of $375, then the number of TRS beneficiaries impacted by SB 341 drops to 344 and the increase in the annual contribution for TRS would change from $5.3 million to $3.7 million. For PERS, the number of beneficiaries impacted by SB 341 would drop to 384 and the increase in the annual contribution for PERS would change from $4.4 million to $2.9 million.
Fiscal Note Summary
Effect this measure will have on costs and revenues of state government.
SB 341 provides a minimum benefit of $750 per month for retired members (or applicable beneficiaries) of PERS and TRS provided the retired member had at least 20 years of service at retirement.
For TRS, if we limit the $750 per month minimum benefit to only participants in pay status with at least 20 years of service, then the increase in actuarial accrued liability will be approximately $24.1 million calculated as of the most recent valuation date, July 1, 2018. Amortizing this liability increase over 6 years on a level dollar basis would increase the annual required contribution for TRS by $5.3 million. SB 341 only impacts inactive TRS participants, so the bill does not change the total normal cost for TRS. Therefore, the additional annual employer cost in the first year would be approximately $5.3 million or 0.38% of payroll.
As of July 1, 2018, the TRS participants affected by SB 341 include 1,086 retirees, 154 disabled retirees, and 655 beneficiaries. For the beneficiaries, 390 are receiving a benefit based on the original retiree benefit form of payment Joint and Survivor 50%. Therefore, these beneficiaries are receiving ½ of the benefit originally paid to the retiree and correspondingly we would expect to use a minimum benefit of $375 per month for this group of beneficiaries. However, SB 341 does not mention a proration for this group of beneficiaries, so we valued this group of beneficiaries with a minimum benefit of $750 per month.
For PERS, if we limit the $750 per month minimum benefit to only participants in pay status with at least 20 years of service, then the increase in actuarial accrued liability will be approximately $19.8 million calculated as of the most recent valuation date, July 1, 2018. Amortizing this liability increase over 6 years on a level dollar basis would increase the annual required contribution for PERS by $4.4 million. SB 341 only impacts inactive PERS participants, so the bill does not change the total normal cost for PERS. Therefore, the additional annual employer cost in the first year would be approximately $4.4 million or 0.32% of payroll.
As of July 1, 2018, the PERS participants affected by SB 341 include 691 retirees, 96 disabled retirees, and 674 beneficiaries. For the beneficiaries, 351 are receiving a benefit based on the original retiree benefit form of payment Joint and Survivor 50%. Therefore, these beneficiaries are receiving ½ of the benefit originally paid to the retiree and correspondingly we would expect to use a minimum benefit of $375 per month for this group of beneficiaries. However, SB 341 does not mention a proration for this group of beneficiaries, so we valued this group of beneficiaries with a minimum benefit of $750 per month.
Fiscal Note Detail
Effect of Proposal |
Fiscal Year |
2019 Increase/Decrease (use"-") |
2020 Increase/Decrease (use"-") |
Fiscal Year (Upon Full Implementation) |
1. Estmated Total Cost |
0 |
9,700,000 |
9,700,000 |
Personal Services |
0 |
0 |
0 |
Current Expenses |
0 |
9,700,000 |
9,700,000 |
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):
SB 341 would increase the unfunded liability of TRS by $24.1 million and PERS by $19.8 million. Amortizing the unfunded liability over 6 years on a level dollar basis would increase the annual employer contribution by $5.3 million for TRS and $4.4 million for PERS.
Going forward, the increased payments toward amortizing the unfunded liabilities in the plans will remain a part of the annual cost for a 6-year amortization period.
Estimates given are based on actuarial results as of July 1, 2018, using the same assumptions and plan provisions from the July 1, 2017 funding valuation report. These estimates are based on assumptions of future events, which may not materialize. Future measurements may differ significantly due to plan experience differing from that anticipated by these assumptions, by the natural operation of the methodology used for these measurements, or by changes to plan provisions.
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.
Person submitting Fiscal Note: Kenneth M. Woodson Jr., Board Actuary, CPRB
Email Address: kenneth.m.woodson@wv.gov