Actuarial Fiscal Note

Date Requested:January 10, 2020
Time Requested:10:13 AM

1204	Introduced	SB146
Agency:	Consolidated Public Retirement Board
CBD Number:	Version:	Bill Number:	Resolution Number:
CBD Subject:	Retirement

Retirement Systems Impacted by Legislation:

PERS 2501 and TRS 2600

FUND(S):

Special 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 146 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. Note, during the West Virginia 2019 Regular Legislative session HB 3095 was passed into law and provided a minimum benefit of $750 per month for current PERS and TRS retired members as of June 3, 2019 (or applicable beneficiaries), provided the retired member had at least 25 years of service. Therefore, current PERS and TRS retired members that retired on or before June 3, 2019 are included in this bill only if the retired member had at least 20 years of service and less than 25 years of service.

    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 $11.5 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 $2.6 million. SB 146 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 $2.6 million or 0.18% of payroll.


    As of July 1, 2018, the TRS participants affected by SB 146 include 838 retirees, 139 disabled retirees, and 170 beneficiaries. For the beneficiaries, 45 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 use a minimum benefit of $375 per month for this group of beneficiaries.


    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 $10.5 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 $2.4 million. SB 146 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 $2.4 million or 0.17% of payroll.


    As of July 1, 2018, the PERS participants affected by SB 146 include 561 retirees, 87 disabled retirees, and 296 beneficiaries. For the beneficiaries, 47 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 use a minimum benefit of $375 per month for this group of beneficiaries.

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	$22,000,000.00	$5,000,000.00	0.18 %
Normal Cost of System	N/A	$0.00	0.00 %
Past Service Liabilities	$22,000,000.00	$5,000,000.00	0.18 %
Fiscal Year Past Service Amortization Period Ends	N/A	2025	N/A

Explanation of above Actuarial estimates:

    SB 146 would increase the unfunded liability of TRS by $11.5 million and PERS by $10.5 million. Amortizing the unfunded liability over 6 years on a level dollar basis would increase the annual employer contribution by $2.6 million for TRS and $2.4 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, 2018 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:

Fiscal Note Summary

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

    SB 146 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. Note, during the West Virginia 2019 Regular Legislative session HB 3095 was passed into law and provided a minimum benefit of $750 per month for current PERS and TRS retired members as of June 3, 2019 (or applicable beneficiaries), provided the retired member had at least 25 years of service. Therefore, current PERS and TRS retired members that retired on or before June 3, 2019 are included in this bill only if the retired member had at least 20 years of service and less than 25 years of service.

    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 $11.5 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 $2.6 million. SB 146 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 $2.6 million or 0.18% of payroll.

    As of July 1, 2018, the TRS participants affected by SB 146 include 838 retirees, 139 disabled retirees, and 170 beneficiaries. For the beneficiaries, 45 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 use a minimum benefit of $375 per month for this group of beneficiaries.

    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 $10.5 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 $2.4 million. SB 146 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 $2.4 million or 0.17% of payroll.


    As of July 1, 2018, the PERS participants affected by SB 146 include 561 retirees, 87 disabled retirees, and 296 beneficiaries. For the beneficiaries, 47 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 use a minimum benefit of $375 per month for this group of beneficiaries.

Fiscal Note Detail

Effect of Proposal	Fiscal Year
Effect of Proposal	2020 Increase/Decrease (use"-")	2021 Increase/Decrease (use"-")	Fiscal Year (Upon Full Implementation)
1. Estmated Total Cost	0	5,000,000	5,000,000
Personal Services	0	0	0
Current Expenses	0	5,000,000	5,000,000
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):

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