FISCAL NOTE

Date Requested: January 11, 2023
Time Requested: 10:39 PM
Agency: Public Employees Insurance Agency (PEIA)
CBD Number: Version: Bill Number: Resolution Number:
1724 Introduced SB87
CBD Subject:


FUND(S):

PEIA Basic Insurance Fund

Sources of Revenue:

Special Fund

Legislation creates:

Creates New Expense



Fiscal Note Summary


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


The purpose of this bill is to expand the PEIA Finance Board’s discretion to include subsidies in its financial plans for employees who meet certain criteria. This will allow the finance board to expand the number of employees or retirees eligible to participate in the West Virginia Other Post Employment Benefit Plan (OPEB) and receive subsidized healthcare insurance. This bill proposes expansion of eligibility for the OPEB Plan to allow the following individuals to pay premiums at a subsidized rate: 1. Active or retired employees who were hired before July 1, 2010, but who separated from public service and returned within 2 years of their separation. These individuals would see their hire dates restored to the original pre-July 1, 2010, hire date. 2. Active or retired employees who separated from public service with more than 10 years of service prior to July 1, 2010, and returned within 10 years of their separation. These individuals would receive an adjusted hire date computed by adding the period of separation to the original pre-July 1, 2010, hire date. Currently, two classes of employees hired on or after July 1, 2010, are not required to pay the unsubsidized rate: 3. Active employees who were originally hired before July 1, 2010, and who have a break in service of not greater than two years after July 1, 2010. 4. Retired employees who retired before July 1, 2010, come back to active service after July 1, 2010, and then go back into retirement. In those cases, the original hire date will apply. PEIA interprets the individuals discussed in note 1 above to be covered by eligibility rules in note 3 of the current benefits. However, the individuals described in note 2 are not covered by the current OPEB eligibility rules. PEIA conducted an analysis, using demographic information in the newest OPEB valuation, on new enrollments over the last 10 years to determine a rate of retention for enrollees who attained 10 years of service from their date of hire. Approximately 66% of the average 4,000 new enrollees per year attain 10 years of service. Assuming 4,000 new enrollments per year from 1990 to 2000, and assuming a rate of retention of 66%-70% of those enrollees retained public employment to achieve 10 years’ service, there is an exposure for 26,390 to 28,000 individuals to incur a break from public service and remain eligible to return by 2020 paying subsidized rates, with an adjusted hire date, per the proposed bill. The current per retiree OPEB cost as of the 2021 valuation, measured as of June 30, 2022, is $2,583.60 because of unprecedented and historically low Medicare Advantage Plan (MAPD) rates. The cost exposure to the OPEB Plan is between $68,181,118 and $72,340,709 additional expenses for entrants who return to the plan under these circumstances. Should the Plan be exposed to new entrants at the levels described, circumstances would certainly change, and if the MAPD rates were increased as a result, the OPEB Plan could face additional expenses materially higher than this estimate. Adding new entrants to the plan will also dramatically change the low OPEB liability. Per the most recent valuation, the OPEB liability is $111,298,764 which is a monumental achievement when compared to the $7 billion OPEB Liability as of June 30, 2009. These reductions are the result of the significant work and sacrifices by many West Virginians over the past decade to achieve an affordable OPEB Plan for the State of West Virginia. Opening the current OPEB Plan to new entrants, jeopardizing the comparably low OPEB liability, also compromises the current use of a 6.65% Single Discount Rate in the OPEB valuation. Lowering the Single Discount Rate by 1% would result in a $286,080,495 OPEB Liability, which is more than double the current OPEB liability. A higher OPEB liability could result in lower scoring from credit rating agencies, increasing financing costs for the State.



Fiscal Note Detail


Effect of Proposal Fiscal Year
2023
Increase/Decrease
(use"-")
2024
Increase/Decrease
(use"-")
Fiscal Year
(Upon Full
Implementation)
1. Estmated Total Cost 70,260,914 0 0
Personal Services 0 0 0
Current Expenses 70,260,913 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):


The cost exposure to the OPEB Plan is between $68,181,118 and $72,340,709 additional expenses for entrants who return to the plan under these circumstances. The cost assigned in the schedule is the midpoint of this range. The effective date is assumed to be the date of passing the proposed bill.



Memorandum


The actuarial valuation used for this analysis is as of June 30, 2021, measured as of June 30, 2022, and applicable to the Plan's Fiscal Year End June 30, 2022, and Plan Sponsor’s Fiscal Year June 30, 2023. A copy of this report may be found at peia.wv.gov under the Financial Reports section.



    Person submitting Fiscal Note: April Taylor
    Email Address: April.A.Taylor@wv.gov