Actuarial Fiscal Note

Date Requested:February 08, 2019
Time Requested:01:08 PM
Agency: Consolidated Public Retirement Board
CBD Number: Version: Bill Number: Resolution Number:
2834 Introduced HB2785
CBD Subject: Retirement

Retirement Systems Impacted by Legislation:

TRS 2600

FUND(S):

Special Fund

Sources of Revenue:

Creates New Expense

Legislation creates:

TRS



Actuarial Note Summary


Impact this measure will have on the liabilities and contributions associated with the retirement system(s).


    HB 2785 provides for an extension of time to July 1, 2019 for certain members of TRS to complete the 25% TDC benefit service purchase. Eligible members are those who completed a written verification of cost for such purchase but failed to complete the purchase by the original deadline, and those members who attempted to complete the purchase of service by the original deadline but were denied in writing by the Board on or before December 31, 2009.
    
    Those members wishing to take advantage of the extension of time to purchase must request an updated purchase cost amount on or before April 15, 2019. The purchase must be completed by July 1, 2019 or 60 days following the mailing of the updated cost amount by the CPRB. The updated cost amount shall equal the original cost amount as of July 1, 2009 updated at the 7.5% actuarial rate of interest to July 1, 2019.
    
    HB 2785 also provides the CPRB Executive Director the authority to correct any clerical errors occurring in the purchase process for any member who attempts to complete the purchase process in writing.
    
    The purchase of service was included as a benefit right for former TDC members who elected to transfer to TRS. This bill extends the time for members who failed to properly complete the purchase by the original deadline but does not increase the amount of benefit service that may be purchased. The costs associated with the extension are paid by the member through the increase at the 7.5% actuarial rate of interest of the purchase cost. There is only a de minimis increase in the Unfunded Actuarial Accrued Liability of TRS due to the purchase of the 25% TDC benefit service.
    



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 estimates:


    The costs associated with the extension are paid by the member through the increase at the 7.5% actuarial rate of interest of the purchase cost which on an actuarial basis pays for the purchase of the 25% TDC benefit service except for a de minimis increase in the Normal Cost and Actuarial Accrued Liability for TRS.
    
    This bill extends the time for members who failed to properly complete the purchase by the original deadline but does not increase the amount of benefit service that may be purchased.
    

Analysis of Impact on Public Pension Policy:


    The extension of time to complete the 25% TDC service purchase allows for the original intended benefits provided under previous legislation. Such benefits could not be purchased by the original deadline in either a timely manner or due to clerical errors.
    
    Those members wishing to take advantage of the extension of time to purchase must request an updated purchase cost amount on or before April 15, 2019. The purchase must be completed by July 1, 2019 or 60 days following the mailing of the updated cost amount by the CPRB. The bill modifies the time period to complete the purchase in subsection ยง18-7D-6(c)(2) of the Statute, however, there are two conflicting time periods in this subsection, July 1, 2019 or 90 days following the mailing of the updated cost amount by the CPRB and later the subsection mentions July 1, 2019 or 60 days following the mailing of the updated cost amount by the CPRB. The number of days following the mailing of the updated cost amount by the CPRB should be clarified to be 60 days or 90 days.
    



Fiscal Note Summary


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


    HB 2785 provides for an extension of time to July 1, 2019 for certain members of TRS to complete the 25% TDC benefit service purchase. Eligible members are those who completed a written verification of cost for such purchase but failed to complete the purchase by the original deadline, and those members who attempted to complete the purchase of service by the original deadline but were denied in writing by the Board on or before December 31, 2009.
    
    Those members wishing to take advantage of the extension of time to purchase must request an updated purchase cost amount on or before April 15, 2019. The purchase must be completed by July 1, 2019 or 60 days following the mailing of the updated cost amount by the CPRB. The updated cost amount shall equal the original cost amount as of July 1, 2009 updated at the 7.5% actuarial rate of interest to July 1, 2019.
    
    HB 2785 also provides the CPRB Executive Director the authority to correct any clerical errors occurring in the purchase process for any member who attempts to complete the purchase process in writing.
    
    The purchase of service was included as a benefit right for former TDC members who elected to transfer to TRS. This bill extends the time for members who failed to properly complete the purchase by the original deadline but does not increase the amount of benefit service that may be purchased. The costs associated with the extension are paid by the member through the increase at the 7.5% actuarial rate of interest of the purchase cost. There is only a de minimis increase in the Unfunded Actuarial Accrued Liability of TRS due to the purchase of the 25% TDC benefit service.
    



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 0 0
Personal Services 0 0 0
Current Expenses 0 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 costs associated with the extension are paid by the member through the increase at the 7.5% actuarial rate of interest of the purchase cost which on an actuarial basis pays for the purchase of the 25% TDC benefit service except for a de minimis increase in the Normal Cost and Actuarial Accrued Liability for TRS.
    
    This bill extends the time for members who failed to properly complete the purchase by the original deadline but does not increase the amount of benefit service that may be purchased.
    



Memorandum


    The extension of time to complete the 25% TDC service purchase allows for the original intended benefits provided under previous legislation. Such benefits could not be purchased by the original deadline in either a timely manner or due to clerical errors.
    
    
    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