Actuarial Fiscal Note

Date Requested:January 14, 2020
Time Requested:10:56 AM
Agency: Consolidated Public Retirement Board
CBD Number: Version: Bill Number: Resolution Number:
1684 Introduced HB4111
CBD Subject: Retirement

Retirement Systems Impacted by Legislation:

DSRS 2150

FUND(S):

Special Fund

Sources of Revenue:

Creates New Expense

Legislation creates:

DSRS



Actuarial Note Summary


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


    HB 4111 provides a benefit increase of $400 per month for current DSRS duty related total disability retirees.
    
    For DSRS, HB 4111 would increase the actuarial accrued liability by approximately $1.8 million as of the most recent valuation date, July 1, 2019. Amortizing this liability increase over 10 years on a level dollar basis would increase the annual required contribution for DSRS by $250,000. HB 4111 only impacts inactive DSRS participants, so the bill does not change the total normal cost for DSRS. Therefore, the additional annual employer cost in the first year would be approximately $250,000 or 0.43% of payroll.
    



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 $1,800,000.00 $250,000.00 0.43 %
Normal Cost of System N/A $0.00 0.00 %
Past Service Liabilities $1,800,000.00 $250,000.00 0.43 %
Fiscal Year Past Service
Amortization Period Ends
N/A 2029 N/A


Explanation of above estimates:


    HB 4111 would increase the unfunded liability of DSRS by $1.8 million. Amortizing the unfunded liability over 10 years on a level dollar basis would increase the annual employer contribution by $250,000 for DSRS.
    
    Going forward, the increased payments toward amortizing the unfunded liabilities in the plans will remain a part of the annual cost for a 10-year amortization period.
    
    
    Estimates given are based on actuarial results as of July 1, 2019, 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:


    For DSRS duty related total disability retirees, their initial retirement benefit is not based on the benefit multiplier, therefore, when the multiplier was increased from 2.25% of final average salary to 2.50% of final average salary, these participants did not receive an increase in their retirement benefit.
    
    HB 4111 would provide a benefit increase for current DSRS duty related total disability retirees.
    



Fiscal Note Summary


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


    The Deputy Sheriffs Retirement System in not a liability of the State, and as such the increased cost to the system due to the proposed legislation would not affect the State’s costs. However, additional costs of approximately $1,000 would be incurred by the CPRB in making the required changes to the computer software used to administer pension benefits. The bill does not provide a source of funding for this additional cost.



Fiscal Note Detail


Effect of Proposal Fiscal Year
2020
Increase/Decrease
(use"-")
2021
Increase/Decrease
(use"-")
Fiscal Year
(Upon Full
Implementation)
1. Estmated Total Cost 0 1,000 0
Personal Services 0 0 0
Current Expenses 0 1,000 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 Deputy Sheriffs Retirement System in not a liability of the State, and as such the increased cost to the system due to the proposed legislation would not affect the State’s costs. However, additional costs of approximately $1,000 would be incurred by the CPRB in making the required changes to the computer software used to administer pension benefits. The bill does not provide a source of funding for this additional cost.



Memorandum


    Additional costs of approximately $1,000 would be incurred by the CPRB in making the required changes to the computer software used to administer pension benefits. The bill does not provide a source of funding for this additional cost.
    
    
    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