Actuarial Fiscal Note

Date Requested:January 28, 2020
Time Requested:12:03 PM

2453	Introduced	SB602
Agency:	Consolidated Public Retirement Board
CBD Number:	Version:	Bill Number:	Resolution Number:
CBD Subject:	Salaries

Retirement Systems Impacted by Legislation:

PERS 2501 and JRS 2140

FUND(S):

Special Fund

Sources of Revenue:

Creates New Expense

Legislation creates:

PERS and JRS

Actuarial Note Summary

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

    SB 602 would allow Family Court Judges to participate in the Judges’ Retirement System (JRS). There are 47 active Family Court Judges currently participating in the Public Employees’ Retirement System (PERS) and to value SB 602 we assume all 47 Family Court Judges would elect to transfer all their service as a Family Court Judge from PERS to JRS. Upon transferring from PERS to JRS, each Family Court Judge member would transfer their corresponding PERS accumulated contributions plus any shortfall accumulated contributions to the JRS Fund as if the member contributed based on JRS member contribution rates for all transferred service. Each active Family Court Judge would enter JRS as a Tier II member.

    The portion of SB 602 that allows Family Court Judges to participate in JRS would increase the actuarial accrued liability for JRS by approximately $8.2 million. JRS is currently overfunded and if Family Court Judges were included in JRS then JRS would continue to be over funded for the foreseeable future. As a result, there is no amortization of unfunded liability due to SB 602 allowing Family Court Judges to participate in JRS. However, the portion of SB 602 that would allow Family Court Judges to participate in JRS would increase the FY 2021 JRS annual required employer contribution by approximately $375,000.

    SB 602 also provides an annual salary increase for magistrates from $57,500 to $68,038. This salary increase would change PERS liability and the PERS annual required employer contribution by an immaterial amount.

    SB 602 provides an annual salary increase for justices of the Supreme Court of Appeals from $136,000 to $160,901. The bill also provides an annual salary increase for Family Court Judges from $94,500 to $113,930. SB 602 would increase the annual salary of Circuit Court Judges from $126,000 to $149,070. The impact from SB 602 for the annual salary increases would increase the JRS Actuarial Accrued Liability by $21.8 million, however, due to JRS overfunding there would be no amortization of unfunded liability due to SB 602 salary increases. The portion of SB 602 due to salary increases would increase the JRS annual employer normal cost $2.5 million. Therefore, the salary increases from SB 602 would increase the total annual JRS employer contribution by $2.5 million.

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	$0.00	$2,875,000.00	17.50 %
Normal Cost of System	N/A	$2,875,000.00	17.50 %
Past Service Liabilities	$0.00	$0.00	0.00 %
Fiscal Year Past Service Amortization Period Ends	N/A	-	N/A

Explanation of above Actuarial estimates:

    SB 602 would increase the Actuarial Accrued Liability of JRS by $30.0 million, however, due to JRS overfunding, there is no amortization of unfunded liability.

    SB 602 would increase the JRS annual employer contribution amount by $2.875 million or 17.5% of JRS payroll ($375,000 from allowing Family Court Judges to participate in JRS and $2.5 million from JRS salary increases).

    The impact of SB 602 on PERS is immaterial.

Analysis of Impact on Public Pension Policy:

As written, the costs of the bill would significantly increase the annual JRS employer contribution amount not only from an increase in the JRS employer normal cost but also from the loss of the credit for overfunding that offsets the employer normal cost.

Fiscal Note Summary

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

    SB 602 would allow Family Court Judges to participate in the Judges’ Retirement System (JRS). There are 47 active Family Court Judges currently participating in the Public Employees’ Retirement System (PERS) and to value SB 246 we assume all 47 Family Court Judges would elect to transfer all their service as a Family Court Judge from PERS to JRS. Upon transferring from PERS to JRS, each Family Court Judge member would transfer their corresponding PERS accumulated contributions plus any shortfall accumulated contributions to the JRS Fund as if the member contributed based on JRS member contribution rates for all transferred service. Each active Family Court Judge would enter JRS as a Tier II member.

    The portion of SB 602 that allows Family Court Judges to participate in JRS would increase the actuarial accrued liability for JRS by approximately $8.2 million. JRS is currently overfunded and if Family Court Judges were included in JRS then JRS would continue to be over funded for the foreseeable future. As a result, there is no amortization of unfunded liability due to SB 602 allowing Family Court Judges to participate in JRS. However, the portion of SB 602 that would allow Family Court Judges to participate in JRS would increase the FY 2021 JRS annual required employer contribution by approximately $375,000.

    SB 602 also provides an annual salary increase for magistrates from $57,500 to $68,038. This salary increase would change PERS liability and the PERS annual required employer contribution by an immaterial amount.

    SB 602 provides an annual salary increase for justices of the Supreme Court of Appeals from $136,000 to $160,901. The bill also provides an annual salary increase for Family Court Judges from $94,500 to $113,930. SB 602 would increase the annual salary of Circuit Court Judges from $126,000 to $149,070. The impact from SB 602 for the annual salary increases would increase the JRS Actuarial Accrued Liability by $21.8 million, however, due to JRS overfunding there would be no amortization of unfunded liability due to SB 602 salary increases. The portion of SB 602 due to salary increases would increase the JRS annual employer normal cost $2.5 million. Therefore, the salary increases from SB 602 would increase the total annual JRS employer contribution by $2.5 million

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	2,875,000	2,875,000
Personal Services	0	0	0
Current Expenses	0	0	0
Repairs and Alterations	0	0	0
Assets	0	0	0
Other	0	2,875,000	2,875,000
2. Estimated Total Revenues	0	0	0

Explanation of above Fiscal Note estimates (include possible long-range effect):

    SB 602 would increase the Actuarial Accrued Liability of JRS by $30.0 million, however, due to JRS overfunding, there is no amortization of unfunded liability.

    SB 602 would increase the JRS annual employer contribution amount by $2.875 million or 17.5% of JRS payroll ($375,000 from allowing Family Court Judges to participate in JRS and $2.5 million from salary increases).

    The impact of SB 602 on PERS is immaterial.

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