Actuarial Fiscal Note

Date Requested:February 22, 2021
Time Requested:01:29 PM

2607	Comm. Sub2	SB275
Agency:	Consolidated Public Retirement Board
CBD Number:	Version:	Bill Number:	Resolution Number:
CBD Subject:	Courts

Retirement Systems Impacted by Legislation:

JRS 2140

FUND(S):

General Fund

Sources of Revenue:

Creates New Expense

Legislation creates:

JRS

Actuarial Note Summary

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

    The Committee Substitute for the Committee Substitute for SB 275 introduces a new article in the West Virginia Code, §51-11. The new article would create the West Virginia Intermediate Court of Appeals, effective July 1, 2022. According to The Committee Substitute for the Committee Substitute for SB 275 the new Intermediate Court of Appeals would have a Northern District and a Southern District, with each district consisting of three judges. The six new judges created by the Intermediate Court of Appeals would have the option to elect within 30 days of taking office to not participate in the Judges’ Retirement System (JRS) and to participate in the Public Employees’ Retirement System (PERS) instead. As the benefit is more valuable in JRS compared to PERS, we assume all 6 new judges will participate in JRS.

    As of the effective date, July 1, 2022, the actuarial accrued liability for the six new judges would be zero, assuming they do not have past service as of this date. Currently and for the foreseeable future, JRS is overfunded to the point that the employer normal cost is set equal to the member portion of the normal cost which is currently 7.0% of member pay. As written, The Committee Substitute for the Committee Substitute for SB 275 would provide an annual salary of $142,500 for each judge of the Intermediate Court of Appeals and therefore as of the effective date, July 1, 2022 the employer normal cost for each new judge would be 7.0% of $142,500 or $9,975. The total employer normal cost for the 6 new judges would be six times $9,975 or $59,850.

    The total estimated payroll of JRS for FY2023 is $10,727,000. Therefore, the increase in the total employer normal cost as a percentage of pay is 0.56%.

    This actuarial/fiscal note does not contain an analysis of the other costs associated with the proposed creation of the West Virginia Intermediate Court of Appeals.

    Effective July 1, 2022, The Committee Substitute for the Committee Substitute for SB 275 also transfers all powers and duties of the Workers’ Compensation Office of Administrative Law Judges to the Worker’s Compensation Board of Review. This actuarial/fiscal note does not address the cost impact of this change.

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	$59,850.00	0.56 %
Normal Cost of System	N/A	$59,850.00	0.56 %
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:

    The creation of six new Intermediate Court of Appeals judges would not increase the unfunded liability of the JRS plan as of the effective date, July 1, 2022 because each new judge would start out with zero actuarial accrued liability under the assumption they have no past service in JRS as of July 1, 2022. During the first year of the new Intermediate Court of Appeals, July 1, 2022 through June 30, 2023, The Committee Substitute for the Committee Substitute for SB 275 would increase the total employer normal cost for the JRS plan by $59,850 which due to the overfunded position of the JRS plan represents 7% of the total pay for the six new judges.

    Going forward for the foreseeable future, we expect the increase in total employer normal cost from The Committee Substitute for the Committee Substitute for SB 275 to be 7% of the total pay for the six new judges.

    Currently, the member contribution rate of JRS is 7% of pay and due to the overfunded status of JRS, the current employer contribution rate is set equal to the member contribution rate, 7% of pay.

    For the appropriate actuarial disclosures, see the July 1, 2020 funding valuation report for JRS, expected to be published in April 2021.

    In particular, future actuarial measurements may differ significantly from the current measurements shown in this actuarial/fiscal note due to plan experience differing from that anticipated by the economic and demographic assumptions, changes expected as part of the natural operation of the methodology used for these measurements, and changes in plan provisions, applicable law and regulations.

    Kenneth Woodson Jr., the CPRB Board Actuary, is a Fellow of the Society of Actuaries and a Member of the American Academy of Actuaries. He meets the Qualification Standards of the American Academy of Actuaries to render the actuarial opinions contained in this actuarial/fiscal note. Both the Board and the CPRB Board Actuary are available to answer any questions on the material contained in this actuarial/fiscal note.

Analysis of Impact on Public Pension Policy:

As written, the costs of the bill would be sustainable by the current employee and employer contribution rates.

Fiscal Note Summary

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

Fiscal Note Detail

Effect of Proposal	Fiscal Year
Effect of Proposal	2021 Increase/Decrease (use"-")	2022 Increase/Decrease (use"-")	Fiscal Year (Upon Full Implementation)
1. Estmated Total Cost	0	59,850	59,850
Personal Services	0	0	0
Current Expenses	0	0	0
Repairs and Alterations	0	0	0
Assets	0	0	0
Other	0	59,850	59,850
2. Estimated Total Revenues	0	0	0

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

    The effective date is July 1, 2022, therefore, the first year to incur cost is FY2023 and equals 7% of the salary of the six new Intermediate Court judges.

    For the appropriate actuarial disclosures, see the July 1, 2020 funding valuation report for JRS expected to be published in April 2021.

    In particular, future actuarial measurements may differ significantly from the current measurements shown in this actuarial/fiscal note due to plan experience differing from that anticipated by the economic and demographic assumptions, changes expected as part of the natural operation of the methodology used for these measurements, and changes in plan provisions, applicable law and regulations.

    Kenneth Woodson Jr., the CPRB Board Actuary, is a Fellow of the Society of Actuaries and a Member of the American Academy of Actuaries. He meets the Qualification Standards of the American Academy of Actuaries to render the actuarial opinions contained in this actuarial/fiscal note. Both the Board and the CPRB Board Actuary are available to answer any questions on the material contained in this actuarial/fiscal note.

Memorandum

This Actuarial/Fiscal Note is being submitted by the Consolidated Public Retirement Board. It has been reviewed by the CPRB Actuary.

Person submitting Fiscal Note: Kenneth M. Woodson Jr.
Email Address: kenneth.m.woodson@wv.gov