Actuarial Fiscal Note

Date Requested:February 15, 2022
Time Requested:05:11 PM

2765	Introduced	HB4688
Agency:	Consolidated Public Retirement Board
CBD Number:	Version:	Bill Number:	Resolution Number:
CBD Subject:	Retirement

Retirement Systems Impacted by Legislation:

PERS 2501 and EMSRS 2615

FUND(S):

Other Fund

Sources of Revenue:

Local Governments Creates New Expense

Legislation creates:

PERS and EMSRS

Actuarial Note Summary

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

    HB 4688 would allow PERS county firefighters to transfer from PERS to EMSRS. There are currently 22 PERS members that are county firefighters and HB 4688 would give these members the option to transfer all their PERS service to EMSRS, provided they notify in writing both the county commission in the county in which he or she is employed and the CPRB Board of his or her desire to become a member of EMSRS by December 31, 2023.

    We assume all 22 PERS members that are county firefighters would elect to transfer all their service from PERS to EMSRS and based on the transfer calculation outlined in §16-5V-9, as of July 1, 2022, the estimated assets that would transfer from PERS to EMSRS is $1,708,000. The actual assets that would transfer from PERS to EMSRS would depend on the PERS market value of assets, the PERS active and inactive actuarial accrued liability, and the PERS actuarial accrued liability for the transferring county firefighters, all quantities measured as of July 1, 2022.

    Measured as of July 1, 2022, the estimated PERS actuarial accrued liability for the 22 county firefighters is $1,400,000. Therefore, as of July 1, 2022, HB 4688 would increase the PERS Unfunded Actuarial Accrued Liability (based on market value of assets) by about $308,000 ($1,708,000 - $1,400,000). The impact from HB 4688 on the PERS employer Normal Cost and the PERS Unfunded Actuarial Accrued Liability is immaterial.

    It is important to note that the estimated asset transfer amount is based on PERS liabilities, calculated as of July 1, 2021, and rolled forward to July 1, 2022, using the data, assumptions, and plan provisions from the July 1, 2021, funding valuation for PERS. Moreover, the estimated PERS market value of assets, as of July 1, 2022, is calculated based on a return on assets of 2.36% for FY 2022, based on a 0% return from July 1, 2021, through February 28, 2022, and the expected return on assets from March 1, 2022, through June 30, 2022. The actual assets transferred in the future from PERS to EMSRS may be significantly different from the estimated asset transfer amount.

    Measured as of July 1, 2022, the estimated EMSRS actuarial accrued liability for the 22 county firefighters is $2,090,000. This liability was calculated as of July 1, 2021, and rolled forward to July 1, 2022, using the data, assumptions, and plan provisions from the July 1, 2021, funding valuation for EMSRS.



    Therefore, as of July 1, 2022, the Unfunded Actuarial Accrued Liability for EMSRS would increase by approximately $382,000 (2,090,000 – 1,708,000) because of the 22 county firefighters transferring from PERS to EMSRS. Amortizing this amount over 10 years on a level dollar basis would increase the annual required employer contribution for EMSRS by approximately $53,000 or 0.15% of payroll. Moreover, HB 4688 would increase the EMSRS employer normal cost by about $67,000 per year, or 0.19% of EMSRS payroll. Therefore, the total EMSRS annual required employer contribution would increase by approximately $120,000, or 0.34% of EMSRS payroll.

    For fiscal 2023, the current EMSRS employer contribution rate of 9.5% of payroll and the current EMSRS employee contribution rate of 8.5% of payroll are not expected to change as result of HB 4688.

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	$382,000.00	$120,000.00	0.34 %
Normal Cost of System	N/A	$67,000.00	0.19 %
Past Service Liabilities	$382,000.00	$53,000.00	0.15 %
Fiscal Year Past Service Amortization Period Ends	N/A		N/A

Explanation of above Actuarial estimates:

    The impact from HB 4688 on the PERS employer Normal Cost and the PERS Unfunded Actuarial Accrued Liability is immaterial.

    As of July 1, 2022, the Unfunded Actuarial Accrued Liability for EMSRS would increase by approximately $382,000 (2,090,000 – 1,708,000) because of the 22 county firefighters transferring from PERS to EMSRS. Amortizing this amount over 10 years on a level dollar basis would increase the annual required employer contribution for EMSRS by approximately $53,000 or 0.15% of payroll. Moreover, HB 4688 would increase the EMSRS employer normal cost by about $67,000 per year, or 0.19% of EMSRS payroll. Therefore, the total EMSRS annual required employer contribution would increase by approximately $120,000, or 0.34% of EMSRS payroll.

    For fiscal 2023, the current EMSRS employer contribution rate of 9.5% of payroll and the current EMSRS employee contribution rate of 8.5% of payroll are not expected to change as result of HB 4688.

    However, these cost estimates are based on an expected path, where all plan assumptions are met in the future, with no gains or losses.

    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.

Analysis of Impact on Public Pension Policy:

    All costs associated with this legislation are based on the July 1, 2021, Actuarial Funding Valuations for PERS and EMSRS and assume that all relevant assumptions will be met in all future years. If those assumptions are not met, costs could fluctuate resulting in a potential increase or decrease in costs.

    EMSRS currently consists of emergency medical services officers. The current actuarial assumptions for EMSRS are based on experience for EMS officers and this experience may not be appropriate for firefighters, which could lead to gains or losses in the future for the group of 22 firefighters assumed to join EMSRS.

Fiscal Note Summary

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

    The impact from HB 4688 on the PERS employer Normal Cost and the PERS Unfunded Actuarial Accrued Liability is immaterial.

    EMSRS consists of local governments and does not cover any state employees. For fiscal 2023, funding for EMSRS is through member contributions of 8.50% of payroll and employer contributions of 9.50% of payroll.

    EMSRS does not impact the costs or revenues of state government.

Fiscal Note Detail

Effect of Proposal	Fiscal Year
Effect of Proposal	2022 Increase/Decrease (use"-")	2023 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 Fiscal Note estimates (include possible long-range effect):

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.

    For the appropriate actuarial disclosures, see the July 1, 2021, funding valuation reports for PERS and EMSRS, expected to be published on March 31, 2022.

    In particular, future actuarial measurements may differ significantly from current measurements due to System 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 system provisions or applicable law or 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.

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