Actuarial Fiscal Note

Date Requested:February 13, 2023
Time Requested:12:13 PM

1134	Amendment	HB2879
Agency:	Consolidated Public Retirement Board
CBD Number:	Version:	Bill Number:	Resolution Number:
CBD Subject:

Retirement Systems Impacted by Legislation:

PERS 2501

FUND(S):

Special Fund

Sources of Revenue:

Creates New Expense

Legislation creates:

PERS

Actuarial Note Summary

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

    Amended HB 2879 would provide a pay increase for PERS Correctional Officers. The pay increase shall be for a total of $10,000 for each PERS Correctional Officer and appropriated over a three-year period as follows:

    (1) On July 1, 2023 applicable correctional officers of the Division of Corrections and Rehabilitation shall be given an increase in annual pay of $5,000;
    (2) On July 1, 2024 applicable correctional officers of the Division of Corrections and Rehabilitation shall be given an increase in annual pay of $2,500; and
    (3) On July 1, 2025 applicable correctional officers of the Division of Corrections and Rehabilitation shall be given an increase in annual pay of $2,500.

    The increase in salaries provided by Amended HB 2879 would increase the actuarial accrued liability for PERS by approximately $1.7 million. The unfunded liability would be amortized on a level dollar basis for the remaining amortization period (until June 30, 2035) leading to an increase in the PERS annual amortization amount of $195,000. The change in the PERS employer normal cost from the salary increases would increase the PERS annual employer contribution by an additional $111,000. Therefore, the total increase to the PERS employer contribution in the first year because of salary increases would be approximately $306,000 or 0.02% of PERS payroll.

    The data, assumptions, methods, and plan provisions used to determine the results shown in this actuarial/fiscal note are as described in the July 1, 2022 actuarial valuation report for PERS, except that the flat-dollar salary increases that take effect July 1, 2023; July 1, 2024; and July 1, 2025 were reflected for FYE 2024, FYE 2025, and FYE 2026 respectively in place of the assumed salary scales. The originally assumed merit-based or inflation-based salary increases do not apply during the three year period.

    If the analysis is performed on a different date the impact to PERS from Amended HB 2879 will change. Except for the salary increases mentioned above, the analysis assumes no gains or losses in the future, where an expected path is presented. There are future paths where the analysis would be significantly different from the one presented in this actuarial/fiscal note.

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	$1,700,000.00	$306,000.00	0.02 %
Normal Cost of System	N/A	$111,000.00	0.01 %
Past Service Liabilities	$1,700,000.00	$195,000.00	0.01 %
Fiscal Year Past Service Amortization Period Ends	N/A	2035	N/A

Explanation of above Actuarial estimates:

    The increase in salaries provided by Amended HB 2879 would increase the actuarial accrued liability for PERS by approximately $1.7 million. The unfunded liability would be amortized on a level dollar basis for the remaining amortization period (until June 30, 2035) leading to an increase in the PERS annual amortization amount of $195,000. The change in the PERS employer normal cost from the salary increases would increase the PERS annual employer contribution by an additional $111,000. Therefore, the total increase to the PERS employer contribution in the first year because of salary increases would be approximately $306,000 or 0.02% of PERS payroll.

    The data, assumptions, methods, and plan provisions used to determine the results shown in this actuarial/fiscal note are as described in the July 1, 2022 actuarial valuation report for PERS, except that the flat-dollar salary increases that take effect July 1, 2023; July 1, 2024; and July 1, 2025 were reflected for FYE 2024, FYE 2025, and FYE 2026 respectively in place of the assumed salary scales. The originally assumed merit-based or inflation-based salary increases do not apply during the three year period.

    If the analysis is performed on a different date the impact to PERS from Amended HB 2879 will change. Except for the salary increases mentioned above, the analysis assumes no gains or losses in the future, where an expected path is presented. There are future paths where the analysis would be significantly different from the one presented in this actuarial/fiscal note.

Analysis of Impact on Public Pension Policy:

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	2023 Increase/Decrease (use"-")	2024 Increase/Decrease (use"-")	Fiscal Year (Upon Full Implementation)
1. Estmated Total Cost	0	306,000	306,000
Personal Services	0	0	0
Current Expenses	0	306,000	306,000
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, 2022 funding valuation report for PERS, expected to be published on March 31, 2023.

    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.

    Regarding Actuarial Standards of Practice 51, the risk assessment for PERS is not expected to change because of the pay increases for PERS Correctional officers.

    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