Actuarial Fiscal Note

Date Requested:January 30, 2024
Time Requested:03:55 PM

3051	Introduced	HB5188
Agency:	Consolidated Public Retirement Board
CBD Number:	Version:	Bill Number:	Resolution Number:
CBD Subject:	Municipalities; Unemployment Compensation

Retirement Systems Impacted by Legislation:

MPFRS 2390

FUND(S):

Special Fund

Sources of Revenue:

Creates New Expense

Legislation creates:

MPFRS

Actuarial Note Summary

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

    HB 5188 creates a new benefit in the Municipal Police Officers and Firefighters Retirement System (MPFRS) for duty-related partially disabled members. It is our understanding that the bill will be amended to be written in a consistent manner with the partial duty related benefit provisions of the Deputy Sheriffs Retirement System (DSRS).

    Currently, DSRS provides the following disability related benefits:
    A member who becomes unable to perform the duties of a deputy sheriff is considered disabled upon the concurrence of a medical review. If the member is unable to perform any gainful employment, the member is eligible for Total Disability Retirement benefits. If the member can perform gainful employment, the member is eligible for Partial Disability Retirement Benefits.

    The DSRS disability benefit provisions are currently separated into four groups:
    Duty-Related Total Disability, Duty-Related Partial Disability, Non-Duty Related Total Disability, and Non-Duty Related Partial Disability.

    The disability benefits under DSRS for these four groups are:

    Duty-Related – Total Disability
    A monthly disability benefit equal to 90% of the last 12 months average compensation prior to disability, payable for life. Prior Total Duty-Related Disability retirees who turned age 65 prior to July 1, 2007, were subject to a benefit recalculation at age 65 under the Normal Retirement Benefits provisions taking into account service prior to disability plus half-time disability service credits while receiving disability benefits prior to age 65. This recalculation was eliminated effective July 1, 2007.

    Duty-Related – Partial Disability
    A monthly disability benefit equal to 45% of the last 12 months average compensation prior to disability, payable through the attainment of age 60. At age 60, the benefit is recalculated under the Normal Retirement Benefit provisions including half-time service credits while receiving disability benefits prior to age 60.

    Non-Duty-Related – Total Disability
    A monthly disability benefit equal to 66.67% of the last 12 months average compensation prior to disability, payable through the attainment of age 60. At age 60, the benefit is recalculated under the Normal Retirement Benefit provisions including half-time service credits while receiving disability benefits prior to age 60.

    Non-Duty-Related – Partial Disability
    A monthly disability benefit equal to 33.33% of the last 12 months average compensation prior to disability, payable through the attainment of age 60. At age 60, the benefit is recalculated under the Normal Retirement Benefit provisions including half-time service credits while receiving disability benefits prior to age 60.

    Currently, MPFRS provides the following disability related benefits:
    A member who becomes unable to perform any gainful employment is considered disabled upon the concurrence of a medical review.

    The MPFRS disability benefit provisions are currently separated into two groups:
    Duty-Related Total Disability, and Non-Duty Related Total Disability. At present, MPFRS disability provisions do not include Partial Disability benefits.

    The disability benefits under MPFRS for these two groups are:

    Duty-Related – Total Disability
    A monthly disability benefit equal to 90% of the last 12 months average compensation prior to disability, payable prior to age 65. At age 65, the benefit is recalculated under the Normal Retirement Benefit provisions, taking into account final average pay and service prior to disability plus half-time disability service credits while receiving disability benefits prior to age 65.

    Non-Duty-Related – Total Disability
    A monthly disability benefit equal to 66.67% of the last 12 months average compensation prior to disability, payable prior to age 60. At age 60, the benefit is recalculated under the Normal Retirement Benefit provisions, taking into account final average pay and service prior to disability plus half-time disability service credits while receiving disability benefits prior to age 60.

    If the MPFRS Duty-Related plan provisions are revised to include Duty-Related Partial Disability benefits, modeled after DSRS, it is possible a member of MPFRS could be Partially Disabled due to duty related causes, but does not qualify for a Duty-Related – Total Disability benefit under the current MPFRS statute. Under this bill, the individual would qualify for a Duty-Related Partial Benefit from MPFRS.

    We assume there is one individual that would qualify for a Duty-Related Partial Benefit in MPFRS due to the bill. Measured as of July 1, 2023, to determine the cost of HB 5188 for this individual, we calculate the difference in actuarially accrued liability (AAL) for the new Duty-Related Partial Benefit in MPFRS from HB 5188 and the benefit they would have received if they had continued as a terminated vested, if the bill were not introduced. This difference in AAL is about $328,000. To calculate these benefits we use average values from the July 1, 2023 funding valuation active data for MPFRS for age, final average salary, FY 2023 pay, and benefit service. If there are other individuals like the one described in this paragraph, then, the cost to MPFRS from HB 5188 would increase accordingly.


    It is plausible, given the ratio of partially to total disabled members in other plans the CPRB administers, there will be a member in the upcoming years that will qualify for this new benefit. These additional cost to MPFRS from HB 5188 will have to be monitored through future experience studies for the Uniformed Services Plans, where disability rates will be reviewed to account for additional disablements in MPFRS from duty related partial disabilities.


    The increase in Unfunded Actuarially Accrued Liability (UAAL) of MPFRS, due to HB 5188, is approximately $328,000. Amortizing this amount over 10 years on a level dollar basis, would increase the MPFRS actuarially recommended annual employer contribution by about $45,000, or 0.11% of MPFRS payroll for FY 2024.

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	$328,000.00	$45,000.00	0.11 %
Normal Cost of System	N/A	$0.00	0.00 %
Past Service Liabilities	$328,000.00	$45,000.00	0.11 %
Fiscal Year Past Service Amortization Period Ends	N/A	2033	N/A

Explanation of above Actuarial estimates:

The increase in Unfunded Actuarially Accrued Liability (UAAL) of MPFRS, due to HB 5188, is approximately $328,000. Amortizing this amount over 10 years on a level dollar basis, would increase the MPFRS actuarially recommended annual employer contribution by about $45,000, or 0.11% of MPFRS payroll for FY 2024.

Analysis of Impact on Public Pension Policy:

    Currently, as written, HB 5188 would divide the MPFRS duty related disability benefit section into two types of disabilities; duty related total disability and duty related partial disability. However, each group would receive the same disability retirement benefit. This practice is inconsistent with other defined benefit plans administered by the Consolidated Public Retirement Board (CPRB). Typically, a duty related partial disability benefit is less than a corresponding duty related total disability, to account for the fact that the partially disabled member is able to perform gainful employment, whereas the totally disabled member is not.

    It is our understanding that the bill will be amended to be written in a consistent manner with the partial duty related benefit provisions of the Deputy Sheriffs Retirement System (DSRS), which would eliminate the inconsistency mentioned in the previous paragraph.

Fiscal Note Summary

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

MPFRS consists of municipality governments and does not cover any state employees. For fiscal 2025, funding for MPFRS is through member contributions of 8.50% of payroll and employer contributions of 8.50% of payroll. MPFRS does not impact the costs or revenues of state government.

Fiscal Note Detail

Effect of Proposal	Fiscal Year
Effect of Proposal	2024 Increase/Decrease (use"-")	2025 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, 2023 funding valuation report for MPFRS, expected to be published on March 31, 2024.

    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.

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