Actuarial Fiscal Note

Date Requested:February 12, 2025
Time Requested:06:43 PM

1285	Introduced	SB191
Agency:	Consolidated Public Retirement Board
CBD Number:	Version:	Bill Number:	Resolution Number:
CBD Subject:	Retirement

Retirement Systems Impacted by Legislation:

State Police Plan A 2392

FUND(S):

Special Fund

Sources of Revenue:

Creates New Expense

Legislation creates:

State Police Plan A

Actuarial Note Summary

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

    It is our understanding that the purpose of SB 191 is modify the benefit formula for a surviving spouse of a duty-related disabled participant in Plan A. The spousal annuity is equal to the greater of the following:

    (1) An amount equal to five and one-half percent of the total salary which was or would have been earned by the deceased member or duty disability retirant during 25 years of service based on the average earnings of the member or duty disability retirant while employed by the agency; or
    (2) An amount equal to three-fourths of the retirement benefit the deceased
     retirant was receiving or would have been entitled to receive while in status
     of retirement, not including any cost-of-living adjustment which the
     beneficiary has accrued since the disabled member’s death through July 1,
     2025; or
    (3) $6,000.

    Measured as of July 1, 2024, SB 191 would increase the actuarial accrued liability (AAL) for Plan A by approximately $16.791 million ($4.463 million for surviving spouses currently in-pay and $12.328 million for future surviving spouses). Amortizing this liability increase over 6 years on a level dollar basis would increase the FY 2026 annual recommended employer contribution for Plan A by approximately $3.676 million.

    Also measured as of July 1, 2024, Plan A has no active members, therefore, the normal cost for Plan A is zero. The total Plan A annual recommended employer contribution would increase by approximately $3.676 million, due to SB 191.

    Note, the increase in AAL from SB 191 exceeds the amount allowed in the West Virginia statute, however, this limiting statute sunsets on July 1, 2025. These plan changes are allowed in the West Virginia statute provided SB 191 is enacted on or after the sunset date, July 1, 2025.

    The analysis was prepared by Gallagher Benefit Services Inc. (Gallagher) and was peer reviewed by the CPRB Actuary. Gallagher provided the following actuarial disclosures:

    The results in this analysis were developed by Gallagher for the West Virginia Consolidated Retirement Board staff using generally accepted actuarial principles and techniques in accordance with all applicable Actuarial Standards of Practice (ASOPs). The purpose of the analysis is to provide a sensitivity analysis based on July 1, 2024 valuation results for Plan A showing the estimated impact of select changes to plan provisions. Use of this analysis for any other purpose may not be appropriate and may result in mistaken conclusions due to failure to understand applicable assumptions, methodologies, or inapplicability of the information for that purpose. Because of the risk of misinterpretation of actuarial results, you should ask Gallagher to review any statement you wish to make on the results contained in this Actuarial/Fiscal Note. Gallagher will accept no liability for any such statement made without prior review by Gallagher. No third-party recipient should rely upon Gallagher’s work product absent involvement of Gallagher or without prior approval by Gallagher.

    Unless where otherwise noted, the data, assumptions, methods and plan provisions used are the same as those to be disclosed in the July 1, 2024 valuation for Plan A.

    ASOPs 27 and 35 require the actuary to disclose the information and analysis used to support the actuary’s determination that the assumptions selected by a party other than the actuary do not significantly conflict with what, in the actuary’s professional judgment, are reasonable for the purpose of the measurement. Based on the actuaries’ review of the assumptions used, including consistency with other assumptions used in the valuation, the actuaries believe the assumptions, in the actuaries’ professional judgment, are reasonable for the purpose of the measurement.

    Elizabeth Wiley is a Member of the American Academy of Actuaries who meets the Qualification Standards of the American Academy of Actuaries to render the actuarial opinions contained in the analysis of this Actuarial/Fiscal Note and she is available to answer questions regarding the analysis.

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	$16,791,000.00	$3,676,000.00	0.00 %
Normal Cost of System	N/A	$0.00	0.00 %
Past Service Liabilities	$16,791,000.00	$3,676,000.00	0.00 %
Fiscal Year Past Service Amortization Period Ends	N/A	2030	N/A

Explanation of above Actuarial estimates:

    Measured as of July 1, 2024, SB 191 would increase the actuarial accrued liability (AAL) for Plan A by approximately $16.791 million ($4.463 million for surviving spouses currently in-pay and $12.328 million for future surviving spouses). Amortizing this liability increase over 6 years on a level dollar basis would increase the FY 2026 annual recommended employer contribution for Plan A by approximately $3.676 million.

    Also measured as of July 1, 2024, Plan A has no active members, therefore, the normal cost for Plan A is zero. The total Plan A annual recommended employer contribution would increase by approximately $3.676 million, due to SB 191.

    Note, the increase in AAL from SB 191 exceeds the amount allowed in the West Virginia statute, however, this limiting statute sunsets on July 1, 2025. These plan changes are allowed in the West Virginia statute provided SB 191 is enacted on or after the sunset date, July 1, 2025.

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	2025 Increase/Decrease (use"-")	2026 Increase/Decrease (use"-")	Fiscal Year (Upon Full Implementation)
1. Estmated Total Cost	0	3,676,000	3,676,000
Personal Services	0	0	0
Current Expenses	0	0	0
Repairs and Alterations	0	0	0
Assets	0	0	0
Other	0	3,676,000	3,676,000
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, 2024 funding valuation report for Plan A, expected to be published in March 2025.

    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. An analysis of the potential range of such future differences is beyond the scope of the request addressed here.

    Regarding Actuarial Standards of Practice 51, the risk assessment for Plan A may be affected by updating the spousal benefit upon the death of a duty related disabled participant to the extent that the higher contributions necessitated by this change may not be covered.

    Actuarial Standard of Practice No. 56 provides guidance to actuaries when performing actuarial services with respect to designing, developing, selecting, modifying, using, reviewing, or evaluating models. The CPRB uses third-party software in the performance of annual actuarial valuations and projections.

    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