Actuarial Fiscal Note

Date Requested:March 27, 2025
Time Requested:12:55 PM

3019	Comm. Sub2	SB506
Agency:	Consolidated Public Retirement Board
CBD Number:	Version:	Bill Number:	Resolution Number:
CBD Subject:	Education (K12)

Retirement Systems Impacted by Legislation:

TRS 2600

FUND(S):

Special Fund

Sources of Revenue:

Creates New Expense

Legislation creates:

TRS

Actuarial Note Summary

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

    The Bill would provide enhanced pay for certified teachers in West Virginia, where pay increases are based on the median home price of the county or region in which they provide educational services, not to exceed 50% of the average teachers’ base pay in the affected county. The enhanced pay would be in addition to any amount prescribed in the West Virginia statute.

    More specific, enhanced pay increases would be determined from the “Market pay enhancement” defined as follows:

    “Market pay enhancement" means a positive result obtained when subtracting the West Virginia median home price from the regional median home price and dividing the difference by the West Virginia median home price; subtracting the West Virginia median home price from the county median home price and dividing the difference by the West Virginia median home price; and then multiplying the highest of the two preceding figures, by the average teacher salary in a county. The market pay enhancement may not exceed 50 percent of the average teachers’ base pay in the affected county.

    Based on information supplied by the West Virginia Department of Education (WVDE), according to the National Association of Realtors (NAR), the West Virginia statewide average of county median home prices is $153,043 and the West Virginia statewide average of regional median home prices is $161,065. The Bill defines the “Regional median home price” as the average of the median home price of the county of employment and the counties contiguous to that county of employment of a teacher as determined by the National Association of Realtors for the calendar year immediately preceding the calculation.

    According to the WVDE, this Bill would provide enhanced pay for approximately 9,908 certified teachers in West Virginia, with an average increase in pay of about 27.24%. It is estimated that certified teachers in 26 West Virginia counties would not initially receive enhanced pay due to the Bill. For the teachers initially receiving enhanced pay, the county teacher pay increase would range from 5% to the cap of 50%.

    Measured as of July 1, 2024, the approximate increase in TRS payroll would be $144.4 million or an increase in total TRS FY 2026 payroll of 7.15%.

    The increase in salaries provided by the Committee Substitute for the Committee Substitute for SB 506 would increase the unfunded actuarial accrued liability for TRS by approximately $273.752 million and would be amortized on a level dollar basis for the remaining amortization period (until June 30, 2034) leading to an increase in the TRS annual amortization amount of $43.978 million.

    The change in the TRS employer normal cost from the salary increases would increase the TRS annual employer contribution by an additional $5.629 million. Therefore, the total increase to the TRS employer contribution in the first year because of salary increases would be approximately $49.607 million.

    The SAF is approximately 90% of the TRS total actuarially required contribution, therefore, the corresponding increase in the School Aid Formula from the proposed salary increases would be about $44.646 million.

    The Committee Substitute for the Committee Substitute for SB 506 would increase the TRS employer contribution rate from 17.43% of payroll to approximately 18.56% of payroll.

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	$273,752,000.00	$49,607,000.00	2.29 %
Normal Cost of System	N/A	$5,629,000.00	0.26 %
Past Service Liabilities	$273,752,000.00	$43,978,000.00	2.03 %
Fiscal Year Past Service Amortization Period Ends	N/A	2034	N/A

Explanation of above Actuarial estimates:

    The increase in salaries provided by the Committee Substitute for the Committee Substitute for SB 506 would increase the unfunded actuarial accrued liability for TRS by approximately $273.752 million and would be amortized on a level dollar basis for the remaining amortization period (until June 30, 2034) leading to an increase in the TRS annual amortization amount of $43.978 million.

    The change in the TRS employer normal cost from the salary increases would increase the TRS annual employer contribution by an additional $5.629 million. Therefore, the total increase to the TRS employer contribution in the first year because of salary increases would be approximately $49.607 million.

    The SAF is approximately 90% of the TRS total actuarially required contribution, therefore, the corresponding increase in the School Aid Formula from the proposed salary increases would be about $44.646 million.

    The Committee Substitute for the Committee Substitute for SB 506 would increase the TRS employer contribution rate from 17.43% of payroll to approximately 18.56% of payroll.

Analysis of Impact on Public Pension Policy:

    According to the WVDE, this Bill would provide enhanced pay for approximately 9,908 certified teachers in West Virginia, with an average increase in pay of about 27.24%. It is estimated that certified teachers in 26 West Virginia counties would not initially receive enhanced pay due to the Bill. For the teachers initially receiving enhanced pay, the county teacher pay increase would range from 5% to the cap of 50%.

    Measured as of July 1, 2024, the approximate increase in TRS payroll would be $144.4 million or an increase in total TRS FY 2026 payroll of 7.15%.

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	49,607,000	49,607,000
Personal Services	0	0	0
Current Expenses	0	0	0
Repairs and Alterations	0	0	0
Assets	0	0	0
Other	0	49,607,000	49,607,000
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 TRS, 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.

    Regarding Actuarial Standards of Practice 51, the risk assessment for TRS may be affected by the salary increases from the Committee Substitute for the Committee Substitute for SB 506 to the extent that the higher contributions necessitated by the salary increases may not be covered.

    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