Actuarial Fiscal Note

Date Requested:January 14, 2026
Time Requested:05:44 PM

1938	Introduced	HB4086
Agency:	Consolidated Public Retirement Board
CBD Number:	Version:	Bill Number:	Resolution Number:
CBD Subject:	Retirement

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).

    HB 4086 would allow TRS Tier 2 members, that is, TRS members hired for the first time on or after July 1, 2015, to convert unused sick leave or annual leave into additional benefit service credits at a conversion rate equal to ½ the rate of the TRS Tier 1 members. That is, for TRS Tier 2 members, the total number of days of unused leave could be converted into additional years of benefit service, where an additional year of benefit service would be based on 20 days per month times the average number of months in a contract year.

    West Virginia Statute §18-7A-28e, “WV 2005 Pension Reform”, prohibits TRS active member benefit increases or the creation of new benefits for TRS active members until the restriction sunsets on July 1, 2034. Therefore, HB 4086 would violate “WV 2005 Pension Reform”; however, the bill has language that overrides the “WV 2005 Pension Reform” restrictions.

    Measured as of July 1, 2025, HB 4086 would increase the actuarial accrued liability for TRS by approximately $12.2 million. Projecting this liability increase forward to July 1, 2026, and amortizing over 10 years on a level dollar basis would increase the annual required employer contribution for TRS by approximately $1.8 million, or 0.09% of FY 2026 TRS payroll.

    Moreover, HB 4086 would increase the TRS employer normal cost by about $1.8 million per year, or 0.09% of FY 2026 TRS payroll. Therefore, measured as of July 1, 2025, the total FY 2026 TRS annual employer contribution would increase by approximately $3.6 million, or 0.18% of TRS payroll, due to HB 4086.

    As of July 1, 2025, TRS Tier 2 active members represent about 50% of the total active population count. In the future as members leave active status, they will be replaced by TRS Tier 2 members. By Fiscal Year 2054 it is estimated that TRS Tier 2 active members will represent about 99.5% of the total active population. That is, by FY 2054 the active population for TRS will consist almost entirely of TRS Tier 2 active members, which would mean that almost the entire active population of the plan would be reflecting the cost associated with the provisions of HB 4086.

    After FY 2026, the actuarial cost associated with HB 4086 is expected to increase each year as TRS payroll increases and the cost of HB 4086, expressed as a percentage of payroll, trends upward.

    As of July 1, 2054, HB 4086 is expected to increase the TRS annual employer cost by $9.0 million or 0.25% of TRS payroll for FY 2054.


    It is important to note that the actuarial costs displayed in this actuarial/fiscal note are based on a middle-of-the-road future path, where all the assumptions are met with no experience gains or losses in the future. The actual cost from HB 4086 may be different from the expected path results 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	$12,200,000.00	$3,600,000.00	0.18 %
Normal Cost of System	N/A	$1,800,000.00	0.09 %
Past Service Liabilities	$12,200,000.00	$1,800,000.00	0.09 %
Fiscal Year Past Service Amortization Period Ends	N/A	2036	N/A

Explanation of above Actuarial estimates:

    HB 4086 would increase the actuarial accrued liability for TRS by approximately $12.2 million, calculated as of July 1, 2025. Projecting this liability increase to July 1, 2026, and amortizing over 10 years on a level dollar basis would increase the annual required employer contribution for TRS by approximately $1.8 million, or 0.09% of FY 2026 TRS payroll.

    Moreover, HB 4086 would increase the TRS employer normal cost by about $1.8 million per year, or 0.09% of FY 2026 TRS payroll. Therefore, as of July 1, 2025, the total FY 2026 TRS annual employer contribution would increase by approximately $3.6 million, or 0.18% of TRS payroll, due to HB 4086.

Analysis of Impact on Public Pension Policy:

    Measured as of July 1, 2025, HB 4086 would increase the actuarial accrued liability for TRS by approximately $12.2 million. Projecting this liability increase forward to July 1, 2026, and amortizing over 10 years on a level dollar basis would increase the annual required employer contribution for TRS by approximately $1.8 million, or 0.09% of FY 2026 TRS payroll.

    Moreover, HB 4086 would increase the TRS employer normal cost by about $1.8 million per year, or 0.09% of FY 2026 TRS payroll. Therefore, measured as of July 1, 2025, the total FY 2026 TRS annual employer contribution would increase by approximately $3.6 million, or 0.18% of TRS payroll, due to HB 4086.

    After FY 2026, the actuarial cost associated with HB 4086 is expected to increase each year as TRS payroll increases and the cost of HB 4086, expressed as a percentage of payroll, trends upward.

    As of July 1, 2054, HB 4086 is expected to increase the TRS annual employer cost by $9.0 million or 0.25% of TRS payroll for FY 2054.

    It is important to note that the actuarial costs displayed in this actuarial/fiscal note are based on a middle-of-the-road future path, where all the assumptions are met with no experience gains or losses in the future. The actual cost from HB 4086 may be different from the expected path results presented in this actuarial/fiscal note.

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	2026 Increase/Decrease (use"-")	2027 Increase/Decrease (use"-")	Fiscal Year (Upon Full Implementation)
1. Estmated Total Cost	3,625,000	3,900,000	9,000,000
Personal Services	0	0	0
Current Expenses	25,000	0	0
Repairs and Alterations	0	0	0
Assets	0	0	0
Other	3,600,000	3,900,000	9,000,000
2. Estimated Total Revenues	0	0	0

Explanation of above Fiscal Note estimates (include possible long-range effect):

    In addition to the increase in the TRS annual employer cost of $3.6 million, or 0.18% of payroll for FY 2026, there is a one-time $25,000 expense to set up the administrative software to allow TRS Tier 2 members to convert unused leave into additional benefit service.

    As of July 1, 2025, TRS Tier 2 active members represent about 50% of the total active population count. In the future as members leave active status, they will be replaced by TRS Tier 2 members. By Fiscal Year 2054 it is estimated that TRS Tier 2 active members will represent about 99.5% of the total active population. That is, by FY 2054 the active population for TRS will consist almost entirely of TRS Tier 2 active members, which would mean that almost the entire active population of the plan would be reflecting the cost associated with the provisions of HB 4086.


    After FY 2026, the actuarial cost associated with HB 4086 is expected to increase each year as TRS payroll increases and the cost of HB 4086, expressed as a percentage of payroll, trends upward.

    As of July 1, 2054, HB 4086 is expected to increase the TRS annual employer cost by $9.0 million or 0.25% of TRS payroll for FY 2054.

    It is important to note that the actuarial costs displayed in this actuarial/fiscal note are based on a middle-of-the-road future path, where all the assumptions are met with no experience gains or losses in the future. The actual cost from HB 4086 may be different from the expected path results presented in this actuarial/fiscal note.

    To estimate the TRS annual employer cost for FY 2054, two deterministic asset/liability projections were used, one without the plan provisions of HB 4086 and the other with the plan provisions of HB 4086. The liability projections were provided by Gallagher Benefit Services, Inc. (Gallagher). The CPRB calculated the asset/liability projections based on these liability projections.

    For the deterministic projections used in this actuarial/fiscal note, the new entrant profile was developed based on an analysis of recent new hires in TRS.

    The projection assumptions and the valuation assumptions are the same and are equal to the assumptions from the TRS July 1, 2023, funding valuation report, except for the projection with the plan provisions from HB 4086, where the TRS Tier 2 Unused Leave Load equals ½ the Unused Leave Load from the TRS Tier 1 counterparts. The projections do not include the assumptions from the 2025 TRS Experience Study.

    The data and plan provisions used in the projections are the same data and plan provisions used in the TRS July 1, 2023, funding valuation report, except for the projection with the plan provisions from HB 4086, where the TRS Tier 2 members are allowed to convert unused leave into additional benefit service at a rate equal to ½ the rate of their TRS Tier 1 counterparts.

    Note, asset values in the projections were updated to reflect actual asset amounts through July 1, 2025. However, the liabilities in the projections were provide by Gallagher on January 26, 2024, and were based on July 1, 2023, valuation data, results and assumptions. Note, the analysis in this actuarial note is not expected to materially change if we update the liability projections using the July 1, 2025, valuation results.

    The gain/loss amortization policy used in the projections is:
    (1) Prior to July 1, 2034, include gains or losses in the TRS unfunded actuarial accrued liability (UAAL) and amortize the UAAL by June 30, 2034 using a level dollar amount.
    (2) After June 30, 2034, each gain or loss, determined annually as of June 30th, has a separate amortization base to be amortized over a 15-year period based on a level dollar amortization amount.

    Note, item (2) above is not currently part of the TRS UAAL amortization policy, however, this potential TRS gain/loss amortization policy is reasonable. The actual TRS gain/loss amortization policy after June 30, 2034 may be different from the assumed gain/loss amortization policy displayed in (2) above.

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, 2025, funding valuation report for TRS, expected to be published in April 2026.

    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 TRS may be affected by the addition of the Tier 2 conversion option to the extent that the higher contributions necessitated by its addition 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. Gallagher 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