Actuarial Fiscal Note

Date Requested:March 10, 2025
Time Requested:04:14 PM

2070	Introduced	HB3278
Agency:	Consolidated Public Retirement Board
CBD Number:	Version:	Bill Number:	Resolution Number:
CBD Subject:	Retirement

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).

    The bill provides a pop-up benefit for current and future PERS retirees that elect a Joint and Survivor annuity, and their spouse dies before them. The pop-up benefit is the amount the PERS retiree would have received if they elected a single life annuity at retirement and is payable prospectively.

    The bill would increase the PERS Unfunded Actuarial Accrued Liability (UAAL) by around $65.141 million ($31.184 million for active and deferred vested members impacted by the bill and $33.957 million for PERS participants currently in-pay that are impacted by the bill). Amortizing the $31.184 million over ten years on a level dollar basis would increase the estimated FY 2025 PERS recommended employer (ER) contribution by $4.337 million and amortizing the $33.957 million over six years on a level dollar basis would increase the FY 2025 PERS recommended ER contribution by $6.932 million.

    Also measured as of July 1, 2024, the FY 2025 PERS ER normal cost would increase by $1.335 million due to the bill. Therefore, the bill would increase the estimated FY 2025 PERS recommended ER contribution by $12.604 million.

    Gallagher provided the actuarial cost estimate for this bill. The Board Actuary has reviewed this cost analysis from Gallagher, and the results are reasonable.

    Gallagher provided the following comments:

    • For members in receipt of joint and survivor benefits, we did not have the original normal form benefit amount. We estimated the original normal form benefit amount (i.e. the “pop-up” amount) by using the proposed actuarial conversion tables previously provided to us on July 29, 2024 by the West Virginia Consolidated Public Retirement Board actuary, the ages of the member and spouse as of their retirement date, and the current benefit payable as a joint life option. To be conservative, we also assumed that if a retiree was in receipt of a joint and survivor benefit that their designated beneficiary is their spouse.

    • For active and deferred vested members, we applied the spouse age assumption described in the July 1, 2023 valuation for PERS. We assumed that election of a joint and survivor option was consistent with election frequencies based on a 3-year weighted average of the newly awarded elections during FY 2022, FY 2023, and FY 2024. The assumed elections are 58% for single life annuities, 13% for joint and 50% survivor annuities, and 29% for joint and 100% survivor annuities. We used a weighted table of loads to benefit amounts based on these assumptions to adjust calculated benefits. Note that loads were also based on proposed actuarial conversion tables previously provided to us on July 29, 2024 by the West Virginia Consolidated Public Retirement Board actuary.

    • As of July 1, 2024, there are 17 return-to-work (RTW) retirees in active status with joint and survivor options. We did not update these workers in this cost study due to immateriality and the added complexity of additional coding updates and testing.

    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 this deliverable is to provide a cost analysis of the bill based on July 1, 2024, valuation results for PERS 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 otherwise noted, the data, assumptions, methods and plan provisions used are the same as those to be disclosed in the upcoming July 1, 2024, valuation for PERS.

    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	$65,141,000.00	$12,604,000.00	0.64 %
Normal Cost of System	N/A	$1,335,000.00	0.07 %
Past Service Liabilities	$65,141,000.00	$11,269,000.00	0.57 %
Fiscal Year Past Service Amortization Period Ends	N/A	2034	N/A

Explanation of above Actuarial estimates:

    The bill would increase the PERS Unfunded Actuarial Accrued Liability (UAAL) by around $65.141 million ($31.184 million for active and deferred vested members impacted by the bill and $33.957 million for PERS participants currently in-pay that are impacted by the bill). Amortizing the $31.184 million over ten years on a level dollar basis would increase the estimated FY 2025 PERS recommended employer (ER) contribution by $4.337 million and amortizing the $33.957 million over six years on a level dollar basis would increase the FY 2025 PERS recommended ER contribution by $6.932 million.

    Also measured as of July 1, 2024, the FY 2025 PERS ER normal cost would increase by $1.335 million due to the bill. Therefore, the bill would increase the estimated FY 2025 PERS recommended ER contribution by $12.604 million.

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	12,604,000	12,604,000	12,604,000
Personal Services	0	0	0
Current Expenses	0	0	0
Repairs and Alterations	0	0	0
Assets	0	0	0
Other	12,604,000	12,604,000	12,604,000
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 PERS, expected to be available on March 31, 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.

    Actuarial Standard of Practice No. 51 (“ASOP 51”) requires certain disclosures of potential risks to the Plan and provides useful information for intended users of actuarial reports that determine plan contributions or evaluate the adequacy of specified contribution levels to support benefit payments. Providing a pop-up benefit option is not expected to adversely affect the funding of PERS.

    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