Actuarial Fiscal Note

Date Requested:March 27, 2025
Time Requested:11:08 AM

4031	Comm. Sub2	SB874
Agency:	Consolidated Public Retirement Board
CBD Number:	Version:	Bill Number:	Resolution Number:
CBD Subject:	Corrections; Retirement; State Personnel

Retirement Systems Impacted by Legislation:

PERS 2501 and EMSRS 2615

FUND(S):

Other Fund

Sources of Revenue:

Local Governments Creates New Expense

Legislation creates:

PERS and EMSRS

Actuarial Note Summary

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

    The Committee Substitute for the Committee Substitute for SB 874 would allow PERS Home Confinement Officers to transfer from PERS to EMSRS. As of July 1, 2024, there are approximately 74 PERS Home Confinement Officers and the Committee Substitute for the Committee Substitute for SB 874 would give these members the option to transfer all their PERS service to EMSRS.

    The estimated administrative costs associated with the Home Confinement Officers transferring to EMSRS is a one-time cost of $50,000 to update CPRB administrative systems and provide the make-up contribution quote to Home Confinement Officers that transfer to EMSRS. These administrative costs would be paid by the Consolidated Public Retirement Board.

    The benefit formula in EMSRS for the transferring Home Confinement Officers depends on their PERS non-Home Confinement Officer service and if they provide a make-up contribution to EMSRS.

    Specifically, for Home Confinement Officers that transfer service from PERS to EMSRS and do not elect to provide a make-up contribution to EMSRS, "Accrued Benefit" means, on behalf of the transferring member, two percent per year of the member's final average salary for all credited service that was credited because of transferred assets. Additionally, two and three-quarter percent for the first 20 years of new credited service earned from date of membership in EMSRS will be credited. Additionally, two percent per year for 21 through 25 years of new credited service earned from date of membership in this plan and one and one-half percent per year for each year over 25 years earned from date of membership in this plan will be credited with a maximum benefit of 90 percent of final average salary.

    For Home Confinement Officers that transfer service from PERS to EMSRS and elect to provide a make-up contribution to EMSRS, "Accrued Benefit" means, on behalf of the member two percent per year of the member's final average salary for all non-Home Confinement Officer credited service that was credited as a result of transferred assets. Additionally, two and three-quarter percent for the first 20 years of Home Confinement Officer credited service will be credited. Additionally, two percent per year for 21 through 25 years of Home Confinement Officer credited service and one and one-half percent per year for each year over 25 years of Home Confinement Officer credited service will be credited. A maximum benefit of 90 percent of a member’s final average salary may be paid.

    If a PERS Home Confinement Officer elects to transfer their PERS service to EMSRS, the assets that would transfer from PERS to EMSRS is outlined in §16-5V-6f(g). Basically, the assets transferred to EMSRS would be equal to the PERS actuarial accrued liability of the transferring Home Confinement Officers, multiplied by the active funded position of PERS, calculated as of July 1, 2025, using the PERS data, assumptions and plan provisions from the July 1, 2025, PERS funding valuation, and this amount is adjusted by applying interest at 7.25% per year from July 1, 2025 to the asset transfer date. For each Home Confinement Officer transferring from PERS to EMSRS, the CPRB shall transfer the assets from PERS to EMSRS no later than March 31, 2026.

    The make-up contribution to EMSRS is defined in §16-5V-6f (i) as follows:

    (1) Compute the contributions made by each Home Confinement Officer for eligible Home Confinement Officer years under the Public Employees’ Retirement System (PERS)

    (2) Compute the contributions that would have been required under the
     Emergency Medical Services Retirement System (EMSRS) for eligible
     Home Confinement Officer years.

    (3) Compute the difference with interest, at 7.25% per year, that each Home Confinement Officer would have been required to pay had he or she originally participated in EMSRS for eligible Home Confinement Officer years.


    The Consolidated Public Retirement Board (CPRB) shall provide a quote of the make-up contribution outlined above, to each Home Confinement Officer who has timely elected to transfer from PERS to EMSRS. The quote shall be provided to the member within 60 days of the board’s receipt of the written request and the employer’s verification of Home Confinement Officer service.

    As of July 1, 2024, we were provided data for 74 Home Confinement Officers from 31 West Virginia Counties. We assume all 74 Home Confinement Officers will elect to transfer from PERS to EMSRS.

    The actuarial cost to EMSRS from the bill was calculated by the CPRB actuarial staff and reviewed by the CPRB Actuary.

    To calculate the actuarial cost, the data, assumptions, and plan provisions from the July 1, 2024, funding valuations for PERS and EMSRS were used, except, the EMSRS data was augmented by the 74 PERS Home Confinement Officers assumed to transfer from PERS to EMSRS on July 1, 2024, and the EMSRS “Accrued Benefit” for the transferring Home Confinement Officers as outlined in the bill.

    We present the actuarial analysis under the scenario where we assume all 74 Home Confinement Officers elect to transfer from PERS to EMSRS and do not provide a make-up contribution. However, there are many possible scenarios with an actuarial cost different from the results presented in this Actuarial/Fiscal note. The actuarial cost to EMSRS from the bill depends on:

    • the future experience of EMSRS, which going forward could be different from the current active members in EMSRS,
    • the number of PERS Home Confinement Officers that elect to transfer from PERS to EMSRS,
    • the non-Home Confinement Officer PERS service of the transferring Home Confinement Officers,
    • the date the assets transfer to EMSRS,
    • and the number of transferring Home Confinement Officers that provide a make-up contribution to EMSRS.


    Scenario Without a Make-up Contribution

    We assume all 74 PERS Home Confinement Officers would elect to transfer all their service from PERS to EMSRS and will not provide the make-up contribution to EMSRS. Furthermore, we assume that all PERS service transferred to EMSRS by the Home Confinement Officers is Home Confinement Officer service, and therefore, the non-Home Confinement Officer PERS service is assumed to be 0 for each Home Confinement Officer transferring from PERS to EMSRS.

    Based on the transfer calculation outlined in §16-5V-6f (g), as of July 1, 2024, the estimated assets that would transfer from PERS to EMSRS is $4.350 million. The actual assets that would transfer according to §16-5V-6f (g) from PERS to EMSRS depends on the PERS market value of assets, the PERS active and inactive actuarial accrued liability, and the PERS actuarial accrued liability for the transferring Home Confinement Officers, all determined as of July 1, 2025.

    It is important to note that the estimated asset transfer amount is based on PERS liabilities, calculated as of July 1, 2024, using the data, assumptions, and plan provisions from the July 1, 2024 funding valuation for PERS. Moreover, the PERS market value of assets, as of July 1, 2024, is provided by the West Virginia Investment Management Board (WVIMB).

    The actual assets transferred in the future from PERS to EMSRS may be different from the estimated asset transfer amount shown above because the actual assets transferred will be determined as of July 1, 2025, with interest at 7.25% per year applied from July 1, 2025, to the asset transfer date.

    Measured as of July 1, 2024, the estimated PERS actuarial accrued liability for the 74 PERS Home Confinement Officers is $4.138 million. Therefore, as of July 1, 2024, the Committee Substitute for the Committee Substitute for SB 874 would increase the PERS Unfunded Actuarial Accrued Liability, based on market value of assets, by about $212,000 ($4.350 million – $4.138 million). The impact from the Committee Substitute for the Committee Substitute for SB 874 on the PERS employer Normal Cost and the PERS Unfunded Actuarial Accrued Liability is immaterial.

    Measured as of July 1, 2024, the estimated EMSRS actuarial accrued liability for the 74 PERS Home Confinement Officers is $5.308 million. This liability was calculated as of July 1, 2024, using the data, assumptions, and plan provisions from the July 1, 2024 funding valuation for EMSRS, except the transferring Home Confinement Officers were included in the EMSRS data, and their “Accrued Benefit” is outlined above. We assume all past service for the transferring Home Confinement Officers is Home Confinement Officer service, however, since a make-up contribution is not provided by the transferring Home Confinement Officers, the past service benefit multiplier is 2.0% for each year of PERS past service. The results will change if the liabilities are calculated at a different date in the future.

    Measured as of July 1, 2024, the estimated EMSRS market value of assets would increase by $4.350 million (transferred assets from §16-5V-6f (g)) if all 74 PERS Home Confinement Officers transfer their PERS service to EMSRS. The increase in EMSRS assets will change if the transfer date is different from the assumed transfer date, July 1, 2024.

    Therefore, as of July 1, 2024, the unfunded actuarial accrued liability for EMSRS would increase by approximately $958,000 ($5.308 million – $4.350 million) if 74 PERS Home Confinement Officers transfer from PERS to EMSRS.

    Amortizing this amount over 10 years on a level dollar basis would increase the annual EMSRS amortization of the unfunded actuarial accrued liability by about $133,000 or 0.21% of EMSRS payroll.

    Moreover, the Committee Substitute for the Committee Substitute for SB 874 would increase the EMSRS employer normal cost by about $199,000 per year, as a percentage of payroll increases by 0.13% of EMSRS payroll given the payroll for new members. To see this result, from the July 1, 2024, funding valuation for EMSRS, the EMSRS employer normal cost is 3.83% of EMSRS payroll and as of July 1, 2024, the EMSRS employer normal cost is 3.96% of EMSRS payroll, as a result of the Committee Substitute for the Committee Substitute for SB 874.

    Therefore, the total EMSRS annual required employer contribution would increase by approximately $332,000 or 0.34% of EMSRS payroll if 74 PERS Home Confinement Officers transfer from PERS to EMSRS. To see this result, from the July 1, 2024, funding valuation for EMSRS, the EMSRS total annual required contribution is 4.26% of EMSRS payroll and as of July 1, 2024, the EMSRS total annual required contribution is 4.60% of EMSRS payroll, as a result of the Committee Substitute for the Committee Substitute for SB 874.

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	$958,000.00	$332,000.00	0.34 %
Normal Cost of System	N/A	$199,000.00	0.13 %
Past Service Liabilities	$958,000.00	$133,000.00	0.21 %
Fiscal Year Past Service Amortization Period Ends	N/A	2034	N/A

Explanation of above Actuarial estimates:

    As of July 1, 2024, the unfunded actuarial accrued liability for EMSRS would increase by approximately $958,000 ($5.308 million – $4.350 million) if 74 PERS Home Confinement Officers transfer from PERS to EMSRS.

    Amortizing this amount over 10 years on a level dollar basis would increase the annual EMSRS amortization of the unfunded actuarial accrued liability by about $133,000 or 0.21% of EMSRS payroll.

    Moreover, the Committee Substitute for the Committee Substitute for SB 874 would increase the EMSRS employer normal cost by about $199,000 per year, as a percentage of payroll increases by 0.13% of EMSRS payroll given the payroll for new members. To see this result, from the July 1, 2024, funding valuation for EMSRS, the EMSRS employer normal cost is 3.83% of EMSRS payroll and as of July 1, 2024, the EMSRS employer normal cost is 3.96% of EMSRS payroll, as a result of the Committee Substitute for the Committee Substitute for SB 874.

    Therefore, the total EMSRS annual required employer contribution would increase by approximately $332,000 or 0.34% of EMSRS payroll if 74 PERS Home Confinement Officers transfer from PERS to EMSRS. To see this result, from the July 1, 2024, funding valuation for EMSRS, the EMSRS total annual required contribution is 4.26% of EMSRS payroll and as of July 1, 2024, the EMSRS total annual required contribution is 4.60% of EMSRS payroll, as a result of the Committee Substitute for the Committee Substitute for SB 874.

Analysis of Impact on Public Pension Policy:

    As of July 1, 2024, there are 943 active members in EMSRS. In the future the experience of the group of 74 PERS Home Confinement Officers, assumed to transfer to EMSRS, may be different from the existing EMSRS active group experience and may lead to plan gains or losses in the future for the EMSRS plan. If there are losses going forward, the EMSRS employer contribution rate may increase in the future.

    Note that many of the Home Confinement Officers that would elect to transfer from PERS to EMSRS may not elect to provide a make-up contribution to EMSRS because,

    • It is possible that a transferring Home Confinement Officer may receive a larger retirement benefit if they do not provide a make-up contribution to EMSRS compared to the retirement benefit they would receive if they elected to provide a make-up contribution. For example, a PERS Home Confinement Officer that transfers 5 years of PERS Home Confinement Officer service to EMSRS and works an additional 21 years in EMSRS, then at retirement the Home Confinement Officer would receive a larger retirement benefit if they did not provide a make-up contribution when they transferred to EMSRS.

    To see this, if the Home Confinement Officer provides a make-up contribution when they join EMSRS, their retirement benefit after 26 years of Home Confinement Officer service would be 66.5% of final average salary. However, if the Home Confinement Officer did not elect to provide a make-up contribution when they join EMSRS, their retirement benefit after 26 years of service (5 years at the PERS benefit multiplier and 21 years at the EMSRS multiplier schedule) would be 67.0% of final average salary. There are other examples where the retirement benefit is larger if the Home Confinement Officer elects not to provide the make-up contribution when they join EMSRS, however, these examples typically involve a participant that transfers from PERS to EMSRS and works many future years with EMSRS.

    Note, 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.

Fiscal Note Summary

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

    The impact from the Committee Substitute for the Committee Substitute for SB 874 on the PERS employer Normal Cost and the PERS Unfunded Actuarial Accrued Liability is immaterial.

    EMSRS consists of local municipalities and does not cover any state employees. For fiscal 2026, funding for EMSRS is through member contributions of 8.50% of payroll and employer contributions of 9.50% of payroll.

    EMSRS does not impact the costs or revenues of state government. However, the estimated administrative costs associated with the Home Confinement Officers transferring to EMSRS is a one-time cost of $50,000 to update CPRB administrative systems and provide the make-up contribution quote to Home Confinement Officers that transfer to EMSRS. These administrative costs would be paid by the Consolidated Public Retirement Board.

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	50,000	0
Personal Services	0	0	0
Current Expenses	0	50,000	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, 2024, funding valuation reports for PERS and EMSRS, expected to be published 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.

    Regarding Actuarial Standards of Practice 51, the risk assessment for EMSRS may be affected by allowing PERS Home Confinement Officers to transfer to EMSRS to the extent the experience of this transferring group may be different from the current active population of EMSRS, which could lead to gains or losses in the future for the EMSRS plan. If losses occur going forward the current EMSRS employer contribution rate of 9.5% of payroll may increase.

    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