Actuarial Fiscal Note

Date Requested:January 23, 2023
Time Requested:03:27 PM

2802	Introduced	HB2900
Agency:	Consolidated Public Retirement Board
CBD Number:	Version:	Bill Number:	Resolution Number:
CBD Subject:	Retirement

Retirement Systems Impacted by Legislation:

DSRS 2150

FUND(S):

Other Fund

Sources of Revenue:

Local Governments Creates New Expense

Legislation creates:

DSRS

Actuarial Note Summary

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

    The purpose of HB 2900 is to allow for the conditional re-employment of retired deputy sheriffs in the Deputy Sheriff Retirement System (DSRS) and allow the deputy sheriffs to continue to receive their full retirement benefit.

    More specific, the Bill would allow a DSRS retiree to return to work as a Deputy Sheriff and continue to receive their full retirement benefit provided the following conditions are met:

    (1) The retired member did not retire as a result of a disability pursuant to the provisions of §7-14D-14;
    (2) The retired member is a certified, or certifiable, law-enforcement officer as provided in §30-29-5;
    (3) The sheriff of the county seeking to re-employ the member has fewer than five
    deputies in his or her employ and has been unable to recruit additional qualified deputy sheriffs despite the exercise of due diligence;
    (4) The re-employment of the retired member is for a period not to exceed ten years or until such time as the sheriff may recruit additional deputy sheriffs to provide for full staffing of the department, whichever is sooner; and
    (5) The retired member shall not again become a contributing member of the Deputy
    Sheriff Retirement System while performing services under the provisions of this subsection.

    Currently, there are 8 counties that satisfy condition (3) above, which limits the number of deputy sheriffs that can return to work and receive their full retirement benefit. However, going forward the number of counties that satisfy condition (3) above could change and therefore, change the number of potential deputy sheriffs allowed to return to work and receive a full retirement benefit.

    Costs for “double dipping” benefits of this nature are recognized through earlier retirement usage. Such usage is studied as part of the Uniformed Services Experience Studies completed every 5 years. At this point in time, the CPRB Board Actuary will not change the current retirement usage assumption for DSRS due to this bill, however, consideration of the impact on retirement usage from HB 2900 will be reviewed at the next Uniformed Services Experience Study, scheduled to be completed by August 2026. The bill limits the number of Deputy Sheriffs allowed to “double dip”, therefore, there is no expected increase in the DSRS unfunded actuarial accrued liability (UAAL) or the contribution requirements of DSRS at this time.

    The legislature should consider its position on “double dipping” when considering the adoption of this bill.

    Also, the IRS requires a break between the time of retirement and the return to work when a participant is allowed to work and receive their retirement benefit. The CPRB outside legal counsel has issued the following statement regarding this matter, Under applicable IRS rules, qualified pension plans are permitted to commence distributions only when an individual has a bona fide retirement (unless there are plan provisions which authorize permissible in-service distributions, which DSRS does not have). Determination of whether a bona fide retirement has occurred is based on a facts and circumstances test (unless there are plan provisions which specify when a retirement will be considered bona fide, which DSRS does not have). Therefore, the provisions of this bill will apply only when the facts and circumstances support that a bona fide retirement occurred prior to the reemployment, but will not apply if the termination of employment and subsequent reemployment were prearranged or otherwise anticipated.

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	$0.00	$0.00	0.00 %
Normal Cost of System	N/A	$0.00	0.00 %
Past Service Liabilities	$0.00	$0.00	0.00 %
Fiscal Year Past Service Amortization Period Ends	N/A	2029	N/A

Explanation of above Actuarial estimates:

    Costs for “double dipping” benefits of this nature are recognized through earlier retirement usage. Such usage is studied as part of the Uniformed Services Experience Studies completed every 5 years. At this point in time, the CPRB Board Actuary will not change the current retirement usage assumption due to this bill, however, consideration of the impact on retirement usage from HB 2900 will be reviewed at the next Uniformed Services Experience Study, scheduled to be completed by August 2026. The bill limits the number of Deputy Sheriffs allowed to “double dip”, therefore, there is no expected increase in the DSRS unfunded actuarial accrued liability (UAAL) or the contribution requirements of DSRS at this time.

    Any actual cost impact from HB 2900 will be incorporated as part of future experience studies for DSRS.

Analysis of Impact on Public Pension Policy:

    The legislature should consider its position on “double dipping” when considering the adoption of this bill.

    Also, the IRS requires a break between the time of retirement and the return to work when a participant is allowed to work and receive their retirement benefit. The CPRB outside legal counsel has issued the following statement regarding this matter, Under applicable IRS rules, qualified pension plans are permitted to commence distributions only when an individual has a bona fide retirement (unless there are plan provisions which authorize permissible in-service distributions, which DSRS does not have). Determination of whether a bona fide retirement has occurred is based on a facts and circumstances test (unless there are plan provisions which specify when a retirement will be considered bona fide, which DSRS does not have). Therefore, the provisions of this bill will apply only when the facts and circumstances support that a bona fide retirement occurred prior to the reemployment, but will not apply if the termination of employment and subsequent reemployment were prearranged or otherwise anticipated.

Fiscal Note Summary

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

DSRS consists of county governments and does not cover any state employees. For fiscal 2024, funding for DSRS is through member contributions of 8.50% of payroll and employer contributions of 16.00% of payroll. DSRS does not impact the costs or revenues of state government.

Fiscal Note Detail

Effect of Proposal	Fiscal Year
Effect of Proposal	2023 Increase/Decrease (use"-")	2024 Increase/Decrease (use"-")	Fiscal Year (Upon Full Implementation)
1. Estmated Total Cost	0	0	0
Personal Services	0	0	0
Current Expenses	0	0	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):

    DSRS consists of county governments and does not cover any state employees.

    For fiscal 2024, funding for DSRS is through member contributions of 8.50% of payroll and employer contributions of 16.00% of payroll. DSRS does not impact the costs or revenues of state government.

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, 2022, funding valuation report for DSRS, expected to be published on March 31, 2023.

    In particular, 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.

    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