Actuarial Fiscal Note
Date Requested:January 26, 2018
Time Requested:01:13 PM |
| Agency: |
Consolidated Public Retirement Board |
|---|
| CBD Number: |
Version: |
Bill Number: |
Resolution Number: |
| 2000 |
Introduced |
HB4325 |
|
|---|
| CBD Subject: |
Retirement |
|---|
|
Retirement Systems Impacted by Legislation:
DSRS
FUND(S):
DSRS 2150
Sources of Revenue:
Other Fund Local governments
Legislation creates:
Neither Program nor Fund
Actuarial Note Summary
Impact this measure will have on the liabilities and contributions associated with the retirement system(s).
As introduced, this bill would provide an annual cost-of-living adjustment of 1% to the annuities of all retirants who are at least age 60, all disability retirants, and all surviving spouses and beneficiaries receiving annuity benefits under the plan. This increase in benefits would occur on July 1 of each year, and be prorated for those who have been retired less than 1 year as of July 1. The first increase in benefits would occur July 1, 2018
If the bill were to pass, the increase in the Unfunded Actuarial Accrued Liability of the plan would increase by approximately $15.378 million, and the Normal Cost of the plan would increase by an estimated 0.98% (or approximately $507,000). The total estimated increase in the required annual employer contribution to the plan would be $2.283 million. However, the current employer contribution rate of 12.0% would be sufficient to meet the additional cost.
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 |
| 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 |
$15,378,000.00 |
$2,283,000.00 |
4.57 % |
| Normal Cost of System |
N/A |
$507,000.00 |
0.98 % |
| Past Service Liabilities |
$15,378,000.00 |
$1,776,000.00 |
3.59 % |
Fiscal Year Past Service
Amortization Period Ends |
N/A |
2029 |
N/A |
Explanation of above Actuarial estimates:
The increase in benefits for current and future retirees who would be eligible for the COLA increases both the Normal Cost of the plan (benefits accrued during the current year) as well as the value of the benefits already accrued (the Actuarial Accrued Liability, or AAL). As a result, the required contribution by employers to the plan would increase.
These estimated additional costs are based on the July 1, 2017 Actuarial Valuation for funding of the DSRS plan, as approved by the CPRB on January 24, 2018.
Analysis of Impact on Public Pension Policy:
As written, the bill is unclear as to whether nonduty-related disability retirees would be eligible for the COLA immediately upon retirement or at age 60. The pricing in this note assumes that they will be eligible immediately.
Fiscal Note Summary
Effect this measure will have on costs and revenues of state government.
The Deputy Sheriff Retirement System is not a liability of the State, and as such the increased cost to the system due to the proposed COLA would not affect the State’s costs. However, additional costs would be incurred by the CPRB in making the required changes to the computer software used to administer pension benefits. The bill does not provide a source of funding for this additional cost.
Fiscal Note Detail
| Effect of Proposal |
Fiscal Year |
2018
Increase/Decrease
(use"-") |
2019
Increase/Decrease
(use"-") |
Fiscal Year
(Upon Full
Implementation) |
| 1. Estmated Total Cost |
0 |
46,000 |
0 |
| Personal Services |
0 |
0 |
0 |
| Current Expenses |
0 |
46,000 |
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):
The Deputy Sheriff Retirement System is not a liability of the State, and as such the increased cost to the system due to the proposed COLA would not affect the State’s costs. However, additional costs would be incurred by the CPRB in making the required changes to the computer software used to administer pension benefits. The bill does not provide a source of funding for this additional cost.
Memorandum
As written, the bill is unclear as to whether nonduty-related disability retirees would be eligible for the COLA immediately upon retirement or at age 60. The pricing in this note assumes that they will be eligible immediately.
Additional costs would be incurred by the CPRB in making the required changes to the computer software used to administer pension benefits. The bill does not provide a source of funding for this additional cost.
This Actuarial/Fiscal Note is being submitted by the Consolidated Public Retirement Board. It has been reviewed by a qualified actuary. Both the Board and the actuary are available upon request for questions.
Person submitting Fiscal Note: Melody Bailey, Actuarial Analyst, WV CPRB
Email Address: melody.j.bailey@wv.gov