Actuarial Fiscal Note
Date Requested:February 21, 2019 Time Requested:02:35 PM |
Agency: |
Consolidated Public Retirement Board |
CBD Number: |
Version: |
Bill Number: |
Resolution Number: |
2743 |
Amendment |
HB2803 |
|
CBD Subject: |
Education (K12) |
---|
|
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).
The amended HB 2803 would permit retired teachers to substitute teach a total of 160 days each year without reducing their retirement benefit.
The amended HB 2803 would violate the West Virginia Statute §18-7A-28e (c), known as “2005 Pension Reform”, which prohibits the increase of existing benefits or the creation of new benefits for active members of the Teachers’ Retirement System until the limitation sunsets on July 1, 2034.
Under current West Virginia State Law, a retired teacher can substitute teach a total of 140 days each year without reducing their retirement benefit. By allowing retired teachers to substitute teach up to 160 days without reducing their retirement benefit, the amended HB 2803 would create a new benefit for active TRS participants.
In addition, the amended HB 2803 would effectively allow retired teachers to return to almost full-time employment as a teacher and continue to receive their retirement benefit without reduction. By allowing teachers to work almost full-time and receive their retirement benefit unadjusted the bill could violate the IRS in-service distribution rule and possibly lead to the TRS defined benefit plan being disqualified by the IRS.
The amended HB 2803 would likely change the demographic experience of TRS because teachers would be encouraged to retire earlier than currently assumed because they could return to almost full-time employment as a teacher and continue to receive their retirement benefit unadjusted. This change in retirement age could significantly increase the Unfunded Actuarial Accrued Liability and Normal Cost for TRS.
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 |
$999,999,999.00 |
$999,999,999.00 |
9.99 % |
Normal Cost of System |
N/A |
$999,999,999.00 |
9.99 % |
Past Service Liabilities |
$999,999,999.00 |
$999,999,999.00 |
9.99 % |
Fiscal Year Past Service Amortization Period Ends |
N/A |
9999 |
N/A |
Explanation of above Actuarial estimates:
The amended HB 2803 would likely change the demographic experience of TRS because teachers would be encouraged to retire earlier than currently assumed because they could return to almost full-time employment as a teacher and continue to receive their retirement benefit unadjusted. This change in retirement age could significantly increase the Unfunded Actuarial Accrued Liability and Normal Cost for TRS.
Analysis of Impact on Public Pension Policy:
The amended HB 2803 would violate the West Virginia Statute §18-7A-28e (c), known as “2005 Pension Reform”, which prohibits the increase of existing benefits or the creation of new benefits for active members of the Teachers’ Retirement System until the limitation sunsets on July 1, 2034.
Under current West Virginia State Law, a retired teacher can substitute teach a total of 140 days each year without reducing their retirement benefit. By allowing retired teachers to substitute teach up to 160 days without reducing their retirement benefit, the amended HB 2803 would create a new benefit for active TRS participants.
In addition, the amended HB 2803 would effectively allow retired teachers to return to almost full-time employment as a teacher and continue to receive their retirement benefit without reduction. By allowing teachers to work almost full-time and receive their retirement benefit unadjusted the bill could violate the IRS in-service distribution rule and possibly lead to the TRS defined benefit plan being disqualified by the IRS.
The amended HB 2803 would likely change the demographic experience of TRS because teachers would be encouraged to retire earlier than currently assumed because they could return to almost full-time employment as a teacher and continue to receive their retirement benefit unadjusted. This change in retirement age could significantly increase the Unfunded Actuarial Accrued Liability and Normal Cost for TRS.
Fiscal Note Summary
Effect this measure will have on costs and revenues of state government.
The amended HB 2803 would permit retired teachers to substitute teach a total of 160 days each year without reducing their retirement benefit.
The amended HB 2803 would violate the West Virginia Statute §18-7A-28e (c), known as “2005 Pension Reform”, which prohibits the increase of existing benefits or the creation of new benefits for active members of the Teachers’ Retirement System until the limitation sunsets on July 1, 2034.
Under current West Virginia State Law, a retired teacher can substitute teach a total of 140 days each year without reducing their retirement benefit. By allowing retired teachers to substitute teach up to 160 days without reducing their retirement benefit, the amended HB 2803 would create a new benefit for active TRS participants.
In addition, the amended HB 2803 would effectively allow retired teachers to return to almost full-time employment as a teacher and continue to receive their retirement benefit without reduction. By allowing teachers to work almost full-time and receive their retirement benefit unadjusted the bill could violate the IRS in-service distribution rule and possibly lead to the TRS defined benefit plan being disqualified by the IRS.
The amended HB 2803 would likely change the demographic experience of TRS because teachers would be encouraged to retire earlier than currently assumed because they could return to almost full-time employment as a teacher and continue to receive their retirement benefit unadjusted. This change in retirement age could significantly increase the Unfunded Actuarial Accrued Liability and Normal Cost for TRS.
Fiscal Note Detail
Effect of Proposal |
Fiscal Year |
2019 Increase/Decrease (use"-") |
2020 Increase/Decrease (use"-") |
Fiscal Year (Upon Full Implementation) |
1. Estmated Total Cost |
999,999,999 |
999,999,999 |
999,999,999 |
Personal Services |
999,999,999 |
999,999,999 |
999,999,999 |
Current Expenses |
999,999,999 |
999,999,999 |
999,999,999 |
Repairs and Alterations |
999,999,999 |
999,999,999 |
999,999,999 |
Assets |
999,999,999 |
999,999,999 |
999,999,999 |
Other |
999,999,999 |
999,999,999 |
999,999,999 |
2. Estimated Total Revenues |
999,999,999 |
999,999,999 |
999,999,999 |
Explanation of above Fiscal Note estimates (include possible long-range effect):
The amended HB 2803 would violate the West Virginia Statute §18-7A-28e (c), known as “2005 Pension Reform”, which prohibits the increase of existing benefits or the creation of new benefits for active members of the Teachers’ Retirement System until the limitation sunsets on July 1, 2034.
Under current West Virginia State Law, a retired teacher can substitute teach a total of 140 days each year without reducing their retirement benefit. By allowing retired teachers to substitute teach up to 160 days without reducing their retirement benefit, the amended HB 2803 would create a new benefit for active TRS participants.
In addition, the amended HB 2803 would effectively allow retired teachers to return to almost full-time employment as a teacher and continue to receive their retirement benefit without reduction. By allowing teachers to work almost full-time and receive their retirement benefit unadjusted the bill could violate the IRS in-service distribution rule and possibly lead to the TRS defined benefit plan being disqualified by the IRS.
The amended HB 2803 would likely change the demographic experience of TRS because teachers would be encouraged to retire earlier than currently assumed because they could return to almost full-time employment as a teacher and continue to receive their retirement benefit unadjusted. This change in retirement age could significantly increase the Unfunded Actuarial Accrued Liability and Normal Cost for TRS.
Memorandum
The amended HB 2803 would violate the West Virginia Statute §18-7A-28e (c), known as “2005 Pension Reform”, which prohibits the increase of existing benefits or the creation of new benefits for active members of the Teachers’ Retirement System until the limitation sunsets on July 1, 2034.
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.
Person submitting Fiscal Note: Kenneth M. Woodson Jr., Board Actuary, CPRB
Email Address: kenneth.m.woodson@wv.gov