Actuarial Fiscal Note

Date Requested:June 17, 2019
Time Requested:04:19 PM
Agency: Consolidated Public Retirement Board
CBD Number: Version: Bill Number: Resolution Number:
4161 Introduced HB173
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).


    Beginning on January 1, 2020, HB 173 would provide any TRS retirant who is receiving an annuity on the effective date of the bill a one-time annual cost-of-living increase of $2,000.
    
    HB 173 would violate the West Virginia Statute §18-7A-28e (a), known as “2005 Pension Reform”, which prohibits the increase of existing benefits or the creation of new benefits for retirees or beneficiaries currently receiving a benefit from the Teachers’ Retirement System unless the increase is less than or equal to one percent of the TRS accrued actuarial liability determined as of the most recent funding valuation, July 1, 2018. The “2005 Pension Reform” limitation sunsets on July 1, 2034.
    
    As of the most recent TRS funding valuation, July 1, 2018, there are 31,491 retirees and 2,178 disabled retirees in TRS. Providing a one-time annual cost-of-living increase of $2,000 for existing retirees and disabled retirees would increase the TRS accrued actuarial liability by more than one percent and would therefore violate the “2005 Pension Reform”.
    



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 9.90 %
Normal Cost of System N/A $999,999,999.00 9.90 %
Past Service Liabilities $999,999,999.00 $999,999,999.00 9.90 %
Fiscal Year Past Service
Amortization Period Ends
N/A 9999 N/A


Explanation of above estimates:


    HB 173 would violate the West Virginia Statute §18-7A-28e (a), known as “2005 Pension Reform”, which prohibits the increase of existing benefits or the creation of new benefits for retirees or beneficiaries currently receiving a benefit from the Teachers’ Retirement System unless the increase is less than or equal to one percent of the TRS accrued actuarial liability determined as of the most recent funding valuation, July 1, 2018. The “2005 Pension Reform” limitation sunsets on July 1, 2034.
    
    As of the most recent TRS funding valuation, July 1, 2018, there are 31,491 retirees and 2,178 disabled retirees in TRS. Providing a one-time annual cost-of-living increase of $2,000 for existing retirees and disabled retirees would increase the TRS accrued actuarial liability by more than one percent and would therefore violate the “2005 Pension Reform”.
    

Analysis of Impact on Public Pension Policy:


    HB 173 would violate the West Virginia Statute §18-7A-28e (a), known as “2005 Pension Reform”, which prohibits the increase of existing benefits or the creation of new benefits for retirees or beneficiaries currently receiving a benefit from the Teachers’ Retirement System unless the increase is less than or equal to one percent of the TRS accrued actuarial liability determined as of the most recent funding valuation, July 1, 2018. The “2005 Pension Reform” limitation sunsets on July 1, 2034.
    
    As of the most recent TRS funding valuation, July 1, 2018, there are 31,491 retirees and 2,178 disabled retirees in TRS. Providing a one-time annual cost-of-living increase of $2,000 for existing retirees and disabled retirees would increase the TRS accrued actuarial liability by more than one percent and would therefore violate the “2005 Pension Reform”.
    



Fiscal Note Summary


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


    Beginning on January 1, 2020, HB 173 would provide any TRS retirant who is receiving an annuity on the effective date of the bill a one-time annual cost-of-living increase of $2,000.
    
    HB 173 would violate the West Virginia Statute §18-7A-28e (a), known as “2005 Pension Reform”, which prohibits the increase of existing benefits or the creation of new benefits for retirees or beneficiaries currently receiving a benefit from the Teachers’ Retirement System unless the increase is less than or equal to one percent of the TRS accrued actuarial liability determined as of the most recent funding valuation, July 1, 2018. The “2005 Pension Reform” limitation sunsets on July 1, 2034.
    
    As of the most recent TRS funding valuation, July 1, 2018, there are 31,491 retirees and 2,178 disabled retirees in TRS. Providing a one-time annual cost-of-living increase of $2,000 for existing retirees and disabled retirees would increase the TRS accrued actuarial liability by more than one percent and would therefore violate the “2005 Pension Reform”.
    



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 estimates (including long-range effect):


    HB 173 would violate the West Virginia Statute §18-7A-28e (a), known as “2005 Pension Reform”, which prohibits the increase of existing benefits or the creation of new benefits for retirees or beneficiaries currently receiving a benefit from the Teachers’ Retirement System unless the increase is less than or equal to one percent of the TRS accrued actuarial liability determined as of the most recent funding valuation, July 1, 2018. The “2005 Pension Reform” limitation sunsets on July 1, 2034.
    
    As of the most recent TRS funding valuation, July 1, 2018, there are 31,491 retirees and 2,178 disabled retirees in TRS. Providing a one-time annual cost-of-living increase of $2,000 for existing retirees and disabled retirees would increase the TRS accrued actuarial liability by more than one percent and would therefore violate the “2005 Pension Reform”.
    



Memorandum


    HB 173 would violate the West Virginia Statute §18-7A-28e (a), known as “2005 Pension Reform”, which prohibits the increase of existing benefits or the creation of new benefits for retirees or beneficiaries currently receiving a benefit from the Teachers’ Retirement System unless the increase is less than or equal to one percent of the TRS accrued actuarial liability determined as of the most recent funding valuation, July 1, 2018. The “2005 Pension Reform” limitation sunsets on July 1, 2034.
    
    As of the most recent TRS funding valuation, July 1, 2018, there are 31,491 retirees and 2,178 disabled retirees in TRS. Providing a one-time annual cost-of-living increase of $2,000 for existing retirees and disabled retirees would increase the TRS accrued actuarial liability by more than one percent and would therefore violate the “2005 Pension Reform”.
    
    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