A Glossary of Actuarial Terms is provided at the end of this impact statement.

ACTUARIAL EFFECTS:

If enacted, HB 617 will not affect the Judicial Retirement System Plan Two (JRS II) normal cost or actuarial accrued liability. The employee contribution rate decreases .12% from 5.95% to 5.83%. The proposal will minimally change the normal cost and actuarial accrued liability, and minimally reduce JRS II assets.  JRS II will remain actuarially sound even if the proposal is adopted. 

SYNOPSIS OF PROVISIONS

HB 617 would allow JRS II members who have served two full terms on an appellate court and whose age plus service credit equals at least 70 to cease making contributions. The proposal would take effect September 1, 2005.

FINDINGS AND CONCLUSIONS

At the Plan level, the proposal is not expected to be significant in terms of the actuarial soundness of JRS II.  At the member level, the proposal will increase compensation by 6%, the current rate of member contributions, in the case of certain members.

This bill provides that JRS II member contributions cease when a member has served at least two full terms on an appellate court and the member’s age plus service credit is at least 70. The bill does not materially change the amounts of any projected benefits. Therefore, the changes in this bill will not change the total normal cost or actuarial accrued liability. However, because the member contributions will decrease, this bill would slightly decrease the projected values of JRS II assets in future years.

The JRS II actuary certifies that the changes proposed by HB 617 would allow JRS II to remain actuarially sound, as required by Section 840.106 of the Government Code.  The State contribution rate necessary to fund the normal cost and amortize the unfunded liabilities over a 31-year period would remain 16.83% of payroll for the next biennium.

Finally, this analysis assumes no further changes are made to JRS II and cautions that the combined effect of several changes can exceed the effect of each change considered individually.

METHODOLOGY AND STANDARDS

The analysis relies on the participant data, financial information, benefit structure and actuarial assumptions and methods used in the August 31, 2004 valuation of JRS II. 

The PRB Actuary reviewed the actuarial assumptions and methods and indicated they appear to be reasonable.  The conclusions contained in the analysis seem reasonable, except as otherwise noted.  

All actuarial projections have a degree of uncertainty because they are based on the probability of occurrence of future contingent events.  Accordingly, actual results will be different from the results contained in the analysis to the extent actual future experience varies from the experience implied by the assumptions.