TO: | Honorable Robert Duncan, Chair, Senate Committee on State Affairs |
FROM: | John S. O'Brien, Deputy Director, Legislative Budget Board |
IN RE: | HB1079 by West, George "Buddy" (Relating to the eligibility of certain judges to retire with full benefits.), Committee Report 2nd House, Substituted |
JUDICIAL RETIREMENT SYSTEM - PLAN TWO |
Current |
Proposed |
Difference |
State Contribution Employee Contribution Total Contribution |
16.83 % 5.97 % 22.80 % |
16.83 % 5.97 % 22.80 % |
0 0.00 % 0.00 % |
Normal Cost (% of payroll) |
19.58 % |
19.65 % |
+ 0.07% |
Net Asset Balance (millions) |
$25.7 |
$24.9 |
- $0.8 |
Funded Ratio |
118.5% |
117.8% |
- 0.7% |
Amortization Period (years), |
0.0 |
0.0 |
0.0 |
A Glossary of Actuarial Terms is provided at the end of this impact statement.
ACTUARIAL EFFECTS:
The normal cost for JRS II would increase 0.07% of payroll, from 19.58% of payroll to 19.65% of payroll. The net asset balance would decrease by $800,000 in fiscal year 2006. The funded ratio would be reduced from 118.5% to 117.8%.
SYNOPSIS OF PROVISIONS
This bill would change the service retirement eligibility requirements for JRS II members to allow retirement before age 55 with at least 20 years of service. This would increase the actuarial accrued liability and normal cost of JRS II.
FINDINGS AND CONCLUSIONS
The ERS actuary certifies that this change would allow the JRS II to remain actuarially sound through the next biennium based on the current State contribution rate of 16.83% of payroll.
The 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
SOURCES:
Actuarial Analyses by Steven R. Rusher, Actuary, Towers Perrin,
GLOSSARY OF ACTUARIAL TERMS:
Normal Cost-- the current annual cost as a percentage of payroll that is necessary to pre-fund pension benefits adequately during the course of an employee's career.
Unfunded Liability-- the amount of total liabilities that are not covered by the total assets of a retirement system. Both liabilities and assets are measured on an actuarial basis using certain assumptions including average annual salary increases, the investment return of the retirement fund, and the demographics of retirement system members.
Amortization Period-- the number of years required to pay-off the unfunded liability. Public retirement systems have found that amortization periods ranging from 20 to 40 years are acceptable. State law prohibits changes in TRS, ERS, or JRS-2 benefits or state contribution rates if the result is an amortization period exceeding 30.9 years.
Source Agencies: | 338 Pension Review Board
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LBB Staff: | JOB, WM
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