SB 1063 would amend the Government Code, as well as the Health and Safety Code, to allow former employees of the Travis County Health District (TCHD) who no longer have service credit in the TCHD retirement plan due to a refund of contributions, to reestablish their service credit for the special proportionate retirement program with the City of Austin Employees Retirement System (COAERS), without actually purchasing the service credit in the TCHD retirement plan. The member must just apply for the service credit and indicate they do not wish to make a contribution for the credit.

Actuarial Effects:

The actuarial valuation dated December 31, 2007, shows the amortization period as infinite, which is actuarially unsound under PRB guidelines for actuarial soundness. According to the PRB actuary, the bill, if enacted, will not make the affected public retirement system significantly more actuarially unsound.

The actuarial analysis shows that the cost of the proportionate program on COAERS is not valued in the actuarial valuation due to a lack of reliable data. Instead, actuarial losses due to the proportionate program are recognized as they occur. Because SB 1063 would not change this process, the bill will have no impact on the actuarial valuation of the System.

It is noted within the actuarial analysis that a member of COAERS, who previously had service credit with TCHD, might be unwilling to reestablish service credit with TCHD if they are required to purchase the service. The bill would allow these persons to establish service for the proportionate program at no cost to the member. This might allow the COAERS member to receive the benefit earlier than they otherwise would have. For this to change the date the COAERS member could receive his or her benefit, the combined service in the two plans would need to be more than 20 years of service. It is assumed that the number of members this could apply to is very small; therefore the bill will have no material actuarial impact on COAERS. The review of the actuarial analysis concludes that if a significant number of members receive accelerated benefits as a result of this bill, there could be a potentially material cost that would be recognized as actuarial losses.

SOURCES:

Actuarial Analysis by Lewis Ward & Joseph P Newton, Actuaries, Gabriel, Roeder, Smith & Co., April 7, 2009

Review of Actuarial Analysis by Mr. Martin McCaulay, Deputy Executive Director/Actuary, Pension Review Board, April 7, 2009