Fiscal Note - SB 0222 - Revises MOSERS Retirement Plans and Adds New COLA Language
L.R. NO. 0839-03
BILL NO. Perfected SCS for SB 222
SUBJECT: Retirement Systems & Benefits
TYPE: Corrected #
DATE: February 26, 1997
# Corrected to reflect costs for Highways and Transportation Employees' and
Highway Patrol Retirement System previously omitted in error (supercedes
fiscal note dated 2/25/97)
FISCAL SUMMARY
ESTIMATED NET EFFECT ON STATE FUNDS
FUND AFFECTED FY 1998 FY 1999 FY 2000
General Revenue ($52,284,896) ($52,436,104) ($52,536,104)
Riverboat Gaming
Fund# ($207,358) ($248,830) ($248,830)
Highway Fund# ($10,276,888) ($12,332,265) ($12,332,265)
Total Estimated
Net Effect on All
State Funds# ($62,769,142) ($65,017,199) ($65,117,199)
ESTIMATED NET EFFECT ON FEDERAL FUNDS
FUND AFFECTED FY 1998 FY 1999 FY 2000
None
$0 $0 $0
Total Estimated
Net Effect on All
Federal Funds $0 $0 $0
ESTIMATED NET EFFECT ON LOCAL FUNDS
FUND AFFECTED FY 1998 FY 1999 FY 2000
Local Government $0 $0 $0
FISCAL ANALYSIS
ASSUMPTION
Officials of the Joint Committee on Public Employee Retirement have reviewed
this proposal and determined that it represents a "substantial proposed
change" in future plan benefits as defined in RSMO 105.660(5). Therefore, an
actuarial cost statement must be provided prior to final action on the
legislation by either legislative body or committee thereof.
Officials of the Missouri State Employees' Retirement System (MOSERS) assume
that the proposal would grant an unreduced Joint & 50% Survivor Options to
all members of the General Employee Plan and would modify the existing
cost-of-living (COLA) provision for members of the General Employee Plan, the
Judicial Retirement Plan, and the Administrative Law Judges and Legal
Advisors' (ALJs) Retirement Plan. All of these plans are administered by
MOSERS. The following summarizes the proposed benefit changes and related
costs by plan type.
General Employee Plan
Under current law members of MOSERS' General Employee Plan, excluding
Department of Conservation employees, are given the option upon retirement of
taking reduced benefits in exchange for the promise that upon their death
their surviving spouse will continue to be eligible for benefits. Department
of Conservation employees have been able by law since October, 1984, to
obtain surviving spouse benefits equal to 50% of the member's benefit without
the member's benefit being reduced. The current proposal would make this
option available to all members of the General Employee Plan retiring after
October, 1984. Therefore, retroactive benefits would also be paid in lump
sums to those members who previously elected this option and incurred reduced
benefits. The total lump sum payments have been calculated to be
$11,507,939. The costs are to be amortized through an increase in the
contribution rate.
This proposal would also provide that when the 65% cumulative COLA cap is
reached under current structure, a new structure of 80% of CPI, no cap, no
minimum, and a 5% annual maximum COLA will take effect. Members hired after
August 28, 1997 will receive a COLA based strictly on the new structure.
Based on an actuarial analysis, MOSERS officials indicate that the annual
increase in required contributions necessary to fund the unreduced Joint &
50% Survivor Option and the COLA modification would approximate $51,845,045.
Administrative Law Judges and Legal Advisors' (ALJ) Plan
The proposal would revise the current COLA structure as described above for
the General Employee Plan. Based on an actuarial analysis, MOSERS officials
indicate that the annual increase in required contributions would be
approximately $82,813.
Judicial Retirement Plan
The proposal would revise the current COLA structure as described above for
the General Employee Plan. Benefits for the Judicial Retirement Plan are
reimbursed on a monthly basis from general revenue after the retirement
expense has been incurred by MOSERS, commonly referred to as a
"pay-as-you-go" plan. If the plan were funded on an actuarial basis, the
annual increase in required contributions would approximate $1,570,173.
However, based on the method of funding used, costs for each of the three
fiscal years included in the fiscal note would be $46,000 for FY 1998,
$135,000 for FY 1999 and $235,000 for FY 2000. The total projected increase
in costs is approximately $16,182,000 through the fifteenth year.
The total annual costs to the state's general revenue fund for the additional
benefits for the three MOSERS plans is estimated at approximately $51,973,858
for FY 1998, $52,062,858 for FY 1999, and $52,162,858 for FY 2000.
Officials of MOSERS and the Office of Administration assert that this
legislation is likely necessary to avoid litigation. Recent litigation
involving instances where special provisions within the state retirement
systems are available only to certain groups of members within the systems
has resulted in significant costs to MOSERS and to the state.
# Officials of the Highways and Transportation Employees' and Highway Patrol
Retirement System (HRS) obtained an actuarial cost analysis of the provisions
revising the current cost-of-living adjustments (COLA's) for its members.
That analysis indicated that the total estimated cost of changes to the
System's COLA provisions would be $12,954,131 annually to the Department of
Transportation (DOT) and the Department of Public Safety - Missouri Highway
Patrol (MHP). HRS officials determined that DOT contributions to HRS would
increase by $8,807,165 annually, and MHP contributions would increase by
$4,147,176 annually. The funds to be charged are shown below.
FISCAL IMPACT - State Government FY 1998 FY 1999 FY 2000
(10 Mo.)
GENERAL REVENUE FUND
Costs-increased contributions
to MOSERS ($51,973,858) ($52,062,858) ($52,162,858)
#Costs-Department of Public Safety-
Missouri Highway Patrol
Increased contributions to HRS ($311,038) ($373,246) ($373,246)
NET EFFECT ON GENERAL
REVENUE FUND ($52,284,896) ($52,436,104) ($52,536,104)
RIVERBOAT GAMING FUND
#Costs-Department of Public Safety-
Missouri Highway Patrol
Increased contributions to HRS ($207,358) ($248,830) ($248,830)
HIGHWAY FUND
#Costs-Department of Transportation
Increased contributions to HRS ($7,339,304) ($8,807,165) ($8,807,165)
#Costs-Department of Public Safety-
Missouri Highway Patrol
Increased contributions to HRS ($2,937,584) ($3,525,100) ($3,525,100)
NET EFFECT ON HIGHWAY FUND ($10,276,888) ($12,332,265) ($12,332,265)
FISCAL IMPACT - Local Government FY 1998 FY 1999 FY 2000
(10 Mo.)
0 0 0
FISCAL IMPACT - Small Business
No direct fiscal impact to small businesses would be expected as a result of
this proposal.
DESCRIPTION
This proposal would provide for an unreduced Joint & 50% Survivor Option for
all members of the General Employee Plan within the Missouri State Employees'
Retirement System (MOSERS). It would also modify the current structure for
cost-of- living adjustments (COLA's) for members within all MOSERS plans so
that when a retiree reaches the current 65% cumulative cap on COLA's, a new
structure of 80% of consumer price index, no cap, no minimum and a 5% maximum
COLA would take effect. The legislation would also make other technical
changes to laws governing MOSERS.
#The proposal would modify the current structure for cost-of-living
adjustments (COLA's) for members of the Highways and Transportation
Employees' and Highway Patrol Retirement System so that when a retiree
reaches the current 65% cumulative cap on COLA's, a new structure of 80% of
the increase in the consumer price index (CPI) with an annual maximum of 5%
would take effect. For employees hired after the effective date, COLA's
would be equal to 80% of the increase in the CPI with an annual maximum of
5%.
This legislation is not federally mandated, would not duplicate any other
program and would not require additional capital improvements or rental
space.
SOURCES OF INFORMATION
Joint Committee on Public Employee Retirement
Office of Administration
Missouri State Employees' Retirement System
Highway and Transportation Employees' and Highway Patrol Retirement System
This Fiscal Note is not an official copy and should not be quoted or cited.