Fiscal Note - SB 0298 - Kansas City Police and Civilian Retirement Systems
L.R. NO. 1173-03
BILL NO. HCS for SB 298 with HA 1
SUBJECT: Retirement Systems: Police
TYPE: Original
DATE: April 30, 1997
FISCAL SUMMARY
ESTIMATED NET EFFECT ON STATE FUNDS
FUND AFFECTED FY 1998 FY 1999 FY 2000
General Revenue $0 $0 $0
Total Estimated
Net Effect on All
State Funds $0 $0 $0
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
City of Kansas City ($263,150) ($276,308) ($290,124)
City of St. Louis $0 ($0 to $1,880,000)($0 to $1,880,000)
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 Section 105.660(5). Therefore,
an actuarial cost statement must be provided prior to final action on the
proposal by either legislative body or committee thereof.
Officials of the Office of Administration assume that fiscal impact would be
determined by the Kansas City Police and Civilian Employees' Retirement
Systems and the St. Louis Police Retirement System.
Officials of the Police Retirement System of Kansas City and the Civilian
Employees' Retirement System of the Police Department of Kansas City
requested an actuarial cost analysis of the proposed legislation. That
analysis indicated that the provisions affecting the Police Retirement System
would not result in an increase in city or member contributions, as the
current contribution rate schedule for the system is actuarially sufficient
to provide current as well as proposed benefits. The analysis revealed that
three separate provisions affecting the Civilian Employees' System would
result in increased costs to the System and the City of Kansas City. The
provision increasing all benefits to 2% of final compensation multiplied by
years of service would result in increased costs of $193,155 for FY 1998,
$202,813 for FY 1999, and $212,954 for FY 2000. The provision extending
disability benefits to members who become totally and permanently disabled
after age 60 would result in increased costs of $4,269 for FY 1998, $4,482
for FY 1999, and $4,707 for FY 2000. The provision for supplemental medical
insurance for all retired members and qualified surviving spouses would
result in increased costs of $65,726 for FY 1998, $69,013 for FY 1999, and
$72,463 for FY 2000. Total increased costs as a result of the legislation
are estimated at $263,150 for FY 1998, $276,308 for FY 1999, and $290,124 for
FY 2000. The annual costs are expected to continue to increase by
approximately 5% thereafter.
St. Louis Police Retirement System officials requested an actuarial cost
analysis of this proposal. That analysis indicated that several provisions
of the legislation would result in an increase in the present value of future
costs of the retirement system, and a potential increase in the contributions
required of the City of St. Louis. The increase in contributions reflects
the impact that these benefit changes would have had in the System's FY 1997
if the changes had been in effect as of the first day of the fiscal year
(October 1, 1996) and if the System's assets did not exceed its liabilities.
If the changes are made effective October 1, 1997, the first year the City's
costs would be affected is the City's FY 1999. The expected costs would
range from $0 (if the plan is in a surplus position at that time) to the
amounts shown below if population demographics remain unchanged. The
provisions affecting future costs of the System and the City of St. Louis,
the increase in the present value of future costs to the System, and
potential increases in the City's contributions are detailed below, as
provided by the System's actuary.
Return of Contributions Upon Accidental Disability
This provision would require the return of member contributions to any
current accidentally disabled member and to active members who become
accidentally disabled in the future. The estimated increase in future costs
to the System is $1,800,000, with a potential increase in the City's annual
contribution of $200,000.
Increase in Widow Benefits
The proposal would increase the benefit for widows from 25% to 35% of the
members' average final compensation for widows currently receiving survivor
benefits, for future widows of retired members, and for future widows of
active members. The estimated increase in the System's future costs is
$14,000,000, with a potential increase in the City's annual contribution of
$1,600,000.
Increase in Dependent Child Benefits
For purposes of performing the actuarial cost analysis, the System's actuary
assumed that the proposal would provide all current dependent children,
including those of ordinary disability retirees, an increase in benefits
equal to the greater of 5% of the member's average final compensation or
$100. The proposal would also increase the benefits for future dependent
children of active members to 15% of the member's average final compensation.
The estimated increase in the System's future costs is $700,000, with a
potential increase in the City's annual contribution of $80,000.
The total increase in future costs of the System as a result of this proposal
is estimated to be $16,500,000. The potential increase in the City's
contributions to the System as a result of this proposal is estimated to be
$1,880,000 annually, depending on the System's surplus at the time of its
annual actuarial valuation.
City of St. Louis officials concur with the actuarial estimates and possible
maximum annual increases in the City's contributions to the System.
Oversight has not reflected potential costs to the state for possible
reimbursement to the City of Kansas City or the City of St. Louis under
Article X, Section 21 of the Missouri Constitution as this proposal contains
language that would eliminate the accrual of any benefit that is determined
by a court judgment to be in violation of that constitutional provision.
Regarding the provision revising the membership of the board of police
commissioners in the City of St. Louis and the City of Kansas City, officials
of the Office of Governor, Kansas City Manager's Office, and the City of St.
Louis assume there would be no fiscal impact.
FISCAL IMPACT - State Government FY 1998 FY 1999 FY 2000
(10 Mo.)
0 0 0
FISCAL IMPACT - Local Government FY 1998 FY 1999 FY 2000
(10 Mo.)
CITY OF KANSAS CITY
Costs-increased contributions to Civilian
Employees' Retirement System of the
Police Department of Kansas City ($263,150) ($276,308) ($290,124)
CITY OF ST. LOUIS
Costs-possible increased contributions to ($0 to ($0 to
St. Louis Police Retirement System $0 1,880,000) 1,880,000)
FISCAL IMPACT - Small Business
No direct fiscal impact to small businesses would be expected as a result of
this proposal.
DESCRIPTION
The proposal would change several provisions governing the Police Retirement
System of Kansas City and the Civilian Employees' Retirement System of the
Police Department of Kansas City. Changes to the Police Retirement System
include deleting the two-year marriage requirement for surviving spouses to
receive benefits, and increasing the duty death benefit from $20,000 to
$50,000 and making the benefit payable in a lump sum. Changes to the
Civilian Employees' Retirement System include providing a normal pension of
2% of final compensation multiplied by years of service for all members
without reduction for spousal benefits, providing medical insurance coverage
to all retired members and qualified surviving spouses and continuing after
the member reaches age 65, and extending disability benefits to members who
become totally and permanently disabled after age 60.
Under this proposal, members of the St. Louis Police Retirement System
retiring for accidental disability would receive a refund of their total
contribution to the system without interest. Effective October 1, 1997, the
proposal would increase the ordinary disability retirement allowance, raise
the benefits of survivors of members who retired for service or disability,
and increase the benefits of survivors of members killed in the line of duty.
The proposal would require that the first appointment after August 28, 1997
and every four years thereafter to the board of police commissioners in the
City of St. Louis and the City of Kansas City be a retired member of the
police force in good standing with ten years of service and a rank no higher
than lieutenant.
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
Police Retirement System of Kansas City and the Civilian Employees'
Retirement System of the Police Department of Kansas City
St. Louis Police Retirement System
City of St. Louis
Office of the Governor
Kansas City Manager's Office
This Fiscal Note is not an official copy and should not be quoted or cited.