SB 0331 - Fiscal Note

This Fiscal Note is not an official copy and should not be quoted or cited.

Fiscal Note - SB 0331 - Revises Public School Retirement System benefits

SB 331 - Fiscal Note

COMMITTEE ON LEGISLATIVE RESEARCH

OVERSIGHT DIVISION

FISCAL NOTE

L.R. NO.: 1445-01

BILL NO.: SB 331

SUBJECT: Retirement: Schools

TYPE: Original

DATE: February 12, 1999

FISCAL SUMMARY

ESTIMATED NET EFFECT ON STATE FUNDS
FUND AFFECTED	FY 2000	FY 2001	FY 2002
None	$0	$0	$0
Total Estimated Net Effect on All State Funds	$0	$0	$0

ESTIMATED NET EFFECT ON FEDERAL FUNDS
FUND AFFECTED	FY 2000	FY 2001	FY 2002
None	$0	$0	$0
Total Estimated Net Effect on All Federal Funds	$0	$0	$0

ESTIMATED NET EFFECT ON LOCAL FUNDS
FUND AFFECTED	FY 2000	FY 2001	FY 2002
School Districts *	$0*	$0*	$0*

*DOES NOT REFLECT FISCAL IMPACT TO PUBLIC SCHOOL RETIREMENT SYSTEM (PSRS) OF $523,122,000. PSRS FUNDS ARE NOT CONSIDERED LOCAL FUNDS FOR FISCAL NOTE PURPOSES.

Numbers within parentheses: ( ) indicate costs or losses

This fiscal note contains 4 pages.

FISCAL ANALYSIS

ASSUMPTION

Officials of the Joint Committee on Public Employee Retirement have reviewed this proposal and have determined that it represents a "substantial proposed change" in future plan benefits as defined in section 105.660(5), RSMo. Therefore, an actuarial cost statement must be provided prior to final action on this legislation by either legislative body or committee thereof.

Officials of the Office of Administration assume that any fiscal impact would be determined by the Public School Retirement System.

Public School Retirement System (PSRS) officials assume that the proposal would provide the following benefit improvements for the PSRS:

A decrease in the final average salary period from five years to three years.
A "rule of 80" retirement.
Allow a primary beneficiary of a deceased member to elect option 2 benefits if the beneficiary has an insurable interest in the life of the member and is otherwise eligible (currently, only a spouse named as primary beneficiary has the right to option 2 benefits).
Minimum benefits to surviving beneficiaries of retirees deceased prior to May 26, 1994.
A $2 per month increase for each year of credit to surviving beneficiaries of retirees deceased prior to May 26, 1994.
A $5,000 death benefit to all retirees.
A $5 per month increase for each year of credit to all members retired prior to July 1, 1999.
An increase in minimum and maximum survivor benefits.
Payment of survivor benefits to a dependent, unmarried child until age 24 if the child remains in school on a full-time basis. (Officials note that the actuarial cost study assumes that survivor benefits will also continue to the surviving spouse until the youngest, dependent, unmarried child reaches age 24 if the child remains in school on a full-time basis; however, as written the proposal provides only for payment to the child until age 24.)

The actuarial cost analysis of these benefit improvements indicates that the total cost of the provisions is $523,122,000. As of June 30, 1998, the PSRS was overfunded by $508,309,000. The resulting unfunded actuarial accrued liability would be $14, 813,000 to be amortized over 2.35 years at the current contribution rate of 21.0% (10.5% for members and 10.5% for school district employers).

ASSUMPTION (continued)

Oversight notes that while there is significant fiscal impact to the retirement system, there is no immediate cost to local school districts since their contribution rates would not increase. Funds of the retirement system are not considered local funds for fiscal note purposes. There will be long-term fiscal impact as a result of this legislation, since elimination of the system's surplus and creation of an unfunded actuarial accrued liability will contribute to any need for increased contributions in the future.

FISCAL IMPACT - State Government	FY 2000	FY 2001	FY 2002


	0	0	0


FISCAL IMPACT - Local Government	FY 2000	FY 2001	FY 2002


SCHOOL DISTRICTS *	$0*	$0*	$0*

*DOES NOT REFLECT FISCAL IMPACT TO PUBLIC SCHOOL RETIREMENT SYSTEM (PSRS) OF $523,122,000. PSRS FUNDS ARE NOT CONSIDERED LOCAL FUNDS FOR FISCAL NOTE PURPOSES.


FISCAL IMPACT - Small Business

No direct fiscal impact to small businesses would be expected as a result of this proposal.

DESCRIPTION

The proposal would make the following changes to the Public School Retirement System (PSRS):

1) Minimum and maximum survivor benefits are increased. Minimum benefits are raised from $400 to $575 and maximums are raised from $600 to $860. Also, the additional payment for each dependent child under age 18 (now one-half of the survivor's base payment) shall be at least $300 per month, but the total payment to spouse including payments for dependents shall not

exceed $2160.

DESCRIPTION (continued)

2) Survivor and dependent child benefits shall continue until the child is age 24 years if still in college. Currently, such benefits end at age 22 years.

3) Expands the option for a beneficiary, other than a spouse, to select Option 2 survivor benefits if the member dies prior to retirement. The bill expands this to include any beneficiary with an insurable interest in the member.

4) Adds a $2 times years of creditable service increase to monthly payments to beneficiaries of deceased retirees.

5) Applies the current minimum retiree benefits to the beneficiaries of deceased retirees.

6) Adds a $5,000 single-sum, death benefit for retired members.

7) Revises final average salary to be determined on final three years rather than final five years of service.

8) Adds a "Rule of 80" clause to allow full retirement when a member's age plus creditable service equals 80 years or more.

9) Adds an additional $5 times years of creditable service to the monthly benefit for those retiring by July 1, 1999.

The act includes an emergency clause to become effective upon passage and approval or July 1, 1999, whichever is later.

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

Public School Retirement System

Jeanne Jarrett, CPA

Director

February 12, 1999