COMMITTEE ON LEGISLATIVE RESEARCH
OVERSIGHT DIVISION
FISCAL NOTE
L.R. No.: 2799-01
Bill No.: SB 977
Subject: Retirement - State; Retirement Systems and Benefits - General; Highway Patrol; Transportation
Type: Original
Date: January 26, 2004
FISCAL SUMMARY
| FUND AFFECTED | FY 2005 | FY 2006 | FY 2007 |
| General Revenue | ($33,482,716) | ($33,482,716) | ($33,482,716) |
| Total Estimated
Net Effect on General Revenue Fund* |
($33,482,716) | ($33,482,716) | ($33,482,716) |
| FUND AFFECTED | FY 2005 | FY 2006 | FY 2007 |
| Highway Fund | (Unknown) | (Unknown) | (Unknown) |
| Total Estimated
Net Effect on Other State Funds* |
(Unknown) | (Unknown) | (Unknown) |
*The provisions affecting the Missouri State Employees Retirement increases the Unfunded Actuarial Accrued Liability (UAAL) by $364,693,759. The provisions affecting the Highway Employees & Highway Patrol Retirement System increases the Unfunded Acutarial Accrued Liability (UAAL) by an unknown amount.
Numbers within parentheses: ( ) indicate costs or losses.
This fiscal note contains 6 pages.
| FUND AFFECTED | FY 2005 | FY 2006 | FY 2007 |
| Total Estimated
Net Effect on All Federal Funds |
$0 | $0 | $0 |
| FUND AFFECTED | FY 2005 | FY 2006 | FY 2007 |
| Local Government | $0 | $0 | $0 |
ASSUMPTION
The Joint Committee on Public Employee Retirement indicated the above referenced legislation would indicate that such legislation is a "substantial proposed change" in future plan benefits as defined in Section 105.655(5). Therefore, an actuarial cost statement as defined in Section 105.665 must be provided prior to final action on this legislation by either legislative body or committee thereof.
Pursuant to Section 105.670, this actuarial cost statement must be filed with 1) the Chief Clerk of the Missouri House of Representatives, 2) the Secretary of the Senate and 3) the Joint Committee on Public Employee Retirement as public information for at lease five (5) legislative days before final passage of the bill.
An actuarial cost statement for this legislation has been filed with the Joint Committee on Public Employee Retirement and it reflected in the attached pension impact statement.
ASSUMPTION (continued)
Officials from the Missouri State Employees' Retirement System assume based on the annual payroll for June 30, 2003 valuation projected forward two years (one year at 1.67% due to the state pay freeze and one year at 4%, the long-term assumed annual rate of payroll growth), the increase in total contribution would be $33.54 million in the first year after the benefit change. MSEP provisions for members hired prior to August 28, 1997 are based on a 4.25% average minimum increase until an aggregate increase of 65% is reached.
The proposed legislation was valued as if the formula for calculating future COLAs in the MSEP and MSEP 2000 was changed from 80% of the increase in the CPI to 100% of the increase in the CPI up to a maximum of 5%. For purposes of clarification, it recommended that this proposal be amended to include section 104.415 to ensure that MSEP active employees and future survivors would be eligible to receive this benefit. Additionally, it is recommended that the Administrative Law Judges and Legal Advisors' Plan and the Judicial Plan, sections 287.820 and 476.601, respectively, be amended to include administrative law judges, legal advisors and judges because these groups are presently receiving the same COLA benefits that are being provided to state retirees under Chapter 104. (It should be noted that the cost associated with providing this benefit to administrative law judges, legal advisors, and judges is not included in this fiscal note.)
Officials with the Missouri Highway and Transportation Employees and Highway Patrol Retirement System (HRS) assume the proposal would present the following effects:
Closed Plan
For active and inactive employees, the benefits of pensioners and their beneficiaries are increased annually by 80% of the increase in the Consumer Price Index (subject to a maximum increase of 5% and a minimum of 4%). The increases are made until the total of the increases reaches 65% at which time the increases will have the minimum removed. For employees hired after 8/27/97 and those hired prior to 8/28/97 and who have reached the 65% cap, the annual percentage increase will be equal to the lesser of : i) 100% of the CPI increase, and ii) 5%.
Year 2000
The annual percentage increase will be equal to the lesser of i) 100% of the CPI increase, and ii) 5%.
ASSUMPTION (continued)
Preliminary Data as of 1/27/2004
MoDOT $4,063,000
Patrol
Non-Uniformed $ 578,000
Uniformed Patrol $1,283,400 $1,861,400
Total $5,924,400
These calculations are based on annual payroll levels of:
MoDOT $239 Million
Non-Uniformed Patrol $ 34 Million
Uniformed Patrol $ 46 Million
Increased contribution rates of:
MoDOT 1.70%
Non-Uniformed Patrol 1.70%
Uniformed Patrol 2.79%
Officials from the Department of Transportation assume this proposal increases COLA for special consultants and retirees from 80% to 100% of consumer price index.
Closed Plan - For active and inactive employees, the benefits of pensioners and their beneficiaries are increased annually by 80% of the increase in the Consumer Price Index (subject to a maximum increase of 5% and a minimum of 4%. The increases are made until the total of the increases reaches 65% at which time the increases will have the minimum removed. For employees hired after 8/27/97 and those hired prior to 8/28/97 and who have reached the 65% cap, the annual percentage increase will be equal to the lesser of: i) 100% of the CPI increase, and ii) 5%.
Year 2000 - The annual percentage increase will be equal to the lesser of i)100% of the CPI increase, and ii) 5%.
These calculations are based on annual payroll levels of:
MoDOT $4,063,309
ASSUMPTION (continued)
Increased contribution rate of:
MoDOT $3,842,000
Increased contribution rates of:
MoDOT 1.70%
A new actuarial study is in the process of being performed, therefore the figures from FY03 are being used for this proposal. The figures will be updated, if necessary, once the study has been completed.
| FISCAL IMPACT - State Government | FY 2005
(10 Mo.) |
FY 2006 | FY 2007 |
| GENERAL REVENUE | |||
| Cost - General Revenue | |||
| Increased Contributions to Retirement Plans |
($33,482,716) |
($33,482,716) |
($33,482,716) |
| TOTAL ESTIMATED NET EFFECT ON GENERAL REVENUE FUNDS* |
($33,482,716) |
($33,482,716) |
($33,482,716) |
| HIGHWAY FUND | |||
| Cost - MoDOT | |||
| Increased Retirement Contributions | (Unknown) | (Unknown) | (Unknown) |
| TOTAL ESTIMATED NET EFFECT ON HIGHWAY FUNDS* | (Unknown) | (Unknown) | (Unknown) |
*The provisions affecting the Missouri State Employees Retirement increases the Unfunded Actuarial Accrued Liability (UAAL) by $364,693,759. The provisions affecting the Highway Employees & Highway Patrol Retirement System increases the Unfunded Acutarial Accrued Liability (UAAL) by an unknown amount.
| FISCAL IMPACT - Local Government | FY 2005
(10 Mo.) |
FY 2006 | FY 2007 |
| $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 act changes the cost-of-living assessment (COLA) for certain special consultants and retirees from 80% to 100% of the consumer price index for all adjustments after September 1, 2003, but no more than 5% of the annuity amount payable immediately before the payment of the COLA.
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
Missouri State Employees Retirement System
Joint Committee on Public Employee Retirement
Missouri Highway Patrol
Missouri Highway and Transportation Employees and
Highway Patrol Retirement System
Department of Transportation
Mickey Wilson, CPA
Director
January 26, 2004