This Fiscal Note is not an official copy and should not be quoted or cited.
Fiscal Note - SB 0609 - Optional Retirement System for State Colleges & Universities
L.R. NO. 2377-01
BILL NO. SB 609
SUBJECT: Retirement
TYPE: Original
DATE: January 12, 1996
FISCAL SUMMARY
ESTIMATED NET EFFECT ON STATE FUNDS
FUND AFFECTED FY 1997 FY 1998 FY 1999
None $0 $0 $0
Total Estimated
Net Effect on All
State Funds $0 $0 $0
ESTIMATED NET EFFECT ON FEDERAL FUNDS
FUND AFFECTED FY 1997 FY 1998 FY 1999
None $0 $0 $0
Total Estimated
Net Effect on All
Federal Funds $0 $0 $0
ESTIMATED NET EFFECT ON LOCAL FUNDS
FUND AFFECTED FY 1997 FY 1998 FY 1999
Local Government $0 $0 $0
FISCAL ANALYSIS
ASSUMPTION
The Joint Committee on Public Employee Retirement (JCPER) has reviewed this
proposal and has determined an actuarial study is not needed under the
provisions of section 105.660, subdivision (5).
Officials of the Coordinating Board for Higher Education (CBHE) would have no
direct fiscal impact on that agency, although ultimately the fringe benefits
percentage may be affected. Officials indicate that the legislation would
appear to affect a limited number of personnel currently, but the number
could increase over time if personnel are recruited from institutional
environments.
Of the nine universities and colleges affected by the legislation, three
responses were received as follows: Truman University officials indicated
the proposal would have no fiscal impact on their university; Central
Missouri State University officials indicated the fiscal impact could not be
determined without knowing the number of participants; Missouri Western State
College officials indicated that there would be no fiscal impact as the total
contributions required by the legislation would approximate the current
contribution made to the Missouri State Employees Retirement System.
Officials of the Missouri State Employees' Retirement System (MOSERS) assume
that this legislation could have long-term fiscal impact to their system.
Officials base this assumption on the anticipation that among new hires,
younger individuals will likely elect the optional retirement program (ORP),
and older individuals will likely elect to remain members of MOSERS. Over a
period of time, this would have the effect of increasing the average entry
age and decreasing the active population participating in MOSERS. Both of
these factors would result in increased contribution rates for the state
since the normal cost is based on entry age of participants, so that as entry
age rises, so do the costs to the state. Also, officials indicate that since
the institutions are limited by the legislation to an amortization
contribution of 2.5%, it is unclear who will pay for contribution shortfalls
resulting from increases in the unfunded accrued liability in future years.
Officials of MOSERS and the Office of Administration (OA) indicate that since
the benefits proposed in the legislation would be available only to certain
members of MOSERS, given past litigation history over special provisions for
certain state employees in the retirement systems, there may be potential
unknown costs which could be generated for MOSERS and/or the state.
Officials have cited a court decision, 631 Federal Supplement 1388, Western
District of Missouri, 1986, as support for this position.
Oversight assumes that there could be cost savings to the institutions who
elect to establish optional retirement programs (ORP's), since the maximum
contribution to both the ORP and MOSERS by the institutions on behalf of
those employees electing to participate in the ORP's would be 9.5%, compared
to the current contribution to MOSERS of 10.66% of salaries. However,
Oversight also assumes that these institutions may incur some administrative
costs associated with establishing and administering the ORP's. Therefore,
for purposes of this fiscal note, Oversight assumes that any fiscal impact on
the institutions would be minimal. Oversight also assumes that any fiscal
impact on MOSERS would be long-term, and no additional costs to the state
from increased contributions are reflected in the fiscal note period.
FISCAL IMPACT - State Government FY 1997 FY 1998 FY 1999
(10 Mo.)
0 0 0
FISCAL IMPACT - Local Government FY 1997 FY 1998 FY 1999
(10 Mo.)
0 0 0
DESCRIPTION
This legislation would allow Missouri regional colleges and universities and
the Coordinating Board for Higher Education to establish optional retirement
programs that certain full-time and senior administrative personnel may elect
to participate in rather than in the Missouri State Employees' Retirement
System (MOSERS). Institutions are required to administer the programs, and
are also required to contribute to the programs 7% of the employees'
salaries, plus a maximum of 2.5% of salaries to MOSERS to be applied to its
unfunded liability.
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
Coordinating Board for Higher Education
Truman State University
Central Missouri State University
Missouri Western State College
NOT RESPONDING: Northwest Missouri State University, Southeast Missouri
State University, Southwest Missouri State University, Harris-Stowe State
College, Lincoln University, Missouri Southern State College