West Virginia Press Association Staff Report
CHARLESTON, W.Va. – The Senate Committee on Pensions, on Wednesday, considered a committee substitute for SB 670, a bill seeking to reallocate a portion of the insurance and casualty premium tax to the Municipal Pensions Security Fund.
As explained by Committee Counsel Phillip Childs, the bill “relates to the one-percent premium tax that is currently levied on fire insurance and casualty insurance policies. Right now it is for the benefit of the Municipal Police and Fire Pension and Relief Fund – also the teacher’s retirement system, and also the volunteer and part volunteer fire companies and departments.”
According to Childs, the insurance commissioner is currently tasked with collecting the taxes, and distributing them.
“25 basis-points (percent) go to the VFDs (Volunteer Fire Departments),” Childs said. “10 basis-points go to TRS (Teacher Retirement System), and 65 basis-points goes to the Municipal Police and Fire pensions. What this bill would do is it would take those 10 basis-points away from TRS, and give it to the Municipal Police and Fire Pension Plan that is overseen by the Municipal Pensions Oversight Board (MPOB).”
Unlike the 65 basis-points currently designated to the MPOB, the 10 basis-points taken from TRS would be “restricted only to those plans currently employing actuarially unsound financing methods,” and would switch to “actuarially sound methods” within the next 36 months.
“All of the plans which do this would split the 10 basis-points – which right now it’s floating, but $3.5 million-ish – for no more than 10 years,” Childs added. “That’s the most that they could be eligible to receive that.”
“If any individual plan reaches 60% funding during that time, they drop out of that pool, and the 10 basis-points are split among the remaining eligible plans,” Childs added. “Right now I believe there are 11 or 12 plans that could be eligible for this.”
On-hand to provide more insight as to the origins of the bill was Blair Taylor, executive director of the MPOB.
“The one-percent surcharge was created in 1981, and it was initially split 75% to Municipal Police and Fire, and 25% were allocated to volunteer and part volunteer fire companies,” Taylor explained. “That stayed in place until the passage of a law in 1990 […] which actually created the Joint Committee on Pensions and Retirement.”
According to Taylor, the law also reduced the Municipal Police and Fire allocation from 75% to 65%, 25% continued to go to volunteer fire departments, and 10% to TRS Reserve Fund.
“At that time, the Teacher’s Retirement System was woefully underfunded,” Taylor said. “I believe it was like seven or eight-percent funded. This body was looking for ways to supplement monies going into the Teacher Retirement System to help continue their funding.”
Since 1991, Taylor added, “The 65%, 25%, 10% has not changed.” SB 670 is the first bill introduced since that time with the intention of returning the allocation to the way it was. If enacted, Taylor said the bill will have a positive impact on 10 municipalities, and 19 different plans. The impacted municipalities include Beckley, Bluefield, Dunbar, Fairmont, Martinsburg, Morgantown, Nitro, Princeton, St. Albans, and South Charleston.
“None of those municipalities have chosen to change their funding methodologies,” Taylor noted. “This is one more attempt to encourage municipalities to make that change.”
With it’s adoption, SB 670 will now be referred to the Senate Committee on Finance for further consideration.