COMMITTEE ON LEGISLATIVE RESEARCH
OVERSIGHT DIVISION
FISCAL NOTE
L.R. No.:1619H.01I Bill No.:HB 686 Subject:Retirement - State; Retirement Systems and Benefits - General; Employees -
Employers
Type:Original Date:January 29, 2025Bill Summary:This proposal modifies provisions relating to public employee retirement
benefits.
FISCAL SUMMARY
ESTIMATED NET EFFECT ON GENERAL REVENUE FUNDFUND AFFECTEDFY 2026FY 2027FY 2028
General Revenue*$0
$0 or
Unknown
$0 or
Unknown
Total Estimated Net
Effect on General
Revenue $0
$0 or
Unknown
$0 or
Unknown
*Based on a review of various scenarios and actuarial outcomes for the lump sum payment
option, Oversight assumes the impact from this proposal could exceed $250,000.
ESTIMATED NET EFFECT ON OTHER STATE FUNDSFUND AFFECTEDFY 2026FY 2027FY 2028Various Other State
Funds* $0
$0 or
Unknown
$0 or
Unknown
Total Estimated Net
Effect on Other State
Funds $0
$0 or
Unknown
$0 or
Unknown
*Based on a review of various scenarios and actuarial outcomes for the lump sum payment
option, Oversight assumes the impact from this proposal could exceed $250,000.
Numbers within parentheses: () indicate costs or losses. L.R. No. 1619H.01I
Bill No. HB 686
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ESTIMATED NET EFFECT ON FEDERAL FUNDSFUND AFFECTEDFY 2026FY 2027FY 2028
Federal Funds*
$0
$0 or
Unknown
$0 or
Unknown
Total Estimated Net
Effect on All Federal
Funds $0
$0 or
Unknown
$0 or
Unknown
*Based on a review of various scenarios and actuarial outcomes for the lump sum payment
option, Oversight assumes the impact from this proposal could exceed $250,000.
ESTIMATED NET EFFECT ON FULL TIME EQUIVALENT (FTE)FUND AFFECTEDFY 2026FY 2027FY 2028Total Estimated Net
Effect on FTE 000
☐ Estimated Net Effect (expenditures or reduced revenues) expected to exceed $250,000 in any
of the three fiscal years after implementation of the act or at full implementation of the act.
☒ Estimated Net Effect (savings or increased revenues) expected to exceed $250,000 in any of
the three fiscal years after implementation of the act or at full implementation of the act.
ESTIMATED NET EFFECT ON LOCAL FUNDSFUND AFFECTEDFY 2026FY 2027FY 2028Local Government$0$0$0 L.R. No. 1619H.01I
Bill No. HB 686
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FISCAL ANALYSIS
ASSUMPTION
Sections 104.490 and 104.1060 – Overpayments
Officials from MoDOT & Patrol Employees’ Retirement System (MPERS) state the bill, if
enacted, would modify provisions related to how the retirement systems recover overpayments.
Section 104.490 is MOSERS’ MSEP (Closed Plan statute), but MPERS’ Closed Plan statute,
104.200, was not included for the same purpose, so the bill will need to be updated to reflect the
change for both systems. MPERS will contact the sponsor to request the change be included. The
same change is reflected in section 104.1060, which applies to the Year 2000 Plan for both
MPERS and MOSERS. These changes simply provide specifically that if an overpayment must
be recovered from a member, it can be done either by single sum payment, installment payments,
or by actuarial equivalent. No fiscal impact for this change.
Officials from Missouri State Employee's Retirement System (MOSERS) state the proposed
changes to these sections would allow MOSERS to accept a single sum or installment repayment
to recover benefit overpayments. Currently, in the case of overpayment or underpayment, this
section requires MOSERS to correct the error by actuarially adjusting future payments to the
extent practicable. The proposed changes are consistent with federal tax law governing public
pension plans and payment correction. The change to sections 104.90 and 104.1060 would have
no fiscal impact. There are so few overpayment or underpayment corrections at any given time
and the amounts of such corrections are insignificant when taking into account the funding of the
System, any related cost or savings from the use of one method over another would be
immaterial.
Section 104.1092 – Lump Sum Payment Option
Officials from MoDOT & Patrol Employees’ Retirement System (MPERS) state section
104.1092.2 is modified to provide a payment option in lieu of retirement annuity benefits if the
board of either system elects to exercise it. Previously, this option had been a one-time offering
in 2018, but this modification provides for a “permanent” payment option beginning in January
2026. This payment option would be available to those members who are vested but no longer
employed by a system sponsor and have not yet reached normal retirement eligibility.
A best-case scenario is paying out a small percentage of the eligible recipients at 50% of the
present value, which provides for a cost savings to the plan. If they pay out 100% of the benefit’s
present value for 100% of the individuals eligible to receive it, the plan would see a small
increase to contributions, approximately less than a percent for the first few years, then slightly
more than one percent in the following years. Based on past experience with buyouts, it is
extremely unlikely that 100% of those eligible to elect the buyout would actually do so. L.R. No. 1619H.01I
Bill No. HB 686
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Officials from Missouri State Employee's Retirement System (MOSERS) state the proposed
change would authorize the MOSERS Board of Trustees to offer members a one-time election to
receive a lump sum payment equal to a certain percentage of the present value of the member’s
deferred annuity in lieu of receiving retirement annuity benefits. MSEP and MSEP 2000
members who have terminated employment are entitled to an annuity from the system, and have
not reached normal retirement age or eligibility would be eligible for any buyout authorized by
the Board under this section. The proposed change to section 104.1092 could have no fiscal
impact or a net positive fiscal impact to the System. The Board would be authorized to
implement an annuity buyout if desired but is not required to do so. If the Board chose not to
implement an annuity buyout, then there would be no fiscal impact.
If the Board decided to offer an annuity buyout, it would concurrently set the percentage of
present value of future benefits to calculate the lump sum payment. MOSERS’s actuaries
currently value a terminated vested member’s full present value of future benefits (PVFB). If the
Board were to determine the buyout percentage to be 100% of the members’ PVFB, there would
be no fiscal impact to the System. If the Board determined a percentage less than 100% of
PVFB, there would be a reduction in the unfunded actuarial accrued liability for each member
who elected the one-time lump sum payment, resulting in a net positive fiscal impact to the
System.
The MOSERS Board previously implemented an annuity buyout program with a buyout
percentage of 60% of PVFB. The initial buyout was offered from October 1 through November
30, 2017, and it offered a second chance buyout in May 2018. The buyouts together eliminated
$41 million in total net liability.
Oversight assumes this proposal authorizes the Board of either system to establish a lump sum
payment option. Oversight assumes the ultimate impact is unknown depending on how the Board
structures the payment option and the number of participants. Oversight assumes 100%
participation paid at 100% of the present value of future benefits is an unlikely outcome. For
purposes of this fiscal note, Oversight assumes there would be a positive net gain to employer
contributions if either system established a lump sum payment option. Based on a review of
various scenarios and actuarial outcomes, Oversight assumes the impact from this proposal could
exceed $250,000.
Section 105.695 – Prohibition on Expenditures
Officials from MoDOT & Patrol Employees’ Retirement System (MPERS) state Section
105.695 is a new section that will prevent the contribution or expenditure of system funds to
advocate, support, or oppose the passage or defeat of a ballot measure. This will not impact
MPERS, as it is not authorized in the governing statutes to make such contributions or
expenditures. No fiscal impact. L.R. No. 1619H.01I
Bill No. HB 686
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Officials from the Missouri State Employee's Retirement System (MOSERS) state the
prohibition of using system funds to advocate, support, or oppose ballot measures or candidates
in section 105.695 would have no fiscal impact.
Officials from Public Schools and Education Employee Retirement Systems (PSRS/PEERS)
state this bill in its current form, will not have a fiscal or operational impact on PSRS and
PEERS of Missouri (the Systems). The Systems have a long-standing policy prohibiting
expending funds for political purposes.
Officials from the Kansas City Civilian Police Employees’ Retirement and the Kansas City
Police Retirement System state the new section in 105.695 significantly limits the ability of
public pension systems to proactively protect their interests and ensure their long-term
sustainability.
Public pension systems often play a critical role in advocating for legislative or policy changes
that directly affect their operations, funding, and the benefits provided to members. This
provision may prevent systems from using funds to advocate for necessary reforms or measures
that ensure the system's sustainability, such as funding increases or structural adjustments.
For example, if a ballot measure proposed reductions to employer contributions, the inability to
advocate against such a measure could leave the system vulnerable to underfunding and
jeopardize its actuarial soundness.
Retirement systems are fiduciaries responsible for acting in the best interests of their members
and retirees. Restrictions on advocating for or against measures that materially affect the system
undermine this fiduciary duty and may result in adverse outcomes for members, such as reduced
benefits or increased contributions. Educating stakeholders, including members, retirees, and the
public, about ballot measures or legislative proposals impacting the retirement system could be
interpreted as "advocacy." This restriction could limit the system’s ability to ensure informed
decision-making by those directly affected. A ballot initiative aiming to reduce or eliminate
defined benefit plans might move forward without the system being able to clarify the long-term
fiscal and economic consequences of such a change.
The prohibition against using system funds for committee debts or obligations could create
ambiguity about permissible activities, including hiring consultants, actuaries, or legal advisors
to analyze or challenge legislation or ballot measures with significant implications for the
system. If a measure impacting the system's funding model passes, the system may face
challenges in engaging external resources to address resulting compliance or legal issues.
Based on the majority of responses, Oversight
direct fiscal impact. Oversight assumes the potential negative impact as estimated by the Kansas
City Civilian Police Employees’ Retirement and the Kansas City Police Retirement System is
speculative and, for purposes of this fiscal note, will not reflect the impact. L.R. No. 1619H.01I
Bill No. HB 686
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Responses regarding the proposed legislation as a whole
Officials from the Joint Committee on Public Employee Retirement (JCPER) have reviewed
this legislation. The JCPER’s review of this legislation indicates it will not affect retirement plan
benefits as defined in Section 105.660(9).
Officials from the University of Missouri System have reviewed this proposed legislation and
does not anticipate a significant financial impact.
Officials from the City of Kansas City, the County Employees Retirement Fund, the Kansas
City Public School Retirement System, the Metro. St. Louis Sewer District Employees
Pension Plan, Northwest Missouri State University, University of Central Missouri and the
Sheriff’s Retirement System each assume the proposal will have no fiscal impact on their
respective organizations. Oversight does not have any information to the contrary. Therefore,
Oversight will reflect a zero impact in the fiscal note for these agencies.
FISCAL IMPACT – State GovernmentFY 2026
(10 Mo.)
FY 2027FY 2028GENERAL REVENUECost Savings - §104.1092 from a
decrease in employer contributions
from a lump sum payout$0
$0 or
Unknown
$0 or
Unknown
ESTIMATED NET EFFECT ON
GENERAL REVENUE$0
$0 or
Unknown
$0 or
Unknown
OTHER STATE FUNDSCost Savings - §104.1092 - from a
decrease in employer contributions
from a lump sum payout$0
$0 or
Unknown
$0 or
Unknown
ESTIMATED NET EFFECT ON
OTHER STATE FUNDS$0
$0 or
Unknown
$0 or
Unknown
FEDERAL FUNDSCost Savings - §104.1092 - from a
decrease in employer contributions
from a lump sum payout$0
$0 or
Unknown
$0 or
Unknown L.R. No. 1619H.01I
Bill No. HB 686
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FISCAL IMPACT – State GovernmentFY 2026
(10 Mo.)
FY 2027FY 2028ESTIMATED NET EFFECT ON
FEDERAL FUNDS$0
$0 or
Unknown
$0 or
Unknown
FISCAL IMPACT – Local GovernmentFY 2026
(10 Mo.)
FY 2027FY 2028$0$0$0
FISCAL IMPACT – Small Business
No direct fiscal impact to small businesses would be expected as a result of this proposal.
FISCAL DESCRIPTION
This bill authorizes a methodology for the Board of Trustees of the Missouri State Employees'
Retirement System to recover over payments made to a beneficiary in error, either in a single
sum or in installment repayments. Under current law, the board's recovery of the over payments
made to a beneficiary is permissive. A similar methodology for the recovery of over payments
erroneously made is included in Section 104.1060, RSMo.
The bill reinstates the time period for a member to make an election to receive a lump sum
payment of the member’s deferred annuity in lieu of retirement annuity benefits, under the
closed plan or year 2000 plan, to on or after January 1, 2026. Under current law, the election may
be made by the member beginning on a date established by the board under such plan, but not
after May 31, 2018. This bill prohibits the contribution or expenditure of system funds by any
public pension system to advocate, support, or oppose the passage or defeat of any ballot
measure or the nomination or election of any candidate for public office. In addition, the system
funds cannot be used to pay any debts or obligations of any committee supporting or opposing
ballot measures or candidates. The bill defines the term "system".
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
MoDOT & Patrol Employees’ Retirement System
Missouri State Employee's Retirement System
Joint Committee on Public Employee Retirement
Public Schools and Education Employee Retirement Systems L.R. No. 1619H.01I
Bill No. HB 686
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County Employee’s Retirement Fund
Kansas City Civilian Police Employees' Retirement
Kansas City Police Retirement System
Kansas City Public School Retirement System
Metro St. Louis Sewer District Employees Pension Plan
Sheriff's Retirement System
City of Kansas City
University of Missouri System
Northwest Missouri State University
University of Central Missouri
Julie MorffJessica HarrisDirectorAssistant DirectorJanuary 29, 2025January 29, 2025