Provides for use of entry age normal valuation method by Louisiana State Employees' Retirement System and Teachers' Retirement System of Louisiana. (7/1/12) (OR -$65,900,000 FC GF&LF EX)
The adoption of the entry age normal method is expected to result in a more stable funding requirement for both LASERS and TRSL as it spreads the cost of benefits over the working life of employees rather than front-loading costs. Supporters argue that this transition is crucial for ensuring the long-term health of Louisiana's public pension systems, as the existing method may not accurately reflect future liabilities. This shift could lead to more predictable contribution rates and ultimately enhance financial planning for the state and its educational sectors.
Senate Bill 13, introduced by Senator Guillory, aims to change the actuarial valuation method used by the Louisiana State Employees' Retirement System (LASERS) and the Teachers' Retirement System of Louisiana (TRSL). The bill proposes to shift from the projected unit credit method to the entry age normal method for determining the necessary contributions to these retirement systems. The effective date of the change is set for July 1, 2012. This shift in valuation method is intended to improve the financial soundness and sustainability of both retirement systems, which have been facing increasing scrutiny regarding their long-term viability.
The sentiment among stakeholders regarding SB 13 appears to be cautiously optimistic. While there is broad support for measures aimed at improving the financial health of state retirement systems, there are concerns about the potential impacts on budget allocations and funding. Some advocates argue that while the new method may lead to short-term costs, it provides a more equitable long-term approach. Conversely, opponents may express skepticism regarding the adequacy of the method to address existing pension shortfalls and ensure that retirees receive the benefits they are entitled to.
Notable points of contention surrounding SB 13 include the debate over the effectiveness of the existing actuarial practices versus the proposed changes. Critics may raise concerns that transitioning to the entry age normal method could mask underlying financial issues without immediately resolving them. Furthermore, discussions may arise regarding the potential increase in required contributions needed in the short term as the systems adjust to the new valuation method. This bill represents a significant policy decision focused on balancing immediate fiscal constraints with long-term pension sustainability.