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Regular Session, 2012
SENATE BILL NO. 47
BY SENATOR GUILLORY
RETIREMENT SYSTEMS. Provides relative to final average compensation. (6/30/12)
AN ACT1
To amend and reenact R.S. 11:102(B)(1) and (3)(a) and (d)(i), (iv), (v), and (vii) and (C)(2),2
(3), and (4)(a), 403(5)(a)(i) and (b)(i) and (ii), 502(B)(1), and 701(5)(a)(introductory3
paragraph) and to enact R.S. 11:102(D) and 701(5)(f) and to repeal R.S.4
11:403(5)(b)(iii), relative to certain members of the Louisiana State Employees'5
Retirement System and certain postsecondary education members of the Teachers'6
Retirement System of Louisiana; to provide with respect to benefit calculation; to7
provide an effective date; and to provide for related matters.8
Notice of intention to introduce this Act has been published.9
Be it enacted by the Legislature of Louisiana:10
Section 1. R.S. 11:102(B)(1) and (3)(a) and (d)(i), (iv), (v), and (vii) and (C)(2), (3),11
and (4)(a), 403(5)(a)(i) and (b)(i) and (ii), and 701(5)(a)(introductory paragraph) are hereby12
amended and reenacted and R.S. 11:102(D) and 701(5)(f) are hereby enacted to read as13
follows: 14
§102. Employer contributions; determination; state systems15
* * *16
B.(1) Except as provided in Subsections C and D of this Section for the17 SB NO. 47
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Louisiana State Employees' Retirement System and except as provided in R.S.1
11:102.1 and 102.2 and in Paragraph (5) of this Subsection, for each fiscal year,2
commencing with Fiscal Year 1989-1990, for each of the public retirement systems3
referenced in Subsection A of this Section, the legislature shall set the required4
employer contribution rate equal to the actuarially required employer contribution,5
as determined under Paragraph (3) of this Subsection, divided by the total projected6
payroll of all active members of each particular system for the fiscal year. Each7
entity funding a portion of a member's salary shall also fund the employer's8
contribution on that portion of the member's salary at the employer contribution rate9
specified in this Subsection.10
* * *11
(3) With respect to each state public retirement system, the actuarially12
required employer contribution for each fiscal year, commencing with Fiscal Year13
1989-1990, shall be that dollar amount equal to the sum of:14
(a) The Except as provided in Subsection D of this Section, the employer's15
normal cost for that fiscal year, computed as of the first of the fiscal year using the16
system's actuarial funding method as specified in R.S. 11:22 and taking into account17
the value of future accumulated employee contributions and interest thereon, such18
employer's normal cost rate multiplied by the total projected payroll for all active19
members to the middle of that fiscal year. For the Louisiana State Employees'20
Retirement System, effective for the June 30, 2010, system valuation and beginning21
with Fiscal Year 2011-2012, the normal cost shall be determined in accordance with22
Subsection C of this Section.23
* * *24
(d) That fiscal year's payment, computed as of the first of that fiscal year and25
projected to the middle of that fiscal year at the actuarially assumed interest rate,26
necessary to amortize changes in actuarial liability due to:27
(i) Except as provided in Items (v), (vi), (vii), and (viii) of this Subparagraph28
and in Subsection D of this Section, actuarial gains and losses, if appropriate for29 SB NO. 47
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the funding method used by the system as specified in R.S. 11:22, for each fiscal1
year beginning after June 30, 1988, such payments to be computed as an amount2
forming an annuity increasing at four and one-half percent annually over the later of3
a period of fifteen years from the year of occurrence or by the year 2029, such gains4
and losses to include any increases in actuarial liability due to governing authority5
granted cost-of-living increases.6
* * *7
(iv) Except as provided in Items (v), (vi), (vii), and (viii) of this Subparagraph8
and in Subsection D of this Section, changes in actuarial accrued liability,9
computed using the actuarial funding method as specified in R.S. 11:22, due to10
legislation changing plan provisions, such payments to be computed in the manner11
and over the time period specified in the legislation creating the change or, if not12
specified in such legislation, as an amount forming an annuity increasing at four and13
one-half percent annually over the later of a period of fifteen years from the year of14
occurrence of the change or by the year 2029.15
(v) Effective Except as provided in Subsection D of this Section, effective16
July 1, 2004, and beginning with Fiscal Year 1998-1999, the amortization period for17
the changes, gains, or losses of the Louisiana State Employees' Retirement System18
provided in Items (i) through (iv) of this Subparagraph shall be thirty years, or in19
accordance with standards promulgated by the Governmental Accounting Standards20
Board, from the year in which the change, gain, or loss occurred. The outstanding21
balances of amortization bases established pursuant to Items (i) through (iv) of this22
Subparagraph before Fiscal Year 1998-1999, shall be amortized as a level dollar23
amount from July 1, 2004, through June 30, 2029. Beginning with Fiscal Year 2003-24
2004, and for each fiscal year thereafter, the outstanding balances of amortization25
bases established pursuant to Items (i) through (iv) of this Subparagraph shall be26
amortized as a level dollar amount. For the Louisiana State Employees' Retirement27
System, effective for the June 30, 2010, system valuation and beginning with Fiscal28
Year 2011-2012, amortization payments for changes in actuarial liability shall be29 SB NO. 47
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determined in accordance with Subsection C of this Section.1
* * *2
(vii) Effective Except as provided in Subsection D of this Section,3
effective July 1, 2004, and beginning with Fiscal Year 2000-2001, the amortization4
period for the changes, gains, or losses of the Teachers' Retirement System of5
Louisiana provided in Items (i) through (iv) of this Subparagraph shall be thirty6
years, or in accordance with standards promulgated by the Governmental Accounting7
Standards Board, from the year in which the change, gain, or loss occurred. The8
outstanding balances of amortization bases established pursuant to Items (i) through9
(iv) of this Subparagraph before Fiscal Year 2000-2001, shall be amortized as a level10
dollar amount from July 1, 2004, through June 30, 2029. Beginning with Fiscal Year11
2003-2004, and for each fiscal year thereafter, the outstanding balances of12
amortization bases established pursuant to Items (i) through (iv) of this Subparagraph13
shall be amortized as a level dollar amount.14
* * *15
C. * * *16
(2) For the Louisiana State Employees' Retirement System, effective for the17
June 30, 2010, system valuation and beginning with Fiscal Year 2011-2012, the18
normal cost calculated pursuant to Subparagraph (B)(3)(a) of this Section, shall be19
calculated separately for each particular plan within the system . An employer shall20
pay employer contributions for each employee at the rate applicable to the plan of21
which that employee is a member. Beginning with the June 30, 2012, system22
valuation, the normal cost for each plan shall be subject to the provisions of23
Subsection D of this Section.24
(3) For the Louisiana State Employees' Retirement System, effective for the25
June 30, 2010, system valuation and beginning with Fiscal Year 2011-2012, changes26
in actuarial liability due to legislation, changes in governmental organization, or27
reclassification of employees or positions shall be calculated individually for each28
particular plan within the system based on each plan's actuarial experience as further29 SB NO. 47
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provided in Subparagraph (4)(c) of this Subsection. Beginning with the June 30,1
2012, system valuation, this calculation for each plan shall be subject to the2
provisions of Subsection D of this Section.3
(4) For each plan referenced in Paragraph (1) of this Subsection, the4
legislature shall set the required employer contribution rate equal to the sum of the5
following:6
(a) The particularized normal cost rate. The normal cost rate for each fiscal7
year shall be the employer's normal cost for the plan computed by applying the8
method specified in R.S. 11:102(B)(1) and (3)(a) to the plan. Beginning with the9
June 30, 2012, system valuation, the normal cost for each plan shall be subject10
to the provisions of Subsection D of this Section.11
* * *12
D. (1) The employer contribution rate for the Louisiana State Employees'13
Retirement System and the Teachers' Retirement System of Louisiana, for any14
valuation prepared following enactment of the Act that originated as Senate Bill15
No. 47 of the 2012 Regular Session, shall be the rate determined pursuant to16
Subsections B and C of this Section, plus the sum of the absolute value of the17
rate attributable to the amortization of any gain plus the initial incremental18
normal cost rate, each as produced by the Act which originated as Senate Bill19
No. 47 of the 2012 Regular Session. The initial incremental normal cost rate20
shall be determined without regard to the phase-in pursuant to the provisions21
of the Act which originated as Senate Bill No. 47 of the 2012 Regular Session.22
(2) The payment attributable to the absolute value of the amortization23
of any gain and the incremental normal cost rate shall be applied as follows for24
each year beginning with Fiscal Year 2013-14:25
(a) To the outstanding balance of the original amortization base without26
reamortization of such base and until such base is fully liquidated.27
(b) After the liquidation of the original amortization base, to the28
outstanding balance of the experience account amortization base without29 SB NO. 47
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reamortization of such base and until such base is fully liquidated.1
(c) After the liquidation of the experience account amortization base, to2
the balance of the oldest outstanding positive amortization base without3
reamortization of such base and until all such bases are fully liquidated. 4
* * *5
§403. Definitions6
The following words and phrases used in this Chapter shall have the7
following meanings, unless a different meaning is clearly required by the context:8
* * *9
(5)(a)(i) "Average compensation", for a member to whom R.S. 11:441(D),10
(E), or (F) applies, and for a member whose first employment making him eligible11
for membership in the system began on or before June 30, 2006, who retires or12
enters the Deferred Retirement Option Plan on or before June 30, 2013, and for13
any person who receives an additional benefit pursuant to R.S. 11:444(A)(2)(b) or14
(c), 557, 582, or 602 or R.S. 24:36 whose first employment making him eligible for15
membership in one of the state systems occurred on or before December 31, 2010,16
means the average annual earned compensation of a state employee for the thirty-six17
highest months of successive employment, or for the highest thirty-six successive18
joined months of employment where interruption of service occurred; however,19
average compensation for part-time employees who do not use thirty-six months of20
full-time employment for average compensation purposes shall be based on the base21
pay the part-time employee would have received had he been employed on a22
full-time basis.23
* * *24
(b)(i) "Average compensation", for a member whose first employment25
making him eligible for membership in the system began on or after July 1, 2006,26
and subject to the limitations provided in this Subparagraph, who is not covered by27
Subparagraph (a) of this Paragraph means the average annual earned28
compensation of a state employee for the sixty highest months of successive29 SB NO. 47
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employment or for the highest sixty successive joined months of employment where1
interruption of service occurred; however, average compensation for part-time2
employees who do not use sixty months of full-time employment for average3
compensation purposes shall be based on the base pay the part-time employee would4
have received had he been employed on a full-time basis. This Item shall also be5
applicable to any judge, court officer, governor, lieutenant governor, member of the6
legislature, clerk or sergeant-at-arms of the House of Representatives, secretary or7
sergeant-at-arms of the Senate, or state treasurer. This Item shall also be applicable8
to any judge or court officer whose first employment making him eligible for9
membership in one of the state systems occurred on or after January 1, 2011.10
(ii) The earnings to be considered for persons to whom Item (i) of this11
Subparagraph applies for the thirteenth through the twenty-fourth month shall not12
exceed one hundred fifteen percent of the earnings of the first through the twelfth13
month. The earnings to be considered for the twenty-fifth through the thirty-sixth14
month shall not exceed one hundred fifteen percent of the earnings of the thirteenth15
through the twenty-fourth month. The earnings to be considered for the16
thirty-seventh through the forty-eighth month shall not exceed one hundred fifteen17
percent of the earnings of the twenty-fifth through the thirty-sixth month. The18
earnings for the final twelve months shall not exceed one hundred fifteen percent of19
the earnings of the thirty-seventh through the forty-eighth month. The limitations20
on the computation of average compensation contained in this Item shall not apply21
to any twelve-month period during which compensation increased by more than22
fifteen percent over the previous twelve-month period solely because of an increase23
in compensation by a uniform systemwide increase adopted by the state Department24
of Civil Service and approved by the governor or because of a pay adjustment25
enacted by the legislature. This Item shall also be applicable to any judge, court26
officer, member of the Louisiana Legislature, governor, lieutenant governor, clerk27
or sergeant-at-arms of the House of Representatives, secretary or sergeant-at-arms28
of the Senate, or state treasurer whose first employment making him eligible for29 SB NO. 47
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membership in one of the state systems occurred on or after January 1, 2011.1
* * *2
§502. Creation of optional retirement plan3
* * *4
B.(1) Notwithstanding Subsection A of this Section, anyone who elected to5
participate in the optional retirement plan in lieu of the defined benefit plan before6
July 31, 2002 December 31, 2007, may regain membership in the defined benefit7
plan by complying with the provisions of this Subsection.8
* * *9
§701. Definitions10
As used in this Chapter, the following words and phrases have the meanings11
ascribed to them in this Section unless a different meaning is plainly required by the12
context:13
* * *14
(5)(a) "Average compensation" subject to the other provisions of this15
Paragraph, for any teacher not listed in Subparagraph (f) of this Paragraph whose16
first employment making him eligible for membership in one of the state systems17
occurred on or before December 31, 2010, means the average earnable compensation18
of a teacher for the three highest successive years of employment, or the highest19
three successive joined years of employment where interruption of service occurred.20
For any teacher whose first employment making him eligible for membership in one21
of the state systems occurred on or after January 1, 2011, and for any teacher listed22
in Subparagraph (f) of this Paragraph "average compensation" means his average23
earnable compensation for the five highest successive years of employment , or the24
highest five successive joined years where interruption of service occurred. The25
computation of such average compensation shall be in accordance with the following26
guidelines:27
* * *28
(f) Regardless of the first date of employment making the teacher eligible29 SB NO. 47
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for membership in a state retirement system and except for a member who is1
employed by an institution of postsecondary education or a postsecondary2
education management board for the sole purpose of providing instruction or3
administrative services at the primary or secondary level, including at any lab4
school and the Louisiana School for Math, Science, and the Arts, "average5
compensation" for any member who is employed by an institution of6
postsecondary education, the Board of Regents, or a postsecondary education7
management board, means his average earnable compensation for the sixty8
highest months of successive employment or for the highest sixty successive9
joined months of employment where interruption of service occurred. The10
computation of such average compensation shall be in accordance with the11
guidelines in Items (a)(i) through (a)(v) of this Paragraph.12
* * *13
Section 2. R.S. 11:403(5)(b)(iii) is hereby repealed.14
Section 3. The provisions of this Act shall not cause the average compensation15
expressed in dollars of any member retiring or entering the Deferred Retirement Option Plan16
on or after July 1, 2013, to be less than such member's average compensation expressed in17
dollars as it existed on June 30, 2013.18
Section 4. The provisions of this Act shall not apply to any person whose date of19
retirement or entry into the Deferred Retirement Option Plan occurs on or before June 30,20
2013.21
Section 5. This Act shall be implemented according to the provisions of this Section.22
(A) For transitional purposes, the provisions of R.S. 11:403(5) and 701(5) as23
amended by this Act shall be phased in as follows: 24
(1) For members retiring before July 1, 2013, the provisions of R.S. 11:403(5) and25
701(5) shall apply as they existed before the effective date of this Act.26
(2) For those members retiring on or after July 1, 2013, and on or before June 30,27
2015, the period used to calculate monthly average final compensation shall be thirty-six28
months plus the number of whole months since July 1, 2013. 29 SB NO. 47
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(B) For transitional purposes, the provisions of this Act as applied to R.S. 11:450(D)1
and 789(D) shall be phased in as follows:2
(1) For members entering the Deferred Retirement Option Plan before July 1, 2015,3
the period of additional service required and utilized to calculate a revised average4
compensation for the supplemental benefit after Deferred Retirement Option Plan5
participation shall be equal to thirty-six months plus the number of whole months from July6
1, 2013, to the date of Deferred Retirement Option Plan entry. 7
(2) For members entering the plan on or after July 1, 2015, the provisions of this Act8
shall apply.9
Section 6. The Public Retirement Systems' Actuarial Committee may adopt an10
actuarial valuation to be utilized in the fiscal year which begins on July 1, 2013, calculated11
in accordance with R.S. 11:102, which has been prepared on behalf of the division of12
administration by a member of the American Academy of Actuaries who meets the13
qualification requirements of the academy to issue a particular statement of actuarial14
opinion.15
Section 7.(A) Because the legislature finds and declares that questions of law may16
be raised by some persons with respect to the constitutionality of some of the provisions of17
this Act, the public welfare requires that such questions of law be resolved with expedition18
prior to such time as its provisions take effect in order to avoid disruption of the orderly19
implementation of its provisions. Therefore, the legislature finds that an expedited hearing20
schedule for actions filed relative to the constitutionality of any provision of this Act should21
be immediately made available in order to avoid confusion by the public. Therefore, any22
domiciliary of this state may institute an action in the Nineteenth Judicial District Court23
seeking a declaratory judgment to determine the constitutionality of the provisions of this24
Act. In the interest of further expediting this procedure, the Nineteenth Judicial District25
Court, First Circuit Court of Appeal, and Louisiana Supreme Court are urged to minimize26
all unnecessary delays in order to resolve any questions of law no later than thirty days prior27
to the prefiling deadline for retirement legislation for the 2013 regular legislative session,28
and the courts may suspend all applicable rules of court for this limited purpose.29 SB NO. 47
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(B) The retirement systems shall provide for the orderly and equitable1
implementation of the provisions of this Act. Such implementation shall be consistent with2
the duties required of the systems' fiduciaries. Notwithstanding any other provision of this3
Act or law to the contrary, and if required by the duties of the systems' fiduciaries, the4
implementation of this Act may be delayed until a final nonappealable judgment is rendered5
in any action instituted on or before June 30, 2013, challenging the constitutionality of the6
provisions of this Act.7
Section 8. If a final judgment declares any of the provisions of this Act8
unconstitutional or unconstitutional as applied to a particular class of employees, the other9
provisions of this Act shall remain in effect and also shall be applicable to all other classes10
of employees unrelated to the judgment.11
Section 9. The provisions of this Act and the provisions of the Acts which originated12
as Senate Bill No. 749 and Senate Bill No. 52 of the 2012 Regular Session shall not apply13
to any member of the Teachers' Retirement System of Louisiana whose membership in the14
system is based solely on employment as a teacher in a public elementary or secondary15
school.16
Section 10. The provisions of this Act shall become effective on June 30, 2012; if17
vetoed by the governor and subsequently approved by the legislature, this Act shall become18
effective on June 30, 2012, or on the day following such approval by the legislature,19
whichever is later.20
The original instrument was prepared by Laura Gail Sullivan. The following
digest, which does not constitute a part of the legislative instrument, was
prepared by Linda Nugent.
DIGEST
Guillory (SB 47)
Present law generally provides for a benefit calculation formula for members of each state
system including the Louisiana State Employees' Retirement System (LASERS) and the
Teachers' Retirement System of Louisiana (TRSL), typically consisting of:
(years of service) x (accrual rate) x (final average compensation (FAC))
Present law (R.S. 11:403(5) and 701(5)), relative to LASERS and TRSL, provides varying
periods of FAC for members of those systems of either 36 or 60 months.
Persons with a 36-month FAC period in present law include: SB NO. 47
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1. Rank-and-file members of LASERS hired on or before June 30, 2006.
2. Certain elected officials whose state system membership began before Jan. 1, 2011,
including:
(a)Governor.
(b)Lieutenant governor.
(c)Legislators.
(d)Judges.
(e)Treasurer.
3. Certain persons in public safety positions whose state system membership began
before Jan. 1, 2011, including:
(a)Wildlife agents.
(b)Corrections officers.
(c)Alcohol-Tobacco Control agents.
(d)Probation and parole officers.
(e)Bridge police.
4.All members of TRSL whose state system membership began before Jan. 1, 2011.
Persons with a 60-month FAC period in present law include:
1. Rank-and-file members of LASERS hired after June 30, 2006.
2. Elected officials whose state system membership began on or after Jan. 1, 2011,
including those listed in (2) above.
3. Members of the Hazardous Duty Services Plan in LASERS, which includes all
persons in (3) above whose state system membership began on or after Jan. 1, 2011.
4. All TRSL members whose state system membership began on or after Jan. 1, 2011.
Proposed law retains present law 36-month FAC period for LASERS members who are in
"hazardous duty" jobs and for pre-K-12 members of TRSL who have the 36 month FAC
currently.
Proposed law further provides that all "non-hazardous duty" employees in LASERS and
higher education employees in TRSL shall have a five-year FAC, regardless of the date of
hire.
Proposed law specifies that a person who retires on or before June 30, 2013, shall have a 36-
month FAC, and that a person who retires on or after July 1, 2015, shall have a 60-month
FAC. For any person who retires between the two dates, the FAC period shall be 36 plus
the number of whole months that have elapsed since July 1, 2013.
Proposed law provides that in order to have the benefit of a revised FAC for the
supplemental benefit, a Deferred Retirement Option Plan (DROP) participant must continue
working after DROP for a period of months that equals or exceeds the FAC period used to SB NO. 47
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calculate his benefit upon DROP entry.
Present law provides that a member who had elected to participate in the optional retirement
plan (ORP) in lieu of the defined benefit plan before July 31, 2002, may regain membership
in the defined benefit plan. Proposed law retains present law but would authorize anyone
who opted to participate in the ORP before December 31, 2007, to regain membership in the
defined benefit plan.
Proposed law provides for actuarial calculation of required employer contributions that
retain any "savings" from proposed law within the system trust.
Proposed law provides for an expedited hearing process if proposed law is subjected to legal
challenge and provides that the implementation of proposed law may be delayed until a final
nonappealable judgment is rendered in any such action instituted on or before June 30, 2013.
Provides for severability if a court declares any provisions of proposed law to be
unconstitutional as applicable to certain members of LASERS and TRSL, retaining
application of the Act to the remaining members of the system.
Effective June 30, 2012.
(Amends R.S. 11:102(B)(1) and (3)(a) and (d)(i), (iv), (v), and (vii) and (C)(2), (3), and
(4)(a), 403(5)(a)(i) and (b)(i) and (ii), 502(B)(1), and 701(5)(a)(intro para); adds R.S.
11:102(D) and 701(5)(f); repeals R.S. 11:403(5)(b)(iii))
Summary of Amendments Adopted by Senate
Committee Amendments Proposed by Senate Committee on Retirement to the
original bill
1. Makes technical corrections.
2. Provides for an expedited hearing process.
3. Expands the agencies which may present actuarial valuations to the Public
Retirement Systems' Actuarial Committee for consideration to include the
division of administration, for purposes of determining the employer
contribution rate to be remitted for the fiscal year beginning July 1, 2012.
Committee Amendments Proposed by Senate Committee on Finance to the
engrossed bill
1. Provides for implementation to begin July 1, 2013. Deletes requirement for
the Public Retirement Systems' Actuarial Committee to meet for the purpose
of adopting a revised valuation, which was made superfluous by the delayed
implementation date.
2. Provides for phase-in of the 60-month FAC period in one-month increments
beginning July 1, 2013.
3. Specifies that a member's post-DROP supplemental benefit will be calculated
with a post-DROP FAC if the member remains employed after DROP for a
period that equals or exceeds the number of months used to calculate his pre-
DROP FAC.
4. Provides a mechanism for any "savings" produced by proposed law to remain
with the system and to be applied to reduce that system's unfunded accrued
liability (UAL). SB NO. 47
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5. Specifies that proposed law applies to elected officials in office on June 30,
2013; provides, however, for such elected officials to opt out of proposed law
by filing a written request with his retirement system.
Senate Floor Amendments to engrossed bill
1. Provides that implementation of the proposed law may be delayed until a
final nonappealable judgment is rendered in any legal challenge instituted on
or before June 30, 2013.
2. Allows a person who had elected to participate in the optional retirement plan
before December 31, 2007, to return to the defined benefit plan.
3. Technical changes relative to the actuarial calculation of employer
contributions.