2013 REGULAR SESSION
ACTUARIAL NOTE SB 17
Page 1 of 4
Senate Bill 17 SLS 13RS-15
Original
Author: Senator Elbert L. Guillory
Date: April 2, 2013
LLA Note S B 17.01
Organizations Affected:
State Retirement Systems
OR INCREASE APV
This Note has been prepared by the Actuarial Services Department of the Office of
the Legislative Auditor. The attachment of this Note to SB 17 provides compliance
with the requirements of R.S. 24:52 1.
Bill Header: Retirement Systems. Provides relative to funding of state retirement systems. (6/30/13)
Cost Summary:
The estimated actuarial and fiscal impact of the proposed legislative is summarized below. Actuarial costs pertain to changes in the
actuarial present value of future benefit payments. A cost is denoted by “Increase” or a positive number. Savings are denoted by
“Decrease” or a negative number.
Actuarial Cost/(Savings) to Retirement Systems and OGB Increase
Total Five Year Fiscal Cost
Expenditures Increase
Revenues $0
Estimated Actuarial Impact:
The chart below shows the estimated change in the actuarial present value of future benefit payments, if any, attributable to the
proposed legislation. A cost is denoted by “Increase” or a positive number. Savings are denoted by “Decrease” or a negative number.
Present value costs associated with administration or other fiscal concerns are not included in these values.
Change in the
Actuarial Cost/(Savings) to: Actuarial Present Value
All Louisiana Public Retirement Systems Increase
Other Post Retirement Benefits $0
Total Increase
Estimated Fiscal Impact:
The chart below shows the estimated fiscal impact of the proposed legislation. This represents the effect on cash flows for
government entities including the retirement systems and the Office of Group Benefits. Fiscal costs include estimated administrative
costs and costs associated with other fiscal concerns. A fiscal cost is denoted by “Increase” or a positive number. F iscal savings are
denoted by “Decrease” or a negative number.
EXPENDITURES 2013-14 2014-15 2015-16 2016-17 2017-2018 5 Year Total
State General Fund $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Agy Self Generated Increase Increase Increase Increase Increase Increase
Stat Deds/Other 0 0 0 0 0 0
Federal Funds 0 0 0 0 0 0
Local Funds 0 0 0 0 0 0
Annual Total Increase Increase Increase Increase Increase Increase
REVENUES 2013-14 2014-15 2015-16 2016-17 2017-2018 5 Year Total
State General Fund Decrease Decrease Decrease Decrease Decrease Decrease
Agy Self Generated Increase Increase Increase Increase Increase Increase
Stat Deds/Other 0 0 0 0 0 0
Federal Funds 0 0 0 0 0 0
Local Funds 0 0 0 0 0 0
Annual Total $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
2013 REGULAR SESSION
ACTUARIAL NOTE SB 17
Page 2 of 4
Bill Information:
Current Law
Current law does not provide for a State Retirement Fund within the state treasury.
Proposed Law
SB 17 creates the State Retirement Fund within the state treasury. It provides that 2% of revenue collections from each tax,
assessment, and fee in excess of each tax, assessment and fee collected in FY E 2012 will be allocated to the F und.
These funds shall be appropriated to each of the state retirement systems in the following manner:
∗ 37.0% to Louisiana State Employees’ Retirement System (LASERS)
∗ 56.7% to Teachers’ Retirement System of Louisiana (TRSL)
∗ 4.5% to Louisiana School Employees’ Retirement System (LSERS)
∗ 1.8% to Louisiana State Police Retirement System (STPOL)
Each retirement system must apply 80% of the appropriated funds to the unfunded accrued liability of the system. The unfunded
accrued liabilities shall be liquidated as follows:
1. To the original amortization base, if any, without re-amortization of the base, until the base is fully liquidated.
2. To the experience account amortization base, if any, without re- amortization of the base, until the base is fully liquidated.
3. To the oldest outstanding amortization base without re-amortization of such base and until all such bases are fully
liquidated.
The remaining 20% of the appropriated funds shall be applied by the retirement systems as follows:
1. If the system has an E xperience Account used to fund permanent benefit increases, the funds shall be credited to the
system’s Experience Account.
2. If the system has no E xperience Account as a result of the enactment of SB 11 of the 2013 Regular Session of the
legislature (i.e., The law is changed to pre- fund permanent benefit increases in another manner), and an unfunded
accrued liability and amortization charge base results from the enactment of SB 11, the funds shall be applied to the
amortization base so creat ed without re-amortization of the base and until the base is fully liquidated.
3. If the system has no Experience Account as a result of the enactment of SB 11 and no unfunded accrued liability or
amortization charge base results from the enactment, all funds shall be applied to the liquidation of the unfunded accrued
liabilities of the retirement system.
Note: SB 11 of the 2013 Regular Session provides, among other things, for pre-funding of post-retirement benefit increases for
retirees of the four state retirement systems.
Implications of the Proposed Changes
If SB 17 is enacted, excess revenue collections will be dedicated to liquidating the unfunded accrued liabilities and to funding
post-retirement benefit increases for retirees of the four state retirement systems.
Cost Analysis:
Analysis of Actuarial Costs
Retirement Systems
Total taxes, assessments, and fees were about $10 billion for FYE 2012. This was about 5% larger than the amount collected
the prior year. Funds that would be appropr iated to the State Retirement Fund and to the retirement systems, assuming that
revenues increase 5% a year, or $500,000,000 a year, are shown below.
Allocations to State Retirement Systems for Permanent Benefit Increases*
FYE LASERS TRSL LSERS STPOL Total
2014 $ 740,000 $ 1,134,000 $ 90,000 $ 36,000 $ 2,000,000
2015 1,480,000 2,268,000 180,000 72,000 4,000,000
2016 2,220,000 3,402,000 270,000 108,000 6,000,000
2017 2,960,000 4,536,000 360,000 144,000 8,000,000
2018 3,700,000 5,670,000 450,000 180,000 10,000,000
∗ Assuming SB 11 is not enacted.
2013 REGULAR SESSION
ACTUARIAL NOTE SB 17
Page 3 of 4
Allocations to State Retirement Systems for Additional UAL Payments
FYE LASERS TRSL LSERS STPOL Total
2014 $ 2,960,000 $ 4,536,000 $ 360,000 $ 144,000 $ 8,000,000
2015 5,920,000 9,072,000 720,000 288,000 16,000,000
2016 8,880,000 13,608,000 1,080,000 432,000 24,000,000
2017 11,840,000 18,144,000 1,440,000 576,000 32,000,000
2018 14,800,000 22,680,000 1,800,000 720,000 40,000,000
Total Allocations to State Retirement Systems
FYE LASERS TRSL LSERS STPOL Total
2014 $ 3,700,000 $ 5,670,000 $ 450,000 $ 180,000 $ 10,000,000
2015 7,400,000 11,340,000 900,000 360,000 20,000,000
2016 11,100,000 17,010,000 1,350,000 540,000 30,000,000
2017 14,800,000 22,680,000 1,800,000 720,000 40,000,000
2018 18,500,000 28,350,000 2,250,000 900,000 50,000,000
The portion of State Retirement Fund monies that will be allocated to provide for permanent benefit increases is a small amount
relative to the cost to provide such increases. For example, the cost to provide a 1% benefit increase to retirees is about $50
million for LASERS and about $100 million for TRSL. It will take about 11 years for allocations to LASERS to be enough to
give a 1% benefit increase. It will take about 13 years to accumulate enough for TRSL to give a 1% increase.
On the other hand, the accumulation of these amounts when added to gain sharing deposits to the Experience Account und er
current law may enable the earlier payment of a permanent benefit increase or the payment of a larger amount than otherwise
would have been available without SB 17.
As shown in the table below, unfunded accrued liabilities for the state systems will be paid off from 5 to 8 years earlier under SB
17 than they would have been otherwise. The dollar amount contributed in the aggregate for all four systems, even with the
inclusion of payments from the State Retirement Fund, will be reduced about $3.069 billion.
LASERS TRSL LSERS STPOL
Number of future years for which
amortization payments are due:
Current Law
SB 17
Decrease
29 years
24 years
5 years
30 years
23 years
7 years
29 years
21 years
8 years
29 years
21 years
8 years
Dollar amount of amortization payments
required until fully funded:
Current Law
SB 17
Decrease
$ 15,748 million
14,607 million
1,141 million
$ 25,856 million
24,064 million
1,792 million
$ 1,882 million
1,788 million
94 million
$ 649 million
608 million
41 million
The effects of SB 17 on actuarial costs are summarized below:
1. The actuarial present value of benefits of the state retirement systems will increase. SB 17 provides a funding source for
permanent benefit increases, and it is reasonable to expect that such benefit increases will be provided when sufficient
funds have been accumulated in the Experience Account.
2. The accrued liability of the state retirement systems will increase when a permanent benefit increase using State
Retirement Fund monies is granted.
3. The unfunded accrued liability will not increase. Whenever a permanent benefit increase is granted, the actuarial
liability associated with the increase will be offset by assets in the Experience Account derived from State Retirement
Fund monies.
4. Employer contribution requirements relative to amortization costs will not change until the current unfunded accrued
liability is paid off. SB 17 does not change the amortization payment schedule that currently exists until the UAL is
liquidated. Employer contribution requirements will be reduced to the employer normal cost rate once the unfunded
accrued liability has been paid.
5. Employer contribution requirements will not increase because SB 17 provides a separate funding source for permanent
benefit increases.
Note: SB 17 as written could be affected by the Administration’s proposal to shift the tax platform from an income tax to a sales
tax. SB 17 provides that each type of tax is to be considered separately in the measurement of revenue increases over FYE 2012
amounts. Therefore, if the Administration’s proposal is enacted, sales tax revenues would increase by billions, and 2% of that
increase, under SB 17, will be diverted to the State Retirement Fund.
2013 REGULAR SESSION
ACTUARIAL NOTE SB 17
Page 4 of 4
Other Post Retirement Benefits
There are no actuarial costs associated with SB 17 for post-employment benefits other than pensions.
Analysis of Fiscal Costs
SB 17 will have the following effect on fiscal costs during the five year fiscal measurement period.
Expenditures:
1. Expenditures from the General Fund will not change because employer contribution requirements will not change during
the five year fiscal measurement period.
2. Expenditures by the state retirement systems (Agy Self-Generated) will increase because it is likely that a permanent
benefit increase will be granted in the next three to five years and State Retirement Fund monies will be used to provide
a portion of such an increase.
3. Expenditures from Local Funds will not change because employer contribution requirements will not change during the
five year fiscal measurement period.
Revenues:
1. Revenues to the General Fund will decrease to the extent that monies that would otherwise go into the General Fund
will be diverted to the State Retirement Fund and then to the state retirement systems.
2. Revenues to the state retirement systems (Agy Self-Generated) will increase by the amounts deposited into the State
Retirement Fund.
Actuarial Credentials:
Paul T. Richmond is the Manager of Actuarial Services for the Louisiana Legislative Auditor. He is an Enrolled Actuary, a
member of the American Academy of Actuaries, a member of the Society of Actuaries and has met the Qualification Standards of the American Academy of Actuaries necessary to render the actuarial opinion contained herein.
Dual Referral:
Senate House
x 13.5.1 ≥ $100,000 Annual Fiscal Cost x 6.8(F) ≥ $500,000 Annual Fiscal Cost
13.5.2 ≥ $500,000 Annual Tax or Fee Change 6.8(G) ≥ $500,000 Annual Tax or Fee Change