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Regular Session, 2013
SENATE BILL NO. 4
BY SENATOR GUILLORY
Prefiled pursuant to Article III, Section 2(A)(4)(b)(i) of the Constitution of Louisiana.
RETIREMENT SYSTEMS. Provides for use of entry age normal valuation method by
Louisiana State Employees' Retirement System and Teachers' Retirement System of
Louisiana. (See Act)
AN ACT1
To amend and reenact R.S. 11:22(B)(6) and (13), 102.1(B)(4) and (C)(4), 102.2(B)(4) and2
(C)(4), 542(A)(2)(a) and (F), and 883.1(A)(2)(a) and (G), relative to actuarial3
valuation methods; to provide relative to the method utilized by the Louisiana State4
Employees' Retirement System and the Teachers' Retirement System of Louisiana;5
to change such method from projected unit credit to entry age normal; to provide for6
an effective date; and to provide for related matters.7
Notice of intention to introduce this Act has been published.8
Be it enacted by the Legislature of Louisiana:9
Section 1. R.S. 11:22(B)(6) and (13) are hereby amended and reenacted to read as10
follows: 11
§22. Methods of actuarial valuation established12
* * *13
B. The following funding methods shall be utilized to determine actuarially14
required contributions:15
* * *16
(6) Louisiana State Employees' Retirement System: projected unit credit17 SB NO. 4
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entry age normal.1
* * *2
(13) Teachers' Retirement System of Louisiana: projected unit credit entry3
age normal.4
* * *5
Section 2. R.S. 11:102.1(B)(4) and (C)(4), 102.2(B)(4) and (C)(4), 542(A)(2)(a) and6
(F), and 883.1(A)(2)(a) and (G) are hereby amended and reenacted to read as follows: 7
§102.1. Consolidation of amortization payment schedules; Louisiana State8
Employees' Retirement System9
* * *10
B. Original amortization base.11
* * *12
(4) In any year in which the system exceeds its actuarially-assumed earns a rate of13
return in excess of eight and one-quarter percent on the actuarial value of assets, the first14
fifty million dollars of excess returns shall be applied to the remaining balance of the15
original amortization base established in this Subsection. After such application, the net16
remaining liability shall be reamortized over the remaining amortization period with annual17
payments calculated as provided in this Subsection or as otherwise provided by law.18
* * *19
C. Experience account amortization base.20
* * *21
(4) In any year in which the excess returns of the system earns a rate of return in22
excess of eight and one-quarter percent on the actuarial value of assets, and such excess23
returns exceed the amount in Paragraph (B)(4) of this Section, the next fifty million dollars24
of excess returns shall be applied to the experience account amortization base established25
in this Subsection. After such application, the net remaining liability shall be reamortized26
over the remaining amortization period with annual payments calculated as provided in this27
Subsection or as otherwise provided by law.28
* * *29 SB NO. 4
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§102.2. Consolidation of amortization payment schedules; Teachers' Retirement1
System of Louisiana2
* * *3
B. Original amortization base.4
* * *5
(4) In any year in which the system exceeds its actuarially-assumed earns a rate of6
return in excess of eight and one-quarter percent on the actuarial value of assets, the first7
one hundred million dollars of excess returns shall be applied to the remaining balance of8
the original amortization base established in this Subsection. After such application, the net9
remaining liability shall be reamortized over the remaining amortization period with annual10
payments as provided in this Subsection or as otherwise provided by law.11
C. Experience account amortization base.12
* * *13
(4) In any year in which the excess returns system earns a rate of return in excess14
of eight and one-quarter percent on the actuarial value of assets, and such excess15
returns exceed the amount in Paragraph (B)(4) of this Section, the next one hundred million16
dollars of excess returns shall be applied to the experience account amortization base17
established in this Subsection. After such application, the net remaining liability shall be18
reamortized over the remaining amortization period with annual payments calculated as19
provided in this Subsection or as otherwise provided by law.20
* * *21
§542. Experience account22
A.23
* * *24
(2) The experience account shall be credited as follows:25
(a) To the extent permitted by Paragraph (3) of this Subsection and after allocation26
to the consolidated amortization bases as provided in R.S. 11:102.1, an amount not to exceed27
fifty percent of the remaining balance of the prior year's net investment experience gain28
attributable to Tier 1 assets as determined by the system's actuary with the gain measured29 SB NO. 4
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as investment earnings in excess of eight and one-quarter percent of the actuarial value1
of assets.2
* * *3
F. (1)The permanent benefit increase which is authorized by Subsection C of this4
Section shall be limited to the lesser of either two percent or an amount as determined in5
Paragraph (C)(2) of this Section in or for any year in which the system does not earn an6
actuarial rate of return of at least eight and one-quarter percent interest on the investment of7
the system's assets.8
(2) No permanent benefit increase shall be authorized based on any actuarial9
valuation in which both of the following apply:10
(a) The system fails to earn an actuarial rate of return which exceeds the board-11
approved actuarial valuation rate eight and one-quarter percent.12
(b) The system is less than eighty percent funded.13
* * *14
§883.1. Experience account15
A.16
* * *17
(2) The experience account shall be credited as follows:18
(a) To the extent permitted by Paragraph (3) of this Subsection and after allocation19
to the consolidated amortization bases as provided in R.S. 11:102.2, an amount not to exceed20
fifty percent of the remaining balance of the prior year's net investment experience gain21
attributable to Tier 1 assets as determined by the system's actuary with the gain measured22
as investment earnings in excess of eight and one-quarter percent of the actuarial value23
of assets.24
* * *25
G. (1)The permanent benefit increase which is authorized by Subsection C of this26
Section shall be limited to the lesser of either two percent or an amount as determined in27
Paragraph (C)(2) of this Section in or for any year in which the system does not earn an28
actuarial rate of return of at least eight and one-quarter percent interest on the investment of29 SB NO. 4
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the system's assets.1
(2) No permanent benefit increase shall be authorized based on any actuarial2
valuation in which both of the following apply:3
(a) The system fails to earn an actuarial rate of return which exceeds the board-4
approved actuarial valuation rate eight and one-quarter percent.5
(b) The system is less than eighty percent funded.6
Section 3. The provisions of Section 1 of this Act shall become effective for a7
system on the date the Public Retirement Systems' Actuarial Committee adopts a valuation8
for that system utilizing the entry age normal method of actuarial valuation.9
Section 4. The provisions of this Section and of Sections 2 and 3 of this Act shall10
become effective on June 30, 2013, and shall be applied to each system's June 30, 2013,11
valuation; if vetoed by the governor and subsequently approved by the legislature, the12
provisions of this Section and of Sections 2 and 3 of this Act shall become effective on June13
30, 2013, or on the day following such approval by the legislature, whichever is later.14
The original instrument was prepared by Margaret M. Corley. The following
digest, which constitutes no part of the legislative instrument, was prepared
by Laura Gail Sullivan.
DIGEST
Present constitution (Art. X, Sect. 29(E)(1)) provides that the legislature shall establish, by
law, the particular method of actuarial valuation to be employed by each state or statewide
retirement system for purposes of attaining and maintaining the actuarial soundness of such
system.
Present law (R.S. 11:4(A)(1)(a) and (b)) provides that the La. State Employees' Retirement
System (LASERS) and the Teachers' Retirement System of La. (TRSL) are state retirement
systems.
Proposed law retains present law.
Present law (R.S. 11:22(B)(6) and (13)) provides that LASERS' and TRSL's valuation
method shall be projected unit credit.
Proposed law changes the valuation method of each system to entry age normal, effective
with the adoption by the Public Retirement Systems' Actuarial Committee of a valuation for
that system utilizing that method.
Present law provides for payment of the unfunded accrued liability of the systems, including
payments on the original amortization base and the experience account amortization base
and for allocations to the system experience account when system investment earnings
exceed a certain threshold. SB NO. 4
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Proposed law specifies that allocations to the original amortization base, the experience
account amortization base, and the experience account are made only from earnings in
excess of 8.25%. Provides that this 8.25% threshold shall be used in each system's June 30,
2013, valuation.
Effective June 30, 2013.
(Amends R.S. 11:22(B)(6) and (13), 102.1(B)(4) and (C)(4), 102.2(B)(4) and (C)(4),
542(A)(2)(a) and (F), and 883.1(A)(2)(a) and (G))
Summary of Amendments Adopted by Senate
Committee Amendments Proposed by Senate Committee on Retirement to the
original bill
1. Specifies that credits to the original amortization base, the experience
account amortization base, and the experience account are made only from
earnings in excess of 8.25%.
2. Requires each system to prepare and the Public Retirement Systems'
Actuarial Committee to adopt a valuation utilizing the new valuation method
and including changes to the actuarially-assumed rate of return, the salary
assumptions, and the method of valuing assets before the entry age normal
method statute becomes effective.
3. Provides an effective date of June 1, 2013, for the requirement that the
Committee adopt a new valuation and the 8.25% threshold for application of
excess returns to the three funds.
Committee Amendments Proposed by Senate Committee on Finance to the
engrossed bill
1. Deletes the requirement that the Public Retirement Systems' Actuarial
Committee adopt a valuation that includes changes to the actuarially-
assumed rate of return, the salary assumptions, and the method of valuing
assets before the entry age normal method statute becomes effective.
2. Provides an effective date of June 30, 2013, for the 8.25% threshold for
application of excess returns to the three funds.
3. Requires the 8.25% threshold for application of excess returns to the three
funds to be utilized in the June 30, 2013, valuation.