Louisiana Senate Bill SB4

Louisiana 2013 Regular Session

• Introduced: 4/8/13
• Refer: 4/8/13
• Report Pass: 4/16/13
• Refer: 4/17/13
• Report Pass: 4/29/13

Caption

Provides for use of entry age normal valuation method by Louisiana State Employees' Retirement System and Teachers' Retirement System of Louisiana. (See Act) (RE DECREASE APV)

Impact

If passed, SB4 is expected to reduce the actuarial present value of future benefit payments, making the funding for these retirement systems less volatile. This change is significant given that the current funding method—Projected Unit Credit (PUC)—tends to escalate costs as employees age. Additionally, it will involve fixing the basis for gain sharing at an 8.25% rate, which could result in savings of approximately $67 million annually for LASERS and $102 million for TRSL. Over time, this could lead to reduced fiscal strain on the state budget and local funds associated with employee pensions.

Summary

Senate Bill 4 (SB4) proposes significant reforms to the Louisiana State Employees' Retirement System (LASERS) and the Teachers' Retirement System of Louisiana (TRSL) by allowing the use of the Entry Age Normal (EAN) funding method. This method stabilizes employer contribution requirements over time, creating a consistent and predictive funding mechanism for retirement benefits. The bill aims to ensure the long-term financial sustainability of these retirement systems by allowing them to adopt a more stable approach to budgeting and funding.

Sentiment

The sentiment surrounding SB4 appears mixed among stakeholders. Supporters argue that the changes will foster a more sustainable retirement system that benefits both employees and the state by providing predictability in payments and costs. Conversely, opponents may view the bill as a cosmetic measure that doesn't adequately address underlying issues of employee retirement security, especially if benefit levels are reduced due to stricter gain-sharing provisions. There is apprehension around the potential impacts on cost-of-living adjustments (COLAs) that retirees currently expect.

Contention

One of the notable points of contention related to SB4 is the shift to a fixed rate for gain sharing. Critics argue that by capping investment returns that can benefit retirees, the company may be undervaluing the retirement accounts of public servants. Additionally, concerns have been raised about the accuracy of future projections regarding decreases in employer contributions, which hinge on economic conditions that are inherently unpredictable. The transition to EAN funding could lead to further scrutiny on how the state adjusts its budget to accommodate these changes.