2014 REGULAR SESSION
ACTUARIAL NOTE HB 38
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House Bill 38 HLS 14RS-295
Engrossed
Author: Representative J. Kevin
Pearson
Date: April 16, 2014
LLA Note HB 38.02
Organizations Affected:
State Retirement Systems
EG DECREASE APV
The Note was prepared by the Actuarial Services Department of the Office of the
Legislative Auditor. The attachment of the Note to HB 38 provides compliance
with the requirements of R.S. 24:521.
Bill Header: RETIREMENT/STATE SYSTEMS: Provides relative to retirement eligibility for certain members of state retirement
systems.
Cost Summary:
The estimated actuarial and fiscal impact of the proposed legislation 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 Decrease
Total Five Year Fiscal Cost
Expenditures Decrease
Revenues Decrease
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.
Increase (Decrease) in
Actuarial Cost (Savings) to: The Actuarial Present Value
All Louisiana Public Retirement Systems Decrease
Other Post Retirement Benefits Decrease
Total Decrease
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 administrati ve
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 2014-15 2015-16 2016-17 2017-2018 2018-2019 5 Year Total
State General Fund $ 0 Decrease Decrease Decrease Decrease Decrease
Agy Self Generated 0 0 0 0 0 0
Stat Deds/Other 0 0 0 0 0 0
Federal Funds 0 0 0 0 0 0
Local Funds 0 Decrease Decrease Decrease Decrease Decrease
Annual Total $ 0 Decrease Decrease Decrease Decrease Decrease
REVENUES 2014-15 2015-16 2016-17 2017-2018 2018-2019 5 Year Total
State General Fund $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Agy Self Generated 0 Decrease Decrease Decrease Decrease Decrease
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 Decrease Decrease Decrease Decrease Decrease
2014 REGULAR SESSION
ACTUARIAL NOTE HB 38
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Bill Information:
Current Law
Current law pertaining to the Louisiana State Employees’ Retirement System (LASERS), the Teachers’ Retirement System of
Louisiana (TRSL), and the Louisiana School Employees’ Retirement System (LSERS), generally provides that non-hazardous
duty members may retire at age 60 with 5 years of service.
Proposed Law
HB 38 will change the age at which non- hazardous duty members of LASERS, TRSL, and LSERS may retire from age 60 with
five years of service to age 62 with five years of service. This change will apply to members first employed on or after July 1,
2014.
Implications of the Proposed Changes
The normal retirement age will be increase from age 60 to age 62 for non-hazardous duty state employees first hired on or after
July 1, 2014.
Cost Analysis:
Analysis of Actuarial Costs
Retirement Systems
Ultimately when the three retirement systems have matured so that there are no active members who were first employed
before July 1, 2014, normal costs will be significantly reduced as a result of the enactment of HB 38.
Retirement
System
Total Normal Cost Increase / (Decrease) in
Total Normal Cost and in
Employer Normal Cost
Age 60 with
5 Years of Service
Age 62 with
5 Years of Service
LASERS $ 200,000,000 $ 184,000,000 $ (16,000,000)
TRSL 407,000,000 376,000,000 (31,000,000)
LSERS 49,000,000 47,000,000 (2,000,000)
Total $ 656,000,000 $ 607,000,000 $ (49,000,000)
Employee contributions account for $499 million of the total normal cost. Therefore, the employer normal cost under HB 38
will be $108 million; and the employer normal cost under current law is $157. The conclusion is that the cost of the proposed
plan for members first employed on or after July 1, 2014, will be only 2/3 the cost of the plan that would be in effect if HB 38
is not enacted.
Complete realization of these savings will not occur for many years. Decreases in employer contribution requirements will
begin in FYE 2016. Cost reduction will be minimal at first, but will gradually increase as new members replace old
members.
Other Post Retirement Benefits
Actuarial costs associated with post-employment benefits other than pensions will be reduced by HB 38. A later retirement
date reduces the number of years for which a retiree will be eligible for post-employment benefits.
Analysis of Fiscal Costs
HB 38 will have the following effect on fiscal costs.
Expenditures:
1. Expenditures from the General Fund will decrease during the five year fiscal measurement period. Initially the decrease
will be very small. The decrease will become increasingly larger each year thereafter.
2. Expenditures from LASERS, TRSL and LSERS (Agy Self-Generated) will not change during the five year measurement
period because no new members will be eligible to retire in that period.
3. Expenditures from Local Funds will decrease during the five year fiscal measurement period. Initially the decrease will
be very small. The decrease will become increasingly larger each year thereafter.
Revenues:
• LASERS, TRSL and LSERS revenues (Agy Self-Generated) will decrease during the five year measurement period.
Initially the decrease will be very small. The decrease will become increasingly larger each year thereafter.
2014 REGULAR SESSION
ACTUARIAL NOTE HB 38
Page 3 of 3
Actuarial Data, Methods and Assumptions
This actuarial note was prepared using actuarial data, methods, and assumptions as disclosed in the most recent actuarial valuation
report approved by PRSAC. These assumptions and methods are in compliance with actuarial standards of practice. This data,
methods and assumptions are being used to provide consistency with the actuary for the retirement system who may also be
providing testimony to the Senate and House retirement committees.
Actuarial Caveat
There is nothing in HB 38 that will compromise the signing actuary’s ability to present an unbiased statement of actuarial opinion.
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 to render the actuarial opinion contained herein.
Dual Referral:
Senate House
13.5.1: Annual Fiscal Cost ≥ $100,000 6.8(F)(1): Annual Fiscal Cost ≥ $100,000
13.5.2: Annual Tax or Fee Change ≥ $500,000 6.8(F)(2): Annual State Revenue Reduction ≥ $500,000
6.8(G): Annual Tax or Fee Change ≥ $500,000