HLS 14RS-445 ORIGINAL
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Regular Session, 2014
HOUSE BILL NO. 44
BY REPRESENTATIVE PEARSON (BY REQUEST)
RETIREMENT/TEACHERS: Requires application of minimum foundation program
formula funds to the unfunded accrued liability of the Teachers' Retirement System
of Louisiana
AN ACT1
To amend and reenact R.S. 11:102(D)(4)(introductory paragraph) and to enact R.S. 11:102.32
and 102.4, relative to payment of certain unfunded accrued liability of the Teachers'3
Retirement System of Louisiana; to provide relative to calculation and distribution4
of certain minimum foundation program funds; to provide relative to the powers and5
duties of the Department of Education; to provide relative to the powers and duties6
of the board of trustees of the retirement system; to provide relative to the calculation7
of employer contribution rates; and to provide for related matters.8
Notice of intention to introduce this Act has been published9
as provided by Article X, Section 29(C) of the Constitution10
of Louisiana.11
Be it enacted by the Legislature of Louisiana:12
Section 1. R.S. 11:102(D)(4)(introductory paragraph) is hereby amended and13
reenacted and R.S. 11:102.3 and 102.4 are hereby enacted to read as follows:14
§102. Employer contributions; determination; state systems15
* * *16
D.17
* * *18 HLS 14RS-445 ORIGINAL
HB NO. 44
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(4) Except as provided in R.S. 11:102.3 and 102.4, for For each plan1
referenced in Paragraph (1) of this Subsection, the legislature shall set the required2
employer contribution rate equal to the sum of the following:3
* * *4
§102.3. Payments by the Louisiana Department of Education to the Teachers'5
Retirement System of Louisiana; 1988 unfunded accrued liability6
A. The Legislature of Louisiana recognizes its constitutional obligation to7
attain and maintain the actuarial soundness of the state and statewide retirement8
systems as well as its constitutional obligation to pay by 2029 the unfunded accrued9
liability of the state systems existing as of June 30, 1988. The legislature further10
recognizes that the minimum foundation program formula contains amounts intended11
to pay retirement costs, which include funds to pay the unfunded accrued liability of12
the retirement system existing as of June 30, 1988. Therefore, beginning Fiscal Year13
2014-2015 and continuing each year thereafter the legislature directs the Louisiana14
Department of Education to allocate annually to the Teachers' Retirement System of15
Louisiana, in this Section, the "retirement system", from the minimum foundation16
program an amount sufficient to make the annual payments required by this Section17
on the system's Original Amortization Base on behalf of all employers receiving18
funds through the minimum foundation program formula.19
B. Notwithstanding any provision of R.S. 11:102(D)(4) to the contrary, the20
retirement system actuary shall annually determine the amount of the cost of the21
mid-year amortization payment on the Original Amortization Base schedule which22
reflects the percentage of the payment allocated to elementary and secondary23
education employers. Once determined, the system actuary shall adjust such cost to24
an actuarial equivalent for a ten-month payment period, comprising equal payments.25
This amount shall be converted to a contribution rate calculated across the active26
payroll of all employers participating in the retirement system as well as the active27
payroll of all personnel who are employed by a private employer receiving minimum28
foundation program funds and whose employment would qualify them for29 HLS 14RS-445 ORIGINAL
HB NO. 44
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membership in the retirement system if they were employees of a local school board.1
The calculation shall be based on all employer payroll data available to the system2
for the fiscal year ending June 30
th
of the immediately preceding year, including3
reports required by Subsection F of this Section. The retirement system shall4
annually invoice the Louisiana Department of Education for this amount and provide5
the contribution rate calculated pursuant to the provisions of this Subsection as well6
as the total number of employees considered in the rate calculation. The invoiced7
amount, the contribution rate, and the number of employees shall be reviewed and8
approved by the Public Retirement Systems' Actuarial Committee as part of the9
process of annually adopting an actuarial valuation for the Teachers' Retirement10
System of Louisiana.11
C. The department shall make contributions to the retirement system from12
formula funds at the approved rate using the approved total number of employees.13
Such contributions shall be made on behalf of all employers receiving formula funds.14
The contributions shall be paid monthly for ten months, beginning in the September15
immediately following approval of the invoiced amount.16
D. Remaining funds appropriated for the minimum foundation program after17
the payments required by this Section and R.S. 11:102.4 shall be distributed and used18
as otherwise provided by law and the formula approved by the legislature.19
E. The Teachers' Retirement System of Louisiana shall determine the20
balance of amounts due pursuant to R.S. 11:102 as a percentage of payroll in21
accordance with the provisions of R.S. 11:102, which shall be reviewed and22
approved by the Public Retirement Systems' Actuarial Committee as part of the23
process of annually adopting an actuarial valuation for the Teachers' Retirement24
System of Louisiana. Each employer that receives formula funds and that employs25
contributing members of the retirement system is liable to the retirement system for26
its share of this balance of amounts due.27
F. Each employer receiving minimum foundation program funding whose28
employees are not members of the retirement system shall make quarterly reports to29 HLS 14RS-445 ORIGINAL
HB NO. 44
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the department and to the retirement system verifying gross wages paid to employees1
whose employment would otherwise qualify them to meet the definition of "teacher"2
in R.S. 11:701(33) if they were employees of a local school board, as reported on3
Internal Revenue Service Form 941 payroll tax statements. Each report shall be4
made at the same time the form is submitted to the Internal Revenue Service.5
§102.4. Payments by the Louisiana Department of Education to the Teachers'6
Retirement System of Louisiana; post-1988 unfunded accrued liability7
A. The Legislature of Louisiana recognizes that the minimum foundation8
program formula contains amounts intended to pay retirement costs, which include9
funds to pay the unfunded accrued liability of the retirement system. Therefore,10
beginning Fiscal Year 2014-2015 and continuing each year thereafter the legislature11
directs the Louisiana Department of Education to allocate annually from the12
minimum foundation program an amount sufficient to make the annual payment to13
the Teachers' Retirement System of Louisiana, in this Section, the "retirement14
system", as required by this Section on behalf of all employers receiving funds15
through the minimum foundation program formula.16
B. Notwithstanding any provision of R.S. 11:102(D)(4) to the contrary, the17
retirement system actuary shall annually determine the amount of the cost of the18
mid-year amortization payment on all existing amortization schedules, with the19
exception of the Original Amortization Base schedule, provided in the most recent20
system valuation adopted by the Public Retirement Systems' Actuarial Committee,21
which reflects the percentage of the payment allocated to elementary and secondary22
education employers. Once determined, the system actuary shall adjust such cost to23
an actuarial equivalent for a ten-month payment period, comprising equal payments.24
This amount shall be converted to a contribution rate calculated across the active25
payroll of all employers participating in the retirement system as well as the active26
payroll of all personnel who are employed by a private employer receiving minimum27
foundation program funds and whose employment would qualify them for28
membership in the retirement system if they were employees of a local school board.29 HLS 14RS-445 ORIGINAL
HB NO. 44
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The calculation shall be based on all employer payroll data available to the system1
for the fiscal year ending June 30
th
of the immediately preceding year, including2
reports required by Subsection F of this Section. The retirement system shall3
annually invoice the Louisiana Department of Education for this amount and provide4
the contribution rate calculated pursuant to the provisions of this Subsection as well5
as the total number of employees considered in the rate calculation. The invoiced6
amount, the contribution rate, and the number of employees shall be reviewed and7
approved by the Public Retirement Systems' Actuarial Committee as part of the8
process of annually adopting an actuarial valuation for the Teachers' Retirement9
System of Louisiana.10
C. The department shall make contributions to the retirement system from11
formula funds at the approved rate using the approved total number of employees.12
Such contributions shall be made on behalf of all employers receiving formula funds.13
The contributions shall be paid monthly for ten months, beginning in the September14
immediately following approval of the invoiced amount.15
D. Remaining funds appropriated for the minimum foundation program after16
the payments required by this Section and R.S. 11:102.3 shall be distributed and used17
as otherwise provided by law and the formula approved by the legislature.18
E. The Teachers' Retirement System of Louisiana shall determine the19
balance of amounts due pursuant to R.S. 11:102 as a percentage of payroll in20
accordance with the provisions of R.S. 11:102, which shall be reviewed and21
approved by the Public Retirement Systems' Actuarial Committee as part of the22
process of annually adopting an actuarial valuation for the Teachers' Retirement23
System of Louisiana. Each employer that receives formula funds and that employs24
contributing members of the retirement system is liable to the retirement system for25
its share of this balance of amounts due.26
F. Each employer receiving minimum foundation program funding whose27
employees are not members of the retirement system shall make quarterly reports to28
the department and to the retirement system verifying gross wages paid to employees29 HLS 14RS-445 ORIGINAL
HB NO. 44
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whose employment would otherwise qualify them to meet the definition of "teacher"1
in R.S. 11:701(33) if they were employees of a local school board, as reported on2
Internal Revenue Service Form 941 payroll tax statements. Each report shall be3
made at the same time the form is submitted to the Internal Revenue Service.4
Section 2. The Legislature of Louisiana acknowledges that, for the purposes of5
implementing Directive No. 68 of the Governmental Accounting Standards Board, the state6
is a nonemployer contributing entity with regard to any payments due to the retirement7
system for the unfunded accrued liability existing as of June 30, 2014. The Legislature of8
Louisiana expressly denies that the state is constitutionally required to provide payments for9
unfunded accrued liability created after June 30, 1988.10
Section 3. As soon as practicable after the effective date of this Act, the Public11
Retirement Systems' Actuarial Committee shall meet to adopt a revised valuation for the12
system, prepared as provided by this Act. This valuation shall include a revised employer13
contribution rate for the K-12 plan in the Teachers' Retirement System to be utilized in the14
fiscal year which begins on July 1, 2014.15
Section 4. The provisions of this of this Act shall become effective on June 3, 2014;16
if vetoed by the governor and subsequently approved by the legislature, this Act shall17
become effective on June 3, 2014, or on the day following such approval by the legislature,18
whichever is later.19
DIGEST
The digest printed below was prepared by House Legislative Services. It constitutes no part
of the legislative instrument. The keyword, one-liner, abstract, and digest do not constitute
part of the law or proof or indicia of legislative intent. [R.S. 1:13(B) and 24:177(E)]
Pearson HB No. 44
Abstract: Requires the Dept. of Education to remit payments from minimum foundation
program (MFP) funds to the Teachers' Retirement System of La. (TRSL) to cover
debt payment on unfunded accrued liability (UAL) of the system attributable to K-12
employers.
Present constitution creates the MFP to provide minimum education funding for public
elementary and secondary education schools in the state. The MFP monies are used by
school districts to cover education-related expenses, including salaries and retirement costs
for the teachers and school employees in the district. MFP monies are also received by
charter schools. HLS 14RS-445 ORIGINAL
HB NO. 44
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Proposed law generally requires the Dept. of Education to send MFP funds to TRSL for
application toward the system's initial unfunded accrued liability (IUAL) and post-1988
UAL prior to MFP funds being sent to school districts and charter schools. More detail on
proposed law is contained below.
Calculation of contribution rates
Present law (R.S. 11:102) establishes the calculation for annual employer contribution rates
for employers participating in the state retirement systems, including TRSL. A part of the
employer contribution rate is an amount to fund debt service on the unfunded accrued
liabilities of the retirement system—both the unfunded accrued liability that existed as of
June 30, 1988, (IUAL) and the unfunded accrued liability (UAL) created after June 30,1988.
Proposed law retains present law.
Present law establishes the employer contribution rates as a percentage of the total payroll
of all active, contributing members of the system. In general terms, the rate is calculated
by dividing the amount determined to be due to cover all costs (including payments on debt)
by the payroll of active members of the system. Proposed law retains present law for all
postsecondary education employers and for all costs except debt payments owed by K-12
employers.
For K-12 employers, proposed law provides that the portions of IUAL and UAL debt owed
by such employers are divided by the payroll of active members of TRSL and of charter
schools, whose employees do not participate in TRSL, using the payroll of employees who
would have been in TRSL if they were school board employees.
UAL existing as of June 30, 1988
Present constitution (Art. X, §29(E)(2)(c)) provides that the legislature annually guarantees
an amount necessary to fund payments on the IUAL debt of state retirement systems until
such debt is retired.
Proposed law (R.S. 11:102.3) requires annual payment of an amount sufficient to cover the
portion of the IUAL payment owed by elementary and secondary employers in TRSL from
the MFP monies before such monies are distributed to school boards. Proposed law requires
the amount due to be calculated as a rate based on the payroll of all entities who receive
MFP funds, as described in more detail in the previous section. Further requires the rate and
the total payroll figures used to calculate it to be reviewed and approved by the Public
Retirement Systems' Actuarial Committee (PRSAC) when the committee reviews and adopts
an actuarial valuation for TRSL each year.
Proposed law requires the department to pay the required rate to the retirement system on
behalf of all employers receiving formula funds. The department shall pay the rate for 10
months beginning in the Sept. immediately following the approval of the rate.
Proposed law further requires TRSL to calculate as a percentage of payroll the balance of
amounts due pursuant to present law from contributing employers. Requires such
calculation to be reviewed and approved by PRSAC when the committee adopts a valuation
for TRSL. Provides that participating employers remain obligated for the remainder of their
required payments to TRSL.
UAL created after June 30, 1988
Proposed law (R.S. 11:102.4) requires annual payment of an amount sufficient to cover the
portion of the UAL payment (excluding IUAL) owed by elementary and secondary
employers in TRSL from the MFP monies before such monies are distributed to school
boards. Proposed law requires the amount due to be calculated as a rate based on the payroll
of all entities who receive MFP funds, as described in more detail above. Further requires HLS 14RS-445 ORIGINAL
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the rate and the total payroll figures used to calculate it to be reviewed and approved by
PRSAC when the committee reviews and adopts an actuarial valuation for TRSL each year.
Proposed law requires the department to pay the required rate to the retirement system on
behalf of all employers receiving formula funds. The department shall pay the rate for 10
months beginning in the Sept. immediately following approval of the rate.
Proposed law further requires TRSL to calculate the balance of amounts due from
contributing employers as a percentage of payroll. Requires such calculation to be reviewed
and approved by PRSAC when the committee adopts a valuation for TRSL. Provides that
participating employers remain obligated for the remainder of their required payments to
TRSL.
Proposed law requires the state to carry on its financial statements for the purposes of
Governmental Accounting Standards Board Directive No. 68, the total outstanding UAL of
TRSL.
Proposed law further expressly denies that the constitution requires the state to provide
payments for UAL created after June 30, 1988.
Proposed law requires the PRSAC to meet and adopt a revised employer contribution rate
for K-12 employers for FY 2014-2015, based on the provisions contained in the Act.
Effective June 3, 2014.
(Amends R.S. 11:102(D)(4)(intro. para.); Adds R.S. 11:102.3 and 102.4)