2014 REGULAR SESSION
ACTUARIAL NOTE S B 14
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Senate Bill 14 SLS 14RS-206
Engrossed
Author: Senator Elbert L. Guillory
Date: March 19, 2014
LLA Note S B 14.02
Organizations Affected:
Louisiana School Employees’
Retirement System
EG +$10,781,337 FC LF EX
The Note was prepared by the Actuarial Services Department of the Office of the
Legislative Auditor. The attachment of the Note to S B 14 provides compliance
with the requirements of R.S. 24:521.
Bill Header: SCHOOL EMPLOYEES RET. Provides for the dete rmination of system liabilities and the payment therefor . (6/30/14)
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 $0
Total Five Year Fiscal Cost
Expenditures $ 29,115,316
Revenues $ 29,115,316
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 $0
Other Post Retirement Benefits $0
Total $0
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 $ 0 $ 0 $ 0 $ 0 $ 0
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 10,781,337 8,411,274 5,934,559 3,346,391 641,755 29,115,316
Annual Total $ 10,781,337 $ 8,411,274 $ 5,934,559 $ 3,346,391 $ 641,755 $ 29,115,316
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 10,781,337 8,411,274 5,934,559 3,346,391 641,755 29,115,316
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 $ 10,781,337 $ 8,411,274 $ 5,934,559 $ 3,346,391 $ 641,755 $ 29,115,316
2014 REGULAR SESSION
ACTUARIAL NOTE S B 14
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Bill Information:
Current Law
Current law provides that changes in the actuarial accrued liability for the Louisiana School Employees’ Retirement System
(LSERS) resulting from actuarial gains and losses, changes in the method of valuing of assets, changes in actuarial assumptions,
and changes in actuarial funding methods, shall be amortized with level payments over a 30 year period. However, exceptions
were made for certain liability changes in FYE 2001, FYE 2002 and FYE 2003. These changes in liability were amortized over a
30 year period with payments increasing 4.5% a year.
Proposed Law
SB 14 will require all existing outstanding balances as of June 30, 2014, to be re-amortized with level payments over a 30-year
period beginning with the payment for FYE 2015 and ending with the payment for FYE 2044. SB 14 does not apply to
outstanding balances associated with contribution variances. SB 14 only applies to bases that exist on June 30, 2014. It does not
pertain to bases created after June 30, 2014.
Implications of the Proposed Changes
SB 14 will re-amortize the June 30, 2014, unfunded accrued liability with level payments over a 30- year period.
Cost Analysis:
Analysis of Actuarial Costs
Retirement Systems
SB 14 does not contain any benefit provision with an actuarial cost.
SB 14 will change the pattern of paying off the Unfunded Actuarial Liability. T he unfunded actuarial liability will be paid off
earlier under current law than under proposed law. Under SB 14, contributions received from participating employers to
amortize the unfunded liability are larger for the first five years. However, interest paid over the entire amortization period
will be greater than the interest paid under current law. The table below summarizes the 5-year period and long term effect of
SB 14.
Amortization of the Outstanding Bases as of June 30, 2014
Under Current Law Under SB 14 Increase/Decrease
Unfunded Amortization Bases (UAB) $ 905,696,580 $ 905,696,580 $ 0
Interest Payment to P ay off UAB 955,679,314 1,235,071,967 279,392,654
Total Payments 1,861,375,894 2,140,768,547 279,392,654
Changes in employer contribution requirements over the five year period following the 2014 legislative session are shown
below:
Increase in Amortization Payments over the 5-Year Measurement Period
FYE Current Law SB 14 Increase/Decrease
2015 $ 71,693,968 $ 82,475,305 $ 10,781,337
2016 68,895,577 77,306,851 8,411,274
2017 67,641,576 73,576,135 5,934,559
2018 67,987,000 71,333,391 3,346,391
2019 69,976,586 70,618,341 641,755
Total $ 346,194,706 $ 375,310,022 $ 29,115,316
Amortization costs and the unfunded accrued liability over the entire amortization period will change as shown in the
following graphs.
2014 REGULAR SESSION
ACTUARIAL NOTE S B 14
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Other Post-Employment Benefits
There are no actuarial costs or savings associated with SB 14 for other post-employment benefits.
Analysis of Fiscal Costs
SB 14 will have the following effect on fiscal costs:
Expenditures:
• Local Fund expenditures will increase because employer amortization payments will increase during the five year
measurement period.
Revenues:
• LSERS revenues will increase because employer amortization payments will increase during the five year measurement
period.
($20)
$0
$20
$40
$60
$80
$100
$120
$140
$160
201520172019202120232025202720292031203320352037203920412043
Millions
Fiscal Year Ending
Amortization Payments
Under SB 14 Under Current Law
($100)
$0
$100
$200
$300
$400
$500
$600
$700
$800
$900
$1,000
2014201620182020202220242026202820302032203420362038204020422044
Millions
June 30
Unfunded Accrued Liability
Under SB 14 Under Current Law 2014 REGULAR SESSION
ACTUARIAL NOTE S B 14
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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. The actuary signing this note may or may not agree with or endorse these assumptions. He is using
this data, methods and assumptions to provide consistency with the actuary for the retirement systems who also may be providing
testimony to the Senate and House retirement committees.
Actuarial Caveat
There is nothing in S B 14 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 necessary to render the actuarial opinion contained herein.
Dual Referral:
Senate House
x 13.5.1: Annual Fiscal Cost ≥ $100,000 x 6.8(F)(1): Annual Fiscal Cost ≥ $100,000
13.5.2: Annual Tax or Fee Change ≥ $500,000 6.8(F)(2): Annual Revenue Reduction ≥ $100,000
6.8(G): Annual Tax or Fee Change ≥ $500,000