2014 REGULAR SESSION
ACTUARIAL NOTE S B 283
Page 1 of 3
Senate Bill 283 SLS 14RS-93
Original
Author: Senators Troy Brown and
Elbert L. Guillory
Date: April 25, 2014
LLA Note S B 283.01
Organizations Affected:
Private Sector Employees
OR DECREASE FC GF RV
The Note was prepared by the Actuarial Services Department of the Office of the
Legislative Auditor. The attachment of the Note to SB 283 provides compliance
with the requirements of R.S. 24:521.
Bill Header: RETIREMENT BENEFITS. Creates a portable retirement savings plan for private sector employees. (7/1/14)
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 $0
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 $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 0 0 0 0 0 0
Annual Total $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
REVENUES 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 0 0 0 0 0
Annual Total $ 0 Decrease Decrease Decrease Decrease Decrease
2014 REGULAR SESSION
ACTUARIAL NOTE S B 283
Page 2 of 3
Bill Information:
Proposed Law
SB 283 establishes the Louisiana Retirement Savings Plan ("Plan"). The purpose of the Plan is to provide retirement and death
benefits. Every private employer operating within the state of Louisiana that does not offer any other type of employer-sponsored
retirement savings plan will be required to participate in the Plan. Churches, employers with less than five employees or operating
for less than 9 months, do not have to participate.
A five member board of trustees will be established to manage the Plan as a private entity. The board of trustees will have the
following responsibilities:
1. Overseeing the investment of the pool of assets.
2. Ensuring that the plan is providing retirement and death benefits to participants while affording maximum portability of
benefits.
3. Act with the care, skill, prudence, and diligence under the prevailing circumstances that a prudent institutional investor
acting in a like capacity and familiar with such matters would use in managing an enterprise of like character and
objectives.
4. Select three or more companies to manage the pool of Plan assets. In selecting these companies, the board shall consider
the following:
a. The ability of the company to reduce individual risk and fees using the pooled asset management approach proposed
by the company.
b. The nature and extent of the rights and benefits to be provided for participating employees and their beneficiaries.
c. The nature and extent of the rights and benefits to the amount of the contributions to be made by participants in the
plan.
d. The suitability of the rights and benefits to the needs and interests of participating employees and their employers.
e. The ability of the designated companies to provide the rights and benefits.
5. Require providers to manage Plan assets with the objective of providing each participant with a cost-effective stream of
income in retirement and reducing benefit level volatility, particularly for those approaching retirement.
6. Promulgate rules to ensure the contribution limits do not conflict with federal law.
7. Take any action necessary to secure the tax-qualified status for the Plan as soon as the federal government provides rules
pertaining to such plans.
Each private employer participating in the Plan shall inform all employees of the provisions of this Act within 30 dates of its
enactment or within 30 days of hire if later. The following information shall be provided to each employee:
1. The payments that may be elected or treated as elected under the plan.
2. The opportunity to make the election to terminate participation in the Plan.
3. The opportunity to elect different rates of contribution to the Plan.
4. The opportunity to modify the manner in which such amounts are invested for the upcoming year.
A participating employer shall designate a default provider for its employees. Contributions made by an employee who fails to
designate a provider shall be made to the default provider.
An employer shall not be a fiduciary with respect to the selection, management, or administration of the Plan . However, an
employer will be required to enroll employees and transmit contributions to the Plan. An employer that fails to comply with the
Act shall be subject to penalties.
Each employee of every employer participating in the Plan is automatically enrolled and is required to 3% of pay. Employee
contributions will not be subject to taxation by the state of Louisiana. Each employee may increase h is rate of contribution to the
Plan or withdraw from participation in the Plan altogether. An employee who withdraws from participation will be automatically
re-enrolled after two years unless he makes a new election not to participate.
Employers may contribute up to five thousand dollars on behalf of each participating employee in the Plan as long as such
contributions are made in a uniform manner and are not intended to benefit solely highly compensated employees.
An employee may at any time withdraw his funds from the provider by terminating participation in the Plan. The withdrawal
shall be subject to applicable fees, penalties, and taxes.
2014 REGULAR SESSION
ACTUARIAL NOTE S B 283
Page 3 of 3
The benefit of a participant who survives to the annuity starting date shall be provided in the form of a qualified joint and survivor
annuity as defined in ERISA. The benefit of the surviving spouse of a person who dies before the annuity starting date shall be a
qualified pre-retirement survivor annuity as defined under ERISA.
A participant may elect to start receiving benefit payments from the Plan after attaining age 60 and must begin receiving benefit
payments before attaining age 72.
Implications of the Proposed Changes
SB 283 establishes the Louisiana Retirement Savings Plan for private employers operating in the state.
Cost Analysis:
Analysis of Actuarial Costs
There are no actuarial costs to the state associated with SB 283.
Analysis of Fiscal Costs
SB 283 will have the following effect on fiscal costs during the five year measurement period.
Expenditures:
• Expenditures from the General Fund will not change because it is expected that trustees will initially serve pro-bono and
pay their own expenses. Once the Plan is operational it is assumed that trustee fees and expenses and administrative
expenses will be paid from investment income.
Revenues:
• General Fund revenues will decrease once the Plan becomes operational because contributions to the Plan will not be
subject to taxation by the State of Louisiana.
Actuarial Caveat
There is nothing in SB 283 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
13.5.1: Annual Fiscal Cost ≥ $100,000 6.8(F)(1): Annual State Fiscal Cost ≥ $100,000
x 13.5.2: Annual Tax or Fee Change ≥ $500,000 x 6.8(F)(2): Annual State Revenue Reduction ≥ $500,000
x 6.8(G): Annual Tax or Fee Change ≥ $500,000