2014 REGULAR SESSION
ACTUARIAL NOTE S B 4
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Senate Bill 4 SLS 14RS-67
Reengrossed with Senate Floor
Legislative Bureau Amendment #1066
Author: Senator Barrow Peacock
Date: March 25, 2014
LLA Note S B 4.03
Organizations Affected:
Firefighters’ Retirement System
RE DECREASE APV
The Note was prepared by the Actuarial Services Department of the Office of the
Legislative Auditor. The attachment of the Note to S B 4 provides compliance with
the requirements of R.S. 24:521.
Bill Header: FIREFIGHTERS RETIREMENT. Provides benefits for members hired on or after January 1, 2015. (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 Decrease
Total Five Year Fiscal Cost
Expenditures $ (4,000,000)
Revenues $ (4,000,000)
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 $ 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 (250,000) (750,000) (1,250,000) (1,750,000) (4,000,000)
Annual Total $ 0 $ (250,000) $ (750,000) $ (1,250,000) $ (1,750,000) $ (4,000,000)
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 (250,000) (750,000) (1,250,000) (1,750,000) (4,000,000)
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 $ (250,000) $ (750,000) $ (1,250,000) $ (1,750,000) $ (4,000,000)
2014 REGULAR SESSION
ACTUARIAL NOTE S B 4
Page 2 of 3
Bill Information:
Current Law
Current law provides for retirement eligibility, a 3 year final average compensation (FAC) period, and a 3 1/3% accrual rate for
all members of Firefighters Retirement System (FRS).
Proposed Law
SB 4 changes the retirement eligibility, the FAC computation period, and the accrual rate. These changes apply to members of
FRS first hired on or after January 1, 2015. These changes are summarized below.
For Members of FRS Hired on or after January 1, 2015
Current Provisions Provisions under SB 4
Retirement
Eligibility
• 25 or more years of service at any age
• 20 or more years of service at age 50
• 12 or more years of service at age 55
• 20 or more years of service at age 50
• 12 or more years of service at age 55
FAC 3 years 5 years
Anti-spiking cap 15% 15%
Accrual Rate 3 1/3%
• 3 1/3%, only if a member has earned 30 or
more years of service
• 3%, otherwise
The calculation of additional benefits earned for continued employment after DROP will change for members first employed on
or after January 1, 2015. This change is summarized below.
1. If a member’s additional service period is less than his FAC period, the additional benefit shall be calculated based on
the FAC used to calculate his original benefit.
2. If a member’s additional service period is at least his FAC period, the additional benefit shall be calculated based on the
FAC during the additional service.
Implications of the Proposed Changes
SB 4 creates a new tier of benefits in FRS for members hired on or after January 1, 2015.
Cost Analysis:
Analysis of Actuarial Costs
Retirement Systems
SB 4 has no effect on any current member of FRS. The actuarial present value of future benefit payments for existing
members will not change. SB 4 has no effect on accrued liabilities because it applies to members first employed on or after
January 1, 2015.
SB 4 provides for a longer FAC period, lower benefit accrual rates and later retirement ages for members first employed on
or after January 1, 2015. As a result, the present value of future benefit payments for future members will decrease. Future
normal costs and future employer contribution requirements will also decrease. However, savings from SB 4 will not begin
to be recognized until new members first employed on or after January 1, 2015 begin to replace currently active members.
The estimated effect of SB 4 on various actuarial cost measures is shown below. This analysis is partially based on
information provided to the FRS by G.S. Curran & Company, Ltd.
Reduction in Normal Cost
Change in
Long Term
over 25 or 30 years
Short Term
within 5 years
FAC Period from 3 years to 5 years 1.08% 0.31%
Accrual Rate from 3 1/3% to 3% with 3 1/3% retroactive for members with 30 or more years of service 1.75% 0.51%
Retirement eligibility by E liminating 25 & out provisions 0.43% 0.18%
Total 3.26% 1.04%
2014 REGULAR SESSION
ACTUARIAL NOTE S B 4
Page 3 of 3
Other Post-Employment Benefits
There are potential savings associated with other post-employment benefits (OPEB) depending upon the OPEB plan
provisions for firefighters. SB 4 will potentially delay when members of FRS will retire. As a result, firefighters will be
receiving OPEB benefits for a shorter period of time and cost will be less.
Analysis of Fiscal Costs
SB 4 will have the following effect on fiscal costs.
Expenditures:
1. Annual expenditures from FRS (Agy Self-Generated) will decrease because benefits for new members will decrease.
However, this decrease is expected to be negligible during the 5 year measurement period because the only benefit likely
to be paid relative to new members is a refund of employee contributions upon termination of employment and SB 4 has
no effect on the calculation of this benefit.
2. Annual expenditures from Local Funds will decrease because employer contribution requirements will decrease. The
expected decrease is shown below:
Fiscal Year
Ending
Estimated Decrease in
Employer Contributions
2015 $ 0
2016 250,000
2017 750,000
2018 1,250,000
2019 1,750,000
Revenues:
• FRS revenues (Agy Self-Generated) will decrease to the extent that employer contribution requirements decrease.
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. This note is also based in part on cost analyses prepared by
the G.S. Curran & Company Ltd., the actuary for FRS.
Actuarial Caveat
There is nothing in S B 4 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 Fiscal Cost ≥ $100,000
13.5.2: Annual Tax or Fee Change ≥ $500,000 x 6.8(F)(2): Annual Revenue Reduction ≥ $100,000
6.8(G): Annual Tax or Fee Change ≥ $500,000