Louisiana 2015 Regular Session

Louisiana House Bill HB11 Latest Draft

Bill / Chaptered Version

                            2015 REGULAR SESSION 
ACTUARIAL NOTE H	B 11
 
 
Page 1 of 3 
House Bill 11 HLS 15RS-367
 
Original 
 
Author: Representative Edward J. 
Price
 
Date: April 28, 2015
 
 
LLA Note H B 11.01
 
 
Organizations Affected: 
Louisiana School Employees’ 
Retirement System 
 
OR NO IMPACT APV 
This Note has been prepared by the Actuarial Services Department of the Office of 
the Legislative Auditor.  The attachment of this Note to H	B 11 provides 
compliance with the requirements of R.S. 24:52	1 
 
 
Bill Header:  Provides exceptions, in certain circumstances, to required employer payment of Louisiana School Employees’ 
Retirement System unfunded accrued liability 
 
Cost Summary: 
 
The estimated actuarial and fiscal impact of the proposed legislative 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 to Retirement Systems  	$0 
Total Five Year Fiscal Cost  
Expenditures 	See Fiscal Analysis 
Revenues 	See Fiscal Analysis 
 
 
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. 
 
 	Change in the 
Actuarial Cost to: 	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 the 
retirement systems and other government entities..  Fiscal costs include estimated administrative costs and costs associated with other 
fiscal concerns.  A fiscal cost is denoted by “Increase” or a positive number.  Actuarial or fiscal savings are denoted by “Decrease” or 
a negative number.  
 
EXPENDITURES	2015-16 2016-17 2017-18 2018-2019 2018-2020 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 See Analysis  See Analysis  See Analysis  See Analysis  See Analysis  See Analysis 
  Annual Total See Analysis  See Analysis  See Analysis  See Analysis  See Analysis  See Analysis 
REVENUES	2015-16 2016-17 2017-18 2018-2019 2018-2020 5 Year Total
  State General Fund $                       0  $                       0  $                       0  $                       0  $                       0  $                       0 
  Agy Self Generated See Analysis   See Analysis   See Analysis   See Analysis   See Analysis   See Analysis  
  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 See Analysis  See Analysis  See Analysis  See Analysis  See Analysis  See Analysis 
  
 
  2015 REGULAR SESSION 
ACTUARIAL NOTE H	B 11
 
 
Page 2 of 3 
Bill Information: 
 
Current Law 
 
When an employer participating in Louisiana School Employees’ Retirement System (LSERS), terminates a group of employees 
by eliminating positions held for these employees through privatizing, outsourcing, contracting with a private employer, or any 
other means, then under current law, the employer is required to pay to LSERS the portion of the unfunded accrued liability 
(UAL) on account of the group of employees terminated.  The UAL attributed to such employees or positions must be paid by the 
employer with level annual installments over 10 years based on the valuation interest rate. 
 
When an employer participating in LSERS, eliminates positions by privatizing, outsourcing, contracting with a private employer, 
or any other means, then under current law, the employer is required to pay to LSERS the portion of the unfunded accrued 
liability (UAL) on account of the position eliminated.  The UAL attributed to such positions may be paid by the employer with a 
lump sum or with level annual installments over 10 years based on the valuation interest rate. 
 
Proposed Law 
 
HB 11 provides that if an employee terminates employment or a position is eliminated as a result of attrition or a force reduction, 
then the rules under current law requiring the employer to pay the unfunded accrued liability relative to these employees or 
positions as a lump sum or in ten equal annual installments shall not apply. Furthermore, if an employee’s position is eliminated, 
but he is retained by the employer in another position covers by LSERS, then the employer will not be required to calculate the 
UAL for such an employee or position.  Neither will the employer be required to make installment payments or a lump sum 
payment relative to this employee or position. 
 
Implications of the Proposed Changes 
 
HB 11 removes circumstances under which an employer must calculate an unfunded accrued liability and eliminates the 
requirement to pay to LSERS the UAL that would have otherwise been calculated. 
 
 
Cost Analysis:  
 
Analysis of Actuarial Costs 
 
HB 11 does not contain any benefit provisions having an actuarial cost. 
 
Retirement Systems 
 
HB 11 only applies to employers of employees or positions that are eliminated as a result of attrition or force reduction.  
Under current law, payment of the UAL associated with such employers and positions would have been made earlier than the 
regular amortization period would have otherwise been 	required. 
 
Under HB 11, earlier payment of such UAL has been rescinded.  Payments attributable to attrition or reduction in force have 
been postponed to the time originally provided for under the law. 
 
Under current law, the following occurs when an employer terminates an employee or eliminates a position due to attrition or 
a reduction in force. 
 
Employer Makes Lump Sum Payment 
 
The following occurs if the affected employer makes a lump sum payment. 
 
1. The UAL for LSERS will decrease. 
 
2. Contribution requirements toward amortization of the UAL will decrease for all employers. 
 
Employer Makes Installment Payments 
 
1. The UAL for LSERS will decrease over a 10 year period as the affected employer makes installment payments. 
 
2. Contribution requirements toward amortization of the UAL will be larger for the next ten years for the affected 
employer. 
 
3. Contribution requirements toward amortization of the UAL will be 	smaller for the next ten years for all other 
employers. 
 
4. Contribution requirements toward amortization of the UAL for all employers, in the aggregate, 	will be larger for the 
next 10 years. 
 
The opposite conclusions apply to HB 11 because current law is being reversed.  When an 	increase is indicated above, HB 11 
will have the opposite effect, or a decrease.  When a decrease is shown above, an increase will apply should HB 11 be 
enacted.  
 
  2015 REGULAR SESSION 
ACTUARIAL NOTE H	B 11
 
 
Page 3 of 3 
Other Post-Employment Benefits  
 
There are no actuarial costs associated with HB 11 for post-employment benefits other than pensions. 
 
Analysis of Fiscal Costs 
 
 
Increases and/or decreases in fiscal costs relative to HB 11 depend on when attrition or a reduction in force occurs and how large 
such attrition or force reductions are.  The only statements that can be made about costs are summarized below. 
 
HB 11 will have the following changes in fiscal costs during the five-year measurement period: 
 
Expenditures:  
 
1. Expenditures from Local Funds attributable to lump sum payments or installment payments will decrease in the year that 
attrition or a reduction in force occurs.  Under current law such payments would be required.  Under HB 11, such 
payments will not be required. 
 
2. Expenditures from Local Funds for years subsequent to the year attrition or a reduction in force occurs will decrease.  
Under current law, the sum of all amortization payments, in the aggregate, would increase.  Under HB 11, such an 
increase will not be required. 
   
Revenues: 
 
1. Revenues to LSERS (Agy Self-Generated) attributable to lump sum payments or installment payments will decrease in 
the year that attrition or a reduction in force occurs.  Under current law such payments would be required.  Under HB 11, 
such payments will not be required. 
 
2. Revenues to LSERS (Agy Self Generated) for years subsequent to the year attrition or a reduction in force occurs will 
decrease.  Under current law, the sum of all amortization payments, in the aggregate, would in	crease. Under HB 11, 
such a decrease will not be required. 
 
 
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 adopted by PRSAC. 
 
Actuarial Caveat 
 
There is nothing in H	B 11 that will compromise the signing actuary’s ability to present an unbiased statement of actuarial opinion. 
 
Actuarial Credentials: 
 
Paul T. Richmond is the actuary 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  6.8(F)(2): Annual Revenue Reduction ≥ $100,000 
    
   6.8(G): Annual Tax or Fee Change ≥ $500,000