2015 REGULAR SESSION
ACTUARIAL NOTE H B 9
Page 1 of 3
House Bill 9 HLS 15RS-289
Original
Author: Representative Dorothy Sue
Hill
Date: April 28, 2015
LLA Note H B 9.01
Organizations Affected:
Municipal Employees’ Retirement
System
OR INCREASE APV
This Note has been prepared by the Actuarial Services Department of the Office of
the Legislative Auditor. The attachment of this Note to HB 9 provides compliance
with the requirements of R.S. 24:52 1
Bill Header: RETIREMENT/MUNICIPAL EMP: Provides relative to enrollment of judges and employees of the Local Tax
Division of the Board of Tax Appeals in the Municipal Employees’ Retirement System.
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 Increase
Total Five Year Fiscal Cost
Expenditures Increase
Revenues Increase
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 o r other fiscal concerns are not included in these values.
Change in the
Actuarial Cost to: Actuarial Present Value
All Louisiana Public Retirement Systems Increase
Other Post Retirement Benefits $0
Total Increase
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 2018-19 2019-2020 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 Increase Increase Increase Increase Increase Increase
Annual Total Increase Increase Increase Increase Increase Increase
REVENUES 2015-16 2016-17 2017-18 2018-19 2019-2020 5 Year Total
State General Fund $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Agy Self Generated Increase Increase Increase Increase Increase Increase
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 Increase Increase Increase Increase Increase Increase
2015 REGULAR SESSION
ACTUARIAL NOTE H B 9
Page 2 of 3
Bill Information:
Current Law
The Local Tax Division of the Board of Tax Appeals (BTA), created during the 2014 legislative session, is an employer that
participates in the Louisiana State Employees’ Retirement System (LASERS). The staff of this organization consists of a judge
and his administrative assistant. The judge for the Local Tax Division of the BTA must be a member of the Board of Tax
Appeals.
The administrative assistant is a member of LASERS.
LASERS initially allowed the judge to also become a member. However, LASERS later reexamined its position and reversed its
decision. LASERS initially allowed the judge to be a member because he did not receive any compensation as a member of the
BTA. It later reversed its opinion and concluded that because being a member of the BTA is a pre- requisite for being employed
by the Local Tax Division, he receives compensation as an employee of the Local Tax Division of the BTA only because he also
serves on the BTA. Therefore, in LASERS opinion, Article 10(29.1)(A)(3) of the Louisiana Constitution deems the judge to be a
part time employee and therefore ineligible for membership in the system.
The Municipal Employees’ Retirement System (MERS) is a voluntary system; meaning that a Louisiana government employer
may voluntarily choose to have its employees covered under MERS. Although Article 10( 29.1)(A)(3) is also applicable to
MERS, legal counsel for MERS interprets the Louisiana C onstitution differently than counsel for LASERS and would allow the
judge to participate in MERS.
MERS has two sub plans – Plan A and Plan B. Plan A’s benefit formula provides a larger benefit accrual rate than Plan B’s
formula. The employer decides which plan will cover its employees when the employer becomes a participating employer.
Proposed Law
Under HB 9, the Local Tax Divi sion of the BTA will be added to the list of employers participating in MERS. The Local Tax
Division of the BTA will decide what plan to participate in once it elects to participate.
Implications of the Proposed Changes
Membership in MERS will increase as a result of HB 9.
Cost Analysis:
Analysis of Actuarial Costs
Retirement Systems
The removal of the Local Tax Division of the BTA from the list of employers eligible to participate in LASERS and the
addition of that organization to the list of eligible to participate in MERS will have the following effect on actuarial costs
factors.
1. LASERS will lose one member, an administrative assistant. MERS will gain two members, a judge and an
administrative assistant.
2. The present value of future benefits for LASERS will decrease. The present value will increase for MERS.
The net effect is an increase.
3. The present value of future normal costs will decrease for LASERS. It will increase for M ERS. The net effect
will be an increase.
4. Annual payroll upon which employer and employee contributions are based will increase. Currently only one
employee of the Local Tax Division of the BTA is participating in a retirement system. Under HB 9, two will
be participating.
5. Employer contributions to LASERS will decrease; it will lose one member with an employer rate of 37.0%.
Employer contributions to MERS will increase; it will gain two members with an employer contribution rate of
20.75%. The net effect will be an increase in employer contributions.
6. Employee contributions to LASERS will decrease; it will lose one member with an employee rate of 8.0%.
Employee contributions to MERS will increase; it will gain two members with an employee rate of at least
9.5%. The net effect will be an increase in employee contributions.
7. LASERS unfunded accrued liability and MERS unfunded accrued liability will not change when the
administrative assistant transfers membership. No additional unfunded accrued liabili ty will be created by the
additional of the judge to MERS.
2015 REGULAR SESSION
ACTUARIAL NOTE H B 9
Page 3 of 3
Other Post-Employment Benefits
HB 9 has no effect on actuarial costs associated with post-retirement benefits other than pensions assuming such benefits are
provided through the Office of Group Benefits.
Analysis of Fiscal Costs
HB 9 will have the following effect on fiscal costs during the five year measurement period.
Expenditures:
1. Expenditures from LASERS (Agy Self Generated) will increase in FYE 2016 because the administrative assistant will
transfer her membership from LASERS to MERS. As a result of the transfer, a one- time exchange of funds will occur
from LASERS to MERS. Benef it expenditures in all other years of the five year measurement period are expected to
decrease because the administrative assistant will no longer be a member and therefore will not be eligible for a
termination benefit should she leave employment.
2. Expenditures from MERS (Agy Self-Generated) will increase during the five year fiscal measurement period only to the
extent that an employee of the Local Tax Division of the BTA terminates employment and requests a refund of his own
contributions from the retirement system.
3. The transfer of assets from LASERS to MERS is cost neutral in the aggregate. However, benefit expenditures (Agy Self
Generated) are expected to increase because there will be two members in MERS entitled to benefits and LASERS
would have had one.
4. Expenditures from Local Funds will increase. Employer contributions for the Local Tax Division of the BTA are funded
from Local Funds regardless of whether its employees participate in LASERS or MERS. Although the lower MERS rate
is being exchanged for the LASERS rate, there will be two members at MERS instead of one. The net effect will be an
increase in employer contributions.
5. In general, the increase in expenditures will be limited to the Local Tax Division of the BTA. The effect on expenditures
for other participating employers in MERS will be negligible.
Revenues:
• LASERS revenues (Agy Self Generated) will decrease because it will no longer receive employer or employee
contributions from the Local Tax Division of the BTA relative to the administrative assistant .
• MERS revenues (Agy Self -Generated) will increase because it will receive employer and employee contributions from
two employees of the Local Tax Division of the BTA .
• The net effect will be an increase in revenues received by the retirement systems because the increase in revenue for
MERS is greater than the decrease for LASERS.
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 9 that will compromise the signing actuary’s ability to present an unbiased statement of actuarial opinion.
Actuarial Credentials:
Paul T. Richmond is the actuary f or 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