2015 REGULAR SESSION
ACTUARIAL NOTE SB 13
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Senate Bill 13 SLS 15RS-111
Reengrossed with Senate Floor
Legislative Bureau Amendment #748
Author: Senator Barrow Peacock
Date: May 11, 2015
LLA Note S B 13.03
Organizations Affected:
Firefighters’ Retirement System
RE DECREASE APV
This Note has been prepared by the Actuarial Services Department of the Office of
the Legislative Auditor. The attachment of this Note to SB 13 provides compliance
with the requirements of R.S. 24:52 1
Bill Header: FIREFIGHTERS RETIREMENT. Provides benefits for members hired on or after January 1, 2016. (6/30/15)
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 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.
Change in the
Actuarial Cost to: 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 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 2019-2020 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 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 2015-16 2016-17 2017-18 2018-2019 2019-2020 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)
2015 REGULAR SESSION
ACTUARIAL NOTE SB 13
Page 2 of 3
Bill Information:
Current Law
Current law provides for retirement eligibility, a 3 year final average compensation (FAC) period, and 3 1/3% accrual rate for all
members of Firefighters Retirement System (FRS).
Proposed Law
SB 13 changes the retirement eligibility, the FAC computation period, and the accrual rate for employees of FRS hired on or after
January 1, 2016 . These changes are summarized below.
For Members of FRS Hired on or after January 1, 2016
Current Law SB 13
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, 2016. 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 13 creates a new tier of benefits in FRS for members hired on or after January 1, 2016.
Cost Analysis:
Analysis of Actuarial Costs
Retirement Systems
SB 13 has no effect on any current member of FRS. The actuarial present value of future benefit payments for existing
members will not change. SB 13 has no effect on accrued liabilities because it applies to members first employed in the
future.
SB 13 provides for a longer FAC period, lower benefit accrual rates and later retirement ages for members first employed on
or after January 1, 2016. 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 13 will not begin
to be recognized until new members first employed on or after January 1, 2016 begin to replace currently active members.
The estimated effect of SB 13
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% 1.00%
2015 REGULAR SESSION
ACTUARIAL NOTE SB 13
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Other Post-Employment Benefits
There are potential savings associated with other post-employment benefits (OPEB) depending upon the OPEB plan
provisions for firefighters. SB 13 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 costs will be less.
Analysis of Fiscal Costs
SB 13 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 13
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
2016 $ 0
2017 250,000
2018 750,000
2019 1,250,000
2020 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 adopted by PRSAC.
Actuarial Caveat
There is nothing in SB 13 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