2016 REGULAR SESSION
ACTUARIAL NOTE H B 22
Page 1 of 3
House Bill 22 HLS 16RS-187
Engrossed 1 with Senate Retirement
Committee Amendment #1762
Author: Representative Jack
Montoucet
Date: April 29, 2016
LLA Note H B 22.03
Organizations Affected:
Firefighters’ Retirement System
EG1 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 22 provides
compliance with the requirements of R.S. 24:52 1
Bill Header: RETIREMENT/FIREFIGHTERS: Establishes a funding deposit account for the Firefighters’ Retirement System and
authorizes the board of trustees of the system to modify required employer contribution rates in certain circumstances and within
certain limits in order to fund the account.
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 to Retirement Systems $0
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 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 2016-17 2017-18 2018-19 2019-2020 2020-2021 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 Increase Increase Increase Increase Increase
Annual Total $ 0 Increase Increase Increase Increase Increase
REVENUES 2016-17 2017-18 2018-19 2019-2020 2020-2021 5 Year Total
State General Fund $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Agy Self Generated 0 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 $ 0 Increase Increase Increase Increase Increase
2016 REGULAR SESSION
ACTUARIAL NOTE H B 22
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Bill Information:
Current Law
The following statewide retirement systems have a Funding Deposit Account.
1. The Assessors’ Retirement Fund (ASSR).
2. The Clerks’ of Court Retirement and Relief Fund (CCRS).
3. The Municipal Employees’ Retirement System of Louisiana (MERS).
4. The Parochial Employees’ Retirement System of Louisiana (PERS).
5. The Registrars of Voters Employees’ Retirement System (RVRS).
6. The District Attorneys' Retirement System (DARS).
If the actuarially required contribution rate for the current year is less than the employer contribution rate for the prior year, the
board of trustees for any of the statewide retirement systems identified above may elect to set the current year employer
contributions rate equal to the prior year contribution rate , or may set the rate at any point between the current year rate and the
prior year rate. The additional amount so contributed by employers will be credited to the system’s Funding Deposit Account.
The board of trustees of a statewide system identified above may use the monies in the Funding Deposit Account:
1. To reduce the unfunded accrued liability of the retirement system, if any.
2. To reduce the system’s employer contribution rate.
3. To provide for cost-of-living adjustments (COLA) to the retirees of the system.
There is no provision for a Funding Deposit Account for the Firefighters’ Retirement System (FRS) under current law.
Proposed Law
HB 22 requires the establishment of a Funding Deposit Account for FRS and provides rules for the Account .
The board of trustees of FRS may use the monies in the Funding Deposit Account:
1. To reduce the unfunded accrued liability of the retirement system, if any.
2. To reduce the system’s employer contribution rate.
HB 22 prohibits FRS from using the funds in the Account to provide cost-of-living adjustments (COLA) to its members.
This Act shall take effect and become operative if and when the Act which originated as SB 3 of the 2016 Regular Session of the
Legislature is enacted and becomes effective.
Implications of the Proposed Changes
HB 22 requires the establishment of a Funding Deposit Account for FRS that will operate in a manner similar to the systems
identified above. .
Cost Analysis:
Analysis of Actuarial Costs
HB 22 does not contain any benefit provisions having an actuarial cost.
Retirement Systems
HB 22 requires FRS to establish a Funding Deposit Account. HB 22 is permissive in that it does not require FRS to use the
account.
The existence of a Funding Deposit Account for FRS will have no effect on employer contribution requirements as calculated
by the system’s actuary. Assets of the FRS Funding Deposit Account will be raised from extra contributions made by
employers in order to provide a reserve.
HB 22 does not itself establish any additional liability. However, it does provide the board of trustees more flexibility that it
may use to reduce fluctuations in employer contribution requirements. Therefore it is likely that the board of trustees will
exercise its authority to use the Funding Deposit Account and will establish contribution rates in the future that are larger
than the minimum employer rate calculated by the actuary.
A change in the timing of employer contributions does not have an effect on the actuarial cost of the system. However, HB
22 is likely to have a fiscal cost.
Other Post-Employment Benefits
There are no actuarial costs associated with HB 22 relative to post-employment benefits other than pensions . 2016 REGULAR SESSION
ACTUARIAL NOTE H B 22
Page 3 of 3
Analysis of Fiscal Costs
A fiscal cost will be incurred under HB 22 only if FRS uses its Funding Deposit Account. The assessments of fiscal costs shown
below are based on the assumption that FRS will use the Funding Deposit Account.
Expenditures:
• Expenditures from Local Funds will increase for fiscal years in which the board requires an employer contribution
rate that is greater than the actuarially required rate.
Revenues:
• FRS revenues (Agy Self-Generated) will increase to the extent that the employer contribution rate is greater than the
actuarially required rate.
We assume that assets in the Funding Deposit Account will not be used by FRS until a substantial pool of assets is accumulated.
Therefore, we conclude that expenditures from the F unding Deposit Account will be $0 during the five-year fiscal measurement
period.
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.
Actuarial Caveat
There is nothing in H B 22 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
x 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