2016 REGULAR SESSION
ACTUARIAL NOTE H B 56
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House Bill 56 HLS 16RS-115
Reengrossed with House Floor
Amendment #4515
Author: Representative Walter J.
Leger III
Date: May 23, 2016
LLA Note H B 56.03
Organizations Affected:
Firefighters' Pension and Relief
Fund in the City of New Orleans
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 H B 56 provides
compliance with the requirements of R.S. 24:52 1
Bill Header: RETIREMENT/LOCAL: Provides relative to retirement eligibility and benefits for new hires in the Firefighters'
Pension and Relief Fund in the city of New Orleans.
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 Decrease
Total Five Year Fiscal Cost
Expenditures Decrease
Revenues Decrease
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
This bill complies with the Louisiana Constitution which requires unfunded liabilities created by an improvement in benefits to be
amortized over a period not to exceed ten years.
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 Decrease Decrease Decrease Decrease Decrease
Annual Total $ 0 Decrease Decrease Decrease Decrease Decrease
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 Decrease Decrease Decrease Decrease Decrease
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 Decrease Decrease Decrease Decrease Decrease
2016 REGULAR SESSION
ACTUARIAL NOTE H B 56
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Bill Information:
Current Law
Current law establishes the Firefighters’ Pension and Relief Fund in the C ity of New Orleans (NOFF) for the benefit of
individuals employed by the fire department in the City of New Orleans who are actively engaged in extinguishing fires.
Under current law, a member of NOFF whose first employment makes him eligible to participate in the system on or after
January 1, 2015 is eligible to receive a retirement benefit upon attaining age 52 with 12 or more years of creditable service. Such
a member will accrue benefits at a rate of 2.75% for each year of service multiplied by his final average compensation.
A member who terminates employment with at least 12 years of service but before attainment of age 52 will be eligible to receive
retirement benefits when he attains age 52.
Proposed Law
HB 56 creates a new tier of retirement benefits for members of NOFF who are first employ ed on or after August 15, 2016.
For Members of NOFF Hired on or after August 15, 2016
Current Provisions Provisions under H B 56
Normal Retirement
Eligibility
Age 52 with 12 or more years of service.
Social Security retirement age, less 10 years,
with 12 or more years of service.
Accrual Rate 2.75% 2.50%
Retirement Benefit
2.75% x years of service x
final average compensation
2.50% x years of service x
final average compensation
Termination of Employment
A member who is less than age 52 and who terminates employment with 12 or more years
of service may retire when he attains age 52.
A member who is less than age 57 and who terminates employment with 12 or more years
of service may retire when he attains age 57.
Death after
Termination of
Employment
A survivor of a member who
1. Dies after terminating employment
2. Has 12 or more years of service
3. Has not yet attained age 52
will be entitled to a survivor benefit based on
an accrual rate of 2.75% per year of service.
A survivor of a member who
1. Dies after terminating employment
2. Has 12 or more years of service
3. Has not yet attained age 57
will be entitled to a survivor benefit based on
an accrual rate of 2.50% per year of service.
Implications of the Proposed Changes
HB 56 creates a new tier of benefits for members of NOFF hired on or after August 15, 2016.
Cost Analysis:
Analysis of Actuarial Costs
HB 56 does not contain any benefit provisions having an actuarial cost.
Retirement Systems
HB 56 has no effect on current members of NOFF. The actuarial present value of future benefit payments for existing
members will not change. HB 56 has no effect on accrued liabilities for existing members because it only applies to
members first employed on or after August 15, 2016 .
HB 56 provides for smaller benefit accrual rates, later retirement ages, and smaller death benefits for those who terminate
employment without being eligible for immediate retirement. As a result, the present value of future benefit payments for
members joining the system on or after August 15, 2016 will decrease. Future normal costs and future employer contribution
requirements will also decrease. However, the effect of HB 56 on employer contribution requirements will be gradual.
Initially, the difference in contribution requirements will be small. However, savings will increase over time as old members
leave the system and are replaced with new members.
Other Post-Employment Benefits
Actuarial costs associated with post-employment benefits other than pensions are expected to decrease to the extent that the
City of New Orleans provides such benefits to its firefighters. Because members will be retiring later under HB 56 than
under current law, NOFF members will be entitled to these benefits for a shorter period of time and actuarial costs will
decrease.
2016 REGULAR SESSION
ACTUARIAL NOTE H B 56
Page 3 of 3
Analysis of Fiscal Costs
HB 56 will have the following effect on fiscal costs.
Expenditures:
1. Benefit payments from NOFF (Agy Self-Generated) will not change d uring the 5-year measurement period. Benefit
reductions for members hired on or after August 15, 2016 will not have any effect on distributions from the system until
a new member has earned at least 12 years of service.
2. Expenditures from Local Funds will decrease because employer contribution requirements will decrease. This decrease
will first occur for FYE 2018.
Revenues:
• NOFF 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 of the retirement system. 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 56 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 6.8(F)(2): Annual Revenue Reduction ≥ $100,000
6.8(G): Annual Tax or Fee Change ≥ $500,000