2016 REGULAR SESSION
REVISED ACTUARIAL NOTE H B 60
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House Bill 60 HLS 16RS-390
Engrossed - Revised
Author: Representative Blake Miguez
Date: April 18, 2016
LLA Note H B 60.02
Organizations Affected:
Teachers’ Retirement System of
Louisiana
EG 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 H B 60 provides
compliance with the requirements of R.S. 24:52 1
Bill Header: RETIREMENT/TEACHERS: Provides relative to the reemployment of retired school nurses in positions covered by
the Teachers’ Retirement System of La.
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 See Analysis
Total Increase
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 Increase Increase Increase Increase Increase
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 Increase Increase Increase Increase Increase
Annual Total Increase 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
REVISED ACTUARIAL NOTE H B 60
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Bill Information:
Current Law
Current law suspends the benefits of a reemployed retired member of the Teachers’ Retirement System of Louisiana (TRSL)
unless he is reemployed in a Reemployment-Eligible Position which is defined as:
1. A position as a substitute classroom teacher in a school where a critical shortage exists;
2. A position assigned to instructing adults through an adult program or literacy program administered through a public
institution of elementary or secondary education, provided the instructor has a valid Louisiana teaching certificate; and
3. A position as an adjunct professor.
Benefits payable to a retiree reemployed in a Reemployment-Eligible Position are subject to the following suspension of benefit
rules.
1. If a retiree is reemployed in a Reemployment-Eligible Position before the first anniversary of his original date of
retirement, the retiree’s benefit will be suspended until the earlier of the date he terminates reemployment and the first
anniversary date of his original retirement.
2. If a retirees is reemployed in a Reemployment-Eligible Position and he is not subject to the suspension of benefit rule set
forth above in Item 1, the retiree may be reemployed in a Reemployment-Eligible Position and earn an income.
However, the income he receives may not exceed 25% of his pension benefit. If he earns more than 25% of his pension
benefit, then his pension benefit will be reduced $1 for each dollar he earns in excess of the 25% limit.
Proposed Law
HB 60 adds the position of school nurse to the list of reemployment -eligible positions.
Implications of the Proposed Changes
HB 60 permits a retired school nurse of TRSL to return to work and continue to receive a retirement benefit under certain
circumstances.
Cost Analysis:
Analysis of Actuarial Costs
HB 60 contains a benefit provision having an actuarial cost. An explanation is given below.
Retirement Systems
The present value of future benefits, the accrued liability, and annual expenditures from TRSL will increase as a result of
HB 60 because:
1. Some retired school nurses will experience a life circumstance making it necessary to return to work in order to have
more income.
2. Under current law, such a retired school nurse will not be considered to be a “Retired Teacher” and his pension
benefit will be suspended.
3. Under HB 60, the retired school nurse will be considered to be a “Retired Teacher” and his pension benefit will not
be suspended.
4. Under these circumstances, TRSL will pay more in benefits under HB 60 than it would have paid under current law.
The number of retired school nurses reemployed because of adverse life circumstances is not likely to vary much from year
to year. However, national economics could cause greater fluctuations in the number of reemployments.
Based on the number of school districts and the law requiring a nurse to be available for every 1,500 students, we estimate
there are about 1,300 school nurse positions in Louisiana. The number of retired school nurses is not known.
We estimate a cost for HB 60 based on the following analysis.
Situation
1. A retired school nurse returns to employment after being retired for one year because his life circumstances
have changed and he needs additional income.
2. His pension benefit is $30,000 a year.
2016 REGULAR SESSION
REVISED ACTUARIAL NOTE H B 60
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3. He returns to work as a school nurse on a full time basis and earns $48,000 a year.
Analysis under Current Law
1. The annual income of the reemployed retired school nurse will only increase $18,000 a year because he will
earn $48,000 but will forfeit his $30,000 annual pension benefit from TRSL.
2. A retired school nurse must have a very compelling financial hardship to return to work under these conditions.
3. It is not likely that many retired school nurses will return to work under current law.
4. But, if he does, TRSL will save $30,000 a year.
Analysis under HB 60
1. The annual income of the reemployed retired school nurse will increase $25,500 a year because he will receive
$7,500 from TRSL and $48,000 from employment.
2. Under these conditions a retired school nurse is more likely to be induced to return to work.
3. If he does return to work, TRSL will save $22,500 a year.
Conclusions
1. Under HB 60, TRSL will pay the reemployed retired school nurse $7,500 a year.
2. Under current law, TRSL will pay nothing to the reemployed retired school nurse.
In light of the above information and analysis and if we assume 5 retired school nurses will be reemployed on a full time
basis each year, we expect the annual cost associated with HB 60 to be about $37,500.
Other Post Retirement Benefits
The liability for post- retirement medical insurance protection provided to retirees by the Office of Group Benefits or other
insurers remains the same regardless of the employment status of a retiree. The liability is based on the present value of
estimated claims and estimated claims will not change just because the member’s status has changed from retiree to
employee. However, depending on OGB rules or rules of other insurers providing health insurance coverage to TRSL
members, the allocation of premiums between the employee and the employer may change as an employee moves from a
retired status to an active reemployed status. Therefore:
1. OGB revenues may increase or decrease as a result of HB 60.
2. Employer premium expenditures may increase or decrease as a result of HB 60.
Analysis of Fiscal Costs
HB 60 will have the following effect on fiscal costs over the next 5 years.
Expenditures:
1. Expenditures from Local Funds and General Revenues will increase to the extent that local funds and the MFP for K-12
will need to be adjusted to accommodate greater retirement plan costs.
2. Expenditures from TRSL (Agy Self-Generated) are estimated to increase to pay for benefits to those who would have
otherwise had their benefits completely suspended.
Revenues:
• TRSL revenues (Agy Self-Generated) are expected to increase as employer contribution rates are increased to
accommodate the estimated increase in annual costs.
The effect of HB 60 on the present value of future benefits and the actuarial accrued liability cannot be measured by valuation
models. We estimate the net effect on fiscal costs will be about $37,500 a year. Actuarial losses will occur as retired school
nurses are reemployed. Such losses cannot be measured and therefore will be amortized over the same period as other actuarial
losses.
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 . 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.
2016 REGULAR SESSION
REVISED ACTUARIAL NOTE H B 60
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Actuarial Caveat
There is nothing in H B 60 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