2016 REGULAR SESSION
REVISED ACTUARIAL NOTE H B 60
Page 1 of 6
House Bill 60 HLS 16RS-390
Engrossed 1 with Senate Retirement
Committee Amendment #3058
Author: Representative Blake Miguez
Date: May 26, 2016
LLA Note H B 60.03
Organizations Affected:
Teachers’ Retirement System of
Louisiana
EG1 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 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 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 See Analysis
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 Decrease Decrease Decrease Decrease Decrease
Agy Self Generated Decrease 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 Decrease Decrease Decrease Decrease Decrease
Annual Total Decrease 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
REVISED ACTUARIAL NOTE H B 60
Page 2 of 6
Bill Information:
Current Law and Proposed Law
Current law provides suspension of benefit rules for retirees the Teachers’ Retirement System of Louisiana (TRSL) who are
reemployed following retirement. Current law and proposed law under HB 60 are summarized below. Note, the following
Special Classes of retirees are not specified as such in current law or in HB 60. However, the information pertaining to each
Special Class was derived from current and proposed law.
Current Law HB 907
General Rule
1. Benefits payable to a reemployed retiree will be suspended for the duration of his
reemployment.
2. Benefits payable to a reemployed retiree who
retired for disability will be suspended.
No Change
Rules for Special
Class A
A Special Class A retiree includes any retiree who is reemployed into one of the following positions
for a district with a critical shortage of teachers
willing to fill such positions.
1. A full or part -time position as a Pre K-12
classroom teacher.
2. A full-time position as a certified speech
therapist, speech pathologist, audiologist,
educational diagnostician, or school counselor.
Limitations on Earnings for Special Class A
Retirees
1. Reemployment earnings will be limited to $0
until the first anniversary of the retiree’s date of
retirement.
2. Benefits will be reduced dollar for dollar for
earnings received from reemployment during
the 12-month period immediately following the
date of retirement.
3. Thereafter, a retiree will be able to be employed
and also receive benefits from TRSL.
No change except for:
HB 60 does not change “first anniversary”.
HB 60 does not change “12- month period”.
Rules for Special Class B
A Special Class B retiree includes any retiree who
is reemployed as a result of an agreement between
the retired teacher and his employer that satisfies
the following conditions:
1. The agreement was perfected prior to the
retiree’s dates of retirement, and
2. The agreement allows for the retiree to become
reemployed within the 12-month period
immediately following his date of retirement.
Limitations on Earnings for Special Class B
Retirees
1. The earnings limitation will be $0 until the first
anniversary of the retiree’s date of
reemployment.
2. Benefits from TRSL will be reduced dollar for
dollar for any earnings received during the 12-
month period immediately following his date of
retirement.
3. Thereafter, the retiree will be able to be
reemployed and receive benefits from TRSL.
No change except for:
HB 60 changes “12- month period” to “36- month
period”
HB 60 changes “first anniversary” to “third
anniversary”
HB 60 changes “12- month period” to “36- month
period”
2016 REGULAR SESSION
REVISED ACTUARIAL NOTE H B 60
Page 3 of 6
Current Law HB 907
Rules for Special
Class C
A Special Class C retiree is one who satisfies one of the following conditions:
1. A retiree who retired on or before June 30,
2010
2. A retiree who holds an advanced degree in
speech therapy, speech pathology or audiology.
Limitations on Earnings for Special Class C Retirees
1. The earnings limit will be $0 until the first anniversary of the retiree’s date of retirement.
2. Benefits payable from TRSL will be reduced
dollar for dollar for any earnings received by
the retiree during the 12-month period
immediately following his date of retirement.
3. Thereafter, the retiree will be able to be
reemployed and receive benefits from TRSL.
No change except for:
HB 60 changes “first anniversary” to “third
anniversary”
HB 60 changes “12-month period” to “36- month
period”
Rules for Special
Class D
A Special Class D retiree is employed into one of the following positions:
1. A position as a substitute classroom teacher for a K-12 school who teaches any Pre K-12
student.
2. A position that has been assigned by a K-12
school district to the instruction of adults
through an adult literacy program.
3. A position as a postsecondary educational
institution as an adjunct professor.
Limitations on Earnings for Special Class D
Retirees
1. The earnings limitation will be $0 until the first
anniversary of the retiree’s date of retirement.
2. Benefits payable from TRSL will be reduced
dollar for dollar for any earnings received by
the retiree during the 12-month period
immediately following his date of retirement.
3. The earnings limitation for the retiree for the
period from the first anniversary of his date of
retirement to the end of the fiscal year in which
that anniversary date occurs will be 25% of the
retiree’s annual benefit from TRSL. Benefits
payable from TRSL will be reduced dollar for
dollar for any earnings received in excess of the
limit during this period.
4. The earnings limitation for the retiree for fiscal
years thereafter will be 25% of the retiree’s
annual benefit from TRSL. Benefits payable
from TRSL will be reduced dollar for dollar for
any earnings received during a fiscal year that
exceeds the 25% limitation.
No change except for:
HB 60 adds item 4: “A position as a school nurse.”
to the list of reemployed retire es classified as
Special Class D retirees.
HB 60 changes “first anniversary” to “third
anniversary”
HB 60 changes “12- month period” to “36- month
period”
HB 61 changes “first anniversary” to “third
anniversary”
Any retiree who returned to active service before May 15, 2016 will continue to be governed by return to work rules under current law.
2016 REGULAR SESSION
REVISED ACTUARIAL NOTE H B 60
Page 4 of 6
Implications of the Proposed Changes
HB 60 permits a school nurse retired from TRSL to return to work and continue to receive a retirement benefit under certain
circumstances. HB 60 also extends the waiting period from 12 months to 36 months for Special Class B, C, and D retirees.
Cost Analysis:
Analysis of Actuarial Costs
HB 60 contains a benefit provision having an actuarial cost. An explanation is given below.
Retirement Systems
Cost Analysis Relative to the Addition of School Nurse to Special Class D
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 a “Retired Teacher” and his pension benefit
will be suspended.
3. Under HB 60, the retired school nurse will be considered 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.
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.
2016 REGULAR SESSION
REVISED ACTUARIAL NOTE H B 60
Page 5 of 6
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.
Cost Analysis Relative to the Extension of the Waiting Period
HB 60 extends the waiting period from 12 months to 16 months for all Special Classes except for Special Class A. Actuarial
costs will be reduced because all inducements for an active member to retire earlier than otherwise under current law have
been eliminated.
Net Total Cost
The total net cost for HB 60 as analyzed above cannot be determined with any degree of certainty. Annual fiscal costs are
estimated to be $37,500 year for the reemployment of 5 school nurses. The actuarial present value cost per individual is
estimated to be $97,000. The actuarial present value cost for five individuals is estimated to be $485,000.
The change in the waiting period from 12 to 36 months will reduce actuarial present value costs. However, it cannot be
measured effectively.
However, we estimate that decreases in actuarial costs will exceed in creases and there will be a net cost de crease. We
estimate the net actuarial present value cost associated with HB 60 will decrease about $2 million. Net annual fiscal costs
will decrease about $150,000.
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 decrease to the extent that local funds and the MFP for K -12
will need to be adjusted to accommodate smaller retirement plan costs.
2. Expenditures from TRSL (Agy Self-Generated), to pay for benefits to those who would have otherwise had their benefits
completely suspended, are estimated to de crease.
Revenues:
• TRSL revenues (Agy Self-Generated) are expected to de crease as employer contribution rates are decreased to
accommodate the estimated decrease in annual costs.
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.
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.
2016 REGULAR SESSION
REVISED ACTUARIAL NOTE H B 60
Page 6 of 6
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