2016 REGULAR SESSION
ACTUARIAL NOTE H B 61
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House Bill 61 HLS 16RS-425
Engrossed
Author: Representative Frank
Hoffman
Date: April 18, 2016
LLA Note H B 61.02
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 61 provides
compliance with the requirements of R.S. 24:52 1
Bill Header: RETIREMENT/TEACHERS: Provides relative to the reemployment of retired school psychologists 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 or 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
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 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
ACTUARIAL NOTE H B 61
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Bill Information:
Current Law
Under ordinary circumstances, benefits from TRSL are suspended for a retiree who is reemployed in a position requiring
participation in TRSL. E xceptions to this general rule apply under specified circumstances. One of those circumstances occurs
when a retiree is reemployed in a Reemployment-Eligible Critical Shortage Position.
A Reemployment-Eligible Critical Shortage Position is defined under current law as:
1. A position for a full or part time classroom teacher who teaches any student in a K-12 school where a critical shortage of
teachers to fill such a position exists.
2. A position for a full time certified speech therapist, speech pathologist, audiologist, educational diagnostician, school
social worker, or school counselor where a critical shortage of individuals eligible to fill such a position exists.
Benefit suspension rules pertaining to a retiree who returns to work in a Reemployment-Eligible Critical Shortage Position are
summarized below.
1. Benefits from TRSL are suspended for any such retiree from the date of his reemployment to the earlier of his
termination of reemployment or the first anniversary date of his original retirement.
2. If such a retiree is no longer subject to a suspension of benefits, he may be reemployed and continue to collect his
pension benefit from TRSL.
A retiree reemployed in a Reemployment-Eligible Critical Shortage Position and his employer will make contributions to the
TRSL. The retiree will not accrue any additional benefits. The retiree will receive a refund of his contributions without interest
when he terminates employment. TRSL retains the contributions made by the employer.
Proposed Law
HB 61 adds school psychologists to the list of professions that are eligible for the less stringent suspension of benefit rule s
applicable to a retiree who is reemployed in a Reemployment-Eligible Critical Shortage Position.
Implications of the Proposed Changes
HB 61 is intended to make it easier for school districts to find qualified school psychologists.
Cost Analysis:
Analysis of Actuarial Costs
HB 61 contains benefit provisions containing an actuarial cost. Retired school psychologists who are reemployed will receive
larger benefits from TRSL than they would have otherwise.
Retirement Systems
HB 61 affects actuarial costs in the following manner:
1. School psychologists may be induced to retire earlier than they would have otherwise.
2. A retired school psychologist may be induced to return to employment to increase his income.
Inducement to Retire
Under HB 61, a school psychologist who knows there is a critical shortage of qualified individuals to fill his position
may elect to retire, keep working, and then a year later begin to collect his pension as well as his salary. Under current
law, his pension would be suspended as long as he continued to work.
The number of psychologists who, as a result of HB 61, will be induced to retire earlier than they would have otherwise
cannot be predicted with any degree of certainty. However, if one school psychologist retires each year a full year earlier
than he would have otherwise, the annual retiree payroll for TRSL is estimated to increase $30,000. This assumes the
average annual pension for a school psychologist is $30,000
Inducement into Reemployment
Under HB 61, a retired school psychologist who has been retired for one or more years and who knows there is a critical
shortage of qualified individuals to fill a position of school psychologist may elect to be reemployed. If so, such an
individual can be reemployed and collect his full pension as well as his salary. Under current law, his pension benefit
would be suspended for as long as he was reemployed.
The number of school psychologists who would be willing to resume employment to take advantage of HB 61 cannot be
predicted with any degree of certainty. However, the actuarial cost to TRSL for every school psychologist who is
reemployed is estimated to be $387,000. This estimate is based on the following: 2016 REGULAR SESSION
ACTUARIAL NOTE H B 61
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1. The average pension benefit for a retired school psychologist is $30,000 a year.
2. Under HB 61, a reemployed retired school psychologist continues to receive his $30,000 a year benefit.
3. Under current law, the pension benefit payable to a reemployed retired school psychologist is suspended.
4. TRSL pays $30,000 more each year under HB 61 than it would have paid under current law.
5. The present value of an indefinite additional payment of $30,000 a year is approximately $387,000.
The number of reemployed retired school psychologists who will benefit from HB 61 is likely to be small primarily because
the number of such positions in Louisiana is comparatively small. However, for each school psychologist who is induced to
retire (and continue to work) or who is induced to be reemployed, the annual cost to TRSL is estimated to be $30,000. The
present value cost is estimated to be $387,000.
If there are five retired school psychologist who are working each year because of HB 61, who would have not been
reemployed under current law, the estimated annual cost to TRSL is $150,000. The actuarial cost is estimated to be
$1,935,000.
Other Post-Employment 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 employee to
retiree. 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 an active status
to a retired status. Therefore:
1. OGB revenues may increase or decrease as a result of HB 61.
2. Employer premium expenditures may increase or decrease as a result of HB 61.
Analysis of Fiscal Costs
HB 61 will have the following effect on fiscal costs over the next 5 years.
Expenditures:
1. Expenditures from the General Fund will not change because HB 61 pertains only to employees of K -12 employers.
2. Expenditures from TRSL (Agy Self-Generated) will increase in order to pay benefits that would not have otherwise been
paid.
3. Expenditures from Local Funds will increase to the extent school psychologists are induced to retire earlier that they
would have otherwise and to the extent that retired school psychologists are induced to return to work without a
suspension of benefits. This will lead to an increase in employer contribution requirements.
Revenues:
• TRSL revenues (Agy Self-Generated) will increase to the extent that employer contribution requirements will increase.
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 61 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
ACTUARIAL NOTE H B 61
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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