2016 REGULAR SESSION
ACTUARIAL NOTE H B 61
Page 1 of 5
House Bill 61 HLS 16RS-425
Reengrossed F with Senate Floor
Legislative Bureau Amendment #3837
Author: Representative Frank
Hoffman
Date: June 1, 2016
LLA Note H B 61.05
Organizations Affected:
Teachers’ Retirement System of
Louisiana
REF 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 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 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
Page 2 of 5
Bill Information:
Current Law and Proposed Law
Current law provides suspension of benefit rules for retirees who are reemployed following retirement. Current law and proposed
law under HB 61 are summarized below. Note, the following Special Classes of retirees are not specified as such in current law
or in HB 61. 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 61 adds “school psychologists” to the end of
the list.
HB 61 does not change “first anniversary”.
HB 61 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 61 changes “12- month period” to “36- month
period”
HB 61 changes “first anniversary” to “third
anniversary”
HB 61 changes “12-month period” to “36- month
period”
2016 REGULAR SESSION
ACTUARIAL NOTE H B 61
Page 3 of 5
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 61 changes “first anniversary” to “third
anniversary”
HB 61 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 61 changes “first anniversary” to “third
anniversary”
HB 61 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
ACTUARIAL NOTE H B 61
Page 4 of 5
Implications of the Proposed Changes
Specified professionals are included in the list of retirees subject to Special Class A rules. HB 61 adds school psychologists to the
list. HB 61 also extends the waiting period from 12 to 36 months for Special Class B, Special Class C and Special Class D
retirees.
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
Special Class A Rules
HB 61 affects actuarial costs associated with Special Class A rules 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:
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.
Extension of Waiting Period
HB 61 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.
2016 REGULAR SESSION
ACTUARIAL NOTE H B 61
Page 5 of 5
Net Total Cost
The total net cost for HB 61 as analyzed above cannot be determined with any degree of certainty. Annual fiscal costs are
estimated to be $30,000 a year per school psychologist induced to retire. If each year, five retirees are collecting a benefit
under HB 61 that would not have otherwise been paid, the annual cost is estimated to be about $150,000 a year. The
actuarial present value cost per individual is estimated to be $387,000. The actuarial present value cost for five individuals is
estimated to be $1,935,000.
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 increases in actuarial costs will exceed decreases and there will be a net cost increase. We
estimate the net actuarial present value cost associated with HB 61 will be about $1.5 million. Net annual fiscal costs will be
about $100,000.
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.
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