2016 REGULAR SESSION
ACTUARIAL NOTE SB 2
Page 1 of 4
Senate Bill 2 SLS 16RS-23
Original
Author: Representative Sam Jones
Date: March 23, 2016
LLA Note SB 2 .01
Organizations Affected:
State Retirement Systems
OR 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 S B 2 provides compliance
with the requirements of R.S. 24:52 1
Bill Header: RETIREMENT SYSTEMS. Authorizes payments funded by state systems' experience accounts to certain retirees and
beneficiaries. (2/3 - CA10s29(F)) (6/30/16).
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 See Analysis
Revenues See Analysis
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 $0
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 See Analysis See Analysis See Analysis See Analysis See Analysis
Agy Self Generated See Analysis See Analysis See Analysis See Analysis See Analysis See Analysis
Stat Deds/Other 0 0 0 0 0 0
Federal Funds 0 0 0 0 0 0
Local Funds 0 See Analysis See Analysis See Analysis See Analysis See Analysis
Annual Total $ 0 See Analysis See Analysis See Analysis See Analysis See Analysis
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 See Analysis See Analysis See Analysis See Analysis See Analysis
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 See Analysis See Analysis See Analysis See Analysis See Analysis
2016 REGULAR SESSION
ACTUARIAL NOTE SB 2
Page 2 of 4
Bill Information:
Current Law
The maximum cost-of-living-adjustment (COLA) that may potentially be given under current law effective July 1, 2016 is
0.124%. This percentage increase would be available for eligible retirees, survivors, and beneficiaries of the Louisiana
Employees’ Retirement System (LASERS), the Teachers’ Retirement System of Louisiana (TRSL), the Louisiana School
Employees’ Retirement System (LSERS) and the Louisiana State Police Retirement System (STPOL). The COLA rate would
apply to the first $60,000 of an eligible person’s annual benefit.
Proposed Law
SB 2 provides a COLA effective July 1, 2016 to eligible retirees, survivors, and beneficiaries equal to the amounts shown below
1. For LASERS, a 1.5% of the benefit amount.
2. For TRSL, a 1.5% of the benefit amount.
3. For LSERS, a 2.0% of the benefit amount.
4. For STPOL, a 2.0% of the benefit amount.
If the balances in the Experience Accounts on June 30, 2016 are less that the cost to provide for these COLAs, the percentage
increase will be reduced accordingly.
The benefit increase will be paid only on the first sixty -thousand dollars of a retiree’s, survivor’s or beneficiary’s annual benefit .
Implications of the Proposed Changes
SB 2 overrides current law for one year and provides a larger COLA to eligible person’s than what they would have otherwise
been entitled.
Cost Analysis:
Analysis of Actuarial Costs
SB 2 contains benefit provisions having an actuarial cost.
Retirement Systems
Cost of COLAs under Current Law
Eligible retirees will receive a 0.124% COLA under current law. The present value of these benefits, $30,733,424, is shown
in Table 1.
Table 1
Current Law COLA Effective July 1, 2016
LASERS TRSL LSERS STPOL Total
0.124% COLA 0.124% COLA
Estimated Number of:
Regular Retirees 33,575 58,751 10,146 696 103,168
Survivors & Beneficiaries 5, 834 6, 771 1,662 335 14,602
Disabled Retirees 2,457 4,121 331 62 6,971
Total 41,866 69,643 12,139 1,093 12 4,741
Actuarial Present Value of COLA
a
Regular Retirees $ 8,956,456 $ 16,845,115 $ 1,384,049 $ 332,603 $ 27,518,223
Survivors and Beneficiaries 875,837 1,216,028 142,285 71,311 2,305,461
Disabled Retirees 346,354 512,504 30,148 20,735 909,740
Total $ 10,178,647 $ 18,573,647 $ 1,556,482 $ 424,649 $ 30,733,424
Estimated Balance in the Experience
Account on June 30, 2016
b
. $ 123,579,684 $ 226,356,559 $ 23,058,055 $ 12,416,791 $ 385,411,089
a. The liability is calculated using census data as of June 30, 2015 and rolled forward to June 30, 2016.
b. Assuming there is no allocation to the Experience Account on June 30, 2016 and the return on the actuarial value of
assets for FYE 2016 is 0.0%.
2016 REGULAR SESSION
ACTUARIAL NOTE SB 2
Page 3 of 4
Cost of COLAs under SB 2
SB 2 gives the boards of trustees the authority to grant a 1.5% to LASERS and TRSL and a 2.0% COLA to LSERS and
STPOL. However, in no event will the COLA grant exceed the amount that can be paid for from the Experience Account.
If a full 1.5% COLA is granted to eligible retirees, survivors, and beneficiaries of LASERS and TRSL and a full 2.0% COLA
is granted to eligible retirees, survivors, and beneficiaries of LSERS and STPOL, then the total actuarial present value of
future COLA payments for the four systems will be $379,763,726.
Table 2
SB 2 COLA Effective July 1, 2016
LASERS TRSL LSERS STPOL Total
1.50% COLA 2.00% COLA
Estimated Number of:
Regular Retirees 33,575 58,751 10,146 696 103,168
Survivors & Beneficiaries 5, 834 6, 771 1,662 335 14,602
Disabled Retirees 2,457 4,121 331 62 6,971
Total 41,866 69,643 12,139 1,093 12 4,741
Actuarial Present Value of COLA
a
Regular Retirees $ 108,344,228 $ 203, 771,553 $ 22,323,370 $ 5,364,558 $ 339,803,709
Survivors and Beneficiaries 10,594,802 14,710,016 2,294,923 1,150,179 28,749,920
Disabled Retirees 4,189,763 6,199,640 486,257 334,437 11,210,097
Total $ 123,128,793 $ 224,681,209 $ 25,104,552 $ 6,849,175 $ 379,763,726
Estimated Balance in the Experience
Account on June 30, 2016
b
. $ 123,579,684 $ 226,356,559 $ 23,058,055 $ 12,416,791 $ 385,411,089
a. The liability is calculated using census data as of June 30, 2015 and rolled forward to June 30, 2016 .
b. Assuming there is no allocation to the Experience Account on June 30, 2016 and the return on the actuarial value of
assets for FYE 2016 is 0.0%.
Under these conditions, all systems would be able to provide the full COLA amount except LSERS. The maximum benefit
increase that LSERS could provide would be 1.837%.
The increase in the present value of future benefits attributable to SB 2 is shown below:
Table 3
Present Value of COLA Grant
Increase System SB 2 Current Law
LASERS $ 123,128,793 $ 10,178,647 $ 112,950,146
TRSL 224,681,209 18,573,647 206,107,562
LSERS 25,104,550 1,556,482 23,548,068
STPOL 6,849,174 424,649 6,424,525
Total $ 379,763,726 $ 30,733 ,424 $ 349,030,302
Other Post-Employment Benefits
There are no actuarial costs associated with SB 2 for post-employment benefits other than pensions.
Analysis of Fiscal Costs
SB 2 will have the following effects on fiscal costs during the next five-year measurement period.
Expenditures:
1. Expenditures from the General Fund will increase because the Experience Account has been emptied and becomes open
to deposits of investment gains.
2. Expenditures from the General Fund will increase because investment gains deposited into the Experience Account will
be treated as an actuarial loss and amortized over a 30-year period. Employer contribution requirements will increase.
3. Expenditures from each state retirement system (Agy Self-Generated) will increase beginning FYE 2017 to account for
the additional COLA benefits. Year by year expenditures are summarized in Table 4 .
2016 REGULAR SESSION
ACTUARIAL NOTE SB 2
Page 4 of 4
Table 4
Fiscal
Year
Increase in
LASERS
Expenditures
Increase in
TRSL
Expenditures
Increase in
LSERS
Expenditures
Increase in
STPOL
Expenditures
Total
Increase in
Expenditures
2016-17 $ 12,006,160 $ 25,874,559 $ 2,867,187 $ 645,552 $ 41,393, 458
2017-18 11,616,068 25,882,507 2,679,340 619,792 40,797,707
2018-19 11,194,587 25,901,468 2,494,090 595,681 40,185,826
2019-20 10,756,994 25,766,804 2,311,587 571,945 39,407,330
2020-21 10,294,891 25,577,556 2,132,007 548,186 38,552,640
Total $ 55,868,700 $ 129,002,893 $ 12,484,211 $ 2,981,156 $ 200,336,961
4. Expenditures from Local Funds will increase because employer contributions to TRSL and LSERS will increase.
Revenues:
• Revenues for each state retirement system (Agy Self-Generated) will increase as employer contributions 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 SB 2 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 x 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