2016 REGULAR SESSION
ACTUARIAL NOTE SB 8
Page 1 of 3
Senate Bill 8 SLS 16RS-69
Engrossed
Author: Senator Barrow Peacock
Date: March 30, 2016
LLA Note S B 8.02
Organizations Affected:
Louisiana School Employees’
Retirement System
EG NO IMPACT APV
This Note has been prepared by the Actuarial Services Department of the Office of
the Legislative Auditor. The attachment of this Note to SB 8 provides compliance
with the requirements of R.S. 24:52 1
Bill Header: EMPLOYEES RET. Provides relative to deferred retirement option plan subaccount disbursements. (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 $0
Total Five Year Fiscal Cost
Expenditures $0
Revenues $0
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 $0
Other Post Retirement Benefits $0
Total $0
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 0 0 0 0 0 0
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 $ 0 $ 0 $ 0 $ 0 $ 0
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 0 0 0 0 0
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 $ 0 $ 0 $ 0 $ 0 $ 0
2016 REGULAR SESSION
ACTUARIAL NOTE SB 8
Page 2 of 3
Bill Information:
Current Law
Current law provides that, in lieu of terminating employment, any member of the Louisiana School Employees’ Retirement
System (LSERS) who is eligible for retirement may participate in the Deferred Retirement Option Plan (DROP) and defer
receiving retirement benefits for a period that does not exceed three years.
During the period of participation in DROP, the member is treated as a retiree in the retirement system and the retirement benefits
are deposited in a notional DROP subaccount. Interest is not credited to the DROP subaccount during the period of participation.
Upon existing DROP, if the member leaves the money with the retirement system, the subaccount is placed in money market
investment fund.
At the end DROP period or the termination of employment, the member may receive his DROP subaccount in a lump sum
payment or in a systemic disbursement form approved by the board of trustees.
Proposed Law
SB 8 removes the requirement that the disbursement of DROP subaccount funds must be “systematic”.
Implications of the Proposed Changes
SB 8 will allow the board to approve certain disbursements from DROP accounts that are not systematic.
Cost Analysis:
Analysis of Actuarial Costs
Retirement Systems
SB 8 contains no benefit provisions having an actuarial cost.
Current law requires that disbursements from DROP accounts must be as a single lump sum payment or by payments that are
systematic. SB 8 will allow the board broader discretion about the disbursement of DROP funds. The following example
will illustrate.
1. A member exits DROP with $90,000 in his DROP account.
2. He elects to receive his DROP account funds in 120 monthly installments of $1,029 each.
3. After 48 months have elapsed, the member has $61,078 in his DROP account. His spouse dies and he needs a one -
time $15,000 distribution to pay for the funeral.
4. He asks the board to disburse $15,000.
The board cannot fulfill his request under current law. SB 8 would allow the board to honor such a request. However, any
request would continue to require board approval.
Other section of law requires actuarial cost neutrality in any such exchange. In preparing this note, we have assumed
actuarially cost neutrality would be maintained. Therefore, there is no actuarial cost associated with SB 8.
Note: the above analysis is hypothetical, used only to illustrate potential effects of the bill. The numbers in the example may
or may not reflect actual disbursement values.
Other Post-Employment Benefits
There is no actuarial cost associated with SB 8 for post -retirement benefits other than pensions.
Analysis of Fiscal Costs
There is a potential under SB 8 for DROP account funds to be paid from LSERS earlier than they would be otherwise.
However it is impossible to know if or when a qualifying request might be made under SB 8. In any event, any increase in
benefit disbursements for any given year during the fiscal measurement period would be negligible.
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. 2016 REGULAR SESSION
ACTUARIAL NOTE SB 8
Page 3 of 3
Actuarial Caveat
There is nothing in SB 8 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