2017 REGULAR SESSION
ACTUARIAL NOTE HB 23
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House Bill 23 HLS 17RS-417
Original
Author: Representatives Barbara
Carpenter and Mark Abraham
Date: April 4, 2017
LLA Note H B 23.01
Organizations Affected:
Firefighters’ Retirement System
OR INCREASE APV
This Note has been prepared by the Actuarial Services Department of the
Legislative Auditor with assistance from either the Fiscal Notes staff of the
Legislative Auditor or staff of the Legislative Fiscal Office. The attachment of this
Note provides compliance with the requirements of R.S. 24:52 1 as amended by
Act 353 of the 2016 Regular Session.
Bill Header: RETIREMENT/FIREFIGHTERS: Provides relative to benefit payments if an eligible member of the Firefighters’
Retirement System dies prior to retirement.
Cost Summary:
The estimated actuarial and fiscal impact of HB 23 on the retirement systems and their plan sponsors is summarized below. Actuarial
costs or savings pertain to estimated changes in the actuarial present val ue of future benefit payments. Fiscal costs or savings pertain
to changes to all cash flows over the next five year period including retirement system cash flows, OPEB cash flows, or cash flows
related to other government entities.
An increase in actuarial costs is denoted throughout the actuarial note by “Increase” or a positive number. Actuarial savings are
denoted by “Decrease” or a negative number. An increase in expenditures or revenues (fiscal impact) is denoted by “Increase” or a
positive number. A decrease in expenditures or revenues is denoted by “decrease” or a negative number.
Estimated Actuarial Impact:
The top part of the following chart shows the estimated change in the actuarial present value of future benefit payments and
expenses, if any, attributable to the proposed legislation. The bottom part shows the effect on cash flows.
Actuarial Costs Pertaining to:
Actuarial Cost
The Retirement Systems Increase
Other Post-Employment Benefits (OPEB 0
Other Government Entities 0
Total Increase
Five Year Fiscal Cost Pertaining to: Expenditures Revenues
The Retirement Systems Increase Increase
Other Post-Employment Benefits 0 0
Other Government Entities 0 0
Total Increase Increase
Bill Information
Current Law
Current law provides that if any vested terminated member dies before selecting a benefit form, the member’s designated
beneficiary shall automatically be paid benefits as though the member had elected a 100% joint and survivor form of benefit,
naming the designated beneficiary as the beneficiary.
In addition, if any active contributing member who is eligible for retirement dies before retiring, the member’s designated
beneficiary shall automatically be paid benefits as though the member had retired on the date of death and elected a 100% joint
and survivor form of benefit, naming the designated beneficiary as the beneficiary.
Proposed Law
HB 23 provides that if any vested terminated member dies before selecting a benefit form, or any active contributing member who
is eligible for retirement dies before retiring, the member’s surviving eligible spouse shall automatically be paid benefits as
though the member had retired on the date of death and elected a 100% joint and survivor form of benefit, naming the spouse as
the beneficiary. In the event the member has no surviving eligible spouse, the designated beneficiary will be the beneficiary.
Implications of the Proposed Changes
HB 23 makes the surviving eligible spouse the automatic recipient of the benefits payable after the death of a retirement- eligible
FRS member rather than the designated beneficiary.
2017 REGULAR SESSION
ACTUARIAL NOTE HB 23
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I. ACTUARIAL ANALYSIS SECTION
A. Analysis of Actuarial Costs
(Prepared by LLA)
This section of the actuarial note pertains to the actuarial present value cost or savings associated with the retirement systems,
with OPEB, and with other government entities.
1. Retirement Systems
The actuarial cost of HB 23 associated with the retirement systems is estimated to be a small increase. Our analysis is
summarized below.
HB 23 will change the automatic death benefit recipient, under some circumstances, from the designated beneficiary to
the member’s surviving spouse. Many members have already designated their spouse as the recipient of the death
benefit with such a spouse remaining alive and married to the member until he experiences a pre-retirement death.
Others, however, may incur death with a designated beneficiary who is not their spouse. Providing the death benefit to a
designated beneficiary who is not the surviving spouse may lead to an increase in FRS costs or a decrease depending on
the age and gender of the designated beneficiary compared to the surviving spouse.
Without age and gender data for all currently designated beneficiaries, the actuarial cost of this proposed bill on these
existing active members of FRS cannot be determined with any certainty. It is estimated, however, that the net effect is
not a material actuarial cost or savings. In addition, there could be a situation where a member’s designated beneficiary
has predeceased the member, and the member has a surviving eligible spouse. In that case the pre-retirement benefit
would be paid to the surviving eligible spouse instead of being forfeited. This would result in a small increase in
actuarial cost.
The opportunity for anti-selection costs appears to be very minimal. It w ould require a very astute member, spouse, and
designated beneficiary to figure out a way to game the retirement system.
2. Other Post- Employment Benefits (OPEB)
The actuarial cost of HB 23 associated with OPEB, including retiree health insurance premiums, is estimated to be $0. Our
analysis is summarized below.
The liability for post- retirement medical insurance protection provided to retirees by the Office of Group
Benefits or other insurers is not affected by the change in the pension beneficiary relating to the death of a
member before retirement.
3. Other Government Entities
The actuarial cost of HB 23 associated with government entities other than those identified in HB 23, is estimate d to be $0 .
See Section II; Subsection C for more information.
B. Actuarial Data, Methods and Assumptions
(Prepared by LLA)
Unless indicated otherwise, the actuarial note for HB 23 was prepared using actuarial data, methods and assumptions as disclosed
in the most recent actuarial valuation reports adopted by PRSAC. The 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.
C. Actuarial Caveat
(Prepared by LLA)
There is nothing in H B 23 that will compromise the signing actuary’s ability to present an unbiased statement of actuarial opinion.
II. FISCAL ANALYSIS SECTION
This section of the actuarial note pertains to fiscal costs or savings associated with the retirement systems (Table A), with OPEB
(Table B), and with other fiscal costs or savings attributable to government entities not associated with either the retirement systems or
OPEB (Table C). Fiscal costs or savings reflect all forms of cash flow including benefit costs or savings, administrative costs or
savings, or any other identifiable type of fiscal cost or savings. The total effect of HB 23 on fiscal costs, fiscal savings, or cash flows
is presented in Table D.
A. Estimated Fiscal Impact – Retirement Systems
(Prepared by LLA)
1. Narrative
Table A shows the estimated fiscal impact of the proposed legislation on the retirement systems and the government entities
that sponsor them. A fiscal cost is denoted by “Increase” or a positive number. Fiscal savings are denoted by “Decrease” or
a negative number. A revenue increase is denoted by “Increase” or a positive number. A revenue decrease is denoted by 2017 REGULAR SESSION
ACTUARIAL NOTE HB 23
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“Decrease” or a negative number. The impact on fiscal information in Table A includes administrative costs or savings
associated with the retirement system and the sponsoring government entities.
Fiscal costs for the Retirement Systems and Their Sponsors: Table A EXPENDITURES 2017-18 2018-19 2019-2020 2020-2021 2021-2022 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 2017-18 2018-19 2019-2020 2020-2021 2021-2022 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
The effects of HB 23 on retirement related fiscal costs and revenues during the five year measurement period are shown in
Table A and Items 2 and 3 below.
2. Expenditures
a. FRS expenditures (Agy Self-Generated) for death benefit payments are expected to increase. The amount of increase
will be small to negligible.
b. Expenditures from Local Funds are expected to increase to the extent that FRS contribution requirements increase. The
increase is expected to be small to negligible.
3. Revenues
a. FRS revenues (Agy Self-Generated) are expected to increase to the extent that the FRS employer contribution
requirements increase. The increase is expected to be small to negligible.
B. Estimated Fiscal Impact – OPEB
(Prepared by LLA)
1. Narrative
Table B shows the estimated fiscal impact of HB 23 on costs or savings associated with OPEB and the government entities that sponsor these benefit programs. Fiscal costs or savings in Table B include administrative costs or savings associated
with the government entities sponsoring OPEB programs. A fiscal cost is denoted by “Increase” or a positive number. Fiscal
savings are denoted by “Decrease” or a negative number. A revenue increase is denoted by “Increase” or a positive number.
A revenue decrease is denoted by “Decrease” or a negative number.
The effects on OPEB related fiscal costs and revenues during the five year measurement period are shown below in Table B.
OPEB Fiscal Cost: Table B
EXPENDITURES 2017-18 2018-19 2019-2020 2020-2021 2021-2022 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 2017-18 2018-19 2019-2020 2020-2021 2021-2022 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
2017 REGULAR SESSION
ACTUARIAL NOTE HB 23
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C. Estimated Fiscal Impact − Other Government Entities (unrelated to the retirement systems or OPEB)
(Prepared by Mike Battle, Audit Manager for the LLA)
1. Narrative
From time to time, legislation is proposed that has an indirect effect on cash flows associated with other government entities,
unrelated to the retirement systems or OPEB. Table C shows the estimated fiscal impact of HB 23 on such government
entities. A fiscal cost is denoted by “Increase” or a positive number. Fiscal savings are denoted by “Decrease” or a negative
number.
Fiscal Costs for Other Government Entities: Table C
EXPENDITURES 2017-18 2018-19 2019-2020 2020-2021 2021-2022 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 2017-18 2018-19 2019-2020 2020-2021 2021-2022 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
The effects on fiscal costs and revenues related to other government entities during the five year measurement period are
shown in Table C and Items 2 and 3 below.
2. Expenditures:
There is no anticipated in direct material effect on the expenditures of local governmental entities (e.g., fire districts)
as a result of this measure. Based on information from the Firefighters’ Retirement System, Louisiana State Firemen’s
Association, Louisiana Municipal Association, and St. George Fire Department, it appears that this bill will not impact the
expenditures of other governmental entities .
3. Revenues:
There is no anticipated in direct material effect on the revenues of local governmental entities (e.g., fire districts) as a
result of this measure. Based on information from the Firefighters’ Retirement System, Louisiana State Firemen’s
Association, Louisiana Municipal Association, and St. George Fire Department, it appears that this bill will not impact the
revenues of other governmental entities.
D. Estimated Fiscal Impact − All Retirement Systems, OPEB, and All Government Entities
(Prepared by LLA)
1. Narrative
Table D shows the estimated fiscal impact of HB 23 on all government entities within the state of Louisiana. Cell values in
Table D are the sum of the respective cell values in Table A, Table B, and Table C. A fiscal cost is denoted by “Increase” or
a positive number. Fiscal savings are denoted by “Decrease” or a negative number. A revenue increase is denoted by
“Increase” or a positive number. A revenue decrease is denoted by “Decrease” or a negative number.
2017 REGULAR SESSION
ACTUARIAL NOTE HB 23
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Total Fiscal Cost: Table D (Cumulative Costs from Tables A, B, & C)
EXPENDITURES 2017-18 2018-19 2019-2020 2020-2021 2021-2022 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 2017-18 2018-19 2019-2020 2020-2021 2021-2022 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
Credentials of the Signatory Staff:
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.
Mike Battle, Audit Manager for the Louisiana Legislative Auditor has supervised the preparation of the fiscal analyses contained in
Section II; Subsection C..
Information Pertaining to Article (10)(29(F) of the Louisiana Constitution
X HB 23 contains a retirement system benefit provision having an actuarial cost.
The actuarial value of the death benefit for some members of FRS will be greater under HB 23 than it would have been
without its enactment.
Dual Referral Relative to Total Fiscal Costs or Total Cash Flows:
The information presented below is based on information contained in Table D for the first three years following the 2017 regular
session.
Senate House
13.5.1 Applies to Senate or House Instruments. 6.8F Applies to Senate or House Instruments.
If an annual fiscal cost ≥ $100,000, then bill is
dual referred to:
If an annual General Fund fiscal cost ≥
$100,000, then the bill is dual referred to:
Dual Referral: Senate Finance Dual Referral to Appropriations
13.5.2 Applies to Senate or House Instruments. 6.8G Applies to Senate Instruments only.
If an annual tax or fee change ≥ $500,000,
then the bill is dual referred to:
If a net fee decrease occurs or if an increase in
annual fees and taxes ≥ $500,000, then the bill is
dual referred to:
Dual Referral: Revenue and Fiscal Affairs
Dual Referral: Ways and Means