2017 REGULAR SESSION
ACTUARIAL NOTE H B 4
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House Bill 4 HLS 17RS-351
Original
Author: Representative Blake Miguez
Date: April 4, 2017
LLA Note H B 4.01
Organizations Affected:
Teachers’ Retirement System of
Louisiana
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. 24:521 as amended by
Act 353 of the 2016 Regular Session.
Bill Header: RETIREMENT/TEACHERS : Provides relative to the reemployment of retired school nurses in positions covered by the
Teachers’ Retirement System of La.
Cost Summary:
The estimated actuarial and fiscal impact of HB 4 on the retirement systems and their plan sponsors is summarized below. Actuarial
costs or savings pertain to estimated changes in the actuarial present value 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
Fiscal Costs
Five Year Fiscal Cost Pertaining to: Expenses Revenues
The Retirement Systems Increase Increase
Other Post-Employment Benefits 0 0
Other Government Entities 0 0
Total Increase Increase
This bill complies with the Louisiana Constitution which requires unfunded liabilities created by an improvement in benefits
associated with the state retirement systems to be amortized over a period not to exceed ten years.
Bill Information:
Current Law
Current law suspends the benefits of a reemployed retired member of the Teachers’ Retirement System of Louisiana (TRSL) unless he is reemployed in a Reemployment-Eligible Position which is defined as:
1. A position as a substitute classroom teacher in a school where a critical shortage exists;
2. A position assigned to instructing adults through an adult educational or literacy program administered through a public
institution of elementary or secondary education, provided the instructor has a valid Louisiana teaching certificate; and
3. A position as an adjunct professor.
Benefits payable to a retiree reemployed in a Reemployment-Eligible Position are subject to the following suspension of benefit
rules.
1. If a retiree is reemployed in a Reemployment- Eligible Position before the first anniversary of his original date of retirement,
the retiree’s benefit will be suspended until the earlier of the date he terminates reemployment and the first anniversary date
of his original retirement. The retiree’s income from employment is unlimited.
2017 REGULAR SESSION
ACTUARIAL NOTE H B 4
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2. If a retiree is reemployed in a Reemployment-Eligible Position thereafter, the retiree may continue to work in the Reemployment-
Eligible Position and earn an unlimited income from employment. However, his pension benefit will be reduced one dollar for
each dollar he earns from employment that exceeds 25% of his original pension benefit. Once his pension benefit has been
reduced to 25% of his original benefit no further benefit reduction will occur.
3. The benefits of a retiree who retired on or before June 30, 2010 and who is now returning to work for the first time will not be
suspended.
Proposed Law
HB 4 adds the position of school nurse to the list of Reemployment-Eligible Positions.
Implications of the Proposed Changes
HB 4 permits a retired school nurse of TRSL to return to work and earn an income from employment that is unlimited. However,
his original pension benefit will be reduced one dollar for each dollar that he earns in excess of 25% of his original pension.
Therefore, the total income for a school nurse who returns to employment will be 100% of his employment earnings plus his
original pension benefit reduced to an amount that is not less than 25% of the original pension benefit.
I. ACTUARIAL ANALYSIS SECTION
A. Analysis of Actuarial Costs
(Prepared by the 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
As a result of HB 4, the actuarial present value of future benefits payable from TRSL is estimated to increase. Our anal ysis is
summarized below.
a. Category A: Retired Nurse Is Already Reemployed
A school nurse has been retired for a year or more and has already returned to work on a full time basis. The most likely
reasons he has returned to employment as a school nurse are:
1. He misses working as a nurse in the educational environment of a local school district, or
2. He has incurred a financial hardship that makes the extra income necessary.
Example
1. A school nurse has been retired for more than one year.
2. His unsuspended pension benefit is $30,000 a year. His suspended benefit under current law if $0.
3. He has already been reemployed.
4. His salary as a school nurse is $48,000 a year.
Benefits Payable by TRSL under Current Law
HB 4 is not enacted. The nurse continues to be reemployed and earns a salary of $48,000 per year . His pension from
TRSL continues to be suspended. He receives no pension f rom TRSL for as long as he is reemployed.
Because he is not considered to be a “retired teacher” under current law, neither the reemployed school nurse nor his
employer will make contributions to the system, and the reemployed school nurse will not accrue additional retirement
benefits.
Benefits Payable by TRSL under HB 4
HB 4 is enacted. The nurse continues to be re employed and earns a salary of $48,000 per year . $22,500 of his $30,000
annual pension will be suspended. TRSL will pay the nurse $7,500 a year in pension benefits. He will receive $7,500 a
year from TRSL for as long as he is reemployed.
Because he is considered to be a “retired teacher” under HB 4, the reemployed school nurse and his employer will make
contributions to the system, but the reemployed school nurse will not accrue additional retirement benefits . Upon
subsequent termination of employment, the reemployed school nurse will receive a refund of his contributions without
interest. Employer contributions will remain with the retirement system.
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ACTUARIAL NOTE H B 4
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Conclusion
TRSL’s pension expenditures will increase $7, 500 a year with the enactment of HB 4. The system will collect
contributions from both the school and the reemployed school nurse , with the employee contributions being refunded
when the reemployed school nurse leaves active employment.
b. Category B: Retired Nurse Is Induced to Become Reemployed as a Result of the Enactment of HB 4.
A school nurse has been retired for a year or more. He misses employment in the K-12 environment. The primary
reason he does not become reemployed is that his pension from TRSL will be completely suspended. However, if HB 4
is enacted, the $7,500 pension he will receive may be just enough to entice him to return to work.
Example
1. A school nurse has been retired for more than one year.
2. His unsuspended pension benefit is $30,000 a year.
3. His annual salary if he is reemployed will be $48,000.
4. He currently does not expect to return to employment.
5. He will seek reemployment if HB 4 is enacted.
Benefits Payable by TRSL under Current Law
HB 4 is not enacted. The nurse will remain retired. He will not be reemployed. He will receive no reemployment
income. He will continue to collect a pension of $30,000 per year from TRSL. Obviously, no employee or employer
contributions are payable to TRSL; nor does the school nurse, who remains retired, accrue any additional benefits.
Benefits Payable by TRSL under HB 4
HB 4 is enacted. The retired nurse elects to be reemployed on a full time basis. His annual income from employment
will be $48,000. TRSL will pay the nurse $7,500 a year in pension benefits. This amount will be paid to the nurse by
TRSL for as long as he continues to be reemployed.
With the enactment of HB 4, the reemployed school nurse becomes a “retired teacher”. The reemployed retiree and his
employer will contribute to the system; however the retiree will not accrue additional retirement benefits and his
contributions will be refunded without interest when he terminates active service. The employer contributions will
remain in the system.
Conclusion
TRSL’s pension expenditures will decrease $22,500 a year with the enactment of HB 4.
c. Statistical Analysis
The cost of HB 4 depends on the number and demographic characteristics of retired nurses in Categories A and B. HB 4
will have an actuarial cost if there are more than three reemployed retired nurses in Categories A for every one
reemployed retired nurse in Category C. In our opinion, we believe that the number of Category A nurses will exceed
the number of Category B by more than a 3:1 margin.
Our analysis is based on the following information. Items 1 and 2 were provided by the Legislative Fiscal Office. Items
3 and 4 are based on our actuarial experiences.
1. There are about 1,400 school nurse positions in Louisiana.
2. The pool of retired school nurses is quite small. O nly 23 members of the Louisiana School Nurses Organization
were reemployed retirees in FYE 2016.
3. The incentive to become reemployed under HB 4 is not very large.
4. The actuarial present value cost resulting from HB 4 is likely to be small or negligible.
Answers to the following questions would have been useful to us in solidifying our conclusions, but were not available.
1. How many school nurse positions are vacant?
2. How many retired school nurses are there?
3. Of the retired school nurses, how many are between ages 60 and 70?
4. Of the retired school nurses, how many retired on or before June 30, 2010.
2. Other Post- Employment Benefits (OPEB)
The actuarial cost of HB 4 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 remains the same regardless of the employment status of a retiree. The liability is based on the present value of 2017 REGULAR SESSION
ACTUARIAL NOTE H B 4
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estimated claims and estimated claims will not change just because the member’s status has changed from retiree to
employee. 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 a
retired status to an active reemployed status. Therefore:
1. OGB revenues may increase or decrease as a result of HB 4 .
2. Employer premium expenditures may increase or decrease as a result of HB 4 .
3. Other Government Entities
The actuarial cost of HB 4 associated with government entities other than those identified in HB 4 , is estimated to be $0. Our
analysis is summarized in Section II; Subsection C. .
B. Actuarial Data, Methods and Assumptions
(Prepared by the LLA)
Unless indicated otherwise, the actuarial note for HB 4 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.
A. Actuarial Caveat
(Prepared by the LLA)
There is nothing in HB 4 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 i dentifiable type of fiscal cost or savings. The total effect of HB 4 on fiscal costs, fiscal savings, or cash flows is
presented in Table D.
A. Estimated Fiscal Impact – Retirement Systems
(Prepared by the 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 i s denoted by “Increase” or a positive number. A revenue decrease is denoted by
“Decrease” or a negative number.
Table A shows the estimated fiscal impact of the proposed legislation on the retirement systems and the government entities
that sponsor them. The impact on fiscal information in Table A includes administrative costs or savings associated with the
retirement system and the sponsoring government entities.
Fiscal Cost for the Retirement System s 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 on retirement related fiscal costs or savings during the five year measurement period are shown in Table A and
Items 2 and 3 below. A precise cost or savings cannot be determined because the actual cost or savings depends upon the
age, service, and salary characteristics of retired school nurses who return to work and upon the ratio of nurses that continue 2017 REGULAR SESSION
ACTUARIAL NOTE H B 4
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reemployment to those who are induced to retire. The best information that can be given relative to retirement related fiscal
costs or savings, based on the information available to us, is that costs will increase and that the increase in cost will be small;
probably less than $100,000 a year.
2. Expenditures:
a. Agy Self-Generated Expenditures will increase under HB 4 because TRSL will distribute more in benefits each year
under HB 4 than it will under current law.
b. Expenditures from Local Funds will increase under HB 4 because school districts will contribute more per year, on
average, to TRSL with the enactment of HB 4 than would have been contributed under current law.
3. Revenues:
a. TRSL revenues (Agy Self-Generated) will increase each year if HB 4 is enacted because school districts will contribute
more per year to TRSL under HB 4 than would have been contributed under current law.
B. Estimated Fiscal Impact – OPEB
(Prepared by the LLA)
1. Narrative
Table B shows the estimated fiscal impact of HB 4 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 entity sponsoring the OPEB program. 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
and Items 2 and 3.
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
2. Expenditures:
Expenditures by local school districts for medical benefits may increase or decrease depending on the employment status of
employees and/or retirees and whether retirees pay a larger or smaller percentage of the medical premium. Eventually,
however, the reemployed retiree will re-retire and the retirees share of the insurance premium will be the same it would have
been had the retiree not returned to work. The state does not maintain sufficient records to enable us to determine how
employer costs will be affected in individual school districts. In our opinion, the cost difference between HB 4 and current
law will be negligible.
3. Revenues:
School district revenues (Local Funds) will not change materially with the enactment of HB 4 for the same reasons as cited
above under Expenditures.
C. Estimated Fiscal Impact − Other Government Entities (unrelated to the retirement systems or OPEB)
(Prepared by Tanesha Morgan , Legislative Fiscal Officer)
1. Narrative
Proposed law authorizes a retiree to return to work as a school nurse and to continue to receive his benefit check; however,
the allowable employment earnings of such retiree are capped at 25% of his benefit amount.
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ACTUARIAL NOTE H B 4
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Fiscal Cost 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
HB 4 will have the following effects on fiscal costs and revenues related to other government entities during the five year
measurement period.
2. Expenditures:
There is no anticipated direct material effect on governmental expenditures as a result of this measure. However, t here may
be implementation costs to make minor software modifications to existing computer programs to identify members that are
rehired under this measure . These costs are negligible and are anticipated to be absorbed through the agency’s existing
budget.
3. Revenues:
There is no anticipated direct material effect on governmental revenues as a result of this measure.
B. Estimated Fiscal Impact − All Retirement Systems, OPEB, and Other Government Agencies
1. Narrative
Table D shows the estimated fiscal impact of HB 4 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.
The “increase” amounts shown in Chart D are small to negligible in value.
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.
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ACTUARIAL NOTE H B 4
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John D. Carpenter, Legislative Fiscal Officer, 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 4 contains benefit provisions for members of a Louisiana public retirement system having an actuarial cost.
Some individual members of TRSL will receive a larger retirement benefit if HB 4 is enacted than would be received without
HB 4.
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