2017 REGULAR SESSION
ACTUARIAL NOTE SB 8
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Senate Bill 8 SLS 17RS-37
Original
Author: Senator Peacock
Date: April 5, 2017
LLA Note S B 8.01
Organizations Affected:
All State and Statewide
Retirement Systems
OR NO IMPACT 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 modified by
Act 353 of the 2016 Regular Session.
Bill Header: RETIREMENT SYSTEMS. Provides for correction of membership and enrollment errors in the state and statewide
retirement systems. (6/30/17)
Cost Summary:
The estimated actuarial and fiscal impact of SB 8 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 $0
Other Post-Employment Benefits (OPEB 0
Other Government Entities 0
Total $0
Fiscal Costs
Five Year Fiscal Cost Pertaining to: Expenses Revenues
The Retirement Systems See Below $0
Other Post-Employment Benefits 0 0
Other Government Entities 0 0
Total See Below $0
This bill complies with the Louisiana Constitution which requires unfunded liabilities created by an improvement in r etirement
benefits to be amortized over a period not to exceed ten years.
Bill Information
Current Law
Except for the following circumstances, statutes governing the Louisiana retirement systems do not include any formal and/or
detailed provisions to follow when a person is incorrectly enrolled in the wrong system. The exceptions are:
1. Detailed instructions are provided by statute for correcting the membership of a person who should have been enrolled in
TRSL was incorrectly enrolled in another Louisiana public retirement system.
2. Detailed instructions are provided by statute for correcting the membership of a person who should have been enrolled in
LSERS was incorrectly enrolled in another Louisiana public retirement system.
A person who is enrolled in the wrong system may be accruing benefits which are more or less than he should be accruing if he
were in the correct system, and both the member and his employer may be contributing more or less than they would to the
correct system.
Proposed Law
The proposed law will create several provisions to correct enrollment errors in the state and statewide retirement systems. The
new provisions associated with SB 8 are summarized below.
2017 REGULAR SESSION
ACTUARIAL NOTE SB 8
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1. Any employee enrolled in the wrong system shall be transferred to the correct system.
2. Within 30 days, the incorrect system shall notify the employee and initiate a transfer to the correct system.
3. If the employee has previously received a refund, he will have the opportunity to repay the refund and have his service
credit restored and transferred to the correct system.
4. If the transfer is made within three years of the enrollment error, the amounts transferred from the incorrect system to the
correct system will be the employer and employee contributions which should have been made to the correct system,
plus interest.
5. If the transfer is made more than three years after the enrollment error, the amounts transferred from the incorrect system
to the correct system will be the greater of (i) the employer and employee contributions that should have been made plus
interest, and (ii) the actuarial cost for the service credit transferred.
6. Any overpayments of employee contributions will be refunded by the incorrect system to the employee, and any
overpayments of employer contributions will be refunded by the incorrect system to the employer.
7. Any underpayments of employer and employer contributions will be paid for by the employer.
Implications of the Proposed Changes
SB 8 provides a clear procedure for correcting enrollment errors relating to the state and statewide retirement systems. The
employees will be made whole based on the provisions of the system in which they should have been enrolled.
The procedure is designed to encourage prompt discovery and correction of errors by employers, and to minimize the chances that
the systems which are involved in the transfers will be affected financially. The financial impact of delayed corrections will be
covered by employers of the person for whom membership errors were made.
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
The actuarial present value cost of SB 8 associated with the retirement systems is estimated to be $ 0. Our analysis is
summarized below.
SB 8 will add costs for some employers and members, and will provide refunds to other employers and
members, depending on the relative costs of the two systems which are involved. For any given year, there
could be a cost or a savings depending on the retirement systems involved. However, over a long period of
time, there should be no net costs or savings for SB 8.
2. Other Post-Employment Benefits (OPEB)
The actuarial cost of S B 8 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 provisions of an enrollment correction.
3. Other Government Entities
The actuarial cost of SB 8 associated with government entities other than those identified in S B 8, 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 SB 8 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 the LLA)
There is nothing in S B 8 that will compromise the signing actuary’s ability to present an unbiased statement of actuarial opinion.
2017 REGULAR SESSION
ACTUARIAL NOTE SB 8
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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 (Tables C and C2). 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 SB 8 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 is denoted by “Increase” or a positive number. A revenue decrease is denoted by
“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.
SB 8 will affect retirement related fiscal costs either positively or negatively in any given fiscal year during the five year
measurement period. However, the cost or savings associated with a correction of incidental membership errors will offset
one another. The net effect on fiscal costs and revenues will be $0.
Fiscal Costs 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 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
B. Estimated Fiscal Impact – OPEB
(Prepared by the LLA)
1. Narrative
Table B shows the estimated fiscal impact of S B 8 on costs associated with OPEB and the government entities that sponsor
these benefits. Fiscal costs in Table B include administrative costs 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.
SB 8 will not have any effect on fiscal costs associated with OPEB. The rules for being assigned to an OPEB plan are
independent from retirement system membership rules. Just because a person has been incorrectly assigned to a retirement
system does not necessarily mean that he has also been assigned to the wrong OPEB program. Therefore, we estimate there
will be no cost or revenues to the sponsors of OPEB benefits. 2017 REGULAR SESSION
ACTUARIAL NOTE SB 8
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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
C1 Estimated Fiscal Impact − Other Government Entities (unrelated to the retirement systems or OPEB)
Prepared by Tanesha Morgan, Legislative Fiscal Office, Relative to the State Retirement Systems
1. Narrative
Section C1 pertains to the state retirement systems.
Proposed law provides that any person who was enrolled in the wrong system by error but who should have been in one of
the systems covered by proposed law shall be transferred to the system for which his employment makes him eligible.
Fiscal Costs for Other Government Entities: Table C1
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 See below See below See below See below See below See below
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:
The proposed legislation addresses membership and enrollment errors in the state and statewide retirement systems. To the extent that there was an overpayment of contributions to a system, the employee receives a refund for the overpayment and
the appropriate system credits the agency’s account in the amount of the overpayment. To the extent that there was an
underpayment of contributions to a system, the employer will bear the cost .
3. Revenues:
There is no anticipated direct material effect on governmental revenues as a result of this measure.
C2 Estimated Fiscal Impact − Other Government Entities (unrelated to the retirement systems or OPEB)
Prepared by Mike Battle, Audit Manager for the LLA, Relative to the Statewide Retirement Systems
1. Narrative
Section C2 pertains to the statewide retirement systems.
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 SB 8 on such government
entities. A fiscal cost is denoted by “Increase” or a positive number. F iscal savings are denoted by “Decrease” or a negative
number. 2017 REGULAR SESSION
ACTUARIAL NOTE SB 8
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Fiscal Costs for Other Government Entities: Table C2 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 See below See below See below See below See below See below
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
SB 8 will have the following effects on fiscal costs related to other government entities during the five year measurement
period.
2. Expenditures:
There may be a minimal indirect effect on the expenditures of individual local entities (e.g. municipalities, parish
governments, assessors’ offices, district attorney offices ) as a result of this measure. The bill provides for the correction
of an enrollment error for a person incorrectly enrolled in any Louisiana public pension or retirement system, plan, or fund
who should have been enrolled in one of the state or statewide retirement systems. If enrollment errors are made, the bill
requires the employer (e.g. municipality, parish government, assessor’s office, district attorney office) to pay any fee or cost
for the actuarial cost calculation for the service credit transfer. Based on information from the Municipal Employees’
Retirement System and Louisiana Municipal Association, this cost could be $300- $500 per case. However, based on
information from various statewide retirement systems and associations , enrollment errors are infrequent.
3. Revenues:
There is no anticipated i ndirect material effect on the revenues of individual local entities (e.g. municipalities, parish
governments, assessors’ offices, district attorney offices ) as a result of this measure. The bill provides for the correction
of an enrollment error for a person incorrectly enrolled in any Louisiana public pension or retirement system, plan, or fund
who should have been enrolled in one of the state or statewide retirement systems. Therefore, this bill will have no fiscal
impact on revenues .
D. Estimated Fiscal Impact − All Retirement Systems, OPEB, and All Government Entities
1. Narrative
Table D shows the estimated fiscal impact of S B 8 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.
Total Fiscal Cost: Table D (Cumulative Costs from Tables A, B, & C2)
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 See Table C See Table C See Table C See Table C See Table C See Table C
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 SB 8
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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.
John D. Carpenter, Legislative Fiscal Officer, supervised the preparation of the fiscal analyses contained i n Section II; Subsection C
relative to the state retirement systems.
Mike Battle, Audit Manager for the LLA, supervised the preparation of the fiscal analysis contained in Section II; Subsection C
relative to the statewide retirement systems.
Information Pertaining to Article (10)(29(F) of the Louisiana Constitution
SB 8 contains a retirement system benefit provision having an actuarial cost.
No member of any Louisiana public retirement system will receive a larger benefit than he should receive because of a
membership error.
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