2017 REGULAR SESSION
ACTUARIAL NOTE SB 8
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Senate Bill 8 SLS 17RS-37
Engrossed with Senate Retirement
Committee Amendment #882
Author: Senator Peacock
Date: April 26, 2017
LLA Note S B 8.02
Organizations Affected:
All State and Statewide
Retirement Systems
EG SEE BELOW
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 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 presen t 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 See Below
Other Post-Employment Benefits (OPEB 0
Other Government Entities 0
Total See Below
Fiscal Costs
Five Year Fiscal Cost Pertaining to: Expenses Revenues
The Retirement Systems See Below See Below
Other Post-Employment Benefits 0 0
Other Government Entities 0 0
Total See Below See Below
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 but 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 but 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.
In addition the Municipal Police Employees’ Retirement System (MPERS) has a provision for members who (i) have at least ten
years of creditable service in this system, and (ii) are or were members of the police department for the city of Lafayette, and (iii)
become employed in other public employment thereby making them ineligible to continue membership in this system. Such 2017 REGULAR SESSION
ACTUARIAL NOTE SB 8
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members may continue membership in MPERS in lieu of membership in the other public system and may transfer credit from
such other system into MPERS .
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.
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 c orrect 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 employee and employer contributions will be paid for by the employer.
In addition the special provision in MPERS covering members who were formerly with the police department for the city of
Lafayette has been eliminated.
Implications of the Proposed Changes
SB 8 provides a clear procedure for correcting enrollment errors relating to the state and statewide retirement systems.
Employees will be made whole relative to the provisions of the system in which they should have been enrolled when they were
first employed.
The correction procedure under SB 8 is designed to encourage prompt discovery and correction of errors by employers and to
minimize the extent to which the incorrect system and the correct system are affected financially. The earlier that a membership
error is corrected, the less effect the correction will have on the correct system and on the employer.
MPERS members who were formerly with the police department for the city of Lafayette will be subject to the same membership
provisions as other MPERS members.
I. ACTUARIAL ANALYSIS SECTION
A. Analysis of Actuarial Costs
(Prepared by the LLA)
Section I, subsection A of th is actuarial note for SB 8 pertains to the actuarial present value or savings associated with the
retirement systems and their sponsors; with OPEB and its sponsors ; and with other government entities not associated with the
retirement systems, OPEB, or the sponsors of these programs.
1. Retirement Systems and their Sponsors
This segment of the actuarial note applies to the actuarial present value cost or savings associated with the retirement systems
and their sponsors. Fiscal cost/savings are also discussed in this segment of the actuarial note. Because it is immaterial to the
analysis of costs and savings, this analysis is based on the assumption that all 13 state and statewide retirement systems
belong to a single Louisiana retirement structure. The costs and savings reported here represent the costs or savings to the 1 3
retirement systems in the aggregate. From an actuarial perspective, there are no costs or savings for any individual retirement
system.
The actuarial present value cost or savings associated with all 13 systems within the program structure is based on the present
value of the stream of expenditures minus the present value of the stream of revenues. If this value is positive, then there is
an actuarial present value cost. If the value is negative, then actuarial present value savings occur. The following provisions
of SB 8 must be examined in order to determine whether the bill as a whole has an actuarial cost or has actuarial savings.
a. The Repayment of Prior Refunds
1). Actuarial Costs/Savings
If an employee had been improperly assigned to an incorrect system when he was first employed, he may have
elected a refund of his own contributions upon termination of employment and, as a result, may have forfeited any 2017 REGULAR SESSION
ACTUARIAL NOTE SB 8
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service accumulated before that date. If he had been assigned to the correct system, he may have elected to retain
his employee contributions and his service credits in the correct system.
SB 8 gives such a member the opportunity to repay the incorrect system the refund he had received. From the
perspective of the Louisiana retirement program , repayment of a prior refund is actuarially neutral. The repayment
amount, calculated on the membership correction date, is actuarially equivalent to the value of the service credits
that will be restored to the member by the incorrect system.
2). Fiscal Costs/Savings
The actuarial present value of all future fiscal expenditures is equal to the actuarial present value of all future fiscal
revenues. However, if we only consider the first five year period, expenditures will differ from revenues.
Expenditures will differ from revenues in each of the five years. Total expenditures for the five years will differ
from total revenues for the same period. And, the actuarial present value of five years of expenditures will differ
from the actuarial present value of five years of revenues. Therefore, it is appropriate to conclude that fiscal
cost/savings are not neutral when measured over a five year period.
The conclusions drawn above may appear to be untrue when considering a single membership error. However, if
we apply the mathematical theory of large numbers, the conclusions are confirmed. Cost/savings values will be
volatile from year to year because it is anticipated that there will be few membership errors each year. However,
over a long period of time the cumulative disparity between expenditures and revenues will become smaller and
perhaps will change from a positive value to a negative amount, and then perhaps may even experience a change in
value several more times thereafter.
More information about fiscal costs/savings is given in Section II, Subsection A.
b. Correction of Membership Errors
1). Actuarial Costs/Savings
SB 8 pertains to any member who was improperly assigned to a retirement system. The bill provides for the transfer
of membership from the incorrect system to the correct system and provides a process to administer such a transfer.
This process occurs after repayments of prior refunds have been completed.
According to SB 8, surplus employee contributions exist if accumulated employee contributions under the incorrect
system exceed accumulated employee contributions the employee would have had if he had instead been properly
assigned to a retirement system when he was first employed.
1). If a surplus exists, then such a surplus will be refunded to the employee by the incorrect system.
2). If a shortfall exists, then the employer must make a one-time contribution to the incorrect system equal to the
shortfall amount.
From the perspective of the Louisiana retirement systems, the process for correcting membership errors is
actuarially neutral with one exception – the payment to the incorrect system of employee contribution shortfalls by
the employer.
Once again, actuarial neutrality depends on the theory of large numbers. The cost of correcting membership errors
will be volatile from year to year because the number of membership corrections from year to year is expected to be
small. However over a long period of time the cumulative disparity between expenditures and revenues will become
smaller and less volatile.
2). Fiscal Costs/Savings
With the exception of a surplus or shortfall of employee contributions, the conclusions drawn relative to the
repayment of prior refunds can be made for the correction of membership errors. More information about fiscal
costs/savings is given in Section II, Subsection A.
c. Administrative Costs
SB 8 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 range from $300-$500 per case.
This is not a cost that will be recorded in the financial statements of a retirement system. But, rather, the employer will
make a direct payment to the actuary making the calculations. If we assume th at five errors are made each year across
all Louisiana systems, the total annual expenditure will be $2,500. If we assume that five errors will be made every year
into the future, the actuarial present value cost to administer SB 8 is about $35,000.
Please note that all cost and savings are anticipated to be very small. The number of errors to be corrected is probably about
five a year. The actuarial and fiscal cost values are also expected to be small. Therefore, although we have been able to
identify costs for certain transactions and cost neutrality for others, costs in the aggregate are small relative to the liabilities
for all 13 retirement systems.
2017 REGULAR SESSION
ACTUARIAL NOTE SB 8
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2. Other Post-Employment Benefits (OPEB)
The actuarial cost of S B 8 associated with OPEB, including retiree health insurance premiums, will 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 SB 8. SB 8 only affects the retirement systems, its
sponsors, and members. In reaching this conclusion, we have assumed that although an employee was
improperly assigned to a retirement system, assignment to an OPEB program was correct.
3. Other Government Entities
The only governmental entities involved in the correction of a membership error are the incorrect retirement system, the
correct retirement system and the employer of the improperly assigned employee. Because there are no other governmental
entities involved, the actuarial cost or savings associated with other governmental entities under SB 8 will be $0. More
information is provided 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.
II. FISCAL ANALYSIS SECTION
This section of the actuarial note pertains to fiscal costs or savings associated with the retirement systems and their sponsors
(Table A), with OPEB programs and their sponsors (Table B), and with other fiscal costs or savings attributable to other government
entities not associated with either the retirement systems or OPEB (Section C1 was prepared by the LLA and Section C2 was prepared
by the Legislative Fiscal Office). 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 – State and Statewide Retirement Systems and their Sponsors
(Prepared by the LLA)
1. Narrative
Table A shows the estimated fiscal impact of the proposed legislation on all state and statewide 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 systems
and the sponsoring government entities.
Fiscal Costs for the State and Statewide Retirement System s and t heir Sponsors: Table A
EXPENDITURES 2017-18 2018-19 2019-2020 2020-2021 2021-2022 5 Year Total
State General Fund See Narrative See Narrative See Narrative See Narrative See Narrative See Narrative
Agy Self Generated See Narrative See Narrative See Narrative See Narrative See Narrative See Narrative
Stat Deds/Other 0 0 0 0 0 0
Federal Funds 0 0 0 0 0 0
Local Funds See Narrative See Narrative See Narrative See Narrative See Narrative See Narrative
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 See Narrtive See Narrative See Narrative See Narrative See Narrative See Narrative
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
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ACTUARIAL NOTE SB 8
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Net expenditures from the General Fund pertain to expenditures from LASERS, higher education employers participating in
TRSL, and employers of state policemen participating in LSPRS. Net expenditures from Local Funds pertain to K-12
employers participating in TRSL, employers participating in LSERS, and employers participating in the statewide retirement
systems. Additional information is provided in Section I, Subsection; Table A; and Items 2 and 3 below.
2. Expenditures
a. Expenditures from the General Fund will occur each year to the extent that employers participating in LASERS, Higher
Education TRSL, and LSPRS are required to pay for any shortfall of employee contributions due to the process for
correcting membership errors made by these systems and sub plans.
b. Expenditures from the General Fund will increase about $500 a year for each membership correction assuming the
administrative cost to make the necessary actuarial calculation is about $500.
c. Expenditures from Local Funds will occur each year to the extent that employers participating in TRSL K-12, LSERS,
and the statewide retirement systems are required to pay for any shortfall of employee contributions due to the process
for correcting membership errors made by these systems and sub plans.
d. Expenditures from Local Funds will increase about $500 a year for each membership correction assuming the
administrative cost to make the necessary actuarial calculation is about $500.
e. Expenditures for all 13 retirement systems (Agy Self-Generated) will increase to the extent that a member who repaid a
prior refund retires during the five-year fiscal measurement period.
3. Revenues
a. Revenues relative to all 13 retirement systems (Agy Self -Generated) will increase to the extent that employers are
required to pay for any employer contribution shortfall amounts.
b. Revenues relative to the 13 retirement systems (Agy Self-Generated) will increase to the extent that employees who
receive a prior refund elect to repay that refund.
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 an
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 improperly assigned to a retirement
system does not necessarily mean that he has also been improperly assigned to the wrong OPEB program. Therefore, we
estimate there will be no cost or revenues to the sponsors of OPEB benefits.
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
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ACTUARIAL NOTE SB 8
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C1. Estimated Fiscal Impact − Government Entities o ther than the Retirement Systems, OPEB Programs or Sponsors
(Prepared by the LLA )
1. Narrative
a. There are no fiscal expenditures or fiscal revenues associated with governmental entities other than the retirement
systems and their sponsors. The only entities affected by SB 8 are the retirement systems and their sponsors.
b. See Section I, Subsections A1 and A3 and Section II, subsection A for additional information.
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 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
C2. Estimated Fiscal Impact; Other Government Entities (unrelated to the retirement systems or OPEB)
(Prepared by Tanesha Morgan, Legislative Fiscal Office)
1. Narrative
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 make him eligible.
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 SEE BELOW SEE BELOW SEE BELOW SEE BELOW SEE BELOW SEE BELOW
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:
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, this cost would be paid by the agency to the appropriate retirement system.
3. Revenues:
There is no anticipated direct material effect on government revenues as a result of this measure
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ACTUARIAL NOTE SB 8
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D. Estimated Fiscal Impact − All Retirement Systems, OPEB, and All Government Entities
(Prepared by the LLA)
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 C1. 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 or Savings : Table D (Cumulative Costs from Tables A, B, & C1)
EXPENDITURES 2017-18 2018-19 2019-2020 2020-2021 2021-2022 5 Year Total
State General Fund See Table A See Table A See Table A See Table A See Table A See Table A
Agy Self Generated See Table A See Table A See Table A See Table A See Table A See Table A
Stat Deds/Other 0 0 0 0 0 0
Federal Funds 0 0 0 0 0 0
Local Funds See Table A See Table A See Table A See Table A See Table A See Table A
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 See Table A See Table A See Table A See Table A See Table A See Table A
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
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
X SB 8 contains a retirement system benefit provision having an actuarial cost.
Some members will be entitled to a larger benefit as a result of SB 8 tha n what they would have been entitled
without SB 8.
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