Sets minimum employer contributions and provides for funding deposit accounts for each state retirement system (OR NO IMPACT APV)
Impact
The implications of HB22 are designed to safeguard the funded ratios of state retirement systems. Under the new requirements, if a retirement system's funded ratio hasn't reached 100% or drops below 90% after previously being above 100%, the minimum employer contribution will remain at 20%. This measure is expected to dampen volatility in contribution levels and enhance the overall funding health of these pension systems over time. However, it is important to note that the immediate impact may be minimal, as current employer contributions are already above 25%. Hence, the formal minimum contribution may not affect most entities for the foreseeable future.
Summary
House Bill 22 (HB22) introduces a minimum employer contribution requirement of 20% for state retirement systems when certain funding conditions are met. This bill primarily applies to the Louisiana State Employees’ Retirement System (LASERS), Teachers’ Retirement System of Louisiana (TRSL), Louisiana School Employees’ Retirement System (LSERS), and Louisiana State Police Retirement System (LSPRS). The intent is to bolster the financial stability of these systems by ensuring consistent contributions, particularly when their funded ratios drop below certain thresholds.
Sentiment
Overall, the sentiment surrounding HB22 appears to be generally supportive, particularly from financial and legislative stakeholders who prioritize the health of retirement systems. There is an acknowledgment that the bill is a proactive measure aimed at preventing future deficits within these systems. However, some concerns were raised regarding how setting a minimum contribution might limit the flexibility in budgetary planning for state authorities. Nevertheless, the lack of expected negative consequences in the short term contributes to the bill's acceptance among legislators.
Contention
While there is general agreement on the need for retirement system sustainability, the discussion surrounding HB22 does reveal some contention regarding its implications. Critics may argue that enforcing a minimum contribution could impose undue pressure on state budgets if unforeseen financial challenges arise, despite the bill's design to mitigate risk in funding levels. The bill aims to create a safety net for retirement funding, but its rigid structure may raise questions about adaptability to changing economic conditions.
Provides for a funding deposit account for Municipal Police Employees' Retirement System and authorizes the board of trustees of the system to modify required employer contributions (EN DECREASE APV)
Provides relative to the funding deposit account for Municipal Police Employees' Retirement System and authorizes the board of trustees of the system to modify employer contributions (EN SEE ACTUARIAL NOTE FC)
Provides for application of a portion of state retirement system investment returns to system debt and increases the threshold that must be met prior to funding state retirement system experience accounts (OR DECREASE APV)
Relative to the La. State Employees' Retirement System, requires employers to remit to the system individualized employer contributions (EN NO ACTUARIAL COST APV)
Establishes a funding deposit account for the Municipal Police Employees' Retirement System and authorizes the board of trustees of the system to modify required employer contribution rates (RE DECREASE APV)
Removes certain members from eligibility for membership in the Teachers' Retirement System of Louisiana and provides for a refund of employee contributions to those members (OR -$1,100,000 APV)
Provides for use of entry age normal valuation method by Louisiana State Employees' Retirement System and Teachers' Retirement System of Louisiana. (See Act) (RE DECREASE APV)
Establishes a minimum employer contribution rate for the Optional Retirement Plan in the Teachers' Retirement System of Louisiana (EN INCREASE FC SG LF EX)