2018 REGULAR SESSION
ACTUARIAL NOTE HB 701
Page 1 of 7
House Bill 701 HLS 18RS-700
Original
Author: Representative Jackson
Date: April 12, 2018
LLA Note HB 701.01
Organizations Affected:
Louisiana State Employees'
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. 24:521 as amended by
Act 353 of the 2016 Regular Session.
Bill Header: RETIREMENT/STATE EMPS : Adds public defenders to the Louisiana State Employees’ Retirement Systems.
Cost Summary:
The estimated actuarial and fiscal impact of HB 701 on the retirement systems and their plan sponsors is summarized below. Actuarial
costs 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
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 is subject to the Louisiana Constitution which requires unfunded liabilities created by an improvement in retirement benefits
to be amortized over a period not to exceed ten years.
Bill Information
Current Law
The following persons are not allowed to participate in the Louisiana State Employees Retirement System (LASERS):
1. An attorney employed – as an employee − by the Louisiana Public Defender Board (LPDB).
2. An attorney working under a contract – as a contractor − with the LPDB.
.
3. An attorney employed by a district indigent defender program (DID P) – as an employee – and the DIDP does not have a
plan for extending benefits to employees of such district approved by the Parochial Employees’ Retirement System
(PERS).
4. An attorney working under contract with a DIPD – as a contractor.
Proposed Law
HB 701 provides that the persons identified above under current law will become participants of LASERS effective July 1, 2018.
Implications of the Proposed Changes
A new group of persons will be allowed to become members of LASERS.
. 2018 REGULAR SESSION
ACTUARIAL NOTE HB 701
Page 2 of 7
I. ACTUARIAL ANALYSIS SECTION
A. Analysis of Actuarial Costs
(Prepared by the LLA)
This section of the actuarial note pertains to actuarial costs or savings associated with LASERS, with the LPDB, with the DIDP,
with OPEB, and with other government entities .
1. Retirement Systems
The actuarial cost of HB 701 associated with the LASERS is expected to increase. Our analysis is summarized below.
The actuarial present value of future benefits payable from LASERS will increase. Adding members to LASERS will
not change the amount or timing of benefit payments for current members of the system. However, the attorneys who
will be allowed LASERS membership as a result of HB 701will accrue retirement benefits and employee and employer
contributions will be required to fund them. Therefore, LASERS’ actuarial costs will increase as a result of HB 701.
The following information was provided to the Louisiana Legislative Auditor by the LPDB.
a. Louisiana’s indigent defender program is divided into 42 districts. Eleven districts have an approved plan of
participation. Attorneys employed by the eleven districts are already covered under an approved plan. They will
continue their participation in PERS. Attorneys hired in the future by one of the 11 districts will also participate in
PERS.
b. Attorney-employees and attorney-contractors of the LPDB do not currently participate in LASERS. There are 169
such attorneys who will become participants of LASERS should HB 701 be enacted. The data supplied to us
indicated that another 96 attorneys may potentially become participants in LASERS. The data provided us was
somewhat vague about whether these attorneys participate or do not participate in a state or statewide retirement
program. Therefore the number of new participants in LASERS may range from 169 to 265. Note: the tables
shown below are based on the mid-point of the range, or 217 new participants in LASERS.
c. We assume that new members of LASERS had been participating in Social Security. Therefore, employer
contributions in total will increase from 6.2% of pay to 37.9% of pay when the attorneys join LASERS, an increase
of 31.7% of pay. Additional information taken from the data supplied is summarized below.
Attorneys: Employees
Number of New Members 178
Average Pay $ 53,705
Payroll $ 9,559,490
Increase in Employee Contribution Rate Paid to LASERS 8.0%
Increase in Employee Contributions Paid to LASERS $ 764,759
Employer Social Security Rate Paid to Social Security 6.2%
Increase in Employer Contributions paid to Social Security $ (592,688)
Employer Contribution Rate Paid to LASERS 37.9%
Increase in Employer Contributions Paid by Employers to LASERS $ 3,623,047
Increase in Employer Contribution Rates for Social Security and LASERS 31.7%
Increase in Employer Contributions Paid to LASERS $ 3,030,358
Increase in Employee and Employer Contributions Paid to LASERS $ 4,387,806
Attorneys: Contractors
Number of New Members 39
Average Pay $ 47,259
Payroll $ 1,843,101
Increase in Employee Contribution Rate Paid to LASERS 8.0%
Increase in Employee Contributions Paid to LASERS $ 147,448
Employer Social Security Rate Paid to Social Security 6.2%
Increase in Employer Contributions paid to Social Security $ (114,272)
Employer Contribution Rate Paid to LASERS 37.9%
Increase in Employer Contributions Paid by Employers to LASERS $ 698,535
Increase in Employer Contribution Rates for Social Security and LASERS 31.7%
Increase in Employer Contributions Paid to LASERS $ 584,263
Increase in Employee and Employer Contributions Paid to LASERS $ 845,983
2018 REGULAR SESSION
ACTUARIAL NOTE HB 701
Page 3 of 7
Attorneys: Total Number of New Members 217
Average Pay $ 52,726
Payroll $ 11,441,542
Increase in Employee Contribution Rate Paid to LASERS 8.0%
Increase in Employee Contributions Paid to LASERS $ 915,323
Employer Social Security Rate Paid to Social Security 6.2%
Increase in Employer Contributions paid to Social Security $ (709,376)
Employer Contribution Rate Paid to LASERS 37.9%
Increase in Employer Contributions Paid by Employers to LASERS $ 4,336,344
Increase in Employer Contribution Rates for Social Security and LASERS 31.7%
Increase in Employer Contributions Paid to LASERS $ 3,626,969
Increase in Employee and Employer Contributions Paid to LASERS $ 5,251,667
d. The actuarial present value of future benefit accruals will increase as a result of HB 701. The amount of the increase
cannot be determined from the data available to us.
2. Other Post-Employment Benefits (OPEB)
The actuarial cost of HB 701 associated with OPEB, including retiree health insurance premiums, is not expected to change.
Post-employment benefit programs for the attorneys depend on the provision for such benefits within the Louisiana Public
Defender Board or the district indigent defender program. The participation of an attorney in a post-employment benefit
program does not necessarily depend on his or her participation in LASERS. Therefore, the actuarial cost of HB 701 relative
to post-employment benefits is expected to be $0.
3. Other Government Entities
Actuarial costs or savings for HB 701 associated with government entities other than LASERS and its sponsors is expected
to be $0 .
B. Actuarial Data, Methods and Assumptions
(Prepared by the LLA)
Unless indicated otherwise, the actuarial note for HB 701 was prepared using actuarial data, methods, and assumptions as
disclosed in the most recent actuarial valuation report 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 HB 701 that will compromise the signing actuary’s ability to present an unbiased statement of actuarial
opinion.
II. FISCAL ANALYSIS SECTION
Tables A, B, C, and D have been prepared by the LLA. These tables include information developed by the LLA from its own sources
as well as information supplied by Tanesha Morgan of the Legislative Fiscal Office (LFO). Table D includes all costs and savings
pertaining to Louisiana government.
The LFO has requested that the information supplied by Tanesha Morgan be included in the actuarial note verbatim and without any
changes. This information is shown below under Fiscal Costs Received by the LLA from the LFO. The reader should note that
complete fiscal cost information is contained within Table D. Fiscal costs developed by the LFO only reflect the portion of Table D
that was supplied by the LFO.
Table A pertains to fiscal costs or savings associated with the retirement systems; Table B pertains to OPEB; Table C pertains to fiscal
costs associated with government entities other than the retirement systems and its sponsors. Table D is the cumulative sum of Tables
A, B, and C.
A. Estimated Fiscal Impact – Retirement Systems
(Prepared by the LLA using information supplied by the LFO)
1. Narrative
Table A shows the estimated fiscal impact of the proposed legislation on the retirement systems and the government entities that sponsor them. Fiscal costs and savings include both administrative and actuarial costs and savings. 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.
2018 REGULAR SESSION
ACTUARIAL NOTE HB 701
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Retirement System Fiscal Cost: Table A EXPENDITURES 2018-19 2019-2020 2020-2021 2021-2022 2022-23 5 Year Total
State General Fund $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Agy Self Generated Increase Increase Increase Increase Increase Increase
Stat Deds/Other 3,626,969 3,626,969 3,626,969 3,626,969 3,626,969 18,134,845
Federal Funds 0 0 0 0 0 0
Local Funds 0 0 0 0 0 0
Annual Total Increase Increase Increase Increase Increase Increase
REVENUES 2018-19 2019-2020 2020-2021 2021-2022 2022-23 5 Year Total
State General Fund $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Agy Self Generated 5,251,667 5,251,667 5,251,667 5,251,667 5,251,667 26,258,335
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 See Below See Below See Below See Below See Below See Below
HB 701 will have the following effect on retirement related fiscal costs and revenues during the five-year measurement
period.
2. Expenditures:
a. Expenditures from LASERS (Agy Self-Generated) will increase because some of the new members will terminate
employment during the five-year measurement period and ask for a refund of their own contributions. These amounts
are expected to be very small.
b. Annual expenditures payable to Social Security from State Dedicated Funds (Stat Deds/Other) will decrease $709,376
(= 6.2% x 11,441,542) because employers will no longer be participating in Social Security .
c. Annual expenditures payable to LASERS from State Dedicated Funds (Stat Deds/Other) will increase $4,336,344
because employers will be participating in LASERS.
d. The net increase in annual expenditures for employers will be Item c minus Item b, or $3,626,968.
e. There will be increased costs to the public defender district offices (Local Funds). This measure requires that attorneys
that do not participate in PERS that are employed or contracted by the district offices shall participate in the LASERS.
Currently, the attorneys identified in this bill do not participate in LASERS. This fiscal note assumes that these attorneys
participate in Social Security instead, which has a contribution rate of 6.2%. The LASERS employer contribution rate in
FY 2019 is 37.9%. This measure increases the public defender district offices’ retirement expenses by the difference,
which is 31.7%.
3. Revenues:
a. LASERS revenues (Agy Self-Generated) will increase because it will receive $915,323 (8.0% x $11,441,542) more from
employee contributions than it would have received without regard to HB 701.
b. LASERS revenues (Agy Self-Generated) will increase because it will receive an additional $4,336,344 (37.9% x
$11,441,542) more from employer contributions than it would have received otherwise.
c. The total additional revenue received by LASERS (Agy Self-Generated) will be $5,251,667 ($915,323 + $4,336,344).
B. Estimated Fiscal Impact – OPEB
(Prepared by LLA using information supplied by the LFO)
1. Narrative
Table B shows the estimated fiscal impact of HB 701 on actuarial 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 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.
2018 REGULAR SESSION
ACTUARIAL NOTE HB 701
Page 5 of 7
OPEB Fiscal Cost: Table B EXPENDITURES 2018-19 2019-2020 2020-2021 2021-2022 2022-23 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 2018-19 2019-2020 2020-2021 2021-2022 2022-23 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 701 will have no effect on OPEB related fiscal costs and revenues during the five year measurement period.
C. Estimated Fiscal Impact: Other Government Entities (unrelated to the retirement systems or OPEB)
(Prepared by the LLA using information supplied by the LFO)
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 (administrative and actuarial)
of HB 701 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 2018-19 2019-2020 2020-2021 2021-2022 2022-23 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 2018-19 2019-2020 2020-2021 2021-2022 2022-23 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 701 will have no effect on fiscal costs and revenues relative to government entities other than LASERS and the Offices
of Public Defenders.
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 HB 701 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. F iscal 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.
2018 REGULAR SESSION
ACTUARIAL NOTE HB 701
Page 6 of 7
Total Fiscal Cost: Table D (Cumulative Costs from Tables A, B, & C)
EXPENDITURES 2018-19 2019-2020 2020-2021 2021-2022 2022-23 5 Year Total
State General Fund $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Agy Self Generated Increase Increase Increase Increase Increase Increase
Stat Deds/Other 3,632,969 3,632,969 3,632,969 3,632,969 3,632,969 18,164,845
Federal Funds 0 0 0 0 0 0
Local Funds 0 0 0 0 0 0
Annual Total Increase Increase Increase Increase Increase Increase
REVENUES 2018-19 2019-2020 2020-2021 2021-2022 2022-23 5 Year Total
State General Fund $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Agy Self Generated 5,251,667 5,251,667 5,251,667 5,251,667 5,251,667 26,258,335
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 See Below See Below See Below See Below See Below See Below
Fiscal Costs Received by the LLA from the LFO
(Prepared by Tanesha Morgan, Legislative Fiscal Office)
1. Narrative
Proposed law provides that following classes of people shall be eligible for membership in LASERS: 1) attorneys employed
by or under contract with the Louisiana Public Defender Board (LPDB), 2) attorneys employed by a district indigent
defender program not covered by a Parochial Employees’ Retirement System of Louisiana (PERS) plan, and 3) attorneys
under contract with a district indigent defender program.
Fiscal Costs for Other Government Entities
EXPENDITURES 2018-19 2019-2020 2020-2021 2021-2022 2022-23 5 Year Total
State General Fund $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Agy Self Generated 0 0 0 0 0 0
Stat Deds/Other See below See below See below See below See below 0
Federal Funds 0 0 0 0 0 0
Local Funds Increase Increase Increase Increase Increase 0
Annual Total $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
REVENUES 2018-19 2019-2020 2020-2021 2021-2022 2022-23 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 0
Annual Total $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
HB 701 will have the following effects on fiscal costs and revenues related to other government entities during the five year
measurement period.
2. Expenditures:
There will be increased costs to the public defender district offices. This measure requires that attorneys that do not
participate in PERS that are employed or contracted by the district offices shall participate in the LASERS. Currently, the
attorneys identified in this bill do not participate in LASERS. This fiscal note assumes that these attorneys participate in
Social Security instead, which has a contribution rate of 6.2%. The LASERS employer contribution rate in FY 18 is 37.8%.
This measure increases the public defender district offices’ retirement expenses by the difference, which is 31.6%.
Note: There are 42 public defender district offices, and they employ or contract with 679 attorneys statewide.
3. Revenues:
The district offices operate with a mixture of local funds derived primarily from fees assessed from traffic tickets and state
funds from the Louisiana Public Defender Board (LPDB). Per RS 15:167 (E), sixty-five percent (65%) of the LPD Fund that
is appropriated to the LPDB is disbursed to these local districts. LPDB prorates the LPD Fund to the district offices based
on the district’s total expenditures. Due to the increase in expenses to public defender district offices as a result of
participating in LASERS, the allocation of the Louisiana Public Defender Fund (LPD Fund) to the districts will be impacted,
which may decrease the current allocation to some district offices and increase the allocation to others.
2018 REGULAR SESSION
ACTUARIAL NOTE HB 701
Page 7 of 7
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 rend er the actuarial opinion contained herein.
John D. Carpenter, Legislative Fiscal Officer, has supervised the preparation of the fiscal analys es contained herein.
Information Pertaining to Article (10)(29(F) of the Louisiana Constitution
x
HB 701 contains a retirement system benefit provision having an actuarial cost.
No current member of LASERS will receive a larger benefit with the enactment of HB 701 than what he would have received
without HB 701. However, new members will be receiving benefits, and employers will be making contributions to fund
them.
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 2018 regular
session.
Senate House
x 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