2018 REGULAR SESSION
ACTUARIAL NOTE HB 771
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House Bill 771 HLS 18RS-436
Engrossed
Author: Representative Bacala
Date: April 18, 2018
LLA Note HB 771. 02
Organizations Affected:
Municipal Police Employees’
Retirement System
EG 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. 24:521 as amended by
Act 353 of the 2016 Regular Session.
Bill Header: RETIREMENT/MUNICIPAL POL : Provides for payment of unfunded accrued liability by an employer participating in
the Municipal Police Employees' Retirement System.
Cost Summary:
The estimated actuarial and fiscal impact of HB 771 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 $0
Other Post Employment Benefits (OPEB) 0
Other Government Entities 0
Total $0
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
Bill Information
Current Law
Current law provides that a participating employer in the Municipal Police Employees' Retirement System (MPERS) that fully
dissolves its police department is required to remit the portio n of the unfunded accrued liability which is attributable to the
employer’s participation in the system as of the June 30
th
immediately prior to the date of dissolution .
Current law also provides that a participating employer in MPERS is deemed to have partially d issolved its police department
when the salaries upon which contributions are made by the employer are less than 70% of the salaries from the prior fiscal year .
When a partial dissolution occurs, the participating employer is r equired to remit a portion of the unfunded accrued liability. The
portion is calculated by applying the percentage decrease in the employer’s fiscal year over fiscal year salaries upon which
contributions are made to the payment that would have been required if the employer had fully dissolved its police department .
When a participating employer in the system fully or partially dissolves its police department, the employer can choose to make
payments either as a lump sum or equal monthly payments amortized over 10 years.
Proposed Law
HB 771 will require that when a participating employer in MPERS fully dissolves its police department, the employer’s portion of
the unfunded accrued liability will be calculated using the allocation percentage included in the prior fiscal year’s employer
pension report produced according to the requirements established by the Governmental Accounting Standards Board.
HB 771 also pro vides that a participating employer in MPERS is considered to have partially dissolved its police department if
either of the following occurs: 2018 REGULAR SESSION
ACTUARIAL NOTE HB 771
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1) The number of participating employees is less than 70% of the number of participating employees as of June 30
th
of the
prior year, with at least a reduction of two participating employees or a decrease to zero participating employees.
2) The number of participating employees as of June 30
th
is fifty fewer than the number of participating employees as of
June 30
th
of the prior year.
When a partial dissolution occur s, the participating employer is required to pay a portion of the unfunded accrued liability . The
portion is calculated by applying the percentage decrease in the salaries paid to participating employees by the employer on June
30
th
of both fiscal years to the payment that would have been required if the employer had fully dissolved its police department.
When a participating employer in the system fully or partially dissolves its police department, the employer will be required to
make equal payments amortized over 15 years and payable beginning July 1 of the fiscal year following the full or partial
dissolution.
If the number of participating employees of an employer whose department was partially dissolved returns to or exceeds the
number of participating employees prior to the partial dissolution, the payments will stop on the July 1 following the increase in
participating employees. Any payments made will be credited as an offset of any amounts due for any subsequent withdrawal that
occurs within 15 years of such payment.
In addition, HB 771 will prohibit the board of trustees from collecting payments as a result of a partial dissolution that occurred
prior to July 1, 2018.
Implications of the Proposed Changes
HB 771 will change how the employer’s portion of the unfunded accrued liability is calculated, how a partial dissolution is
determined, and how the payments of the employer’s portion of the unfunded accrued liability will be made.
The change in how a partial dissolution is determined could lead to more employers being required to pay a portion of the
unfunded accrued liability when there is a reduction in the number of participating employees.
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 the retirement systems , with OPEB, and
with other government entities.
1. Retirement Systems
The actuarial cost or savings of HB 771 associated with the retirement systems is estimated to be $0. Our analysis is
summarized below.
HB 771 does not change the timing or amount of benefits payable.
It may change whether an employer is considered to have partially withdrawn from the plan, due to a wider definition of
partial dissolution. And it may change the amount of the payment due to changing the method used to determine the
employer’s portion of the unfunded accrued liability when fully or partially dissolving its police department, and to
extending the payment period from 10 years to 15 years.
2. Other Post-Employment Benefits (OPEB)
The actuarial cost or savings of HB 771 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 is not affected by whether or not the
employer is subject to a withdrawal liability payment, or how the employer’s portion of the unfunded accrued liability is
calculated.
3. Other Government Entities
The actuarial cost or savings of HB 771 associated with government entities other than those identified in HB 771, is
estimated to be $0.
B. Actuarial Data, Methods and Assumptions
(Prepared by the LLA)
Unless indicated otherwise, the actuarial note for HB 771 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.
2018 REGULAR SESSION
ACTUARIAL NOTE HB 771
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C. Actuarial Caveat
(Prepared by the LLA)
There is nothing in HB 771 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 associated with government entities not associated with either the retirement systems
or OPEB (Table C). Fiscal costs or savings in Table A include administrative costs associated with the retirement systems and the
sponsoring government entities. The total effect of HB 771 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. Fiscal costs and savings include both 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.
Retirement System Fiscal Cost: T able 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 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 Increase Increase Increase Increase Increase
Annual Total $ 0 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 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
HB 771 will have the following effects on retirement related fiscal costs and revenues during the five year measurement
period. Table A was prepared assuming a reduction in participating employees in the 2018-19 fiscal year will be considered
a partial dissolution under HB 771while not meeting the requirements of a partial dissolution under the current law.
2. Expenditures:
a. Expenditures from the Local Funds will increase to pay for a portion of the unamortized unfunded accrued liability .
b. The bill will impact those participating employers that may consider reducing the number of participating employees and
that may now be deemed to have a partial dissolution. That is, any savings from the dissolution would have to be
weighed against the amount of unfunded liability payment that would offset the dissolution. The net fiscal impact on
expenditures cannot be accurately estimated for the five-year period.
3. Revenues:
a. MPERS revenues (Agy Self-Generated) will increase when the portion of the unamortized unfunded accrued liability is
paid by the employer.
B. Estimated Fiscal Impact – OPEB
(Prepared by the LLA)
1. Narrative
Table B shows the estimated fiscal impact of HB 771 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 2018 REGULAR SESSION
ACTUARIAL NOTE HB 771
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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.
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 771 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 Bradley Cryer, Assistant Legislative Auditor)
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
771 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 See below See below See below See below See below See below
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 771 will have the following effects on fiscal costs and revenues related to other government entities during the five year
measurement period.
2. Expenditures:
The bill will impact participating employers that may consider fully or partially dissolving their police departments by
changing the dollar value of incentives or disincentives for doing so. Because existing law already provides for such
dissolutions, proposed law changes the methods and definitions regarding such dissolutions, and the number of employers
that may be impacted for the five- year period can not be accurately estimated, the net fiscal impact on expenditures can not
be accurately estimated for the five-year period.
3. Revenues:
This bill is not expected to have a fiscal impact.
2018 REGULAR SESSION
ACTUARIAL NOTE HB 771
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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 HB 771 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, T able 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.
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 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 Increase Increase Increase Increase Increase Increase
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 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 0 0 0 0 0
Annual Total Increase 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.
Bradley Cryer, Assistant Legislative Auditor, has supervised the preparation of the fiscal analys es contained herein.
Information Pertaining to Article (10)(29) (F) of the Louisiana Constitution
HB 771 contains a retirement system benefit provision having an actuarial cost.
No member of MPERS will receive a larger benefit with the enactment of HB 771 than what he would have received without
HB 771.
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
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