2020 REGULAR SESSION
ACTUARIAL NOTE HB 33
Page 1 of 14
House Bill 33 HLS 20RS-211
Original
Author: Representative Ivey
Date: March 2, 2020
LLA Note HB 33. 01
Organizations Affected:
Teachers' Retirement System of
Louisiana
Louisiana State Employees’
Retirement System
OR INCREASE APV
This Note has been prepared by the Actuarial Services Department of the
Louisiana Legislative Auditor (LLA) with assistance from either the Fiscal Notes
staff of the Legislative Auditor or staff of the Legislative Fiscal Office (LFO). 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.
Lowell P. Good, ASA, EA, MAAA
Actuarial Services Manager
James J. Rizzo, ASA, EA, MAAA
Senior Consultant & Actuary
Gabriel, Roeder, Smith & Company
Bill Header: RETIREMENT/TEACHERS: Establishes an optional hybrid retirement plan for persons who are employed by a public
postsecondary education management board.
Cost Summary:
The estimated net actuarial and fiscal impact of this proposed legislation on the retirement systems and their plan sponsors is
summarized below. Net actuarial costs pertain to estimated changes in the net actuarial present value of future benefit payments and
administrative expenses incurred by the retirement system. Net 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 local and state 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 net 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 (i.e., contributions, benefit
payments, and administrative expenses).
Net Actuarial Costs (Liabilities) Pertaining to: Net Actuarial Cost
The Retirement Systems Increase
Other Post-employment Benefits (OPEB) Decrease
Total Increase
Five Year Net Fiscal Cost Pertaining to: Expenditures Revenues
The Retirement Systems Increase Increase
Other Post-employment Benefits (OPEB) 0 0
Local Government Entities Increase 0
State Government Entities Increase 0
Total Increase Increase
This bill complies with 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
Under current law, generally speaking, members of the Teachers’ Retirement System of Louisiana (TRSL) participate in a
traditional defined benefit (DB) pension plan, with some of the eligible Higher Education members electing a defined
contribution (DC) styled Optional Retirement Plan. Members of the Louisiana State Employees' Retirement System (LASERS)
participate in a traditional defined benefit (DB) pension plan.
Some public postsecondary education management board positions are covered by TRSL and some are covered by LASERS.
The benefit payable to future members in TRSL and LASERS will generally be equal to 2.5% x years of service x the member’s
final average compensation.
The current plan provides disability benefits that are based on the same accrual rates as those that will apply at retirement.
Survivor benefits under current law are roughly similar to the benefits a survivor would have received had he participated in
Social Security.
Participation in TRSL or LASERS is generally a condition of employment for employees of a public postsecondary education
management board and requires an 8.00% contribution from active members. 2020 REGULAR SESSION
ACTUARIAL NOTE HB 33
Page 2 of 14
Proposed Law
Under HB 33, new employees of a public postsecondary education management board first employed on or after July 1, 2021
may participate in the hybrid retirement plan of TRSL.
The hybrid program consists of a traditional DB plan and a defined contribution (DC) plan. Member contributions toward the
hybrid program will be allocated to the normal cost of the hybrid DB plan and toward amortization of unfunded accrued
liabilities. Members will also contribute to the hybrid DC plan. Employee contribution toward amortization of the UAL will
consist of the following components.
1. Amortization of UALs created by benefit improvements. Members of the hybrid plan will be required to pay for 50% of
any such cost increase attributable to Post-7/1/2021 members.
2. Amortization of UALs resulting from actuarial gains or losses relative to Post-7/1/2021 members. Hybrid plan members
will pay for 50% of any such increase.
3. Amortization of UALs resulting from assumption changes and changes in actuarial methods relative to Post-7/1/2021
members. Hybrid plan members will pay for 50% of any such increase.
4. Amortization of UALs resulting from investment gains or losses relative to Post-7/1/2021 members. Hybrid plan members
will be responsible for 50% of any such increase in the UAL.
All system assets relative to Pre and Post-7/1/2021 defined benefit structures will be pooled for investment purposes. A notational
DB plan account will be established for the Pre-7/1/2021 (current) plan and a notational DB plan account will be established for
the hybrid DB plan. Notational accounts are needed to determine separate employee and employer contribution requirements for
the Pre-7/1/2021 sub plans and the hybrid sub plans. The notational accounts will not be treated as separate trusts. Assets in the
notational account for the Pre-7/1/2021 DB plan will be available to pay benefits to members of the hybrid DB plan and assets in
the notational account for the hybrid DB plan will be available to pay benefits for members of the Pre-7/1/2021 DB plan.
Key provisions of the hybrid plan are summarized in Table 1.
TABLE 1
Summary of Hybrid Plan for Post-7/1/2021 Employees of a
Public Postsecondary Education Management Board
Plan Provisions DB Plan DC Plan
Participation
Optional participation on or after July 1, 2021.
Optional participation on or after July 1, 2021.
Contributions
Shared equally between employer and employee.
5% of pay for the employee,
5% of pay for the employer.
Individual Accounts
Not Applicable.
1. Administered and maintained by third-party
provider,
2. Three or more DC providers must be selected
by the Dept. of the Treasury,
3. 10 to 25 funds must be made available,
4. Investments are self-directed by the member,
5. Member may contribute up to the IRS limit.
Borrowing or withdrawing
from the Individual
Account
Not Applicable.
Not Allowed.
Final Average
Compensation
Average of the highest 60-consecutive months
with 15% anti-spiking rule.
Not Applicable.
Retirement Benefits
1% x years of credited service
x final average compensation.
1. 75% or more of the DC account at retirement
must be annuitized,
2. No more than 25% of the DC at retirement
may be rolled over or paid as a lump sum.
Retirement Eligibility
1. 65 and 5 years of service,
2. 55 and 20 years of service with actuarial
reduction.
Upon retirement from the DB plan.
Payment Form
Same as under Pre-7/1/2021 plan.
Annuity contract purchased from
third party provider.
DROP or Back-DROP
Not Allowed.
Not Applicable. 2020 REGULAR SESSION
ACTUARIAL NOTE HB 33
Page 3 of 14
TABLE 1 (Continued)
Summary of Hybrid Plan for Post-7/1/2021 Employees of
a Public Postsecondary Education Management Board
Plan Provisions DB Plan DC
Plan
Termination, death or
disablement with less than
5 years of service
Return of employee contributions
without investment earnings.
Return of employee contributions
without investment earnings
Termination with 5 years
of service.
Benefits payable upon retirement or death, or
Return of employee contribution without
interest.
1. Employer and employee contributions
accumulated with investment earnings
are 100% vested,
2. Account balance will always be credited
with interest,
3. Benefits are payable only upon retirement
or death.
Eligibility for Disability
Benefits
Same as Pre-7/1/2021 plan: 10 years of service.
Same as Pre-7/1/2021 plan: 10 years of service.
Disability Benefits
1. Same as Pre-7/1/2021 plan
2. Benefit is based on the accrual rate for the
hybrid DB plan without actuarial reduction.
Distribution of individual account balance in
the same manner as under regular retirement.
Eligibility for Death
Benefits
Same as Pre-7/1/2021 plan:
1. 5 years of service for spouse with qualifying
children,
2. 5 years of service for minor children and to
handicapped children or adults,
3. 10 years of service for spouse without
qualifying children.
Same as Pre-7/1/2021 plan:
1. 5 years of service for spouse with
qualifying children,
2. 5 years of service for minor children and
to handicapped children or adults,
3. 10 years of service for spouse
without qualifying children.
Death Benefits
1. Same as Pre-7/1/2021 plan,
2. Benefit is based on the accrual rate for the
hybrid DB plan without actuarial reduction.
Distribution of individual account balance in
the same manner as under regular retirement.
Retired Member Is
Reemployed
DB plan benefits are suspended
while member is reemployed.
DC plan benefits continue to be paid.
Disability Retiree Returns
to Work before Normal
Retirement Age.
1. Benefit is suspended,
2. Member accrues service under the DB plan,
3. If employed 3 or more years after disability
ceases, periods on disability is used only for
retirement eligibility.
1. Annuity payments from DC plan
are discontinued,
2. Annuity is converted to lump sum value
and is deposited into the member’s DC
plan account.
COLA Eligibility
1. Regular retiree: Age 65 with at least one year
of retirement,
2. Beneficiary or survivor: The member would
have attained 65 with at least one year of
benefit payments had he not died,
3. Disability retiree or beneficiary of disability
retiree: Benefits have been payable for at
least one year.
Not Applicable.
COLA Benefit
1. Automatic adjustment every odd-numbered
year after becoming eligible,
2. Lesser of 2% and CPI-U for the South over
the last 12-month period,
3. COLA applies to first $50,000 of benefits.
Not Applicable.
Assets
1. Commingled with Pre-7/1/2021 plan assets,
2. Nominal accounts for Pre-7/1/2021 and Post-
7/1/2021 plans.
Administered and maintained
by third-party provider. 2020 REGULAR SESSION
ACTUARIAL NOTE HB 33
Page 4 of 14
TABLE 1 (Continued)
Summary of Hybrid Plan for Post-7/1/2021 Employees
of a Public Postsecondary Education Management Board
Plan Provisions DB Plan DC Plan
Determination of
Unfunded Accrued
Liabilities (UAL)
Nominal accounts for Pre-7/1/2021 and Post-
7/1/2021 plans are maintained to determine
UAL associated with the Pre-7/1/2021 plan and
the UAL for the DB portion of the hybrid plan.
Not Applicable.
Discount Rate for
Valuation Purposes
1. As specified by law: 6.00%,
2. Note: the discount rate for the Pre-7/1/2021
plan is set by the board of trustees.
Not Applicable.
A comparison of the key provisions between the current DB plan and the proposed hybrid DB plan is given in Table 2.
TABLE 2
DB Plan Summary Comparison
Plan Provisions
Current Law
DB Plan for Employees of a
Public Postsecondary Education
Management Board
HB 33
Hybrid DB Plan
Employee Contributions
8.00%
1. Actuarially determined percentage of pay
based on the normal cost for the hybrid plan
and UAL amortization payments allocated to
the hybrid plan,
2. Employer and employee contribute equal
amounts.
Employer Contributions
1. Total normal cost less employee contributions,
2. Payments to amortize the UAL.
Shared equally between employer and employee.
Retirement Benefits
1. 2.50% x years of service x final average
compensation.
1. 1.00% x years of service x final average
compensation.
COLAs, Gain Sharing and
the Experience Account
COLAs are provided under a gain sharing
arrangement. A portion of investment gains are
deposited into the Experience Account. COLA
benefits are funded by amounts in the Experience
Account.
A COLA grant depends on:
1. The increase in the CPI-U,
2. Whether a COLA was granted in prior year,
3. COLA is tied the funded level of each
system,
4. Investment performance,
5. Availability of funds in the Experience
Account,
6. Approval of the legislature.
Other COLA rules:
1. COLAs apply to the first $60,000 of
benefits; the cap is indexed annually by
the CPI-U,
2. Must be at least age 62 to be eligible for a
COLA.
A COLA will be automatically paid in every
odd-numbered year.
COLA rules:
1. The benefit will be the lesser of 2.0% or the
CPI-U applicable to the South region,
2. COLA pertain to the first $50,000 of benefits,
3. Must be at least age 65 to be eligible for a
COLA.
Death and Disability
1. Benefit accrual rate is 2.5%.
1. Benefit accrual rate is 1.0%,
2. Otherwise, benefit provisions are the same as
for the Pre-7/1/2021 plan. 2020 REGULAR SESSION
ACTUARIAL NOTE HB 33
Page 5 of 14
TABLE 2 (Continued)
DB Plan Summary Comparison
Plan Provisions
Current Law
DB Plan for Employees of a Public
Postsecondary Education
Management Board
HB 33
Hybrid DB Plan
Termination of service
after 5 years
Member has the option to a refund of employee
contributions without interest, or an annuity
beginning at age 62.
An annuity beginning at age 65.
Discount Rate for
Valuation Purposes
The discount rate is set by the board of directors.
Rates for the June 30, 2020 valuation will be
7.45%.
6.00%.
Implications of the Proposed Changes
HB 33 establishes an optional hybrid plan for employees of a public postsecondary education management board first employed on or
after July 1, 2021.
The hybrid program consists of a pared-down DB component and a new DC component. The hybrid’s DB component includes a
shared cost provision in which the employer and employee contribution requirements are split equally each year.
The optional feature of the proposed program exposes the system to anti-selection risk as employees are likely to participate in the
plan option they expect to benefit them more, such as younger, shorter term employees joining the hybrid plan, and older longer-term
employees joining the current Pre-7/1/2021 plan.
The hybrid program will have no effect on normal costs or the UAL or its payment associated with the current Pre-7/1/2021 plan.
2020 REGULAR SESSION
ACTUARIAL NOTE HB 33
Page 6 of 14
I. ACTUARIAL IMPACT ON RETIREMENT SYSTEMS AND OPEB [Completed by LLA]
A. Analysis of Net Actuarial Costs
(Prepared by LLA)
This section of the actuarial note pertains to net actuarial costs or savings associated with the retirement systems and with OPEB.
The analysis presented below was originally prepared for House Bill 65 of the 2016 regular session and was used for HB 28 in
2019. This proposed HB 33 is very similar to HB 65. The main difference is HB 33 establishes an optional hybrid plan for
employees of a public postsecondary education management board first eligible for membership in a state system on or after
July 1, 2021 rather than a mandatory hybrid plan for employees eligible for membership in any of the state systems on and
after July 1, 2018. Since the two bills are otherwise very nearly identical, the maximum impact of HB 33 (if all eligible
members elect participation in the hybrid plan) on TRSL will be similar to but much smaller in dollar amount than the impact
of HB 65 on TRSL (since HB 33 only applies to employees of a public postsecondary education management board).
The analysis below is based on all employees first eligible for TRSL membership on or after July 1, 2021 being eligible to
participate in the hybrid plan. The actual impact may be different since HB 33 authorizes all employees of postsecondary
education institutions to participate in the hybrid plan, not just TRSL-eligible members. In addition, employees of the public
postsecondary education management board may have different demographic characteristics. The x-axis timelines in Charts C
and D were adjusted for the new effective date, while retaining the shape of the data point curves.
1. Retirement Systems
The net actuarial cost or savings of the proposed legislation is estimated to be an increase in cost. The actuary’s analysis is
summarized below.
Benefit Comparison
Generally speaking, a DB plan tends to favor a participant who has earned a significant amount of service or who joins the
plan in the second half of his career. A DC plan tends to favor a participant who joins the plan in the first part of his career or
who terminates employment before retirement age. Therefore, it is virtually impossible to replace a traditional DB plan with a
hybrid program containing a DC component without shifting benefit delivery from one group of employees to another. This
is demonstrated in Charts A and B below relative to the replacement of the current program with the hybrid program
proposed under HB 33. Chart A illustrates which program provides a better benefit at termination or retirement for new hires
-- the current program or the proposed hybrid program. Chart B provides information about how much better one program is
than the other.
CHART A
2020 REGULAR SESSION
ACTUARIAL NOTE HB 33
Page 7 of 14
Observations about Chart A:
1. The proposed hybrid program will provide a better benefit than the current program for those who are age 48 or
younger when they terminate employment.
2. The proposed hybrid program tends to favor participants who join at the younger ages. Note that the largest green
dots follow the diagonal, which reflects those who join at age 18.
3. The current program is more favorable to those who retire during the prime retirement ages – ages 58 to 62.
4. Although the current program is more favorable for those who retire at age 65 and later, the benefit difference
between the two programs becomes smaller as age and service increase.
CHART B
Observations about Chart B:
1. The proposed hybrid program is significantly better for a participant who terminates employment at age 30 with 5 or
10 years of service. The benefit under the proposed hybrid program is more than double the benefit that would be
available under current law. In either case however, the value of the benefit is quite small. Under the proposed hybrid
program, the terminating member will have accumulated retirement wealth that includes his own contributions, his
employer’s contributions, and investment earnings on all contributions. Under the current program, the terminating
participant’s wealth accumulation toward retirement will be limited to his own contributions without interest.
2. At age 60, a participant will receive a benefit from the proposed program that is only about 70% of the benefit that he
would have received from the current program. Notice that the more service the member has earned, the smaller the
differential between the two programs.
3. At age 65, a participant will receive a benefit from the proposed program that is only about 80% of the benefit that he
would have received from the current program.
Cost Comparison
Charts C and D have been prepared under the assumption that current laws and laws under the proposed HB 33 will continue
to exist indefinitely into the future. However, whether projections are based on current law or proposed law, the retirement
systems will reach a point in our projection period where the UAL will be paid off and continuation of the constitutional
minimum contribution or the legislative minimum will cease to be realistic. Obviously, this will be “good news”. However,
it is not known how the legislature will respond to the good news. Options that will be available to the legislature at that time
are discussed under the observations for the Unfunded Accrued Liability. In our analysis, however, we have continued to 2020 REGULAR SESSION
ACTUARIAL NOTE HB 33
Page 8 of 14
recognize constitutional minimum contribution requirements because we cannot predict the decisions the legislature will
make at that time.
Projected employer contribution rates with the HB 33 program are compared below with projected employer contribution
rates with the current plan. For the purpose of this Actuarial Note, these projected employer contribution rates below are
based on a presumption that all new hires elect the hybrid program. As described more fully in the Implications of the
Proposed Changes section above, the anti-selection factor in the optional nature of this proposed bill is likely to cause costs to
increase further.
CHART C
Observations about Chart C:
1. Employer contribution rates with the hybrid program will be slightly larger than with the current program.
2. Employer contribution rates are virtually the same initially. However, the difference between employer contribution
rates with the enactment of HB 33 and rates with continuation of the current program increases as participants in the
hybrid program replace members in the current program.
3. By 2047, the employer contribution rate with the hybrid program is estimated to be about 2% of pay higher than with
the current plan.
Employer contributions in dollars are compared below. Chart D is based on the effect of having all TRSL new hires enter the
hybrid plan. Since HB 33 only covers new employees of a public postsecondary education management board, the contribution
dollars would be considerably less, but would follow a similar pattern. For the purpose of this Actuarial Note, these projected
employer contribution rates below are based on a presumption that all new hires elect the hybrid program. As described more
fully in the Implications of the Proposed Changes section above, the anti-selection factor in the optional nature of this proposed
bill is likely to cause costs to increase further.
2020 REGULAR SESSION
ACTUARIAL NOTE HB 33
Page 9 of 14
CHART D
Observations about Chart D:
Projected employer contribution requirements for the proposed hybrid program in dollars are expected to be slightly greater
than expected for the current plan.
2. Other Post-employment Benefits (OPEB)
The net actuarial cost or savings of the proposed legislation associated with OPEB, including retiree health insurance
premiums, is estimated to be a decrease in cost. The actuary’s analysis is summarized below.
Employees of a public postsecondary education management board are likely to delay retirement to accumulate
additional retirement income in order to replace the income they would have received under the current program if they
elect the hybrid retirement plan. Delayed retirement produces smaller OPEB costs.
B. Actuarial Data, Methods and Assumptions
(Prepared by LLA)
This actuarial note was prepared using actuarial assumptions as disclosed in the June 30, 2017 actuarial valuation report adopted
by PRSAC subject to the following exceptions.
1. The tables and graphs above were based upon census data used in the June 30, 2015 actuarial valuation report issued by
TRSL and approved by PRSAC. While the details and shapes of the lines might be slightly different using more current
census data, the differences would not be material and the resulting conclusions would be the same.
2. This analysis has been prepared by explicitly recognizing gain sharing features of the current plan. The PRSAC
valuations were prepared by implicitly recognizing the gain sharing.
3. The discount rate used in the analysis was based on the average of capital market assumptions for eight leading
investment consulting firms. Discount rates used in the PRSAC valuations are based on capital market assumptions
developed by TRSL’ investment consultant (AON-Hewitt).
4. The discount rates used was 6.50% for the Pre-7/1/2021 plan and 6.00% for the DB component of the hybrid plan as
required by the text of HB 33. The actual emerging investment performance was projected to be 6.50%. The discount
rate used for the PRSAC valuation was 7.70%.
5. We used a 2.50% inflation assumption in our analysis. TRSL used a 2.50% inflation rate for the PRSAC valuation.
6. We assumed investment earnings on account balances for the hybrid DC plan will be 6.00% during the accumulation
period. We assumed that DC account balances will be converted into annuities based on a 3.00% discount rate. Annuity
conversion rate in the market place have traditionally ranged from 2.00% to 4.00%.
Although the TRSL board adopted new demographic assumptions for the June 30, 2018 valuation, these changes are not expected
to affect the impact of HB 33. These assumptions and methods are in compliance with actuarial standards of practice.
C. Actuarial Caveat
(Prepared by LLA)
There is nothing in the proposed legislation that will compromise the signing actuary’s ability to present an unbiased statement of
actuarial opinion. 2020 REGULAR SESSION
ACTUARIAL NOTE HB 33
Page 10 of 14
II. FISCAL IMPACT ON RETIREMENT SYSTEMS AND OPEB [Completed by LLA]
This section of the actuarial note pertains to fiscal (annual) costs or savings associated with the retirement systems (Table A) and with
OPEB (Table B). Fiscal costs or savings in Table A include benefit-related actuarial costs and administrative costs incurred by the
retirement systems.
A. Estimated Fiscal Impact – Retirement Systems
(Prepared by 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.
Retirement System Fiscal Cost: Table A EXPENDITURES 2020-21 2021-22 2022-23 2023-24 2024-255 Year Total
State General Fund $ 0 Increase Increase Increase Increase Increase
Agy Self Generated 175,312 403,236 411,300 419,526 427,916 1,837,290
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 $ 175,312 Increase Increase Increase Increase Increase
REVENUES 2020-21 2021-22 2022-23 2023-24 2024-255 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
Retirement system expenditures illustrated above were estimated by the System’s staff.
The actual sources of funding for employer contributions (e.g., Federal Funds, State General Fund) may vary by employer
and are not differentiated on the table.
The proposed legislation will have the following effects on retirement related fiscal costs and revenues during the five year
measurement period.
2. Expenditures:
a. State General Fund Expenditures are expected to increase because employer contribution requirements are expected to
be higher under the proposed law (some LASERS eligible state employees may elect participation in the proposed
Hybrid Plan administered by TRSL).
b. Local Fund Expenditures are expected to increase because employer contribution requirements are expected to be larger.
c. There will be implementation costs to TRSL associated with the modification of computer systems, development and
dissemination of publications and training materials, legal fees related to reviewing and monitoring the new plan for
compliance with federal tax law, and workload increases related to developing, reviewing, and evaluating solicitation for
proposals for new defined compensation plan providers. TRSL staff estimates these costs to be approximately $175 K
during the first year. Because HB 33 does not affect all TRSL’s future entrants, the cost will likely be somewhat lower
than this estimate.
d. Additionally, TRSL indicates ongoing costs of approximately $403 K - $428 K per year associated with employing two
new staff accountants ($105 K), investment fees ($250 K - $500 K) and actuarial and external auditor service fees for the
new plan ($40 K). Because HB 33 does not affect all TRSL’s future entrants, the emerging costs may be lower than this
estimate.
3. Revenues:
TRSL revenues (Agy Self-Generated) are expected to increase because employer contributions will increase.
2020 REGULAR SESSION
ACTUARIAL NOTE HB 33
Page 11 of 14
B. Estimated Fiscal Impact – OPEB
(Prepared by LLA)
1. Narrative
Table B shows the estimated fiscal impact of the proposed legislation on actuarial benefit and administrative costs or savings
associated with OPEB and the government entities that sponsor these benefit programs. 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.
OPEB Fiscal Cost: Table B EXPENDITURES 2020-21 2021-22 2022-23 2023-24 2024-25 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 2020-21 2021-22 2022-23 2023-24 2024-25 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
All expenditures for employer contributions are reflected on a single line in the table above. The actual sources of funding
(e.g., Federal Funds, State General Fund) may vary by employer and are not differentiated on the table.
The proposed legislation will have the following effects on retirement related fiscal costs and revenues during the five year
measurement period.
1. Expenditures:
The proposed legislation will not have measurable effects on OPEB related expenditures during the five year measurement
period because members affected by HB 33 are not projected to attain eligibility for retirement during that period.
2. Revenues:
The proposed legislation will not have measurable effects on OPEB related revenue during the five year measurement period
because members affected by HB 33 are not projected to attain eligibility for retirement during that period.
III. FISCAL IMPACT ON LOCAL GOVERNME NT ENTITIES [Completed by LLA]
This section of the actuarial note pertains to annual fiscal costs, cost savings, and revenue impacts incurred by local government
entities other than those included in Tables A and B. See Table C.
Estimated Fiscal Impact - Local Government Entities (other than the impact included in Tables A and B)
(Prepared by Bradley Cryer, Director of Local Government Services)
1. Narrative
From time to time, legislation is proposed that has an indirect effect on expenditures and revenues associated with local
government entities (other than the impact included in Tables A and B). Table C shows the estimated fiscal impact of the
proposed legislation on such local government entities. 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.
2020 REGULAR SESSION
ACTUARIAL NOTE HB 33
Page 12 of 14
Fiscal Costs for Local Government Entities: Table C EXPENDITURES 2020-21 2021-22 2022-23 2023-24 2024-25 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 2020-21 2021-22 2022-23 2023-24 2024-25 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
The proposed legislation will have the following effects on fiscal costs and revenues related to local government entities
during the five year measurement period.
2. Expenditures:
Proposed changes may impact the hiring and retention of future employees; however, the related cost increases or savings for
employers are unknown and cannot be quantified.
3. Revenues:
No measurable effects.
IV. FISCAL IMPACT ON STATE GOVERNMENT ENTITIES [Completed by LFO]
This section of the actuarial note pertains to annual fiscal costs, cost savings, and revenue impacts incurred by state government
entities other than those included in Tables A and B. See Table D.
Estimated Fiscal Impact − State Government Entities (other than the impact included in Tables A and B)
(Prepared by John Carpenter, Legislative Fiscal Officer)
1. Narrative
Legislation may be proposed that has an indirect effect on expenditures and revenues associated with state government
entities (other than the impact included in Tables A and B). Table D shows the estimated fiscal impact of the proposed
legislation on such state government entities. 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.
Fiscal Costs for State Government Entities: Table D EXPENDITURES 2020-21 2021-22 2022-23 2023-24 2024-25 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 2020-21 2021-22 2022-23 2023-24 2024-25 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
The proposed legislation will have the following effects on fiscal costs and revenues related to state government entities
during the five year measurement period.
2020 REGULAR SESSION
ACTUARIAL NOTE HB 33
Page 13 of 14
2. Expenditures:
Other than the impact on employer contribution rates which is already reflected in Table A above, there is no anticipated
direct material effect on governmental expenditures as a result of this measure.
3. Revenues:
There is no anticipated direct material effect on governmental revenues as a result of this measure.
Credentials of the Signatory Staff:
Lowell P. Good is the Actuary for the Louisiana Legislative Auditor. He is an Enrolled Actuary, a member of the American Academy
of Actuaries, an Associate 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.
James J. Rizzo is a Senior Consultant and Actuary with Gabriel, Roeder, Smith & Company, which currently serves as staff for the
Actuarial Services Department of the Louisiana Legislative Auditor. He is an Enrolled Actuary, a member of the American Academy
of Actuaries, an Associate 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.
Actuarial Disclosure: Risks Associated with Measuring Costs
This Actuarial Note is an actuarial communication, and is required to include certain disclosures in compliance with Actuarial
Standards of Practice (ASOP) No. 51.
A full actuarial determination of the retirement system’s costs, actuarially determined contributions and accrued liability require the
use of assumptions regarding future economic and demographic events. The assumptions used to determine the retirement system’s
contribution requirement and accrued liability are summarized in the system’s most recent Actuarial Valuation Report accepted by the
respective retirement board and by the Public Retirement Systems’ Actuarial Committee (PRSAC).
The actual emerging future experience, such as a retirement fund’s future investment returns, may differ from the assumptions. To the
extent that emerging future experience differs from the assumptions, the resulting shortfalls (or gains) must be recognized in future
years by future taxpayers. Future actuarial measurements may also differ significantly from the current measurements due to other
factors: changes in economic or demographic assumptions; increases or decreases expected as part of the natural operation of the
methodology used for these measurements (such as the end of an amortization period; or additional cost or contribution requirements
based on the system’s funded status); and changes in plan provisions or applicable law.
Examples of risk that may reasonably be anticipated to significantly affect the plan’s future financial condition include:
1. Investment risk – actual investment returns may differ from the expected returns (assumptions);
2. Contribution risk – actual contributions may differ from expected future contributions. For example, actual contributions
may not be made in accordance with the plan’s funding policy or material changes may occur in the anticipated number of
covered employees, covered payroll, or other relevant contribution base;
3. Salary and Payroll risk – actual salaries and total payroll may differ from expected, resulting in actual future accrued liability
and contributions differing from expected;
4. Longevity and life expectancy risk – members may live longer or shorter than expected and receive pensions for a period of
time other than assumed;
5. Other demographic risks – members may terminate, retire or become disabled at times or with benefits other than assumed,
resulting in actual future accrued liability and contributions differing from expected.
The scope of an Actuarial Note prepared for the Louisiana Legislature does not include an analysis of the potential range of such
future measurements or a quantitative measurement of the future risks of not achieving the assumptions. In certain circumstances,
detailed or quantitative assessments of one or more of these risks as well as various plan maturity measures and historical actuarial
measurements may be requested from the actuary. Additional risk assessments are generally outside the scope of an Actuarial
Note. Additional assessments may include stress tests, scenario tests, sensitivity tests, stochastic modeling, and a comparison of the
present value of accrued benefits at low-risk discount rates with the actuarial accrued liability.
However, the general cost-effects of emerging experience deviating from assumptions can be known. For example, the investment
return since the most recent actuarial valuation may be less (or more) than the assumed rate, or a cost-of-living adjustment may be
more (or less) than the assumed rate, or life expectancy may be improving (or worsening) compared to what is assumed. In each of
these situations, the cost of the plan can be expected to increase (or decrease).
The use of reasonable assumptions and the timely receipt of the actuarially determined contributions are critical to support the
financial health of the plan. However, employer contributions made at the actuarially determined rate do not necessarily guarantee
benefit security.
2020 REGULAR SESSION
ACTUARIAL NOTE HB 33
Page 14 of 14
Information Pertaining to Article (10)(29(F) of the Louisiana Constitution
X
HB 33 contains a retirement system benefit provision having an actuarial cost.
Some members of the Teachers’ Retirement System of Louisiana could receive a larger benefit with the enactment of HB 33
than what they would have received without HB 33.
Dual Referral Relative to Total Fiscal Costs or Total Cash Flows:
The information presented below is based on information contained in Tables A, B, C, and D for the first three years following the
2020 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