2021 REGULAR SESSION
ACTUARIAL NOTE HB 22
Page 1 of 7
House Bill 22 HLS 21RS-143
Reengrossed
Author: Representative LaCombe
Date: May 6, 2021
LLA Note HB 22.03
Organizations Affected:
Teachers’ Retirement System of
Louisiana
Parochial Employees’ Retirement
System of Louisiana
RE INCREASE APV
This Note has been prepared by the Actuary for 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.
James J. Rizzo, ASA, EA, MAAA
Senior Consultant & Actuary
Gabriel, Roeder, Smith & Company
Piotr Krekora, ASA, EA, MAAA, PhD
Senior Consultant & Actuary
Gabriel, Roeder, Smith & Company
Bill Header: RETIREMENT/TEACHERS: Provides relative to Louisiana School Boards Association employees' membership in
retirement systems
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 Present Values pertain to estimated changes in the net actuarial present value of future benefit payments and
administrative expenses incurred by the retirement system
1
. 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 Present Values Pertaining to:
Net Actuarial
Present Values
The Retirement Systems Increase
Other Post-employment Benefits (OPEB) 0
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 Decrease 0
State Government Entities Decrease 0
Total Increase Increase
Bill Information
Current Law
Current law provides for the employees of the Louisiana School Boards Association (LSBA) to be members of the Parochial
Employees' Retirement System (PERS).
Proposed Law
HB 22 provides for the following employees of the Louisiana School Boards Association to be members of the Teachers' Retirement
System of Louisiana (TRSL) instead of PERS:
1. Any employee hired after June 30, 2021.
2. Any employee with at least five years of creditable service in TRSL as of June 30, 2021.
3. The director of the Louisiana School Boards Association.
1
Note: This is a different assessment from the actuarial cost relating the 2/3 vote (refer to the section near the end of this Actuarial
Note “Information Pertaining to Article (10)(29)(F) of the Louisiana Constitution”). 2021 REGULAR SESSION
ACTUARIAL NOTE HB 22
Page 2 of 7
If an employee of the LSBA separates from service and at the time of such separation is a member of PERS due to his employment
with the LSBA, the LSBA will pay PERS that portion of the unfunded actuarial accrued liability, if any, existing on December 31st
immediately prior to the date of separation of employment which is attributable to that position.
The unfunded accrued liability will be determined by the actuary employed by PERS using the entry age normal funding method
and PERS' actuarial value of assets. The portion of the unfunded actuarial accrued liability attributable to any such position will be
determined based upon the annual salary of the person who left the position divided by the total annual salary for all participating
members of PERS Plan B.
Implications of the Proposed Changes
Future employees of the Louisiana School Boards Association hired after June 30, 2021 will become members of TRSL instead of
PERS. In addition, the director of the Louisiana School Boards Association and any employee of the Louisiana School Boards
Association who has at least five years of creditable service in TRSL as of June 30, 2021 will be members of TRSL instead of PERS
as of the effective date. The proposed bill is silent regarding any creditable service earned under PERS by the director and any
employees who may have also had at least five years of creditable service in TRSL as of June 30, 2021, leaving them to arrange for
transfers of service credits under existing law.
The LSBA will become responsible for a portion of PERS’ unfunded actuarial accrued liability when an employee of the LSBA
who is a member of PERS separates from service, whereas under current law it has no such responsibility.
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 present value costs or savings associated with the retirement systems and
with OPEB.
1. Retirement Systems
The net actuarial cost or savings of the proposed legislation associated with the retirement systems is estimated to be an increase
in cost. The actuary’s analysis is summarized below.
The LSBA is a private not-for-profit entity, not a state agency or a local government. LSBA currently participates in PERS
(Plan B).
According to LSBA officials, out of their five current employees, three employees do not satisfy HB 22’s conditions for moving
their retirement plan coverage from PERS (Plan B) to TRSL and, therefore, will remain in PERS (Plan B), unaffected by HB
22.
However, there are two current employees who do satisfy such conditions under HB 22 and will transfer from PERS (Plan B)
to TRSL. Under HB 22, these two LSBA employees as well as all new hires after June 30, 2021 are eligible to earn benefits
under TRSL at equal or higher multiplier rates using equal or more favorable final average compensation and payable at an
earlier retirement date than they would if they continue under PERS (Plan B).
Therefore, HB 22 provides greater benefits to these two current employees and to all future hires than current law: HB 22
would result in a decrease in expected benefits from PERS (Plan B), but a greater increase in benefits expected from TRSL.
In addition, HB 22 would result in higher employer and employee contributions under TRSL than under PERS (Plan B).
Therefore, there is a net increase in revenue to the retirement systems: HB 22 would result in a decrease in such contributions
by LSBA to PERS (Plan B), but a higher increase to TRSL. The employer contributions paid by LSBA (a private not-for-profit
entity) to TRSL under HB 22 would be higher than to PERS (Plan B) in the absence of HB 22.
HB 22 will also prevent cost-shifting of a portion of PERS’ unfunded actuarial accrued liability (UAAL) from LSBA to the
remaining employers of PERS should a UAAL exist at the end of the year immediately prior to an employee of the LSBA
separating from service. The funding method employed by PERS under the current statutes does not explicitly identify
contributions required for paying off of UAAL. Should the actuarial value of assets drop below the actuarial accrued liability
giving rise to a UAAL, any such shortfall will be financed over working lives of remaining active employees. If a new employee
replacing the separating LSBA employee is not enrolled in PERS, funding of UAAL would be shifted to remaining employers.
In order to minimize such cost shifting, HB 22 requires LSBA to remit an amount equal to that portion of UAAL which is
allocated to the separating employee. While this employer-specific unfunded actuarial accrued liability established under the
proposed law is not directly used under the method otherwise employed by the statutes for funding the plan under the current
law and therefore is not an exact representation of the contribution obligation for exiting employees, it is a convenient estimate.
The UAAL for PERS’ Plan B is currently estimated to be zero and as such this provision has no immediate impact on the
system revenues; but that could change in the future.
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 $0. The actuary’s analysis is summarized below.
2021 REGULAR SESSION
ACTUARIAL NOTE HB 22
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The state and local government liability for any post-retirement medical insurance subsidies provided to retirees is not affected
by the membership of the employees of the Louisiana School Boards Association.
B. Actuarial Data, Methods and Assumptions
(Prepared by LLA)
Unless indicated otherwise, the actuarial note for the proposed legislation was prepared using actuarial data, methods, and
assumptions as disclosed in the most recent actuarial valuation report adopted by the Public Retirement Systems’ Actuarial
Committee (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. With certain exceptions, the actuary
for the LLA finds the assumptions used by the retirement systems and PRSAC to be reasonable.
C. Actuarial Caveat
(Prepared by LLA)
There is nothing in the proposed legislation that will compromise the signing actuaries’ ability to present an unbiased statement of
actuarial opinion.
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 2021-22 2022-23 2023-24 2024-25 2025-26 5 Year Total
State General Fund $ 0 Decrease Decrease Decrease Decrease Decrease
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 Decrease Decrease Decrease Decrease Decrease
Annual Total Increase Increase Increase Increase Increase Increase
REVENUES 2021-22 2022-23 2023-24 2024-25 2025-26 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
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 in 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. Expenditures for benefits by TRSL (Agy Self Generated) are expected to increase when more employees than currently
expected will become members of TRSL and then either terminate or retire.
b. Expenditures for benefits by PERS (Agy Self Generated) are expected to decrease when fewer employees than currently
expected will be members or become members of PERS.
c. The net effect on the expenditures for benefits (Agy Self Generated) is expected to be an increase.
d. The employer contribution requirement from TRSL would include a small allocation of unfunded liability amortization
contributions from LSBA even though the two new members would bring no unfunded liability with them into TRSL.
That slight re-allocation to LSBA (a private not-for-profit entity) causes a slight decrease in unfunded liability amortization 2021 REGULAR SESSION
ACTUARIAL NOTE HB 22
Page 4 of 7
contributions otherwise allocable to all other TRSL-participating entities (local governments). Therefore, contribution
expenditures from all other TRSL-participating local government entities (Local Funds) and contribution expenditures
from TRSL-participating higher education institutions (State General Fund) will decrease slightly as well.
e. The LSBA’s expenditures are expected to increase slightly whenever an employee of the LSBA who is a member of PERS
separates from service and the LSBA pays a portion of PERS’ unfunded accrued liability attributable to that position.
Since the LSBA is not a local government, but a private not-for-profit entity, this increase in expenditures is not reflected
in Table A or the table on the first page of this Actuarial Note.
3. Revenues:
a. TRSL revenues (Agy Self Generated) are expected to increase since employer and employee contributions to the system
are expected to be received.
b. PERS revenues (Agy Self Generated) are expected to decrease since lower employer and employee contributions will be
received.
c. The net effect on the revenues (Agy Self Generated) is expected to be an increase.
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 2021-22 2022-23 2023-24 2024-25 2025-26 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 2021-22 2022-23 2023-24 2024-25 2025-26 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 OPEB related fiscal costs and revenues during the five year
measurement period.
2. Expenditures:
No measurable effects.
3. Revenues:
No measurable effects.
2021 REGULAR SESSION
ACTUARIAL NOTE HB 22
Page 5 of 7
III. FISCAL IMPACT ON LOCAL GOVERNMENT ENTITIES [Completed by LLA]
This section of the actuarial note pertains to annual fiscal costs (savings) relating to administrative expenditures 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 administrative expenditures and revenues associated
with local government entities (other than the impact included in Tables A and B). Table C shows the estimated fiscal
administrative cost 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.
Fiscal Costs for Local Government Entities: Table C EXPENDITURES 2021-22 2022-23 2023-24 2024-25 2025-26 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 2021-22 2022-23 2023-24 2024-25 2025-26 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 administrative costs and revenues related to local government
entities during the five year measurement period.
2. Expenditures:
No measurable effects.
3. Revenues:
No measurable effects.
2021 REGULAR SESSION
ACTUARIAL NOTE HB 22
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IV. FISCAL IMPACT ON STATE GOVERNMENT ENTITIES [Completed by LFO]
This section of the actuarial note pertains to annual fiscal cost (savings) relating to administrative expenditures 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 Chris Keaton, Legislative Fiscal Officer)
1. Narrative
From time to time, legislation is proposed that has an indirect effect on administrative expenditures and revenues associated
with state government entities (other than the impact included in Tables A and B). Table D shows the estimated fiscal
administrative cost 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 2021-22 2022-23 2023-24 2024-25 2025-26 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 2021-22 2022-23 2023-24 2024-25 2025-26 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.
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:
James J. Rizzo and Piotr Krekora, on behalf of Gabriel, Roeder, Smith & Company, serve as the Actuary for the Louisiana Legislative
Auditor. They are Enrolled Actuaries, members of the American Academy of Actuaries, Associates of the Society of Actuaries and
have 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.
2021 REGULAR SESSION
ACTUARIAL NOTE HB 22
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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.
Information Pertaining to Article (10)(29)(F) of the Louisiana Constitution
X
HB 22 contains a retirement system benefit provision having an actuarial cost.
Some members of the Teachers' Retirement System of Louisiana, transferred from Parochial Employees’ Retirement System of
Louisiana could receive a larger benefit with the enactment of HB 22 than what they would have received without HB 22.
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 2021
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