OFFICE OF LEGISLATIVE AUDITOR
2022 REGULAR SESSION
ACTUARIAL NOTE
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.
Kenneth J. “Kenny” Herbold, ASA, EA, MAAA
Director of Actuarial Services
Louisiana Legislative Auditor
Page 1 of 6
Bill Header: TEACHERS RETIREMENT: Allows an optional retirement plan participant to transfer to the defined benefit plan on an
actuarial basis.
Purpose of Bill: This bill provides members of the Teachers Retirement System of Louisiana (TRSL) Optional Retirement Plan (ORP),
who previously made irrevocable elections to participate in ORP, the right to revoke those elections and become participants in the
TRSL defined benefit plan (DBP). The provisions of this bill terminate on June 30, 2028.
Cost Summary
1
: The estimated net actuarial and fiscal impact of the proposed legislation is summarized below. An increase in actuarial
present values (actuarial impact) and an increase in expenditures or revenues (fiscal impact) is denoted by “Increase” or a positive
number. A decrease in actuarial present values (actuarial impact) or a decrease in expenditures or revenues (fiscal impact) are denoted
by “Decrease” or a negative number.
In the following table, “Net Actuarial Present Values” pertain to estimated changes in the net actuarial present value of future benefit
payments and administrative expenses incurred by a retirement system or associated with an OPEB plan. A more detailed explanation
of the information presented in this table can be found in Section I: Actuarial Impact on Retirement Systems and OPEB.
Change in Net Actuarial Present Values Pertaining to:
The Retirement Systems Increase
Other Post-employment Benefits (OPEB) 0
Total 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.
“Net Fiscal Costs” 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.
In the following table, expenditures and revenues only include cash flows to or from the affected retirement system or OPEB plan, (e.g.
administrative expenses incurred by, benefit payments from, or contributions to the retirement system) and do not include administrative
expenditures and revenues specifically incurred by the state or local government entities associated with implementing the legislation.
A more detailed explanation of the information presented in this table can be found in Section II: Fiscal Impact on Retirement Systems
and OPEB.
Five Year Net Fiscal Costs 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
From time to time, retirement legislation is proposed that affects administrative expenditures and revenues for state and local government
entities associated with implementing the proposed legislation (other than contribution changes included in the above table). This
information, provided by the LLA Local Government Services or the Legislative Fiscal Office, is summarized in the following table. A
more detailed explanation of the information presented in this table can be found in Sections III: Fiscal Impact on Local Government
Entities and Section IV: Fiscal Impact on State Government Entities.
Five Year Net Fiscal Costs Pertaining to: Expenditures Revenues
Local Government Entities $ 0 $ 0
State Government Entities 0 0
Total $ 0 $ 0
1
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 La. Const. Art. X, §29(F)”).
Senate Bill 10 SLS 22RS-71 Date: March 29, 2022
Engrossed Organizations Affected: TRSL
Author: Morris
LLA Note SB 10.02 OR INCREASE APV 2022 REGULAR SESSION
ACTUARIAL NOTE SB 10
Page 2 of 6
I. ACTUARIAL IMPACT ON RETIREMENT SYSTEMS AND OPEB
This section of the actuarial note pertains to changes in the net actuarial present value of expected future benefit payments and
administrative expenses incurred by the retirement systems or associated with an OPEB plan.
1. Retirement Systems
The net change in actuarial present value of expected future benefits and administrative expenses incurred by the retirement
systems from the proposed legislation is expected to be an increase.
Under current law, certain employees of public colleges and universities may elect to participate in the TRSL Optional
Retirement Plan (ORP) rather than the regular defined benefit plan (DBP), any time before the employee accrues five years of
credited service in the DBP. The DBP is the default program, with a 5-year opt-out window to elect the ORP instead of the
DBP. Once made, this election is irrevocable.
This bill allows any member who previously made that election to reverse it, and become a member of the DBP at any time
prior to the earlier of retirement, or June 30, 2028, when the provisions terminate. The bill provides that all the member’s funds
from the ORP must be transferred to the DBP, and to the extent such funds are not sufficient to cover the full “actuarial cost”
of the participant’s benefits, the member must either pay the difference or accept a decreased benefit reflecting the amount
which can be covered by the available funds.
On its surface, this bill would appear to be “cost neutral” with respect to changes in TRSL’s unfunded accrued liability.
However, the development of the actuarial cost, as outlined in statute, results in an ORP member being able to purchase
guaranteed benefits (e.g. a retirement annuity, disability, and death benefits, all guaranteed by TRSL and backed by the State
of Louisiana) at a price that is significantly less than the cost of similar benefits on the open market. This is a function of several
factors, primarily the comparatively generous assumptions used to develop the “actuarial cost” and the lack of individual
underwriting that an insurance company would undertake (e.g. requiring basic health information). Further, ORP members
have knowledge about their personal situations, and it is reasonable to assume only those ORP members who perceive this
transfer as advantageous will utilize it, ultimately resulting in a long-term expected cost greater than the transfer amount, and
an increased cost to TRSL.
2. Other Post-employment Benefits (OPEB)
The net change in actuarial present value of expected future benefits and administrative expenses associated with OPEB,
including retiree health insurance premiums, from the proposed legislation is estimated to be $0.
The liability and expenses for post-retirement medical insurance is not impacted by any provisions of this bill.
II. FISCAL IMPACT ON RETIREMENT SYSTEMS AND OPEB
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 only include cash flows to or from the affected retirement system or OPEB plan, (e.g.
administrative expenses incurred by, benefit payments from, or contributions to the retirement system) and do not include administrative
expenditures and revenues specifically incurred by the state or local government entities associated with implementing the legislation.
A. Estimated Fiscal Impact – Retirement Systems
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.
Table A: Retirement System Fiscal Cost EXPENDITURES 2022-23 2023-24 2024-25 2025-26 2026-27 5 Year Total
State General Fund $ 0 $ 0 Increase Increase Increase Increase
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 Increase Increase Increase Increase
Annual Total Increase Increase Increase Increase Increase Increase
REVENUES 2022-23 2023-24 2024-25 2025-26 2026-27 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
The proposed legislation will have the following effects on retirement related fiscal costs and revenues during the five-year
measurement period.
2022 REGULAR SESSION
ACTUARIAL NOTE SB 10
Page 3 of 6
1. Expenditures:
a. For the purpose of this actuarial note, ORP and DBP are considered under TRSL as a single (Agy Self Generated) entity.
Therefore, transfers arising from this bill constitute “a wash” within TRSL and are not separately reflected as expenditures
and revenue in Table A.
b. To the extent that members of ORP transfer to the DBP, future expenditures from TRSL (Agy Self Generated) will increase
due to new members being eligible for monthly benefit payments after having transferred into the DBP.
c. In addition, TRSL administrative expenses are expected to increase in order to administer the provisions of this bill, from
both additional actuarial fees for calculating the cost of the transfer and subsequent allowable benefits as well as staff
resources needed to process the transfers. The total increase in expenses will be heavily dependent on the number of ORP
members who elect to transfer to the DBP, but TRSL estimates the cost to be approximately $82 per request for internal
staff time. The total cost is highly dependent on the number of ORP members who elect to explore a potential transfer,
but TRSL has estimated it will cost approximately $50,000 per year while the transfer provisions are in effect (through
June 30, 2028).
d. To the extent that members of ORP transfer to DBP, employer contributions payable from State General Funds and Local
Funds to TRSL are expected to increase as a result of anti-selection and increased administrative expenses being passed
on to employer through higher contribution requirements, as compared to what they are expected to be in the absence of
this bill, beginning in the third year.
It is expected that expenditures from the State General Fund and from TRSL (Agy Self Generated) will increase more than
$100,000 in the first three years of the five-year measurement period. However, State General Funds alone (in the form
of increased employer contributions) are not expected to exceed $100,000 in the first three years of the five-year
measurement period.
Increases in employer contributions are reflected in both the State General Fund and Local Funds lines above. The actual
sources of funding (e.g., Federal Funds, State General Fund) may vary by employer and are not differentiated in the table.
2. Revenues:
a. For the purpose of this actuarial note, ORP and DBP are considered under TRSL as a single (Agy Self Generated) entity.
Therefore, transfers arising from this bill constitute “a wash” within TRSL and are not separately reflected as expenditures
and revenue in Table A.
b. For the purpose of this actuarial note, the DBP portion of TRSL revenues (Agy Self-Generated) will increase as members
make additional payments to purchase additional service credits.
c. To the extent that members of ORP transfer to the DBP, employer contributions payable to TRSL (Agy Self-Generated)
are expected to increase as a result of anti-selection and increased administrative expenses being passed on to employer
through higher contribution requirements, as compared to what they are expected to be in the absence of this bill, beginning
in the third year.
B. Estimated Fiscal Impact – OPEB
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.
Table B: OPEB Fiscal Cost EXPENDITURES 2022-23 2023-24 2024-25 2025-26 2026-27 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 2022-23 2023-24 2024-25 2025-26 2026-27 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
2022 REGULAR SESSION
ACTUARIAL NOTE SB 10
Page 4 of 6
The proposed legislation will have the following effects on OPEB related fiscal costs and revenues during the five-year measurement
period.
1. Expenditures:
No measurable effects
2. Revenues:
No measurable effects
III. FISCAL IMPACT ON LOCAL GOVERNMENT ENTITIES
(Prepared by LLA Local Government Services)
This section of the actuarial note pertains to annual fiscal costs (savings) related 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)
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.
Table C: Fiscal Costs for Local Government Entities EXPENDITURES 2022-23 2023-24 2024-25 2025-26 2026-27 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 2022-23 2023-24 2024-25 2025-26 2026-27 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.
1. Expenditures: No measurable effects.
2. Revenues: No measurable effects.
IV. FISCAL IMPACT ON STATE GOVERNMENT ENTITIES
(Prepared by Legislative Fiscal Office)
This section of the actuarial note pertains to annual fiscal cost (savings) related 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)
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.
2022 REGULAR SESSION
ACTUARIAL NOTE SB 10
Page 5 of 6
Table D: Fiscal Costs for State Government Entities EXPENDITURES 2022-23 2023-24 2024-25 2025-26 2026-27 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 2022-23 2023-24 2024-25 2025-26 2026-27 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.
1. 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.
2. Revenues:
There is no anticipated direct material effect on governmental revenues as a result of this measure.
V. ACTUARIAL DISCLOSURES
Intended Use
This actuarial note is based on our understanding of the bill as of the date shown above. It is intended to be used by the Legislature
during the current legislative session only and assumes no other legislative changes affecting the funding or benefits of the affected
systems, other than those identified, will be adopted. Other readers of this actuarial note are advised to seek professional guidance as to
its content and interpretation, and not to rely upon this communication without such guidance. The actuarial note, and any referenced
documents, should be read as a whole. Distribution of, or reliance on, only parts of this actuarial note could result in its misuse and may
mislead others. The summary of the impact of the bill included in this actuarial note is for the purposes of an actuarial analysis only, as
required by La. R.S. 24:521, and is not a legal interpretation of the provisions of the bill.
Actuarial Data, Methods and Assumptions
Unless indicated otherwise, this actuarial note 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 assumptions and
methods are reasonable for the purpose of this analysis.
For certain calculations that may be presented herein, we have utilized commercially available valuation software and/or are relying on
proprietary valuation models and related software developed by our actuarial contractor. We made a reasonable attempt to understand the
intended purpose of, general operation of, major sensitivities and dependencies within, and key strengths and limitations of these models.
In our professional judgment, the models have the capability to provide results that are consistent with the purposes of the analysis and have
no material limitations or known weaknesses. Tests were performed to ensure that the model reasonably represents that which is intended
to be modeled.
To the extent that this actuarial note relies on calculations performed by the retirement systems’ actuaries, to the best of our knowledge, no
material biases exist with respect to the data, methods or assumptions used to develop the analysis other than those specifically identified.
We did not audit the information provided, but have reviewed the information for reasonableness and consistency with other information
provided by or for the affected retirement systems.
Conflict of Interest
There is nothing in the proposed legislation that will compromise the signing actuary’s ability to present an unbiased statement of
actuarial opinion.
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). 2022 REGULAR SESSION
ACTUARIAL NOTE SB 10
Page 6 of 6
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 at rates that differ from
what was 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.
Certification
Kenneth J. Herbold is an Associate of the Society of Actuaries (ASA), a Member of the American Academy of Actuaries (MAAA), and
an Enrolled Actuary (EA) under the Employees Retirement Income Security Act of 1974. Mr. Herbold meets the US Qualification
Standards necessary to render the actuarial opinion contained herein.
VI. LEGISLATIVE PROCEDURAL ITEMS
Information Pertaining to La. Const. Art. X, §29(F)
X
This bill 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 this bill
than what they would have received without this bill.
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 2022
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