OFFICE OF LEGISLATIVE AUDITOR
2024 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 5
Bill Header: RETIREMENT/MUNICIPAL POL: Provides relative to contributions to and the administration of the Municipal Police
Employees' Retirement System
Purpose of Bill:
This bill:
1) Modifies the requirements for a police department to be considered partially dissolved, which requires the police department
to make certain unfunded accrued liability payments to MPERS.
2) Requires employers to submit to MPERS membership information, subject to fines, and changes the deadline to submit the
physical examination to MPERS from six months to 90 days after employment.
3) Provides that an employee cannot opt out of MPERS until all the required membership documents have been provided to the
system.
4) Provides that if a member of the board with no more than two years left in his term becomes a retiree of MPERS or is no
longer a police chief, he will continue to serve as a member of the board until the expiration of the term for which he was
elected.
5) Requires a municipality that employed a police officer or chief within the previous 10 fiscal years to submit a monthly report
to MPERS that includes pay information and any other information prescribed by the board, subject to fines.
Cost Summary
1
: The estimated net actuarial and fiscal impact of the proposed legislation is summarized below.
The expected change in the net actuarial present value of expected future benefits and administrative expenses incurred by the
retirement systems from the proposed law is estimated to be an increase. A more detailed explanation can be found in Section I:
Actuarial Impact on Retirement Systems.
Net Fiscal Costs pertain to changes to all cash flows over the next five-year period including retirement system cash flows or cash flows
related to local and state government entities.
In the following table, expenditures and revenues include cash flows to or from the affected retirement system (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 can be found in Section II: Fiscal Impact on Retirement Systems.
Five Year Net Fiscal Costs Pertaining to: Expenditures Revenues
The Retirement Systems Increase Increase
Local Government Entities Increase 0
State Government Entities 0 0
Total Increase Increase
In the following table, expenditures and revenues include administrative expenditures and revenues specifically incurred by the state or
local government entities associated with implementing the legislation and do not include cash flows to or from the affected retirement
system (i.e. contribution changes included in the above table). This information is provided by the LLA Local Government Services or
the Legislative Fiscal Office. A more detailed explanation 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 Increase $ 0
State Government Entities 0 0
Total Increase $ 0
1
This is a different assessment from the actuarial cost requiring a 2/3
rd
vote (refer to the section near the end of this Actuarial Note “Information
Pertaining to La. Const. Art. X, §29(F)”).
House Bill 43 HLS 24RS-239 Date: March 18, 2024
Original Organizations Affected: MPERS
Author: Bacala
LLA Note HB 43.01 OR INCREASE APV 2024 REGULAR SESSION
ACTUARIAL NOTE HB 43
Page 2 of 5
I. ACTUARIAL IMPACT ON RETIREMENT SYSTEMS
This section of the actuarial note is intended to provide a brief outline of the changes in plan provisions and actuarial effect on key
aspects of the affected retirement systems.
This bill changes the process and lowers the threshold for determination if a participating entity is deemed to have partially dissolved.
Under current law, police departments are required to pay a portion of the unfunded accrued liability when they are deemed to have
partially dissolved. This occurs when a department reduces its number of participating employees as compared to the prior year by
either 30% or more (subject to additional limitations), or by 50 or more employees. This bill changes the basis for comparison to average
enrollment over the preceding 10 years, and decreases the percentage threshold for deemed partial dissolutions from 30% to 20%. This
bill will make it more likely that a police department will be deemed to have partially dissolved, resulting in that police department
making additional payment towards the affected employer’s portion of the unfunded accrued liability. The employer contribution rate
for all other employers will decrease proportionally, resulting in essentially no change in net contributions to the retirement system.
Furthermore, this bill tightens up enrollment and reporting procedures, including:
• Requiring employers to submit all the required membership and physical examination documentation to MPERS within 90
days after employment.
• Not allowing an employee to opt out of MPERS until all the required membership documents have been provided to the system.
• Requiring submission of a monthly compensation report covering all eligible employees, from every employer that has
employed even one police officer or chief of police within the past 10 years.
Tighter reporting requirements will allow the actuary to properly determine the liability and cost of the system, and ensure that the
proper documentation is in place to process potential disability claims. Requiring membership before allowing an employee to opt out
will prevent the unintended consequences of an employee making an uninformed decision, and ensure that .
To the extent more employees are enrolled as members, contributions and benefits will increase. However, employer contribution rates
would likely to decrease as the unfunded accrued liability will be spread across a larger employee payroll base.
II. FISCAL IMPACT ON RETIREMENT SYSTEMS
This section of the actuarial note pertains to annual fiscal costs (savings) associated with the retirement systems.
Fiscal costs or savings include only cash flows to or from the affected retirement system (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 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 2024-25 2025-26 2026-27 2027-28 2028-29 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 2024-25 2025-26 2026-27 2027-28 2028-29 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
Changes in employer contributions are reflected in the State General Fund and/or Local Fund expenditure lines above. The actual
sources of funding (e.g., Federal Funds, State General Fund, etc.) may vary by employer and are not differentiated in the table.
Proposed changes relative to deemed partial dissolution are not expected to have any measurable effects on retirement related fiscal
costs and revenues during the five-year measurement period. While the bill tightens criteria for deeming a police department to
undergo a partial dissolution requiring accelerated payoff of the unfunded accrued liability, the combined amount of contributions
remitted by employers and received by the system is not expected to be affected.
Contributions are also not expected to change because although the process for an employee opting out of participation will be
stricter and more controlled, it is assumed that all employees who have currently opted out of participation will continue to opt out.
2024 REGULAR SESSION
ACTUARIAL NOTE HB 43
Page 3 of 5
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 Table A.
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). Table B 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 B: Fiscal Costs for Local Government Entities
Expenditures 2024-25 2025-26 2026-27 2027-28 2028-29 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 2024-25 2025-26 2026-27 2027-28 2028-29 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: While the effect on fiscal administrative costs is indeterminable at this time, there could be increased costs
related to the tighter enrollment and reporting procedures.
a. Risk Management, Inc (RMI), a subsidiary of the Louisiana Municipal Association (LMA), indicates additional clerical
staff hours could be required to comply with the tighter enrollment and reporting procedures. In some cases, this additional
time requirements may be absorbed by existing staff; however, in some cases, the municipalities may need to increase staff
in order to meet the additional time requirements.
b. RMI estimated an increase in clerical staff hours of 5, 7, and 10 hours per month for villages, towns, and cities, respectively,
at $15 per hour plus 25% for related benefits. There are approximately 69 cities, 127 towns, and 107 villages in Louisiana.
If every municipality incurred increased costs for all of the additional hours, the total cost could be $475,650.
2. Revenues: The proposed legislation is not expected to have any additional effects on fiscal revenues related to local government
entities during the five-year measurement period, other than those outlined above.
IV. FISCAL IMPACT ON STATE GOVERNMENT ENTITIES
(Prepared by Legislative Fiscal Office)
This section of the actuarial note pertains to annual fiscal costs (savings) related to administrative expenditures and revenue impacts
incurred by state government entities other than those included in Table A.
N/A - This bill only impacts local government, and therefore, has no state impact. The LFO does not review local government bills.
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 2024 REGULAR SESSION
ACTUARIAL NOTE HB 43
Page 4 of 5
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).
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.
2024 REGULAR SESSION
ACTUARIAL NOTE HB 43
Page 5 of 5
VI. LEGISLATIVE PROCEDURAL ITEMS
Information Pertaining to La. Const. Art. X, §29(F)
☐ This bill contains a retirement system benefit provision having an actuarial cost. Some members of the Municipal Police
Employees’ Retirement Systems 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 Sections II, III, and IV for the first three years following the 2024
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 If an annual General Fund fiscal cost ≥ $100,000, then
dual referred to: bill is dual referred to:
Dual Referral: Senate Finance Dual Referral: 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 If a net fee decrease occurs or is an increase in annual
bill is dual referred to: fees and taxes ≥ $500,000, then bill is dual referred to:
Dual Referral: Revenue and Fiscal Affairs Dual Referral: Ways and Means