Provides for reduction of investment fees and allocation of savings. (6/30/18) (OR INCREASE APV)
Impact
The legislation is expected to impact both fiscal costs and revenues within the state regarding the TRSL. The immediate fiscal benefits would likely lead to a decrease in the employer contribution rates. However, over the long term, reduced investment management fees could result in lower investment returns due to a shift from active to passive management, which is expected to lead to an increase in employer contribution rates of approximately 1.7% of estimated payroll. Thus, while the bill aims to provide short-term savings, it may ultimately increase costs in the long run due to lower investment performance.
Summary
Senate Bill 530 seeks to significantly reduce investment fees for the Teachers' Retirement System of Louisiana (TRSL) by 50% by June 30, 2025. This bill mandates the board of trustees to conduct thorough reviews of existing contracts for investment services and implement a fee reduction while ensuring that such changes adhere to their fiduciary duty. The savings generated from the lowered fees are designated to be allocated equally between reducing the oldest outstanding positive amortization base and providing credits for employers to decrease the required actuarial contributions towards the retirement system.
Sentiment
The sentiment surrounding SB 530 appears mixed. Supporters argue that reducing investment fees will lead to substantial savings for the retirement system and its stakeholders. Conversely, opponents express concern that the bill may adversely affect the investment performance due to required shifts in management strategies, potentially undermining long-term financial stability. This division underscores a conflict between managing immediate fiscal relief and ensuring robust investment strategies for the retirement fund.
Contention
A prominent point of contention includes the potential adverse impact on the actuarial present value of future benefits stemming from a likely decrease in the assumed rate of return on investments. This might necessitate increased employer contributions down the line, which could hamper the objectives of providing immediate financial relief and managing the retirement fund effectively. Opponents of the bill might argue that ensuring high-quality investment management is vital for sustained financial health of the retirement system, and significant fee reductions could compromise this aspect.
Provides a regular schedule for permanent benefit increases for retirees of the state retirement systems. (2/3 - 10s29(F)) (6/30/12) (OR -$4,700,000,000 APV)
Provides for a flat rate for purposes of calculating income tax for individuals, estates, and trusts, increases the standard deduction, and modifies or repeals certain income tax deductions and credits (Item #5 and 6) (RE1 DECREASE GF RV See Note)