Thursday, November 20, 2014

State, school boards to get pension relief

Marsha Shuler
The Advocate

State agencies and local school boards won’t have to pay as much next fiscal year to cover pension costs for active employees after action Wednesday by a special panel.

All told, the Public Retirement Systems’ Actuarial Committee, called PRSAC, approved a $120 million reduction.

The committee must sign off on financial evaluations of the four statewide retirement systems, which among other things, sets the benchmark for investment earnings as well as required employer contribution rates.

Healthy investment earnings — and to some degree — reductions in work force contributed to the coming budget relief on employers.

State agency contributions to the Louisiana State Employees Retirement System, better known as LASERS, are projected to decline by $62.8 million in the fiscal year that starts July 1, 2015.

Meanwhile, school boards’ contributions to the Teachers Retirement System of Louisiana are anticipated to drop by $46 million and to the Louisiana School Employees Retirement System by $13 million.

The Louisiana State Police Retirement System remains flat.

“This is good news for the state as we begin the budgeting process for the next fiscal year,” Commissioner of Administration Kristy Nichols said in a statement issued by her office. “Saving money here helps free up funding for other areas.”

Louisiana School Boards Association executive director Scott Richard, who attended the meeting, praised the committee action. “The fact that school board contribution rates will go down for 2015-16 is welcome news - at a time when the costs to educate students in Louisiana continues to rise,” Richard said.

“The reduction in costs reverses the trend of recent increases that negatively affected local district budgets,” he added.

School systems have been hit by increases in health insurance costs for the teachers and other of their employees as well as Affordable Care Act changes that are expected to add to the expense.

“We look forward to continued collaboration with legislators and the retirement systems to ensure costs of pensions are reasonable and to avoid spikes in costs that take dollars out of the classroom,” Richard said.

The government employers are still on the hook for payments to defray the pension systems long-term debt known as the unfunded accrued liability, or UAL. The debt developed because past administrations did not contribute sufficient funds to cover benefits granted. A constitutional amendment requires the initial UAL to be paid off by 2020. The UAL has grown because of interest that piles up on that debt.

Tuesday, November 18, 2014

Pension debt reduction plan a no-go

Original article here.
Marsha Shuler, The Advocate

A proposal to borrow money to help reduce state pension system debts got shot down quickly Monday.

The idea was to borrow money that would be used to pay one lump sum and buy out the pensions of vested retirees who have not yet begun to draw their benefits. Waiting before drawing on a pension allows the retiree’s pension to increase in value. Paying off the benefits of those retirees would reduce the state’s $20 billion long-term debt obligations, called the unfunded accrued liability.

But a state treasury official, the Legislature’s actuary and two state retirement system chiefs all testified that the idea was plagued with problems.

Just how many vested retirees could take part in such a program, if approved, is unclear. However, the Teachers Retirement System of Louisiana has 6,336 vested but inactive members, and the value of their pensions is $283 million.

Maureen Westgard, executive director of the Teachers Retirement System, said her board “has viewed (the idea of borrowing) as highly risky” in the past.

The testimony came as the state House Retirement Committee took up a study resolution passed during the 2014 Legislature. Committee Chairman Kevin Pearson’s resolution involved offering an optional lump-sum pension buyout to certain vested, inactive members.

The state would borrow the money to cover the buyouts. “The borrowing costs to finance such buyouts would be less than the interest rate on the unfunded accrued liability associated with such benefits,” the resolution stated, thereby improving the pension system’s finances.

Goldman Sachs pitched the idea of “pension obligation bonds,” and he wanted to see if the idea was a viable one, said Pearson, R-Slidell.

“Pension obligation bond history has not been very favorable,” said legislative actuary Paul Richmond, who noted a disaster involving the New Orleans firefighters retirement system.

First Assistant State Treasurer Ron Henson said the state is restricted in its ability to issue debt by a limit on the money it can spend annually in debt payments.

Further, he said, borrowing is already planned for state and local projects that legislators and their constituents want. “Our debt capacity will not allow the luxury of issues like these,” Henson said.

Louisiana State Employees Retirement System Executive Director Cindy Rougeou said it’s uncertain whether the idea would produce a savings or a cost.

“The overall debt is not being reduced. It’s just restructuring part of the overall UAL debt for a hard bond debt,” she said. “It’s almost taking out a second mortgage.”

Tuesday, October 28, 2014

LASERS Finanical Reports Now Available

We are pleased to announce that the Comprehensive Annual Financial Report (CAFR) for LASERS fiscal year ending June 30, 2014, is now available on our website. 

LASERS investment return for the fiscal year was 18.8 percent, bringing the total asset value of the System to the highest in its history. 

The CAFR, along with the Summary Annual Report or Popular Annual Financial Report (PAFR) may be found here on our website

Wednesday, October 1, 2014

LASERS Actuarial Valuation Shows Nearly $1 Billion Increase in Assets

Over the past fiscal year, the Louisiana State Employees’ Retirement System (LASERS) actuarial value of assets increased from $9.7 billion to $10.6 billion. This positive information was part of the annual actuarial valuation report for the period ending June 30, 2014, adopted by the LASERS Board of Trustees at its September 26 meeting.

Other highlights from the valuation included: LASERS fiscal year 2014 investment return, which was in excess of 18 percent, a reduction in the employer contribution rate which is expected to save the State of Louisiana approximately $60 million in payments next year, and a decrease in the Normal Cost of the retirement benefit from 6.54 to 3.56 percent.

“The 2014 valuation reflects the implementation of major reforms which are good for LASERS and for Louisiana going forward,” said LASERS Executive Director Cindy Rougeou. “The change to a new cost method, Entry Age Normal; the reduction in the discount rate to 7.75 percent; and the implementation of Act 399 of 2014 which dedicates more investment returns toward the System debt, allows for greater budget stability, and improvement in the overall health and sustainability of the plan.”

LASERS Actuary Shelley Johnson noted in her presentation that LASERS retirees outnumber active members, 46,940 to 40,321. For the fifth consecutive year, the number of active state employees has decreased, resulting in a reduction of the amount of total payroll by $140 million.

The valuation reflected an increase in the Unfunded Accrued Liability (UAL) of the System as a result of the change to Entry Age Normal and the discount rate change, but there will be no change in total benefits to be paid. Rougeou said, “The UAL increase is offset by a corresponding decrease in current and future Normal Costs. LASERS Benefits Louisiana: implementing these important reforms in a time and manner that will not increase costs to the System or the taxpayers.”

To read the complete LASERS Annual Actuarial Valuation, refer to the Annual Reports page on the LASERS website.

Friday, August 22, 2014

New Retirement Study Reveals Good News for Louisiana Economy

A 2014 study by the National Institute on Retirement Security (NIRS), Measuring the Economic Impact of DB Pension Expenditures, reveals that benefits paid by state and local pension plans had a total impact of $6.1 billion on Louisiana's economy.

$3.0 billion in direct economic impacts were supported by retirees' initial expenditures, followed by an additional $1.9 billion in indirect impact resulting when these businesses purchased additional goods and services.

For more information about Louisiana, view the NIRS study.