Tuesday, March 8, 2016

LASERS Board Takes Positions on Retirement Bills

The LASERS Board of Trustees met February 26 and voted to take positions on 19 prefiled retirement bills for the 2016 Regular Session of the Legislature that would directly impact LASERS if passed. The Board delayed making a decision on seven other bills until additional information could be provided. As positions are taken, the LASERS website will be updated.

Trustees voted to support the following bills:
  • HB 15 by Representative Pearson addresses non-investment related administrative expenses in calculating the required employer contribution rate.
  • SB 2 by Senator Peacock authorizes a Cost of Living Adjustment (COLA) of up to 1.5 percent (based on the amount of funds available in the Experience Account) for LASERS retirees and beneficiaries.
  • SB 5 by Senator Peacock addresses non-investment related administrative expenses in calculating the required employer contribution rate.
  • SB 20 by Senator Peacock clarifies provisions created in Act 399 of 2014 regarding excess investment earnings, employer contributions, and Cost of Living Adjustments (COLAs).
Trustees voted to oppose the following bills:
  • HB 20 by Representative Foil places new hires of the 19th Judicial District Court in the Municipal Employees' Retirement System. The Board is concerned about the precedent that would be set by allowing employers to choose a retirement system solely based on the employer contribution rate. There is also concern that the bill will result in a cost to LASERS since the System would no longer be receiving those employer contributions.
  • HBs 45, 46, 50, 65 and 66 by Representative Ivey would create new retirement plans. Since our members do not contribute to Social Security, our Board recognizes the importance of retirement security. In addition to being deemed a qualified plan by the IRS, the existing defined benefit plan has an extremely modest normal cost of 4 percent of pay. The Board is also aware that over the past decade, the legislature has adopted significant pension reform that, for LASERS alone, is expected to reduce costs by $3 billion.
  • HB 48 by Representative Ivey adds five members to the LASERS Board of Trustees. The members and their immediate families must not be active or retired members of LASERS. Two members would be appointed by the Speaker of the House, two by the President of the Senate, and one by the Legislative Auditor. The only qualification for the new members is that they must have filed state income tax returns for the previous five years. The Board opposes HB 48 since it would interfere with the composition of the Board without corresponding benefit. In addition to active and retired LASERS members, there are currently four ex-officio members of the Board; the Chairs of the Senate and House Retirement Committees, the State treasurer and the Commissioner of Administration. Additionally, all members of the Board are tasked with fiduciary duty that requires them to act solely in the best interest of the members.
  • HB 49 by Representative Ivey would change the calculation method for contribution rates for new hires on or after July 1, 2017. The Board opposes HB 49, recognizing that members who obtain refunds would be paid funds that should be applied to the Unfunded Accrued Liability (UAL). It could also result in a member paying the UAL of another member, for no corresponding benefit, thereby constituting a tax. The Board also noted that since members would be unsure of the amount of their contribution they would be unsure of their amount of compensation.
  • HB 51 by Representative Ivey requires that the LASERS Board of Trustees select an actuary from a list of at least three firms approved by the Legislative Auditor. The Board opposes HB 51 since it would interfere with its constitutional authority and would create a conflict of interest for the Legislator Auditor.
  • HB 52 by Representative Ivey adds four members to the Public Retirement Systems Actuarial Committee (PRSAC) if passed. The LASERS Board opposes HB 52 because it would change the nature of PRSAC from an actuarial committee to a policy committee.
  • HB 63 by Representative Ivey requires that one hour of annual training for members of the LASERS Board be conducted by the legislative auditor's office. With respect to HB 63, the LASERS Board has no opposition to receiving training from the Legislative Auditor and the Auditor has been invited to speak at the upcoming LAPERS Conference. It should also be noted that the Board is currently statutorily required to attend 16 hours of educational training in the areas of fiduciary duty and ethics, investments, laws, rules, regulations, and actuarial science. As such, the Board would oppose HB 63 only insofar as it is duplicative and unnecessary.
Trustees voted to take a neutral position on the following bills:
  • HB 62 by Representative Ivey sets a minimum employer contribution rate of 20 percent if the System is less than 100 percent funded or if the System reaches 100 percent funded status and the funded ratio later drops below 90 percent, and creates a funding deposit account.
  • HB 78 by Representative Pearson requires the executive director of each of the state and statewide retirement systems to file annual personal financial disclosure statements.
  • SB 14 by Senator Morrish adds employees of the Chenier Plain Coastal Restoration and Protection Authority to LASERS.
  • SB 15 by Senator Mills adds employees of the Iberia Parish Levee, Hurricane and Conservation District to LASERS.
More detailed descriptions of the legislation can be found on the LASERS website.
The 2016 Legislative Session begins March 14.

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