Regular Session News #3: Amended PBI funding bill clears first hurdle
Apr 18, 2023
On Monday, the Senate Retirement Committee reported Senate Bill 18 (Sen. Price/co-sponsored by Senate President Cortez) favorably with amendments.SB 18 would establish a new model for providing permanent benefit increases (PBIs) to retirees and beneficiaries of the four state retirement systems for teachers, state employees, school employees, and state police.
The new model changes the funding mechanism, granting criteria, and eligibility criteria for future PBIs. SB 18 would fund future PBIs directly through employer contributions to the retirement system. In other words, funding for PBIs would be built into the annual employer contribution rate, starting in FY 2024-25, and be referred to as the PBI account funding contribution rate (“AFC rate”).
TRSL would then deposit the AFC rate into a new PBI funding account from which PBIs would be paid. The AFC rate would equal one-half of any decrease in the total employer contribution rate each year, and would grow over time until it reaches 2.5% of payroll (“maximum AFC rate”).
Amendments were adopted to clarify that the sum of the required employer contribution rate and the maximum AFC rate could not exceed the projected aggregate employer contribution rate for FY 2023-24. The amendment further clarified that beginning in FY 2039-40, if the sum of those two rates exceeds the allowable percentage in a fiscal year, the amount of the maximum AFC rate would be decreased proportionately in that fiscal year.
Under provisions of SB 18, when the first PBI is paid from the new PBI funding account, it will be calculated on the first $60,000 of a retiree’s benefit, and the eligibility criteria to receive a PBI would change as follows:
The proposed model is projected to allow for a 2% PBI every two to three years. SB 18 now goes to the Senate Finance committee for consideration.
TRSL will keep you informed about the status of bills being monitored throughout the session. You can view all meeting schedules and agendas on the Louisiana State Legislature website. Visit the Legislature page of this website, to see all legislation impacting the retirement system.
Stay tuned for future updates.
The new model changes the funding mechanism, granting criteria, and eligibility criteria for future PBIs. SB 18 would fund future PBIs directly through employer contributions to the retirement system. In other words, funding for PBIs would be built into the annual employer contribution rate, starting in FY 2024-25, and be referred to as the PBI account funding contribution rate (“AFC rate”).
TRSL would then deposit the AFC rate into a new PBI funding account from which PBIs would be paid. The AFC rate would equal one-half of any decrease in the total employer contribution rate each year, and would grow over time until it reaches 2.5% of payroll (“maximum AFC rate”).
Amendments were adopted to clarify that the sum of the required employer contribution rate and the maximum AFC rate could not exceed the projected aggregate employer contribution rate for FY 2023-24. The amendment further clarified that beginning in FY 2039-40, if the sum of those two rates exceeds the allowable percentage in a fiscal year, the amount of the maximum AFC rate would be decreased proportionately in that fiscal year.
Under provisions of SB 18, when the first PBI is paid from the new PBI funding account, it will be calculated on the first $60,000 of a retiree’s benefit, and the eligibility criteria to receive a PBI would change as follows:
- Regular retiree: Must have received a benefit for two years and be at least age 62;
- Disability retiree: Must have been retired at least two years regardless of age;
- Beneficiary of retired member: Retiree would have met the above criteria, if alive;
- Survivor of non-retired member: Must have received a benefit for at least two years and the benefits must have originated from the service of a deceased member who would have been age 62 at the time the PBI is payable.
The proposed model is projected to allow for a 2% PBI every two to three years. SB 18 now goes to the Senate Finance committee for consideration.
TRSL will keep you informed about the status of bills being monitored throughout the session. You can view all meeting schedules and agendas on the Louisiana State Legislature website. Visit the Legislature page of this website, to see all legislation impacting the retirement system.
Stay tuned for future updates.