Regular Session News #8: Amended PBI funding bill deferred in Senate Finance
May 2, 2023
On Monday, the Senate Finance Committee amended and deferred Senate Bill 18 (Sen. Price/co-sponsored by Senate President Cortez). 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”).
The adopted amendments would offer additional safeguards for employers should the employer contribution rate decrease at a faster pace than expected. The amendments also provide for the incremental growth of the maximum AFC rate in the event that other measures working their way through the legislative process provide enough funds to pay off the TRSL initial unfunded accrued liability (IUAL) by June 30, 2023.
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.
Reconsideration of SB 18 by the Senate Finance Committee has not yet been scheduled.
In other news:
The House Appropriations Committee amended and reported House Bill 560 (Rep. Zeringue) favorably. HB 560 would make a supplemental appropriation of $49.2 million to the TRSL initial unfunded accrued liability (IUAL) from a portion of the FY 2021-22 surplus funds in the state treasury as required by the Constitution. The amendments were unrelated to TRSL.
HB 560 will now go to the full House for consideration.
House Bill 47 (Rep. Nelson) was deferred until next week in the House Civil Law and Procedure Committee. HB 47, a proposed Constitutional amendment, would require a minimum of 25% of nonrecurring state revenue to be appropriated to the unfunded accrued liabilities (UALs) of the four state retirement systems for teachers, state employees, school employees, and state police, beginning FY 2024-25.
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 our website, to see all legislation impacting the retirement system.
Stay tuned for future updates