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Retirement Manual - Method of Financing

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Webster Parish Clerk of Court

Hon Holli Vining

President
Clerks' Association

 

Board of Trustees Membership Information Active Members Information Regular/DROP Benefits Retirement Manual Retirement Forms

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Methods of Actuarial Valuation Established – (See R. S. 11:22)

The Clerks of Court Retirement and Relief Fund uses the frozen attained age normal funding method.

Unfunded Accrued Liabilities; Amortization – (See R. S. 11:42)

The unfunded accrued liability as of June 30, 1989 was amortized over a period of forty years.  The payments set at that time were structured as an annuity increasing at four and three-quarters percent annually.

Employee Contribution Rate Established – (See R. S. 11:62)

The employee contribution is set at 8.25%of compensation.

Ad Valorem Tax Contributions Established – (See R. S. 11:82)

The system is due ad valorem taxes in the amount of .25% (.5% for Orleans Parish) of aggregate taxes shown to be collectible by the rolls of each parish.

Determination of Employer Contributions – (See R. S. 11:103)

This statute provides a description of the method used to calculate the actuarially required employer contribution for each fiscal year. It states that the employer contribution rate will be equal to the actuarially required employer contribution divided by total projected payroll of all active members for the fiscal year.  The contribution shortfall will be the difference between the actuarially required employer contribution for the fiscal year and the amount of employer contributions actually received, after adjustments for irregular contributions. 

The actuarially required employer contribution is equal to the sum of:

  1. The employer's normal cost for that fiscal year, computed as of the first of the fiscal year using the system's actuarial funding method as specified in R.S. 11:22 and taking into account the value of employee contributions, including interest thereon, such employer's normal cost projected to the middle of the fiscal year at the assumed actuarial interest rate.
  2. The projected non-investment related administrative expenses for the fiscal year.
  3. That fiscal year's payment, computed at the first of that fiscal year and projected to the middle of that fiscal year, at the actuarially assumed interest rate necessary to amortize previous years' shortfall amounts over the future working lifetime of current participants.
  4. That fiscal year's payment, computed as of the first of that fiscal year using that system's amortization method specified in R.S. 11:42, necessary to amortize the unfunded accrued liability as of the end of the fiscal year ending 1989, such unfunded accrued liability computed using the system's actuarial funding method as specified in R.S. 11:22, such payment projected to the middle of that fiscal year at the actuarially assumed interest rate.

The net direct actuarially required employer contribution for each fiscal year, is to be that dollar amount equal to the sum of the above items, reduced by the dedicated ad valorem taxes and revenue sharing funds and rounded to the nearest one-quarter percent.

Employer Contributions; Determination Date; Notification – (See R. S.  11:104)

The employer contribution rate is to be determined by the Public Retirement Systems' Actuarial Committee by the fifteenth day of January of each year.  Within ten business days thereafter, the chairman of the Public Retirement Systems' Actuarial Committee should notify each employer or the retirement system that the referenced rate will be recommended to the legislature for approval, or that the given rate should be used by the retirement system. 

Employer Contributions; Maintaining Rates – (See R. S. 11:105)

In any fiscal year during which the net direct employer contribution rate would otherwise be decreased, the board of trustees of the fund is authorized to maintain the net direct employer contribution rate in effect at the time that the decrease would otherwise occur according to R. S. 11:103.

Any excess funds collected under this statute resulting from maintaining the contribution rate are combined with any contribution surplus, or offset by any contribution shortfall, and the resulting balance, if greater than zero, is applied, until exhausted, exclusively for and in the order of the following purposes:

  1. To reduce the frozen unfunded accrued liability, if any; however, the future payments on the frozen unfunded accrued liability shall continue to be made according to the original amortization schedule establishedto initiate compliance with the requirements of Article X, Section 29(E)(2)(c) and (3) of the Constitution of Louisiana until the outstanding balance is fully liquidated.
  2. To reduce the outstanding amortization charge base or bases with the greatest number of outstanding payments; however, the future payments on the base or bases shall continue to be made according to the original amortization schedule until the outstanding balance is fully liquidated.
  3. To establish a contribution surplus amortization base or add to the otherwise established contribution surplus base for the fiscal year if an immediate gain funding method is used, or to reduce the present value of future employer normal costs if a spread gain funding method is used.

Additional Employer Contributions; Increasing Rates – (See R. S. 11:106)

The Board is authorized to increase the net direct employer contribution rate detailed in the section titled “Employer Contributions” by up to three percent more than the approved rate.

If the board elects to increase the net direct employer contribution rate, any excess funds resulting from increasing the contribution rate will be combined with any contribution surplus, or offset by any contribution shortfall, and the resulting balance, if greater than zero, will be applied exclusively for and in the order of the following purposes:

  1. To reduce the frozen unfunded accrued liability, if any.  However, the future payments on the frozen unfunded accrued liability must continue to be made according to the original amortization schedule established to initiate compliance with the requirements of Article X, Section 29(E)(2)(c) and (3) of the Constitution of Louisiana until the outstanding balance is fully liquidated.
  2. To reduce the outstanding amortization charge base or bases with the greatest number of outstanding payments.  However, the future payments on the base or bases shall continue to be made according to the original amortization schedule until the outstanding balance is fully liquidated.
  3. To establish a contribution surplus amortization base or add to the otherwise established contribution surplus base for the fiscal year, if an immediate gain funding method is used, or to reduce the present value of future employer normal costs, if a spread gain funding method is used.

Additional Employer Contributions; Reducing Rate Decreases –(See R. S. 11:107)

Notwithstanding the provisions of law detailed above, in any fiscal year during which the net direct employer contribution rates would otherwise be decreased, the board is authorized to set the employer contribution rate at any point between the previous year’s employer contribution rate and the decreased rate that would otherwise occur.  Any excess funds resulting from the additional contributions will be applied as provided in R. S. 11:105(C).

Funding Deposit Account – (See R. S. 11:107.1)

This section establishes a funding deposit account which will be credited and charged solely as provided in this Section.

Under the law, a funding deposit account was established.  This section details the items that credit and charge the balance in the account.  The account was set equal to zero as of December 31, 2008.  For fiscal years ending on or after June 30, 2009in which the board of trustees elects or previously elected to set the net direct employer contribution rate higher than the minimum recommended rate, all surplus funds collected by the system will be credited to the system's funding deposit account.

The funds in the account will earn interest annually at the board-approved actuarial valuation interest rate.

Beginning with the June 30, 2009 valuation, the board of trustees may in any fiscal year direct funds, if any, in the account be charged for the following purposes:

  1. To reduce the unfunded accrued liability as prescribed in this Subpart.
  2. To reduce the present value of future normal costs for systems using an aggregate funding method.
  3. To pay all or a portion of any future net direct employer contributions.

In no event can the funds charged from the account exceed the outstanding account balance.  If the board of trustees elects to charge funds from the funding deposit account under item (3) above, the percent reduction in the minimum recommended employer contribution rate otherwise applicable will be determined by dividing the interest-adjusted value of the charges from the funding deposit account by the projected payroll for the fiscal year for which the contribution rate is to be reduced.

For funding purposes, any asset value utilized in the calculation of the actuarial value of assets of a system excludes the funding deposit account balance as of the asset determination date for such calculation.  For all purposes other than funding, the funds in the account will be considered assets of the system.

Tax Sheltering of Employee Contributions – (See R. S. 11:154)

Tax sheltering of employee contributions means that a member does not pay federal income taxes on, and the employer does not report as taxable income, that portion of income that is deducted from gross earnings and remitted to the retirement system as an employee contribution.

All employee contributions withheld from a member’s earnings on and after January 1, 2000 are tax sheltered.  Therefore, the employee does not pay federal income taxes on, and the employer does not report as taxable income, such contributions.  Employee contributions that were withheld from a member’s earnings prior to January 1, 2000 were not given this treatment. 

Example: Assume an employee’s salary is $1,000 per month.

Such an employee would contribute $82.50 (8.25% of earnings).  Prior to January 1, 2000, the taxable income was $1,000 per month.  However, on and after January 1, 2000, the taxable income is only $917.50 per month.  This represents the employee’s gross monthly salary of $1,000 minus the employee’s sheltered retirement contribution of $82.50. At the end of the calendar year, the annual taxable earnings that would be reported to the Internal Revenue Service (IRS) under such a scenario are $11,010 ($917.50 ´ 12), not $12,000 ($1,000 ´ 12) as would be the case without tax sheltering.

Purpose; Elimination of Unfunded Accrued Liability – (See R. S. 11:271)

This statute provides for the furnishing of accurate actuarial data in order to facilitate the imperative that the system be maintained on a sound actuarial basis, and that such maintenance requires that the unfunded accrued liability of the system be eliminated.

In addition, the statute requires the system to provide certain reports to the legislative auditor on a fiscal year basis, at least ninety days prior to the convening of the legislature in regular session.  These reports are to be provided using calculation methods and forms prescribed by the legislative auditor.  The reports are to include the amount of funding, stated as a percentage of payroll, which is necessary to meet the system's normal cost and to amortize, at the valuation rate of interest, the system's unfunded accrued liability.
 

Failure to Timely Remit Contributions – (See R. S. 11:281)

Payments of employer and employee contributions which are paid after becoming delinquent will include interest to be paid to the retirement system at the rate of legal interest computed from the date the payments became delinquent.

Dedication and Payment of Certain Tax Revenue – (See R. S. 11:1561)

Each sheriff, ex officio tax collector, or other person responsible for the collection of taxes shown to be collectible on the tax rolls of each parish other than Orleans must deduct one-fourth of one percent of those taxes, and remit the deducted amount to the Clerks' of Court Retirement and Relief Fund.  The tax collector or other person responsible for the collection of taxes shown to be collectible by the tax rolls in Orleans Parish must deduct one-half of one percent of those taxes, and remit the deducted amount to the Clerks' of Court Retirement and Relief Fund.  The monies must be remitted periodically and at the same time that each such official disburses funds to the tax recipient bodies of his respective parish.

If the official responsible for the collection of the taxes fails to remit the monies due to the Clerks' of Court Retirement and Relief Fund as stated above, the board of trustees is empowered to submit a resolution to the state treasurer making demand for the monies due to the fund.  The resolution must certify which parish is delinquent in payment and the amount owed.  Before distribution of any revenue sharing dollars otherwise to be distributed to each delinquent parish, the treasurer must deduct from them and pay to the fund the amount due from the respective parish.

Employee and employer contributions – (See R. S. 11:1562)

Each employer must deduct eight and one-quarter percent of the salary of each person who is required to be a member of the fund (see the section titled “Membership” above).  Such deduction will be made during each regular payroll period and must be paid to the fund monthly by each clerk within ten days after the close of the month for which was collected.  In addition, each employer must pay to the fund an amount equal to nine percent of all salaries paid by each clerk to members of the fund.  These employer contributions will be paid from each clerk's salary fund or, if there is no salary fund, out of any fund from which the clerk pays the salaries of his employees and himself.

The failure of any clerk to make the required deductions, or to remit to the fund all required contributions within thirty days of becoming due, will render him liable to suspension of his membership and participation in the fund at the discretion of the board.  If the board suspends any clerk it must notify the clerk of his suspension by registered mail sent to him at his address as it appears upon the records of the system, and it must prescribe the conditions and terms pursuant to which he may be reinstated.  If any clerk continues to be delinquent in the payment of the required contributions for a period exceeding ninety days, he will be personally liable to the fund in his individual capacity for the delinquent contributions and for a penalty equal to twenty-five percent of all delinquent contributions.  If and when the delinquent contributions and penalty are collected, both will be paid into and constitute a part of the fund.

Notwithstanding any other provision of law to the contrary, in lieu of deducting the employee contribution from the salary of each clerk, deputy, and employee who is required to be a member of the fund, upon giving written notice to the board of trustees fifteen days prior to the beginning of a fiscal year, each employer may elect to pay out of the clerk's or board's operating funds all or any portion of the employee contributions which would otherwise be deducted from the salary of each employee who is a member of the fund.  If a clerk or a board elects to pay a portion of the contributions required as stated above, then the portion will be in the same proportion of the salary of each employee in the office of the clerk or board, and no employee will be able to choose the amount of such payment.  Such payments will specifically not be included as salary or monthly average final compensation for purposes of benefit computation.  If such election is made, the election will remain in effect for a fiscal year and may be rescinded only upon providing written notice to the board of trustees fifteen days prior to the beginning of a fiscal year.

Eight and one-quarter percent of all per-page transcription payments must be deducted monthly from each such payment and that amount, plus the appropriate employer contribution applied to such payments, as otherwise established by law, must be remitted to the fund on a monthly basis within ten days after the close of each month by the judicial administrator or other appropriate officer of the court for which the transcriptions were made.  Such reports must be distinct and separate from the reports of regular salary otherwise required by law.

Deficiencies – (See R. S. 11:1563)

If at any time the monies of the fund are insufficient to pay each retiree and beneficiary the full amount to which he is entitled, equal percentages of the full amount will be paid to each retiree and beneficiary until the fund is replenished so as to warrant resumption of the payment of the full amount to each retiree and beneficiary.

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