Based on the projected August 31, 2019 Actuarial Valuation.

Law Enforcement and Custodial Officer Supplemental Retirement Fund (LECOSRF)	Current	Proposed	Difference
Employer Contribution	1.49%	1.53%	0.04%
Employee Contribution	0.50%	0.50%	0.00%
Total Contribution	1.99%	2.03%	0.04%
31-Year Contribution Rate (as a % of pensionable pay)	3.14%	3.09%	-0.05%
Unfunded Actuarial Accrued Liability (millions)	$546.60	$546.60	$0.00
Amortization Period (years)	Infinite	Infinite	N/A

ACTUARIAL EFFECTS
The bill would allocate additional court cost proceeds to the Law Enforcement and Custodial Officer Supplemental Retirement Fund (LECOSRF). Due to the changes in the bill, LECOSRF would receive additional court fees which would increase the employer contribution as a percentage of payroll by 0.04%. The increase in contributions would not have a significant impact on the funded status of LECOSRF.

The PRB's actuarial review (AR) states that LECOSRF is currently actuarially unsound; under the bill, the funding level would improve slightly, however the system would remain actuarially unsound.

SYNOPSIS OF PROVISIONS
The bill would amend Local Government Code Section 133.102 to change court costs for various levels of convictions and reallocate the proceeds among several state agencies. The bill also would reduce the minimum percentage that could be allocated to LECOSRF, a supplemental plan of the Employees Retirement System (ERS), from 11.1426% to 7.8898%.

The bill would take effect January 1, 2020.

FINDINGS AND CONCLUSIONS
Although the percentage of costs allocated to LECOSRF would be lower, the AA estimates the court cost proceeds allocated to LECOSRF would increase by approximately $574,000 in fiscal year 2020 and $1.148 million in fiscal years 2021 and thereafter. The AR states that the additional proceeds are not expected to have an impact on the funded status of the plan or be sufficient to lower the amortization period from infinite to a finite number of years but would decrease the remaining State contribution necessary to amortize the unfunded actuarial accrued liability over a 31-year period from 3.14% to 3.09%.

The AR notes that the bill would have no direct impact on members of the system.

METHODOLOGY AND STANDARDS
The LECOSRF analysis relies on the participant data, financial information, benefit structure and actuarial assumptions and methods used in the LECOSRF updated actuarial valuation for February 28, 2019 and projected to August 31, 2019.

According to the PRB actuary, the actuarial assumptions, methods and procedures are reasonable for the purpose of this analysis. All actuarial projections have a degree of uncertainty because they are based on the probability of occurrence of future contingent events. Accordingly, actual results will be different from the results contained in the analysis to the extent actual future experience varies from the experience implied by the assumptions. This analysis is based on the assumption that no other legislative changes affecting the funding or benefits of LECOSRF will be adopted. It should be noted that when several proposals are adopted, the effect of each may be compounded, resulting in a cost that is greater (or less) than the sum of each proposal considered independently.

SOURCES
Actuarial Analysis by R. Ryan Falls, FSA, EA, MAAA, Gabriel, Roeder, Smith & Company, April 5, 2019.

Actuarial Review by Kenneth J. Herbold, ASA, EA, MAAA, Staff Actuary, Pension Review Board, April 6, 2019.

GLOSSARY
Actuarial Accrued Liability (AAL) -The portion of the PVFB that is attributed to past service.
Actuarial Value of Assets (AVA) - The smoothed value of system's assets.
Amortization Payments - The yearly payments made to reduce the Unfunded Actuarial Accrued Liability (UAAL).
Amortization Period - The number of years required to pay off the unfunded actuarial accrued liability. The State Pension Review Board recommends that funding should be sufficient to cover the normal cost and to amortize the UAAL over as brief a period as possible, but not to exceed 30 years, with 10-25 years being the preferable target range.
Actuarial Cost Method - A method used by actuaries to divide the Present Value of Future Benefits (PVFB) into the Actuarial Accrued Liability (AAL), the Present Value of Future Normal Costs (PVFNC), and the Normal Cost (NC).
Funded Ratio (FR) - The ratio of actuarial assets to the actuarial accrued liabilities.
Market Value of Assets (MVA) - The fair market value of the system's assets.
Normal Cost (NC) - The portion of the PVFB that is attributed to the current year of service.
Present Value of Future Benefits (PVFB) - The present value of all benefits expected to be paid from the plan to current plan participants.
Present Value of Future Normal Costs (PVFNC) - The portion of the PVFB that will be attributed to future years of service.
Unfunded Actuarial Accrued Liability (UAAL) - The Actuarial Accrued Liability (AAL) less the Actuarial Value of Assets (AVA).