Thursday, February 5, 2015

The Facts about Retirement Changes

The following guest commentary by LASERS Executive Director Cindy Rougeou is in response to Jim Beam's column in the Lake Charles American Press on February 1.

The Facts about Retirement Changes

Several recent reports, containing inaccurate data, are challenging the sustainability of public retirement systems nationally and in Louisiana. By failing to note the multi-billion dollar pension reforms that have been enacted by our Legislature over the past 10 years, these reports do a great disservice.

It is important to recognize the work of the Louisiana Legislature over the past decade in adopting significant pension reforms that are expected to save LASERS nearly $3 billion; thereby reducing taxpayer costs while significantly improving LASERS sustainability.  It is surprising that the passage and immense impact of these reforms seem to be the best kept secret in our state. Those reforms enabled the LASERS Board of Trustees to approve and recommend additional reforms to our cost method and actuarially assumed rate of return that will provide greater budget stability going forward.

We reduced our actuarially assumed rate of return to 7.75 percent, a more fiscally responsible expectation.  Changing our cost method did result in a one-time increase in the unfunded accrued liability (UAL) but that cost was almost entirely offset by the decrease in the cost of the accruing benefit. The employer contribution to LASERS consists of the debt payment and the employer cost of the accruing benefit. For purposes of comparison, a private employer pays 6.2 percent to Social Security for the cost of the accruing benefit; next year the State will be paying 3.54 percent for the cost of the LASERS accruing benefit. And as you may recall, our members do not participate in Social Security.

It is the initial unfunded accrued liability (IUAL), not the total UAL that must be paid off by the year 2029. We are on track for this pay-off to occur; and with recent legislative changes, this pay-off may occur earlier than 2029.

Because of the 2014 reforms, the State will be paying LASERS $63 million less next year than was paid the year before and the employer contribution rate will be reduced. I am also proud that LASERS Benefits Louisiana by generating $1.27 billion in state economic activity. Louisiana has actually been on the leading edge of pension reform.  To say that nothing is being done, could not be further from the truth.

Monday, January 26, 2015

Battle over Louisiana pension funds shaping up

Marsha Shuler
The Advocate

More than $300 million is sitting in state employee and teachers pension system accounts reserved for future cost- of-living raises for retirees.

A state senator wants the 90,000-plus retirees to get an immediate boost in their pension checks. But some of the Louisiana Legislature’s budget committee members are eyeing the dollars to help close a $1.4 billion — and growing — gap between spending and revenues in the state budget.

Cindy Rougeou, Louisiana State Employees Retirement System executive director, said it would not be the first time dollars were “swept” from the retiree cost-of-living accounts. She said it happened in 2009 with dollars going to payments on the systems’ unfunded accrued liability. Commonly called the UAL, the term refers to the amount of money necessary to pay out all promised future benefits. The state contributes extra dollars to pay down the immense debt.

“They are already giving us $63 million fewer dollars in employer contributions this coming year because our investment earnings have been so good,” Rougeou said.

The Teachers Retirement System of Louisiana has $218 million available in the accounts used to pay cost-of-living bumps. The Louisiana State Employees Retirement System has $117 million, which is sufficient to cover a 1.5 percent raise.

The money cannot legally be taken out of pension systems for use in funding other areas of the budget. But the dollars can be used toward reducing the pension systems’ long-term debts, which stand at $19 billion: $12 billion for teachers’ retirements and $7 billion for state government retirees. The payments toward the UAL would reduce the required state contribution. That would free up state dollars for other purposes.

“We have a long way to go. Some people already have designs on the money,” said Retired State Employees Association legislative liaison Frank Jobert. The large stash of cash is already getting the attention of some members of the Legislature’s budget committee who are “wondering if they can get access to it.”

Jobert said retirees want the money reserved for its intended purpose — cost-of-living adjustments to retiree pension checks.

The retiree group will publish the required public notice that legislation will be filed aimed at granting a cost-of-living increase, Jobert said.

Retirees will push for a 1.5 percent cost-of-living increase in the fiscal year that begins July 1 with help from Senate Retirement Committee Chairman Elbert Guillory, R-Opelousas. Retirees got a 1.5 percent adjustment during the current fiscal year. Under a 2014 law, retirees would be eligible for cost-of-living adjustments only every other year, meaning there would not be one in the new fiscal year, which begins July 1.

Neither Guillory nor House Retirement Committee Chairman Kevin Pearson, who are both LASERS board members, attended LASERS’s meeting on Friday.

During an interview later in the day, Guillory said he will file legislation to grant a $50 a month extra payment to retirees or a 1.5 percent cost-of-living raise.

Guillory said the increase would offset the cost of (state) health insurance because those premiums have skyrocketed. “This year is crucial because of those high insurance costs,” Guillory said.

The Jindal administration’s revamp of the state’s Group Benefits insurance program will require members to pay nearly 11 percent more in premiums beginning July 1.

Guillory said he has heard talk of using the cost-of-living or COLA accounts to help balance the budget.

“It’s one of my great concerns. It should be used for the purpose it was set up,” Guillory said. “It’s there to help retirees, not funnel money into the general fund in any way.”

Contacted Friday afternoon, Pearson, R-Slidell, said he has “severe reservations” about the COLA proposal and raiding the fund.

“It’s going to take a lot of will from some to take that money and put it toward the UAL,” Pearson said. “I don’t know that it’s good to make it a regular practice.”

Friday, January 23, 2015

LASERS Board Elects New Chair and Vice Chair

The LASERS Board of Trustees unanimously elected Thomas Bickham and Janice Lansing as new Chair and Vice Chair, respectively, at its January meeting. The 13-member policy-making Board of Trustees has fiduciary oversight over LASERS.

Thomas Bickham, Undersecretary of the Department of Public Safety and Corrections, will lead the LASERS Board as Chair. Bickham has served as an active member Trustee since 2012. He most recently chaired the Management Committee of the LASERS Board.

Janice Lansing, Chief Financial Officer of the Coastal Protection and Restoration Authority, will serve as the new Vice Chair. Lansing has served as an active member Trustee since 2010. She most recently chaired the Investment Committee of the LASERS Board.

LASERS Executive Director Cindy Rougeou said, “Under the leadership of Thomas Bickham and Janice Lansing, we will continue to serve our members well in 2015 and ensure that LASERS Benefits Louisiana.”