Tuesday, April 26, 2016

Louisiana House OKs cost of living increase for state retirees, but there's still another hurdle

Mark Ballard
The Advocate

Not a single Louisiana representative and senator has voted against raising the monthly pension checks for most of the state’s retirees.
But the bill that passed the full House on Monday 92-0 is not the same as the version that passed the Senate 35-0 on April 13.
The differences between the House and Senate measures would have to be worked out — both chambers must agree on the exact language — before any cost of living adjustments could be approved and sent to the governor for his signature.
The cost of living adjustment, for about 125,000 retirees beginning on July 1, in Senate Bill 2 is conditioned on the passage of two other bills that tweak how the retirement system funds retirements and pays for administrative costs. House Bill 32 carries no conditions and would simply raise the benefits.
“The key point,” said Rep. Sam Jones, the Franklin Democrat who sponsored HB32, “is we have consensus to pass a COLA.”
HB32 and SB2 would give retired state workers and public school teachers over the age of 60 a 1.5 percent increase. Retirees in the systems that handle the pensions for State Police employees and public school workers over the age of 60 would receive an increase of about 2 percent.
The average monthly increase would be about $30 but could vary based on the circumstances of individual retirees and the retirement systems to which they belong. It would be the first cost of living adjustment in two years for many retirees. For others, it’ll be the first raise in benefits in at least eight years, Jones said.
The state is in a fiscal crisis and is still looking at a budget deficit of about $600 million for the fiscal year that begins July 1, without any real plan to bridge that gap short of draconian cuts to hospitals, higher education institutions and possibly not funding the college tuition-paying Taylor Opportunity Program for Students, or TOPS, for more than 30,000 students already qualified for the scholarships.
But the money would come from an account where excess investment earnings were deposited and the $385 million ultimate cost would not impact the state budget. The money in the funds cannot legally be used for other state expenses.
Part of the reason for the $20 billion debt issue involving retirement accounts is the COLAs granted over the years. Generally, the additional dollars were tacked onto the debt, which state government didn’t adequately fund.
Two years ago, Act 399 set criteria that allowed cost of living adjustments every other year, provided enough money was in the excess investment accounts and the systems hit predetermined levels of funding. Part of the criteria is inflation, which last year was below the amount needed to trigger the increased benefit.
Both Jones and Sen. Barrow Peacock, who sponsored SB2, acknowledge that the federal consumer price index last year wasn’t high enough. However, they argue, the cost of health care and food, on which seniors spend most of their money, rose last year, while the collapse of energy prices drove down the official inflation rate. If looking at the rise in consumer prices over the past two years, the inflation rate is plenty high enough, both Jones and Peacock said.
While Jones’ House bill puts no conditions on the adjustment, Peacock’s Senate Bill 2 would grant a COLA only if two other measures also are approved.
A Shreveport Republican who chairs the Senate retirement panel, Peacock said during an interview moments before the House vote that he still wants to link the cost of living adjustment to his two other bills. Senate Bill 18 would tinker with how the retirement systems are funded, and Senate Bill 5 would require administrative costs to be paid annually rather than rolled into the long-term debt.
“The important thing is to help the long-term soundness of the retirement system,” Peacock said.
Jones said he is OK with the two measures attached to Peacock’s cost of living adjustment bill. But the two of them haven’t yet met to decide how best to proceed.
All three Senate bills are scheduled for a hearing Thursday before the House Retirement Committee.

HB32 now goes to the Senate, where it’ll likely be assigned to Peacock’s committee for a hearing.

Original article here.

Tuesday, April 19, 2016

Bills to Change Plans for New Hires to be Heard in House Retirement Committee

The House Retirement Committee is scheduled to meet Thursday, April 21, 2016 at 9:00 a.m. The following bills, sponsored by Rep. Ivey, are on the agenda:
  • HB 45 (Constitutional Amendment) would modify existing constitutional guarantees to provide that only benefits annuitized by a state retirement system will be guaranteed by the State and that the accrued benefits of members that are annuitized and calculated based on accrual rate and average compensation shall not be diminished or impaired. Current constitutional language provides that the "state shall guarantee benefits payable to a member of a state retirement system or retiree or to his lawful beneficiary upon his death." And, that "accrued benefits ... shall not be diminished or impaired."
  • HB 46 (Constitutional Amendment) would apply for new hires on or after July 1, 2017, whose benefits are guaranteed by the Constitution. The bill specifies that member and employer shall share equally in the normal cost of the member's benefit and any Unfunded Accrued Liability (UAL) associated with an augmentation of the member's benefit.
  • HB 50 would create a new retirement plan with tiered accrual rates for new hires on or after July 1, 2018. 
  • HB 65 would create a new hybrid retirement plan for new hires on or after July 1, 2018.
The LASERS Board of Trustees opposes HBs 45, 46, 50, and 65 since our members do not contribute to Social Security and the Board recognizes the importance of retirement security. In addition to being deemed a qualified plan by the IRS, the existing defined benefit plan has an extremely modest normal cost of four percent of pay. The Board is also aware that over the past decade, the legislature has adopted significant pension reform that, for LASERS alone, is expected to reduce costs by $3 billion.
 
Also on the agenda is:
  • HB 49 (Ivey) which would stipulate that rather than a set rate, contribution rates for new hires on or after July 1, 2017, shall be calculated each year to 50 percent of the normal cost, plus that year's amortization payment of any Unfunded Accrued Liability (UAL) associated with benefit augmentations, plus that year's amortization of overpayment or underpayment of employee contributions. The change is contingent upon passage of a constitutional amendment.
The LASERS Board of Trustees opposes HB 49 as it recognizes that members who obtain refunds would be repaid funds that should be applied to the Unfunded Accrued Liability (UAL). It could also result in a member paying the UAL of another member, for no corresponding benefit, thereby constituting a tax. The Board also noted that since members would be unsure of the amount of their contribution, they would be unsure of their amount of compensation.

Please note that meeting schedules and agendas are subject to change. Check the LASERS website daily for updates and for detailed information about proposed retirement legislation that may impact LASERS if passed.


Experts to Provide Testimony at House Retirement Committee Meeting

Keith Brainard
Keith Brainard, Research Director for the National Association of State Retirement Administrators (NASRA) is expected to testify at the House Retirement Committee meeting on Thursday, April 21. Mr. Brainard collects, prepares and distributes to NASRA members news, studies, and reports pertinent to public retirement system administration and policy. 
 
Mr. Brainard is co-author of The Governmental Plans Answer Book, Third Edition, and he created and maintains the Public Fund Survey, an online compendium of public pension data sponsored by NASRA. He created the State & Local Pension Exchange, predecessor to the Public Fund Survey and recipient of the Award for Excellence in Government Finance from the Government Finance Officers Association. He has discussed public pension issues before Congress, state legislative committees, public pension boards of trustees, and on multiple media outlets.
 
He is an appointed member of the Texas Pension Review Board and an elected member of the Georgetown, Texas, city council. Mr. Brainard previously served as manager of budget and planning for the Arizona State Retirement System and as a fiscal analyst for the Texas and Arizona legislatures. He holds a B.A. and an M.P.A. from the University of Texas at Austin.

Robert Klausner
Robert D. Klausner, principal in the law firm of Klausner, Kaufman, Jensen & Levinson, is also expected to testify at the House Retirement Committee meeting on Thursday, April 21.  For 39 years, he has been engaged in the practice of law, specializing in the representation of public employee pension funds.  The firm represents state and local retirement systems in more than 20 states.
 
Mr. Klausner has assisted in the drafting of many state and local laws on public employee retirement throughout the United States. He is a frequent speaker on pension education programs and has also published numerous articles on fiduciary obligations of public employee pension trustees.  He is co-author of the book State and Local Government Employment Liability, published by Thomson-Reuters West Publishers and is the author of the first comprehensive book on the law of public employee retirement systems, State and Local Government Retirement Law: A Guide for Lawyers, Trustees, and Plan Administrators, originally published in April 2009, and an expanded version which was published in November 2014. 
 
Mr. Klausner graduated Phi Beta Kappa from the University of Florida with a Bachelor of Arts and from the University Florida College of Law with the degree of Juris Doctor.  For more than 15 years, Mr. Klausner has been listed in the publication The Best Lawyers in America and holds an "AV pre-eminent" rating, the highest rating for competence and ethics, from Martindale Hubbell national lawyer rating service. In 2008, Mr. Klausner successfully represented the Commonwealth of Kentucky and the Kentucky Retirement Systems in the United States Supreme Court in Kentucky Retirement Systems v. Equal Employment Opportunity Commission, 128 S. Ct. 2361 (2008).

Monday, April 18, 2016

Retirement COLA bill passes House committee

Jim Beam
American Press

The House Retirement Committee approved a measure Thursday to provide for a cost-of-living adjustment for retirees and beneficiaries of four state retirement systems.

House Bill 32 moves to the full House. A similar measure passed the Senate and is awaiting a House committee hearing.

The four systems are the Louisiana State Employees’ Retirement System, the Teachers’ Retirement System of Louisiana, the Louisiana School Employees’ Retirement System and the State Police Retirement System.

The increase would only be paid on the first $60,000 of a retiree’s or beneficiary’s benefit. The maximum amount would be 1.5 percent of the retiree’s benefit for LASERS and the TRSL, 1.9 percent for LSERS and 2 percent for the SPRS.

H.B. 32 is by Rep. Sam Jones, D-Franklin. His measure would override current law for one year and provide a larger COLA than what recipients would have otherwise received July 1. Each state system board would grant the COLA provided for under H.B. 32 on July 1 of this year. Funds would come from the systems’ experience accounts.

If the balances in the accounts on June 30 are less than the cost of the COLAs, the percentage increase would be reduced accordingly.

Eligible under current law for the COLA are any regular retiree who has received a benefit for at least one year and who has attained at least age 60; any beneficiary of a regular retiree, beneficiary, or both combined have received a benefit for at least one year and if the deceased member would have attained age 60; and any disability retiree or any beneficiary who receives benefits based on the death of a disability retiree if benefits have been received by the retiree, beneficiary or both combined for at least one year.

LASERS has 33,575 regular retirees, 5,834 survivors and beneficiaries, and 2,457 disabled retirees. Total cost of their COLA would be $123.1 million. The TRSL has 58,751 retirees, 6,771 survivors and beneficiaries, and 4,121 disabled retirees. Total coast of their increase would be $224.7 million.
LSERS has 10,146 retirees, 1,662 survivors and beneficiaries, and 331 disabled retirees. Total cost of their increase would be $23.8 million. The SPRS has 696 regular retirees, 335 survivors and beneficiaries, and 62 disabled retirees. The cost of their increase would be $11.2 million.

Sen. Barrow Peacock, R-Bossier City, is sponsor of the similar retirement measure. His Senate Bill 2 was approved 35-0 by the full Senate and is awaiting a hearing in the House Retirement Committee.


Peacock’s measure has one major difference from Jones’ bill. Peacock’s is linked to passage of two other bills. S.B. 5 would require the retirement systems to timely pay administrative costs rather than rolling them over. S.B. 18 would reduce the time for paying off retirement debt from 30 to 20 years.