Friday, April 11, 2014

Retirees eye debate over COLA’s link to pensions

By: Marsha Shuler
The Advocate

More than 100,000 retired state employees, teachers, school employees and State Police find themselves in the middle of a political squeeze play.

A 1.5 percent increase in their pension checks — the first in six years for most — got tied to a revamp of the system that grants cost-of-living adjustments.

The changes being proposed would limit both the frequency and amount of future COLA increases.

Lawmakers have made it plain: Either accept the COLA system change, or there will be no 1.5 percent bump, the equivalent of an average $29 a month increase for most.

It’s not as if the legislative debate over COLAs, and how they are funded, was not anticipated.

In fact, the leaders of the largest agencies handling government retirees — Louisiana State Employees Retirement System and the Teachers Retirement System of Louisiana — had long predicted COLAs would be the big retirement topic of the year.

COLAs are funded through special “experience accounts” into which are deposited pension system investment gains above a certain specified amount.

The trigger is different, depending on which of the four statewide retirement systems is involved. The Legislature established the accounts not so long ago.

But pension system debts exceed $19 billion, and some legislators want to change the rules.

The liability is largely because of past administrations and Legislatures providing pension benefits without adequately funding them and escalating interest on that debt.

State Rep. Joel Robideaux, R-Lafayette, and other legislators familiar with retirement plans are pushing legislation that would require more of the systems’ investment earnings to go into reduction of their unfunded accrued liability, the money needed to meet pension commitments over time.

The legislation also would link the maximum cost-of-living adjustment that could be awarded to the financial health of each of the government retirement systems.

As each becomes better funded, the potential for COLAs above 1.5 percent increases to a maximum of 3 percent. A system would have to be at least 85 percent funded to get the highest amount. In addition, the age eligibility for COLAs would rise from 60 to 62.

As the push is occurring, the Public Affairs Research Council of Louisiana issued a report encouraging the Legislature to take the opportunity “to make larger and needed changes” in the process.

“The Experience Account takes funds that otherwise would be used to reduce the debt of the retirement system and applies them toward permanent benefit increases,” wrote PAR’s Stephen Procopia. “This method is particularly troublesome for Louisiana’s systems that have only about 60 percent of the funds needed to meet their liabilities, one of the most severe liability shortfalls in the nation.”

PAR reurged a 2005 recommendation: Abolish the experience accounts. It further stated, “Planned COLAs for existing retirees should be funded through employer contributions, while planned COLAs for active employees should be funded by both employer and employee contributions.”

So far, the state employee and teachers retirement systems have not taken positions on the proposed changes. The retirement systems were not blindsided by the Robideaux bill. Officials of each were involved in negotiations over provisions in advance of the bill filing and got some concessions. They are hoping for more concessions.

Meanwhile, state employee and teacher retiree groups’ top priority is the COLA for their members whose only income is their pension checks.

Legislators have not wanted to appropriate funds for cost-of-living increases so, instead, they tapped some “excess” investment earnings.

That decision, as PAR noted, runs counter to efforts to improve the systems’ debt — a debt in large part from past Legislatures and administrations’s failing to properly fund the benefits they approved.

Now, legislators want to modify the plan so more dollars go toward debt reduction and cost-of-living increases become harder to come by.

And the retirees are caught in the middle wishing and hoping for what PAR called “a realistic, affordable, predictable and carefully defined COLA policy.”

Thursday, April 3, 2014

Senate puts conditions on retiree COLAs

Marsha Shuler
The Advocate

The Louisiana Senate advanced legislation Wednesday to give a cost-of-living raise to more than 100,000 retired state employees, teachers, school employees and State Police.

Before approving the measure, senators linked the 1.5 percent increase in retiree pension checks to passage of separate House legislation that would limit the amount and frequency of future increases.

Bills granting cost-of-living adjustments — the first in six years for many — sailed through the Senate without a dissenting vote.

The fate of cost-of-living adjustments for all four groups had already been tied to each other. If one group’s COLA did not make it through the process, no group would get one.

When the bill hit the floor, senators without debate tied the COLAs to a proposed revamp of the policy governing the awards which are funded through “experience accounts.” State Rep. Joel Robideaux, R-Lafayette, proposed the change in recently filed House Bill 1225.

Retirement system investment earnings over an amount set in law go into the special accounts the Legislature set up for the purpose of COLA granting.

Robideaux’s bill would require more of the systems’ investment earning to go into reduction of their unfunded accrued liabilities — money required to fill commitments made to retirees and current members over time.

The systems have more than $19 billion in liabilities — most of it in the Teachers Retirement System of Louisiana and the Louisiana State Employees Retirement System.

“There have been some people who felt like we needed to be a little more responsible to make sure the UAL is paid down,” said state State Sen. Elbert Guillory, R-Opelousas, author of the COLA bills.

Guillory said Robideaux’s bill “does the proper balancing act and does the right thing. It puts some mild reforms into effect.”

Some argue that putting “excess” investment earnings into the COLA accounts creates additional liabilities on the system.

They argue there cannot be “excess” investment earnings as long as the systems are so underfunded.

State Sen. Page Cortez, R-Lafayette, who sponsored the change to each COLA bill, said the legislation would build in “certain benchmarks” that would have to be achieved.

For instance, the House bill would link the maximum COLA that could be awarded to the financial health of each of the systems.

If the system is less than 55 percent funded, no benefit increase would be granted. If it’s 55 percent but less than 65 percent funded, and the Legislature hasn’t granted an increase in the prior year, a 1.5 percent raise could be granted.

The systems would have to be 85 percent or greater funded to get a 3 percent benefit increase.
The COLA bills now move to the House for debate. Two-thirds votes are required for passage.

The Robideaux legislation has not yet been scheduled for a House committee hearing.

Tuesday, April 1, 2014

Legislative Session Update for April 1

The Senate Retirement Committee met Monday, March 31 and four bills were on the agenda that would impact LASERS if passed:

·   SB 13, by Senator Peacock, advanced favorably. The LASERS Board of Trustees requested the change in the System's actuarial funding method from projected unit credit to entry age normal promoted through this bill. The legislation would also make changes regarding excess earnings to be applied to the Unfunded Accrued Liability (UAL) and the Experience Account; and regarding the payment of cost-of-living adjustments (COLAs).

·      SB 26, sponsored by Senator Guillory, advanced favorably. This bill would provide for the assessment of employer contributions to fund projected non-investment related administrative expenses for each of the state retirement systems. The LASERS Board of Trustees is neutral on this bill.

·        SB 27 was voluntarily deferred by Senator Walsworth. SB 27, which is supported by the LASERS Board of Trustees, would provide a supplemental benefit increase (amount is to be determined) payable from the Experience Account. 

·   SCR 5, sponsored by Senator Guillory, advanced favorably. This legislation would memorialize Congress to reduce or eliminate the Windfall Elimination Provision (WEP) and the Government Pension Offset (GPO).

The Senate Finance Committee met Monday, March 31 and voted to advance SB 18. This bill, supported by the LASERS Board of Trustees, would provide a 1.5 percent COLA for eligible retirees, survivors, and beneficiaries.

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

State pension boost wins support

Marsha Shuler
The Advocate

Legislation advanced Monday that would provide more than 100,000 retired state employees, teachers, school employees and State Police with a 1.5 percent increase in their pension checks.

The Senate Finance Committee quickly signed off on legislation that would grant 1.5 percent cost-of-living adjustments — the first in six years for many retirees.

The 1.5 percent would amount to an average $29 a month increase in state employee and teacher pension checks.

Earlier in the day, legislative sponsors sidelined proposals aimed at giving retired state employees and teachers the possibility of a boost in their pension checks above the 1.5 percent.

Both legislators had their eyes set on using money left over in system “experience accounts” after the 1.5 percent proposed cost of living adjustment is implemented.

Excess investment earnings flow into the special accounts set up to fund cost-of-living adjustments .
Other legislation has been filed that would grab the remaining funds and use them to pay toward each system’s long-term liabilities, which are substantial.

State Sens. Mike Walsworth, R-West Monroe, and Gerald Long, R-Winnfield, asked the Senate Retirement Committee to defer action on their bills.

Walsworth said he pulled Senate Bill 27 to allow the retirement committee to decide whether sufficient funds would be available to grant the supplemental benefit for retired state employees.

“We know the situation our retirees are in. They have had a tough time,” Walsworth said. But he said he would leave its fate up to the “wisdom of the committee."

The State Employee “experience account” has $196 million in it. The 1.5 percent cost-of-living raise would cost $106 million.

Tuesday, March 25, 2014

Benefit increases Ok’d for retirees

By Marsha Shuler
The Advocate

Cost of living increases appear to be on the horizon for some 100,000 state employee, teacher, school employee and state police retirees.

The proposed 1.5 percent increases the first in six years for some cleared the Senate Retirement Committee on Monday.

The raise must be approved by a two-thirds vote of the Legislature and the governor before it can be implemented.

Money to fund the cost of living adjustment comes from special “experience accounts” of each of the four statewide retirement systems. The accounts are funded from excess investment earnings of each of the pension systems.

State Sen. Elbert Guillory, R-Opelousas, linked the fate of the four system COLAs together. Under the change, if one group’s COLA does not garner sufficient votes, no one would get a COLA.

“We are all in the same canoe and we want these COLAs to be above any political games that may be played through the system,” Guillory said.

Guillory said pensions have been “eroded by time and inflation” for retirees. He said the COLA is “far from a giant step,” but one made possible through pension systems’ prudent investments and good market returns.

The COLA would mean about a $29 a month increase in the pension checks of some 35,000 retirees of the Louisiana State Employees Retirement System. Retirees must be at least age 60 and retired for a year. It will take $105 million of the $196 million in LASERS experience account to cover the cost. The COLA is in Senate Bill 18.

The Association of Retired State Employee executive director Frank Joubert said there has been a 13 percent increase in the consumer price index since 2008 the last time retirees got a pension increase. “The cumulative effect for six years is very devastating,” said Jobert, noting the rising cost of food, medicine and gasoline.

Some 64,000 retirees of the Teachers Retirement System of Louisiana would also be eligible for a $29 per month pension check increase via Senate Bill 21. The increase will cost $203 million and is funded through an experience account that has a $219 million in it.

About 11,000 Louisiana School Employees Retirement System retirees would get an average $14 a month increase through SB19. The system’s experience account contains $31 million and $15.9 million will be used to fund the increase.

Senate Bill 16 funds the same 1.5 percent increase for retired State Police.

The four bills now move to the Senate floor for debate.