Wednesday, November 21, 2007

Article describes unfunded liability as "growing problem"

An article in the Baton Rouge Business Report examines the unfunded accrued liabilities (UALs) of Louisiana's four statewide retirement systems. The UAL is the difference between the benefits that the system owes to its retirees and their beneficiaries and the money available to pay them.

The two largest systems that cover three-quarters of all state employees—the Teachers’ State Retirement System of Louisiana (TRSL) and the Louisiana State Employees’ Retirement System (LASERS)—were established in 1936 and 1946, respectively, and from day one both were underfunded. That’s because existing employees were grandfathered in and guaranteed a pension upon retirement, even though they had never contributed a portion of their earnings.

It might have been good politics, but it wasn’t good business and it set a precedent that fit well with the state’s laissez faire practice of putting off till tomorrow what it can’t pay for today. The debt grew larger over the years, as legislators generously added benefits for one favored group of employees or another—without ever identifying a funding source. In the mid-1980s, legislators realized they had to do something and proposed a constitutional amendment that voters passed in 1987. It requires that the state’s retirement systems be fully funded—but not until 2028, which at the time was 40 years away.


Officials at the major retirement systems say they’re concerned about the problem and are always trying to find solutions. Without much legislative support, however, that’s easier said than done.

“We can try to make the Legislature and the administration aware of the problem and we do,” says Cynthia Rougeou, executive director of LASERS. “But legally we cannot lobby, so we can only do so much.”

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