By Marsha Shuler, The Advocate
Capitol news bureau
November 29, 2011
The Louisiana State Employees Retirement System wants a change in state law
that will reduce state government’s pension system contribution by $40 million.
LASERS Deputy Director Maris LeBlanc said Monday that the system’s board of
trustees will ask the Louisiana Legislature to change the calculation method
that determines employer payments.
The change — to a method expected to be recommended by the Governmental
Accounting Standards Board for certain reports — would end up lowering the
percent of payroll that the state would contribute into the system in the
fiscal year that begins July 1.
Those payments along with employee contributions cover projected costs of
future benefits of some 55,000 current employees.
State law requires LASERS to use a “projected unit credit” for each year
the pension benefit accrues for funding purposes. In projecting actuarial
costs, the normal cost is a lower percentage of salary in early years of
service. The normal cost increases annually as each member approaches
retirement eligibility, LeBlanc said.
The proposal would move to what is called an “entry age normal” method
under which normal cost is generally level as a percentage of payroll over the
pension system member’s career, she said.
That’s the method GASB is expect to move for accounting purposes in
measuring the actuarial liability of the system.
LASERS Director Cindy Rougeou said the simple law change would “free up
real dollars” that the state could use to help reduce the LASERS unfunded
accrued liability or long-term debt.
LASERS has a $6.46 billion system debt. The debt is a result of the state —
in decade past — not paying enough into the system, plus interest payments on
that debt and approval of benefits without a source of funding. There have also
been some investment losses.
LeBlanc said the time is right to make the change because some LASERS
pension plans have been closed to new hires. As employees get older state contributions
rates would rise under the current system because there are no new employees to
average out costs, she said.
“If we switch the method right now, we could cut what the state has to put
in,” LeBlanc said.
Instead of paying 28.2 percent of payroll, the state contribution would be
26.6 percent — triggering a $40 million savings, she said.
The system is generally more stable for budgeting purposes if average
demographics of the plan change, according to LASERS actuary.
LASERS administers pension plans covering more than 150,000 employees,
retirees and their families. The system includes almost 55,000 active