Wednesday, April 4, 2012

Baton Rouge Advocate Report: Jindal Excluded in Pension Cost

By Marsha Shuler
Capitol News Bureau
April 04, 2012

Gov. Bobby Jindal wants state employees to contribute more toward their future pension benefits.

But legislation Jindal is proposing exempts the governor and other elected officials who are members of the Louisiana State Employee Retirement System, called LASERS, from the 3 percent increase in the contribution rate sought in the legislation.

The 3 percent translates into a near 40 percent increase for rank-and-file members of LASERS. But not for the governor and other elected officials — their contribution rates would not increase.

“... this Act shall not apply to an elected official during the term of office he is serving on July 1, 2012. The contribution rate for such a member shall remain what it was on July 1, 2012, for the duration of his term of office,” according to Senate Bill 52 and House Bill 56, two pension revamp measures backed by Jindal.

The increased contribution rate would apply to those in the elected positions following the current term under the legislation.

In addition to the governor and other statewide elected officials, the measures would exempt judges and some legislators from the rate increases. Louisiana voters passed a constitutional amendment in 1996 stopping part-time elected officials from participating in LASERS, so new legislators, unless otherwise eligible, cannot be members.

Jindal did not respond to three requests for an interview made Tuesday through his press office.

But his deputy chief of staff, Kristy Nichols, said in a prepared statement: “The Governor and other elected officials currently pay a rate of 11.5 percent. After these reforms are passed, state workers will pay a rate of 11 percent.”

While elected officials pay a higher contribution rate today, state law also give them a higher 3.5 percent accrual — the rate at which they earn benefits — compared with employees’ 2.5 percent and they also can retire earlier.

Jindal’s legislation covers the retirement contribution of LASERS members as well as those in the higher education community who are members of the Teachers Retirement System of Louisiana, or TRSL. Jindal argues that the changes are necessary to help reduce the heavy drain on state coffers to cover the costs of a system facing a $6.45 billion unfunded accrued liability, or UAL. The UAL is the total amount by which the retirement system’s benefit obligations exceed the assets of the system.

Most of the $6.45 billion is attributable to promises made decades ago by past governors and Legislatures that went unfunded. Louisiana voters approved a constitutional amendment requiring the state to pay off the old UAL by 2029. The repayment schedule has been back-loaded by prior administrations, meaning increasingly higher state government payments are becoming due.

LASERS and TRSL boards have opposed the increased contribution rate, claiming employees would be paying more than what’s required to pay for the benefit they would receive. Board attorneys have said an argument can be made that it is a payroll tax.

Jindal argues that the current LASERS system cannot be financially sustained.

Jindal recently paid $42,000 to buy back just over two years of LASERS service credit for time, which gives him more years of eligibility on his state retirement. The two years covered his stint as secretary of the state Department of Health and Hospitals. That gives him more than six years of LASERS membership including his first four-year term as governor.

According to LASERS records, Jindal received $15,252 in retirement contribution refund in March 1999, when he left the DHH job. He paid to get service credit restored from Jan. 9, 1996, to Feb. 16, 1998. The $42,000 included interest at 8.25 percent.

Jindal declined several interview requests made over a week. The governor’s press office released a prepared statement quoting Jindal as saying: “It made sense for my retirement planning.”

The LASERS invoice notes that “only the amount shown as ‘refunded’ will be credited to the member’s account. The amount shown as ‘interest’ is not credited to the member’s account and is not refundable in the event the member should terminate State employment and request another refund of contributions after payment of this invoice.”

Jindal has also asked the teachers retirement system for information on how much it would cost to purchase time back from his nearly two years as a member of it including as president of the University of Louisiana System. When he left the teachers system, Jindal got a $28,894 refund. To buy the time back, TRSL said it would cost more than $54,000.

Jindal has not yet purchased that time back, according to TRSL records.

If he does, those years can be transferred to LASERS as credit earned.

“It didn’t make sense for my retirement planning at this point,” Jindal said in a prepared statement.

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