Tuesday, December 4, 2012

Judge Refuses to Toss Pension Suit

A Baton Rouge judge refused Monday to throw out a lawsuit challenging the constitutionality of a new pension plan for future state employees.
The Retired State Employees Association of Louisiana filed suit in August, alleging that the law establishing a 401(k)-type pension plan for future state employees did not get a two-thirds vote in the 2012 legislative session, as required by Louisiana’s Constitution.
The Jindal administration had asked state District Judge William Morvant to dismiss the suit, claiming the association and individual plaintiffs did not have legal standing to file the suit.
Morvant disagreed at the conclusion of a hearing Monday and set a Jan. 24 trial date.
“We got over the first hurdle. We live to fight another day,” association executive director Frank Jobert said outside the 19th Judicial District Courthouse.
Incoming association president Dianna Guillot also attended the hearing.
The Jindal administration contends the law was legally approved by the 2012 Legislature.
John Davis, an attorney for the state and the administration, argued in court Monday that those filing the suit are not affected by the change.
“Nothing is being altered for these plaintiffs,” he told Morvant.
Robert Tarcza, an attorney for the Retired State Employees Association, essentially argued the constitutional requirement for a two-thirds vote on legislation that drives up pension system expenses is in place to protect the state and its taxpayers who must cover a lot of the costs.
The Louisiana House did not approve by a two-thirds vote the “cash balance” plan, which its own actuary advised had a cost attached to it, Jobert has said.
“It’s going to have a cost effect on the existing system,” Morvant said.
The new hire plan, scheduled to go into effect in July, would operate similar to a private sector 401(k) except funds would be protected from investment losses.
An employee would contribute 8 percent of pay and the employer — meaning the state — would contribute 4 percent with all but 1 percent of the investment earnings attributed to the account. The 1 percent would be set aside in a reserve fund as a hedge against investment losses.
The Louisiana State Employees Retirement System opposed the plan, contending it would not provide sufficient retirement income for state employees who have no Social Security safety net.
Jindal has argued the plan would help stem increasing state retirement system financial liabilities while providing a sustainable pension benefit for employees.
State employees today have a “defined benefit” plan that guarantees lifetime benefits at a certain level based on years of service and compensation. Jindal contends that plan is too expensive for the state.
Shannon Bates, press secretary for Jindal, released the following statement Monday evening:
“Today’s ruling was a preliminary procedural matter, and we look forward to a successful defense on the merits in court. We’re confident that the bill was constitutionally passed. The cash balance plan will help get our debt under control, protect taxpayers and provide new state employees with a portable retirement account that realizes investment earnings.”

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