Monday, March 25, 2013

La. retirees board looks at legislation

By Marsha Shuler
The Advocate
Capitol News Bureau

The Louisiana State Employees Retirement System board voted Friday to endorse legislation that would delay implementation of a 401(k)-type pension plan for new hires, with a Jindal administration representative going along.

The board also, with its administration member objecting, voted to oppose legislation billed as a measure to fix problems with implementation of the new so-called “cash balance” plan.

LASERS Executive Director Cindy Rougeou said the legislation fails to address pension system administrative concerns and still does not include provisions that would provide “retirement security” in a state where state employees are not in the Social Security system.

Steven Procopio, chief of staff for the Division of Administration, said LASERS should support the legislation, billing it as purely “cleanup.” He said he did not understand the opposition.

The legislation has been prefiled for consideration in the legislative session that opens April 8.

Gov. Bobby Jindal’s signature retirement bill of the 2012 session is scheduled to go in effect July 1. The administration has resisted a delay in the plan which operates similar to a 401(k) pension plan but differs because the employee accounts cannot be reduced if there are investment losses.

But on Friday, Procopio conditionally supported a resolution to suspend the law until July 1, 2014.

The resolutions cite an unresolved constitutional challenge as well as federal tax and Social Security equivalency determinations that have not been made.

Procopio said he could go along if the resolution only mentioned the need for a determination on the Social Security equivalency of the plan prior to implementation. If it does not provide equivalent benefits, employees and the state would have to also make Social Security payments.

Procopio said the tax ruling was an entirely different matter and the Internal Revenue Services allows time for states to fix problems before penalties are levied.

The board agreed.

A state district judge ruled the statute did not get the constitutionally required two-thirds vote to pass a retirement measure that adds to costs. The Legislature actuary said the cash-balance plan would increase expenses. A Jindal hired actuary said it did not.

The Louisiana Supreme Court heard arguments earlier this week on the issue. The administration had sought an expedited review because of the July 1 effective date and the legislative session starting April 8, where any problems that might arise could be rectified.

In addition, the tax ramifications and Social Security equivalency status of the plan have not been ruled on by federal officials.

Adverse decisions from the IRS could subject employees’ vested contributions and retirement system trust earnings to taxes.

Some employees also would have to be enrolled in Social Security if the state benefit is not equivalent to Social Security’s — adding to state employee and taxpayer costs. The costs would be levied retroactively from the plan’s start, according to Maris LeBlanc, LASERS deputy director.

LASERS board voted to endorse resolutions to be considered in the legislative session which opens April 8 that would suspend the law until June 30, 2014. The Legislature can approve those resolutions by a simple majority vote. They cannot be vetoed by the governor.

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