Capitol News Bureau
An effort to delay implementing
Gov. Bobby Jindal’s 401(k)-type pension plan for new state government hires is
one step away from final legislative passage.
The House Retirement Committee on
Wednesday approved a Senate-passed resolution suspending the “cash balance” law
until July 1, 2014.
The law has been challenged in
the Louisiana Supreme Court and an IRS ruling is pending that could prove
costly. If the IRS decides Jindal’s plan fails to provide a benefit equal to
Social Security, both the state and the employee would have to pay more.
A state Senate panel passed a
similar House-passed resolution.
Now, all that’s needed is for
either chamber to pass one of the instruments that would suspend the law until
2014. Suspension resolutions cannot be vetoed by the governor.
Also Wednesday, the state House
Retirement Committee voted 7-5 to advance legislation rewriting Jindal’s cash
balance plan to fix flaws identified since its passage in 2012.
The amended version of the bill
makes the pension plan optional for Louisiana judges but makes it mandatory for
The legislation had stalled in
committee previously on a 6-6 tie vote.
Opponents argued that there was
no reason to press House Bill 68 during the current legislative session, noting
the resolution the panel had just approved would suspend the law for a year.
The attempt to fix problems made the legislation worse and made the employee
benefit even less equivalent to Social Security, said state Rep. Sam Jones,
D-Franklin. “We are in the process of creating more damage,” he said.
Higher education community
representatives lined up to tell the committee that the plan as structured
would further damage efforts to recruit faculty.
Steven Procopio, chief of state
at the state Division of Administration, said the legislation should not be
He said the existing pension plan
for state employees, including those who work on college campuses, is not
financially sustainable. The state’s four retirement systems have $18.5 billion
in long-term liabilities, which is called the unfunded accrued liability, or
“We do have a serious UAL issue,
retirement issue,” Procopio said. “It’s been put off too long.”
Procopio argued that HB68 could
actually delay implementation of “cash balance” longer because of a bill
provision that sets the date as six months after the state receives a ruling
from the IRS that it is Social Security equivalent.
If the IRS determines it is not,
there would be added expense to the state and employee for enrollment in Social
Under the “cash balance” plan
employees would contribute 8 percent of their pay toward retirement and the
state as employer 4 percent.
Interest earned from investments
would be credited to the employee’s retirement account with 1 percent withheld
to guard against investment losses. As written there would be a 10 percent cap
on investment earnings.
The employee could never lose
money because of the reserve fund that would make up the difference.
Cindy Rougeou, executive director
at Louisiana State Employees Retirement System, said from an administrative
standpoint the bill had a lot of problems.
“Besides the nuts and bolts
issues,” Rougeou said, LASERS still opposed the legislation because of the
“lack of security” it offers to employees in their retirement.
Original report here.