Supreme Court finds ‘cash balance’ retirement plan unconstitutional

Marsha Shuler

The Advocate

June 28, 2013

The Louisiana Supreme Court on Friday struck down Gov. Bobby Jindal’s proposed overhaul of retirement plans for new state employees.

The decision, written by Associate Justice Greg Guidry, found that supporters of Jindal’s revamp needed approval by two-thirds of the Louisiana Legislature. Act 483 of the 2012 Regular Session was passed by a simple majority of legislators.

“We went into this thing thinking it was a very simple decision: Whether it needed a two-thirds vote or did not,” said Frank Jobert, executive director of the Retired State Employees Association, which filed the lawsuit. “It got more complicated along the way but came back to the basic thing that caused us to file suit in the beginning.”

Jobert said he had been on the telephone conveying the news to his board members when he took a break for a news interview. “I’m happy, as you can probably tell,” he said.

Jindal issued a prepared statement saying his administration would work with legislators on the best way to proceed.

“We think the ‘cash balance’ plan is good for the people of Louisiana because it helps get our retirement liabilities under control, protects taxpayers and provides new state employees with a portable retirement account that realizes investment earnings,” Jindal said.

Called “cash balance,” Jindal’s plan was to replace the pensions paid to retired state workers for the rest of their lives with a 401(k)-style plan, in which the retiree receives only the proceeds of investments and contributions made over the years. Jindal’s plan would protect the “cash balance” of state employees from financial losses and could be taken with the employee should the worker leave state employment.

State Senate Retirement Committee Chairman state Sen. Elbert Guillory said Friday’s ruling would trigger new bills in the next legislative session because the state can no longer afford the pension plan it provides workers today.

“We are going to come back with a different plan, a better plan. There’s no question about it,” said Guillory, R-Opelousas. “We have to provide a more reasonable pension plan for incoming employees.”

Initially, the “cash balance” retirement, instead of pensions, was to be offered to new hires starting Monday. But recent a legislative resolution postponed the beginning of the plan for a year.

Louisiana State Employees Retirement System officials declined comment. LASERS had opposed passage of the cash balance plan because it failed to provide a “safety net” for state employees who do not have Social Security to fall back on.

Teachers Retirement System of Louisiana spokeswoman Lisa Honore said the pension system is pleased with the ruling. “The board supported legislation several years ago that required two-thirds passage for legislation with an actuarial cost,” Honore wrote in an email response.

The state constitution requires a two-thirds vote — 70 yes votes from the 105 House members — if a change in the pension law increases costs. A legislative actuary said Jindal’s “cash balance” plan would do so.

But Louisiana House Speaker Chuck Kleckley, R-Lake Charles, ruled that only a majority vote, or 53 representatives, was needed. The bill passed the House on a vote of 68 to 36.

The Retired State Employees Association filed a lawsuit arguing the “cash balance” bill that became Act 483 was passed unconstitutionally. The Jindal administration argued that the legislative actuary’s finding was wrong and that its own actuarial analysis found expenses were such that a two-thirds vote was not required.

Nineteenth Judicial District Judge R. Michael Caldwell, of Baton Rouge, sided with the retiree group.

The Supreme Court wrote that the Louisiana legislative auditor is required by law to provide the actuarial note on any proposed retirement measures and that the auditor’s findings determine whether the two-thirds vote applies. Justice Guidry wrote that the legislative auditor’s note found an increase, therefore a two-thirds vote was required.

“Because it was stipulated that a two-thirds vote was not obtained in the House, the district court correctly found that Act 483 was enacted in violation” of the constitution, Guidry wrote.

“The Supreme Court is saying the rule of law is alive and well in Louisiana, even if it’s ignored by the governor and the speaker,” said state Rep. John Bel Edwards, D-Amite, who challenged Kleckley’s “majority” vote decision on the House floor. “What it means is that we don’t have a ‘cash balance’ plan now.”