Tuesday, June 2, 2015

Pension fixes added to COLA increase bill

Marsha Shuler
The Advocate

Some friendly hitchhikers added to an effort to boost the monthly pension checks of retired state employees and teachers should help ensure the bill’s passage, the legislation’s sponsor said Monday.

The Senate Retirement Committee amended House Bill 42, then agreed to the proposed 1.5 percent cost-of-living adjustment, or COLA, for about 135,000 retirees.

The measure now heads to the Senate floor for debate. If approved there, it would return to the House for concurrence in Senate changes.

“I feel really good about it,” said Rep. Sam Jones, D-Franklin, who is sponsoring HB42. “It’s an easier task to carry this back.”

Jones argued that retirees needed a pension increase this year because health care costs had more than eaten up last year’s average monthly benefits increase of less than $30 a month. The pension adjustment proposed by Jones would add another $30 per month to the average retiree’s check.

The Senate panel added some provisions aimed at shoring up the finances of the four statewide retirement systems to which the retirees belong. The two largest — teachers and state employees — have a combined $19 billion in long-term liabilities.

“It’s an incredible balancing act,” committee chairman Sen. Elbert Guillory said. “It’s a balancing of the idea and inclination of legislators who want to grant a COLA and other concerns about the long-term impact on the system.

“I guess you can call this a Christmas bill. There’s a little something for everybody in it,” the Opelousas Republican said.

The House approved the COLA measure on an 80-20 vote last week with opponents citing concerns over the pension systems finances. The same opposition initially bottled it up in committee, refusing to advance the bill.

The COLA covers retirees of the four statewide pension systems — state employees, teachers, school employees and State Police.

The new provisions would put more money into the retirement systems to more quickly to pay down what are called unfunded accrued liabilities, or UAL — the dollars needed to fulfill all the pension obligations to retired and current members. Instead of debts being paid off over 30 years, the period would gradually be reduced to 20 years by the year 2020.

“This will make our system a whole lot more actuarially sound,” Sen. Barrow Peacock, R-Shreveport, said.

Another change would help control the cost of employer contributions, which both state government and local school boards have been struggling to pay.

“This shores up some funding and will cause accelerated funding of the retirement system reducing the interest payments,” Legislative Actuary Paul Richmond told the panel.

The retirees got a COLA last year and were not supposed to receive one this year under a new law. Under the 2014 law, more of the retirement systems’ excess investment earnings will go toward reduction of long-term debts before dollars are put into the special COLA accounts.

The changes limited both the frequency and amount of future retiree benefit hikes until systems hit certain unfunded accrued liability levels.

The Senate committee adopted amendments allowing the 1.5 percent COLA for all groups as well as the potential for up to 2 percent for school employees and State Police if funds were available. School employees and State Police have hit the benchmark for a potential 2 percent COLA.

But the panel said there would be no adjustment in the following year because no money would be deposited in the special accounts from which COLAs are paid.

Retirement system officials had earlier testified that the $350 million to cover the long-term expense of a 1.5 percent permanent benefit adjustment was available.

The COLA would average $26 a month for state employee retirees and $28.72 for teacher retirees.

“You have provided a belt and suspenders ... granting a COLA but also improving the financial soundness of the system,” said Cindy Rougeou, executive director of the Louisiana State Employees Retirement System, better known as LASERS.

“We don’t see anything that would have great concerns for us,” Teachers Retirement System of Louisiana Executive Director Maureen Westgard said of the changes.

Retired State Employees Association lobbyist Frank Jobert called the changes “a fair trade-off to accelerate the COLA this year and forgo next.”

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