Cash Balance Plan Ruled Unconstitutional

On Thursday, January 24, 19th Judicial District Court Judge William Morvant ruled Act 483, known as the Cash Balance Plan (CBP), unconstitutional.

Attorneys representing the Retired State Employees Association (RSEA) filed the lawsuit on August 16, 2012 challenging the constitutionality of House Bill 61, which became Act 483 of the 2012 Louisiana Legislative Session. RSEA claimed the law required a two-thirds vote because an actuarial cost was associated with its enactment, based on Article X - Section 29(F) in the Louisiana Constitution. The House of Representatives passed the CBP with a simple majority, lacking the 70 votes of the elected members.

The legislation would have affected future non-hazardous duty state employees of LASERS, post-secondary education members of the Teachers' Retirement System, and would have been optional for certain Louisiana School Employees' Retirement System members. The plan would have taken effect for these new hires on July 1, 2013.

RSEA Files Lawsuit Challenging Constitutionality of Cash Balance Plan

Attorneys representing the Retired State Employees Association (RSEA) filed a lawsuit Thursday, August 16 in the 19th Judicial District Court in Baton Rouge challenging the constitutionality of House Bill 61, which became Act 483 of the 2012 Louisiana Legislative Session. The act, known as the Cash Balance Plan, affects future non-hazardous duty state employees of LASERS, post-secondary education members of the Teachers' Retirement System, and is optional for certain Louisiana School Employees' Retirement System members. The plan would not take effect for these new hires until July 1, 2013.

  

RSEA and their attorneys, Robert "Bob" Tarcza of New Orleans and Robert "Bob" Klausner of Plantation, Florida, reached the conclusion that Act 483 required a two-thirds vote for passage, rather than a simple majority. The Louisiana Constitution, Article X - Section 29(F), mandates a two-thirds vote when an actuarial cost is associated with enactment of benefit provisions for members of a public retirement system. The Legislative Actuary had determined that the Cash Balance Plan would have an actuarial cost. The bill passed in the Louisiana House of Representatives by a simple majority, but lacked the required 70 votes of the elected members.

The lawsuit is entitled The Retired State Employees Association, Frank L. Jobert, Jr., et al vs. State of Louisiana, Honorable Governor Bobby Jindal and Honorable John Neely Kennedy, State Treasurer.

LASERS will share more information as it becomes available.

LASERS Board Urges Legal Clarification of Cash Balance Plan

Baton Rouge- At its June board meeting, the Louisiana State Employees’ Retirement System (LASERS) Board of Trustees considered implications of the cash balance plan created by Act 483 of the 2012 Legislative Session. The cash balance plan will apply to certain employees hired in non-hazardous duty positions after July 1, 2013. Given the implementation delay, the Board recognized the opportunity to clarify important questions about Social Security and tax consequences.

Therefore, the Board voted to urge the Division of Administration on behalf of the State, as the employer for state employees, to seek a determination from the Internal Revenue Service (IRS) of the Social Security equivalency of the new cash balance plan. Since LASERS members do not participate in Social Security, it is critical to determine whether the cash balance plan offers a benefit to all members that is adequate to maintain the current exemption from Social Security.

The Board also voted to seek a determination from the IRS as to whether the cash balance plan will jeopardize the tax qualified status of the existing defined benefit plan. Plan status determines whether contributions and earnings are taxable and if distributions are eligible for rollover into another tax-qualified vehicle.

The 12-member policy-making Board of Trustees has fiduciary oversight over LASERS.