Details of Social Security Offset Legislation Postponed

The federal House Ways & Means Committee met Wednesday, July 13, but consideration of H.R. 711, the "Equal Treatment of Public Servants Act of 2015" was postponed. The proposed legislation would repeal the current Social Security Windfall Elimination Provision (WEP) and put in a proportional formula that calculates benefits using a public servant's actual earnings.

Rep. Kevin Brady (R-TX) commented that over the past several days, it was evident that public servants were not in agreement over the legislation. Both he and Rep. Richard Neal (D-MA) remarked that the community needed to come together and that a bipartisan solution was necessary to move forward.

The WEP affects those LASERS retirees who have also worked in the private sector by reducing or eliminating their Social Security benefits. Keep in mind that your LASERS pension is NOT diminished by WEP, only Social Security benefits if applicable.

LASERS will continue to distribute information regarding the WEP and relevant legislation, but our knowledge of this federal law is limited. If you have specific questions on how you may be impacted by WEP, please contact the Social Security Administration for assistance. You may also contact RSEA, your advocates in the Louisiana Legislature and National Congress on issues relating to retirement and healthcare.

 

WEP Resources:

Windfall Elimination Fact Sheet

Social Security Offsets Chapter in the LASERS Membership Handbook

Social Security Offsets Video

View the Recording of the Ways & Means Committee Meeting

New Video Explains Social Security Offsets

If you are interested in learning about the Windfall Elimination Provision (WEP) or the Government Pension Offset (GPO), please watch our new video in the educational outreach series. This video explains how these federal offsets can affect your Social Security benefit if you receive a LASERS benefit. 

If you wish to be notified each time LASERS uploads a new video, we encourage you to subscribe to our channel by clicking the "subscribe" button located on the LASERS YouTube page.

Opinion: Public Plans No Windfall for Workers

Written by Dennis Persica 
Original article in The Advocate
September 12, 2013

One of the more interesting philosophical flip-flops in the debate over public-employee pensions is how willing people are to use a level-the-field argument against government workers.

But first, a disclosure: As the surviving spouse of a former state worker, I get a monthly benefit from LASERS, the Louisiana State Employees Retirement System.

Back to the discussion: Look at the comment stream on any online story about retirement benefits for public workers, and you’re likely to see a certain sentiment expressed. It goes like this: Defined-benefit pensions are a thing of the past in private industry, so why should government employees still be entitled to them?

If you raised that “leveling” argument in any other discussion, though, you’d be shot down promptly, and probably by the same people.

Tax better-off folks to pay for government services for the classes below them? Answer: That’s socialism!

Enact affirmative action programs to ensure that opportunities are spread out to an ethnically diverse corps of job seekers? Answer: It’s not about race, it’s about finding qualified employees.

But talk about preserving government pensions, and suddenly we’re fighting like crabs in a barrel, with people demanding that public pensioners be dragged down to the level of private-industry workers who have no access to defined-benefit pensions.

There are a few things to remember about government retirees. For Louisiana state employees, as well as many other public employees across the country, there is no Social Security to fall back on. The same once was true of federal workers; they contributed only to the federal retirement system but not to Social Security. When President Ronald Reagan and a Democratic Congress decided to try to fix Social Security, they required federal employees to contribute to it.

People who’ve spent a lifetime in state or local government service may have only their public pension coming to them. That’s a major difference between those on a public pension and those on one provided by private industry. If the private pension program goes belly-up, the former employee still can draw Social Security.

Another difference between government-pension systems and private-industry pensions is this irony: If a private-industry pension program runs into trouble, its retirees wind up on the equivalent of a government pension, via the Pension Benefit Guaranty Corp. PBGC works as a kind of insurance company (businesses pay premiums into it) and takes over pension systems that run into trouble.

It will pay a retiree a maximum of $57,477 per year in benefits, and that maximum changes every year. So, someone with a pension from a private system that’s run into trouble can be assured they’re not going to be living on the street, begging for food. However, a government employee whose pension plan defaults –— and all eyes are on Detroit at the moment — has no protection. PBGC does not cover public pensions.

Yes, there have been abuses in the system, as we saw a few years ago in Jefferson Parish, but that’s no reason to let public-pension systems wither on the vine. After all, no one’s talking about shutting down Wall Street just because some people occasionally figure out ways to cheat investors.

Usually, the pension abusers are those who have enough political pull to game the system to their advantage. Most rank-and-file public employees don’t have that, and they would be the babies thrown out with the bathwater if we decided to let a troubled public pension system die just because private-industry workers don’t have access to similar plans.


Dennis Persica is a New Orleans-area journalist. In his weekly column, he shares his thoughts and observations about people, places and issues in the New Orleans area. Persica’s email address is dpersica@theadvocate.com.

Jindal hopes to fix flaws in pension plan

Retirement groups seek year's delay

By Marsha Shuler

Capitol news bureau

The Jindal administration hopes to fix flaws in the new ''cash balance'' pension plan, while two major retirement systems are trying to get a year's delay in its planned July 1 implementation.

Although Gov. Bobby Jindal opposes any delay, the Louisiana State Employees Retirement System and the Teachers Retirement System of Louisiana have served legal notice that they will ask the Legislature to approve a resolution suspending the law.

Jindal cannot veto such resolutions.

A state district court judge last month ruled that the 401(k)-type plan, known as ''cash balance,'' did not receive the required votes for passage. Administration lawyers have filed for a suspensive appeal in 19th Judicial District Court, while the issue goes to the Louisiana Supreme Court where it will be decided.

''Cash balance,'' which affects new hires, was the only major piece of Jindal's proposed pension system revamp to clear the Louisiana Legislature, during the 2012 session. Other legislation making current members of the LASERS and TRSL work longer for less benefits failed to win passage.

A legal notice has been filed indicating that legislation would be filed in the upcoming 2013 legislative session that addresses the ''cash balance'' plan's administration and operation, membership, contributions and eligibility.

The Governor's Office confirmed the legislation in the legal notice is part of a package for the session that opens April 8.

''We are continuing to meet with legislators, as we plan for the upcoming session, and no final decisions have been made on retirement system legislation to pursue,'' Jindal's Chief of Staff Paul Rainwater wrote in an email statement. He would not agree to answer questions about the issue.

''However, we want to be ready to address any issues that might be raised by the courts,'' Rainwater stated.

If the Louisiana Supreme Court agrees with the lower court's ruling, the administration must go back to the Legislature on its ''cash-balance'' plan, and get a two-thirds vote of approval required by the constitution because it adds to pension costs.

If the administration wins the appeal, the new law still would need some alteration, said Maureen Westgard, the TRSL executive director. Westgard said the pension system has identified at least 13 issues that need to be resolved in how the plan is administered.

Cindy Rougeou, the LASERS executive director, said her board favors a delay in implementation ''due to the significant federal issues that have yet to be resolved'' involving the plan's Internal Revenue Service and Social Security status.

Adverse decisions from the IRS could subject employees' vested contributions and retirement system trust earnings to taxes. In addition, some employees 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, said Maris LeBlanc, LASERS deputy director.

TRSL also supports the delay ''given how many complications there are with the court case and Social Security equivalency,'' Westgard said. ''There appears there may be some interest in suspending that (law) ... probably not from the administration.''

House Retirement Committee Chairman Kevin Pearson, R-Slidell, said he doesn't see ''a tremendously active session'' in the pension arena.

''Legislators said 'don't bring another retirement bill back,' '' said Pearson, who sponsored the cash balance plan. He said cash balance clean up legislation is on the table.

Senate Retirement Committee Chairman Elbert Guillory said he's working on legislation that will guarantee cost-of-living raises to retirees but at the same time require an additional contribution by active employees and change how the pension benefit is calculated.

Companion legislation will provide revenue streams that can be used to pay for the COLAs, said Guillory, D-Opelousas.

''I really expect the (employee) contribution to be temporary. I expect and hope we will be able to get enough money, we will not need to ask people to make that extra sacrifice,'' Guillory said.

He said he has four ideas to pitch to Jindal including earmarking 2 percent of all state settlements, and 2 percent of the interest on unclaimed property, proceeds for tickets for driving in the left lane on multi-lane highways and taxes on games at ''racinos,'' a race track with casino gambling games.

LASERS and TRSL also served legal notice they will ask the Legislature to change the calculation method that determines employer payments to ''entry age normal.'' The proposal got nowhere last year.

The pension change could have saved state government about $40 million last year.

In projecting actuarial cost, the normal cost is a lower percentage of salary in early years of service. The normal cost increases annually as each member approaches retirement eligibility.

LASERS board asks delay in start of retirement plan

By Marsha Shuler

Capitol News Bureau

The Louisiana State Employees Retirement System board voted Friday to ask the Legislature to delay the July 1 start of a 401(k)-type pension plan for new state hires.

The board took the action because members voiced concern that federal issues involving the Internal Revenue Service and Social Security status of the “cash balance” plan wouldn’t be resolved before the new law was to take effect, said Maris LeBlanc, deputy director for Louisiana State Employees Retirement System, better known as LASERS.

The “cash balance” plan was the only major part of a multipronged plan to overhaul the state employee retirement system that was approved by legislators earlier this year.

Adverse decisions from the IRS could subject employees’ vested contributions and retirement system trust earnings to taxes, LeBlanc said. In addition, some employees 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, she said. The costs would be levied retroactively from the plan’s start, she said.

The IRS determination period does not begin until February, and it is unclear how long it will take to get an answer, LeBlanc said. The Social Security equivalency letter, which must be sought by the Jindal administration, has not been submitted “to our knowledge,” she said.

The board gave LASERS staff authority to publish notices of intent to file the proposal in the 2013 Legislature as well as to seek a legislative sponsor. Besides changing the July 1 date, LASERS would propose some “cleanup” provisions to eliminate some administrative problems with ultimate implementation, LeBlanc said.

Jindal administration spokesman Michael DiResto said Friday that there is no reason for delay.
“We are confident that the plan meets all IRS requirements,” he said.

DiResto said the governor’s Division of Administration would submit the letter regarding Social Security status to federal officials on Monday and ask for an expedited review.

State House Retirement Committee Chairman Rep. Kevin Pearson, who sponsored the legislation that became the “cash balance” plan, said he is willing to listen to LASERS’ concerns.

“If somebody can tell me we will get some determination by October, I’d say, ‘Let’s wait until October,’” Pearson, R-Slidell, said. “But I’m not into delaying and delaying.”

The “cash balance” plan won approval in the 2012 Legislature as Gov. Bobby Jindal embarked on pension system changes originally designed to impact both current and future employees. Jindal said benefits needed to be altered in order to curb rising state pension costs and reduce the plan’s unfunded liabilities.

Opponents, including LASERS officials, said employees should not be penalized because of past administrations that did not pay their share of costs.

Legislation changing benefits for current employees died.

The new plan for future nonhazardous-duty employees, which won approval would operate similar to a private-sector 401(k) plan, except funds would be protected from investment losses.

An employee would contribute 8 percent of pay and the employer — the state — 4 percent with all but 1 percent of the investment earnings going toward an individual’s pension. The 1 percent would act as a reserve to guard against investment losses.

The Louisiana Retired State Employees Association has filed a lawsuit alleging that the “cash balance” legislation did not get the required vote to become law.

A Nov. 21 status conference is scheduled in the case in 19th Judicial District Court. A hearing date is set for Dec. 3 before 19th Judicial District Judge William A. Morvant, of Baton Rouge.

The legal issue concerns whether the legislation required a two-thirds vote because there was a cost involved. The Legislature’s actuary determined there was a cost. House Speaker Chuck Kleckley, R-Lake Charles, ruled that there was no extra cost and a simple majority vote would do. The House passed the legislation with a majority vote.

Jindal asks IRS about pension

BY MARSHA SHULER 
Capitol News Bureau

Gov. Bobby Jindal on Friday ordered his top budget adviser to seek an Internal Revenue Service decision on any potential tax consequences of Louisiana’s new 401(k)-type pension plan for future state employee hires. 
Earlier in the day, the Louisiana State Employees Retirement System board voted to do the same thing, with members wanting to know whether the so-called “cash balance” system would be a “qualified plan” under IRS regulations and enjoy tax-exempt status. 

Otherwise, employees’ vested contributions and system trust earnings would be subject to taxation, LASERS Executive Director Cindy Rougeou told the board at its monthly meeting. “There are tremendous ramifications for our members and the system,” she said.

 Jindal issued an executive order authorizing Commissioner of Administration Paul Rainwater to apply to the IRS for one or more “determination letters” on the tax-qualified status of the cash-balance plan. 

Under the order, Rainwater also is supposed to seek a ruling on whether the new pension plan would meet the test of offering benefits that are equivalent to Social Security. 

The LASERS board voted earlier Friday to ask the administration to expedite a request to Social Security because such decisions take on average six months. The plan is supposed to go into effect July 1, 2013.

A LASERS tax lawyer advised, that if it’s not equivalent, some employees would have to be enrolled in Social Security — adding state costs, Rougeou said.

State employees are not in Social Security today. “It is the responsibility of the employer — the state of Louisiana — to provide the equivalent benefit. They are the ones going to be on the hook for paying for Social Security,” Rougeou said. 

The LASERS board briefly went into secret session to discuss potential litigation related to the cash balance law. It took no action upon returning to the open meeting. If problems arise on either front, the Legislature would have “lots of time” to fix them in the 2013 regular session, said Senate Retirement Committee Chairman Elbert Guillory, D-Opelousas, a LASERS board member. 

Cash balance would be the plan for new nonhazardous-duty state employees as well as those working in higher education. LASERS and the Teachers Retirement System of Louisiana are affected the most. The plan would operate similar to a private sector 401(k) except funds would be protected from investment losses. An employee would contribute 8 percent of pay and the employer — the state — 4 percent with all but 1 percent of investment earnings attributed to the account. The 1 percent would be set aside in a reserve fund as a hedge against investment losses. The reserve fund is not created in the new statute. 

LASERS opposed the plan, contending it would not provide sufficient retirement income for state employees who have no Social Security safety net. 

The only other state with a cash balance system is Nebraska, where employees also have Social Security. Jindal argued that the plan would help stem increasing state retirement system financial liabilities while providing a sustainable pension benefit for employees. 

According to Jindal’s executive order, the state of Louisiana as pension plan sponsor is “the appropriate party” to file applications with the IRS. It notes that LASERS is not the only one of the state’s four retirement systems for which a determination must be made. The order states that it is better to coordinate applications “in a manner that avoids multiple, duplicative and conflicting submissions.”

After Jindal issued the order, Rougeou said it is uncertain whether it will be necessary for LASERS to proceed with the IRS determination letter.

 “We look forward to discussing coordination efforts with the administration,” Rougeou said.

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.

Social Security Cuts Weighed by Panel

A White House-created commission is considering proposals to raise the retirement age and take other steps to shore up the finances of Social Security, prompting key players to prepare for a major battle over the program's future.

In addition to raising the retirement age, which is now set to reach age 67 in 2027, specific cuts under consideration include lowering benefits for wealthier retires and trimming annual cost-of-living increases, perhaps only for wealthier retirees, people familiar with the talks said.

On the tax side, the leading idea is to increase the share of earned income that is subject to Social Security taxes, officials said. Under current law, income beyond $106,000 is exempt. Another idea is to increase the tax rate itself, said a Democrat on the commission.

The commission's Social Security proposals would face an uncertain reception in Congress, which would have to approve changes to the program.

Social Security "An American Sucess Story"

For more than seven decades, the Social Security program has been helping millions of Americans - from adding to their retirement income to providing income for the disabled.

The plan was a lifesaver to those struggling in poverty through the Great Depression, and continues to be for many retired citizens without pensions or savings. Despite initial fears of socialism, many would agree that the small cushion Social Security provides makes a big difference in a lot of people's lives.

But even as the administration celebrates Social Security's 75th anniversary Saturday, many people are wondering what the next 75 years will look like, especially because many retirement savings accounts have taken a financial hit during the current economic downturn.

The fact that it has lasted 75 years proves the program's staying power, said Edward Lafferty, public affairs specialist for the Social Security Administration.

Social Security Expects No COLAs for 2 Years

Millions of older people face shrinking Social Security checks next year, the first time in a generation that payments would not rise.

The trustees who oversee Social Security are forecasting that there will be no cost-of-living adjustment for the next two years. That has not happened since automatic increases were adopted in 1975.

By law, Social Security benefits cannot decrease. Nevertheless, monthly payments would drop for millions of people in the Medicare prescription drug program because the premiums, which often are deducted from Social Security payments, are scheduled to rise slightly.

Cost-of-living adjustments are pegged to inflation, which has been negative this year, largely because energy prices are below 2008 levels.

Lawmakers Seeking Consensus On Social Security Overhaul

Tentative talks are underway about overhauling the Social Security system, and Congress could turn its attention to the federal retirement program as soon as this fall if a bipartisan consensus emerges.

So far, Democrats have found a willing partner in the Senate, where Sen. Lindsey O. Graham (R-S.C.) has stated his desire to work with President Obama to make changes to keep Social Security solvent. Projections show that the system, which has brought in more money than it pays out, will begin to need at least small infusions of cash from the rest of the government within the next decade without changes to the benefit structure.

Graham described Social Security as "a math problem" that could be easily solved if both parties were willing to work together. He sketched out a plan that would include lower benefits for wealthy Americans, a higher retirement age and additional revenues. With the stock market devastated by the recession, the traditional Republican option of diverting Social Security taxes to new private retirement accounts is, he said, "off the table."

Social Security Administration announces Cost-Of-Living (COLA) Increase

There's some good news if social security is a big part of your monthly income. You'll soon have a little more cash to put in your pocket.

Social Security checks are going up $63 a month for the typical retiree — the largest increase in more than a quarter century.

The 5.8 percent increase announced Thursday by the Social Security Administration will go to the 50 million Americans receiving benefits. It is the biggest jump since the 7.4 percent of 1982. The $63 typical monthly increase compares to the $24 advance
that retirees saw in this year's benefit checks, an increase of just 2.3 percent and the smallest in four years.

The typical retiree's monthly check will go from $1,090 to $1,153.

The Social Security increase is based on changes in the Labor Department's Consumer Price Index in the July-September quarter compared with the same period a year earlier.

Social Security more solvent than most Americans realize

Social Security is financially more sound than the federal government as a whole, that's what the numbers crunched by the actuaries at the Social Security Administration say.

Thanks to hikes in the Social Security payroll tax in the 1980s designed to create a surplus to handle the crunch of baby-boomer retirements, the program's trust fund is projected to grow steadily for nearly 20 more years — until 2027.

After that, officials estimate there will be sufficient money to pay 100 percent of benefits until 2041, when the surplus is expected to be exhausted. From that year on, payroll tax revenue alone should be able to meet 78 percent of the program's obligations — even if no changes are made.

That would mean substantially smaller checks — but a long way from nothing.

''I have no doubt that Social Security will be there for a couple generations,'' said Teresa Ghilarducci, professor of economics at the New School for Social Research in New York. ''Looking at the numbers right now, Social Security is one of the most financially sound programs that we have in the federal budget.''

The plan is on track to meet the needs of most baby boomers. In 2041, when Social Security trustees estimate the surplus will be exhausted, the oldest boomers will be 95 and the youngest, 77. The nonpartisan Congressional Budget Office is optimistic the surplus will go a bit further. It projects that, without changes, Social Security will be able to meet its obligations in full until 2046.

Social Security unveils new earnings calculator

The Social Security Administration unveiled its new retirement estimator for people planning their retirement.

The new calculator will be followed this fall by an updated online application for benefits that Social Security Administrator Michael Astrue promises will reduce application time from the current 45-minute process to 15 minutes — and eliminate the need for follow-up visits to agency field offices.

Currently, workers get an annual benefit estimate mailed to them. It's based on prior earnings but assumes people's salary stays the same until retirement age. The online calculator supplements the annual mailing but won't replace it.

The online calculator permits future retirees to create a more accurate estimate of benefits since people can factor in a higher estimate of their upcoming earnings. People can also factor in different alternatives for retirement ages.

More Workers Waiting Longer to Claim Social Security

New research says fewer workers are claiming Social Security when they reach age 62...

For decades, data from the Social Security Administration have indicated that a fairly consistent share of workers -- about 60% of women and about 52% of men -- have claimed a Social Security check at 62, the earliest age at which most people qualify for benefits. Of course, collecting Social Security before "full retirement age," which is climbing gradually to age 67, results in a permanent reduction in a person’s monthly payout?

A study published in June, found that: 48% of women and 43% of men who turned 62 in 2006 claimed Social Security benefits as soon as they became available. That's down from 60% of women and 51% of men who turned 62 in 2000.

Indeed, financial advisers increasingly are urging people to push back their "start date" for Social Security. A number of factors argue for postponing, and trying to maximize, that first check -- including the demise of traditional pensions, increased life expectancy, retirement accounts that fall victim to bear markets, and Social Security's own rules (which tend to favor survivors whose spouses claim benefits at a later date).

LASERS-Did you know?

LASERS members do not pay Social Security Tax.

However, state employees hired after April 1, 1986 will pay Medicare tax.

Group: Projected Social Security COLA is inadequate

The Senior Citizens League is criticizing a proposed Social Security cost-of-living adjustment (COLA) that the advocacy group says will do nothing to alleviate the financial burdens of millions of retirees.

Late last month, the Congressional Budget Office published a little-noticed estimate that forecasts seniors will receive just a 2.8 percent increase in their Social Security checks beginning in January, 2009.

Despite the increase, at least five million people aged 65 and over will remain in poverty, since senior costs are rising significantly faster than the annual Social Security Cost of Living Adjustment (COLA).

Between 2001 and 2008, Medicare Part B premiums have soared by more than 93 percent while the COLA has crept up just 19 percent, leaving many seniors on their own to cover all other rising costs. Part B premiums cover doctors' visits, tests, and outpatient hospital care.

Although the COLA is intended to help seniors keep up with inflation, a recent study by The Senior Citizens League (TSCL) that analyzed eight key expenditures found that people 65 and over have lost 40 percent of their buying power since 2000. Expenses such as home heating oil and gasoline have more than doubled since the beginning of the decade, while food staples such as potatoes and butter have increased by 47 and 39 percent, respectively.