Shreveport and Monroe RSEA Meetings Rescheduled

RSEA chapter meetings for Shreveport and Monroe have been rescheduled as indicated below. If you should know of anyone planning to attend either meeting in Monroe or Shreveport, please make them aware of these rescheduled dates.

Shreveport: Tuesday, March 11, 10:00 a.m., North West Technical College, 2011 North Market Street, Building E, Shreveport.

Monroe: Wednesday, March 12, 9:00 a.m., West Monroe Convention Center, 901 Ridge Avenue, West Monroe.

Please be advised that the RSEA Chapter Meeting in Alexandria will remain as scheduled for Thursday, February 13, 9:30 a.m., Kees Park Community Center, 2450 Highway 28 East, Pineville. 

The complete and updated RSEA statewide tour schedule is on our website.

Panel Resolves to Suspend “Cash Balance” Retirement Plan

By Marsha Shuler
The Advocate
Capitol News Bureau

The Louisiana Legislature is on its way to suspending the July 1 implementation of the Jindal administration’s 401(k)-type pension plan for new state employee hires.

The Senate Retirement Committee on Monday — without administration objection — approved Senate Concurrent Resolution 1 which would delay the plan’s start until July 1, 2014.

The resolution cannot be vetoed by the governor.

State Sen. Page Cortez, R-Lafayette, said he sponsored the resolution because of significant questions yet to be answered about what is known as the “cash balance” plan.

Cortez said both a constitutional challenge of passage of the measure which is pending before the Louisiana Supreme Court and an IRS ruling that’s pending on whether the plan provides a benefit equivalent to Social Security.

If “cash balance” is not equivalent, the employee would have to be enrolled in Social Security too at added expense.

Cortez said it would be prudent to delay. “Before we make a mistake let’s just wait and implement it correctly,” Cortez said.

The resolution had the support of the Louisiana State Employees Retirement System and the Teachers’ Retirement System of Louisiana. Only higher education members of Teachers’ would be required to join the cash-balance plan.

Cortez said the resolution was not submitted at the boards’ request. “I just thought it was the right thing to do,” he said.

The cash balance plan was the only major piece of a retirement package Gov. Bobby Jindal proposed last year to win legislative approval. Other bills impacted current employee benefits and were shelved during the legislative process.

Controversy surrounded cash balance plan’s passage as opponents said the measure constitutionally required a two-thirds vote. The administration said there was no additional cost and only required the majority vote the legislation received.

A state district court judge ruled that it was unconstitutionally passed. The issue is now before the Louisiana Supreme Court.

The governor’s Division of Administration is seeking a Social Security equivalency determination but that is expected to take some time. The pension system actuary has submitted documents indicating it would not a Social Security equivalent for many. 

La. retirees board looks at legislation

By Marsha Shuler
The Advocate
Capitol News Bureau


The Louisiana State Employees Retirement System board voted Friday to endorse legislation that would delay implementation of a 401(k)-type pension plan for new hires, with a Jindal administration representative going along.

The board also, with its administration member objecting, voted to oppose legislation billed as a measure to fix problems with implementation of the new so-called “cash balance” plan.

LASERS Executive Director Cindy Rougeou said the legislation fails to address pension system administrative concerns and still does not include provisions that would provide “retirement security” in a state where state employees are not in the Social Security system.

Steven Procopio, chief of staff for the Division of Administration, said LASERS should support the legislation, billing it as purely “cleanup.” He said he did not understand the opposition.

The legislation has been prefiled for consideration in the legislative session that opens April 8.

Gov. Bobby Jindal’s signature retirement bill of the 2012 session is scheduled to go in effect July 1. The administration has resisted a delay in the plan which operates similar to a 401(k) pension plan but differs because the employee accounts cannot be reduced if there are investment losses.

But on Friday, Procopio conditionally supported a resolution to suspend the law until July 1, 2014.

The resolutions cite an unresolved constitutional challenge as well as federal tax and Social Security equivalency determinations that have not been made.

Procopio said he could go along if the resolution only mentioned the need for a determination on the Social Security equivalency of the plan prior to implementation. If it does not provide equivalent benefits, employees and the state would have to also make Social Security payments.

Procopio said the tax ruling was an entirely different matter and the Internal Revenue Services allows time for states to fix problems before penalties are levied.

The board agreed.

A state district judge ruled the statute did not get the constitutionally required two-thirds vote to pass a retirement measure that adds to costs. The Legislature actuary said the cash-balance plan would increase expenses. A Jindal hired actuary said it did not.

The Louisiana Supreme Court heard arguments earlier this week on the issue. The administration had sought an expedited review because of the July 1 effective date and the legislative session starting April 8, where any problems that might arise could be rectified.

In addition, the tax ramifications and Social Security equivalency status of the plan have not been ruled on by federal officials.

Adverse decisions from the IRS could subject employees’ vested contributions and retirement system trust earnings to taxes.

Some employees also 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, according to Maris LeBlanc, LASERS deputy director.

LASERS board voted to endorse resolutions to be considered in the legislative session which opens April 8 that would suspend the law until June 30, 2014. The Legislature can approve those resolutions by a simple majority vote. They cannot be vetoed by the governor.

The Beam: Winter 2012-2013 Edition

The Winter 2012/2013 edition of The Beam is now available. Click here to view. 

Subscribe to The Paperless Beam
In an effort to go green, we encourage you to subscribe to receive The Beam newsletter via email. As a subscriber, you will receive a copy of The Beam directly in your email inbox in a timely manner. When you subscribe to go paperless, you will no longer receive a paper copy of The Beam. Subscribing to the Paperless Beam will reduce paper usage and cut printing cost for LASERS. 

LASERS Responds to Baton Rouge Business Report

On February 5, 2013, the Baton Rouge Business Report published an article by Penny Font entitled, “No Escape,” which characterized public pensions as generous and unsustainable, ultimately costing the citizens of Louisiana more tax dollars. In attempting to make its point, the article lumps together anecdotal stories from 13 different public retirement systems, ignoring fundamental distinctions. 

Further, the article relies on reports by the Bureau of Governmental Research, the Pew Center, and Northwestern University, which have previously been analyzed and criticized*  for providing misleading, incomplete, or erroneous information.  Of particular note is a recently released report from the Government Accountability Office (GAO) that categorically rejected conclusions set forth by Northwestern University.  The GAO found:  Referring to the May 15, 2010 report by Joshua Rauh that projected some notably early fund exhaustion dates, "the projected exhaustion dates are ... not realistic estimates of when the funds might actually run out of money." The new GAO report, which is "the most comprehensive government study of public pension plans to date," validates "that the vast majority of plans are adequately funded to meet their current obligations and have adopted systemic and operational reform to ensure their long-term sustainability."

On behalf of LASERS, the retirement system for State employees and elected judges, I would like to call your attention to the following:

• Private sector employees, by law, participate in a defined benefit plan: Social Security.  And as noted in your report, most also have what is known as a defined contribution or 401(k) type plan.
• Public sector employees in Louisiana, by law, do not participate in the Social Security defined benefit plan; nor do they have a 401(k) type plan. Instead, the State of Louisiana decided decades ago that state employees would participate in LASERS.
• Private sector employees contribute 6.2 percent of payroll to Social Security.  LASERS rank-and-file members contribute 7.5 to 8.0 percent of their annual salary toward their retirement benefits.  Judges who are LASERS members contribute 11.5 to 13 percent.
• Private sector employers pay 6.2 percent of payroll to Social Security.  Louisiana will be contributing 6.1 percent of payroll for the accruing benefit of its employees. 
• LASERS members are also taxpayers.
• The average LASERS rank-and-file employee pension is $21,732 per year, which can hardly be described as generous.
• From 1999-2011, Social Security recipients have received 11 cost-of-living adjustments.  Over that same time period, LASERS retirees have received seven such adjustments. 
• LASERS retirees have not received a cost-of-living adjustment (COLA) since 2008-2009, with 22 percent of our retirees receiving payments below the poverty level.
• Pension experts do not “agree that trading a defined benefit plan for a defined contribution plan helps governments remain solvent.”  In fact, experts have recognized that such a swap does nothing to satisfy existing debt of retirement systems. Read the National Institute on Retirement Security report, A Better Bang for the Buck, for this information.

Ms. Font did acknowledge that LASERS realized a 14.3 percent investment return for the calendar year 2012, with a three-year average return of 10 percent.  Losses in tough times like 2008 were across the board for all investors, not a “painfully obvious sign” of lack of investment expertise.  In fact, LASERS has been ranked in the top ten of pension systems nationally for the past decade.  By managing over $3 billion of our fund internally, LASERS will save over $9 million this year; enough to fund the salaries for our entire agency.

The debt owed to LASERS by the State has not “more than tripled . . . largely due to poor investment returns and lawmakers who reduced the debt payment schedule in 1992 and increased benefits in 1993 and 2001.”  Rather, the debt has grown primarily because of a statutorily enacted, back-loaded, payment schedule and the interest that accrues each year on that debt.  But, the legislature has continued to grapple with that debt, making the annual required contributions to it, and modifying the payment schedule in 2010 to realize significant savings.  In the next fiscal year, the payments will finally start paying into the principal.

On the current payment schedule, in 10 years the debt owed to LASERS will decrease by nearly $1.5 billion.  In 20 years, it is expected to decrease by $4.4 billion.

It is unfortunate that the bold reforms enacted by the legislature since 2005 have been ignored or forgotten by the Business Report.  In fact, these real reforms are expected to reduce pension costs by nearly $700 million. 

The failure by the legislature to adopt recent administration proposals to harshly reduce the benefits of current members of LASERS should not be attributed to fear of losing 500,000 votes, as stated in the article; but, rather, to the recognition that those members received a benefit package as part of their compensation agreement and have contractual and constitutional rights to those benefits. 

These significant legislative changes modify the benefit structure for future employees and therefore, contain costs.  And, contrary to the representation in the article, many of these reforms were recommended in a 2005 report of the Public Affairs Research Council, including:

• Raising the normal retirement age to 60,
• Instituting a sub-plan for hazardous duty employees,
• Instituting a 60-month final average compensation period,
• Building in-house investment expertise,
• Emphasizing passively managed investments, and
• Lowering the 8.25 percent assumed investment return.

LASERS remains committed to achieving strong investment returns and responsibly managing the funds of the more than 100,000 active and retiree members of LASERS. Decisions made that affect the lives and welfare of so many of our citizens should be based on facts.  As such, we appreciate the opportunity to set the record straight.

Cindy Rougeou,

LASERS Executive Director

* For more information on LASERS responses to reports by the Pew Center and Northwestern University, please visit the following links:

§  LASERS Response to Pew Center on the States Report

§  LASERS Responds to November 8 Times Picayune Report

§  LASERS Responds to Rauh Report

§  LASERS Responds to Pension Sustainability Report

§  NASRA Issues Response to Rauh Report

RSEA Annual Statewide Tour Kicks Off March 5

RSEA will conduct their annual statewide chapter tour beginning March 5 in Shreveport. A LASERS official will speak at each of the nine meetings across the state. All members are encouraged to attend their respective meetings for up-to-date information on issues affecting state employees and retirees. 

View the schedule below to find out where your RSEA chapter is meeting. 

Shreveport	Tuesday, March 5 at 10:00 a.m.NWLA Technical College 2011 N. Market Street, Bldg E, Shreveport
Monroe	Wednesday, March 6 at 9:30 a.m. West Monroe Convention Center 901 Ridge Ave., West Monroe
Alexandria	Thursday, March 7 at 9:30 a.m. Main Street Community Center 708 Main Street, Pineville
Lake Charles	Tuesday, March 12 at 10:00 a.m. Lake Charles Civic Center, Contraband Room 900 Lakeshore Drive, Lake Charles
Acadiana	Wednesday, March 13 at 9:30 a.m. Fezzo's III 100 Lions Club, Scott
Baton Rouge	Wednesday, March 20 at 9:30 a.m. Lod Cook Alumni Center (LSU Campus) 3838 W. Lakeshore Drive, Baton Rouge
North Shore	Monday, March 25 at 10:00 a.m. Greater Covington Center, Bogue Falaya Hall 317 N. Jefferson Ave., Covington
Coastal	Tuesday, March 26 at 9:30 a.m. Ramada Inn 1400 West Tunnel Blvd., Houma
New Orleans	Wednesday, March 27 at 10:00 a.m. Landmark Hotel 2601 Severn Avenue, Metairie

Judge Strikes Down New State Pension Plan

Joe Gyan Jr. 

The Advocate

A Baton Rouge judge on Thursday struck down a 401(k)-type pension plan that was scheduled to take effect July 1 for future state employees.

State District Judge William Morvant, who did not rule on the merits of the so-called “cash balance” plan, agreed with the Retired State Employees Association of Louisiana that the plan did not get a two-thirds vote in the 2012 legislative session, as required by the state Constitution.

Morvant ruled at the conclusion of a daylong bench trial of an RSEA lawsuit against the state and Gov. Bobby Jindal, that Act 483 is “invalid” because it was passed in violation of the Constitution.

The association filed its suit in August.

“We are disappointed in the court’s ruling and we look forward to a successful appeal. We’re confident that the bill was constitutionally passed,” Jindal said in a prepared statement.

“The cash balance plan will help get our debt under control, protect taxpayers and provide new state employees with a portable retirement account that realizes investment earnings,” Jindal added.

House Speaker Chuck Kleckley said in his own prepared statement that he regrets “that the work done by the House and the entire Legislature on behalf of our citizens was ruled unconstitutional today, but that is the nature of our democratic process.”

“We believe we found a better means of providing for retirement for future employees of our state while saving a retirement system from potential failure, and the majority of the Legislature voted for it,” Kleckley said.

He continued,“Because this was a measure for future rather than current employees, we believed then — and still do — that the bill called for a simple majority vote. The judge ruled differently.”

Because a Louisiana law was struck down, the state can appeal the judge’s decision directly to the Louisiana Supreme Court.

“We’re happy, we’re not gloating, for our retirees and future retirees,” RSEA Executive Director Frank Jobert Jr., a retired state employee and plaintiff in the suit, said outside the 19th Judicial District Courthouse.

Jobert, who testified at the trial, said afterward that RSEA’s membership includes 700 current state employees and about 10,000 retired state workers.

“It was a suit about whether the Legislature followed the dictates of the Constitution,” RSEA attorney Robert Klausner said outside the downtown courthouse. “They didn’t follow the rules.”

Klausner argued in court that, even after the Legislature’s own actuary advised that the cash balance plan had a cost attached to it, state lawmakers did not approve the measure by a required two-thirds vote.

A 2010 amendment to the state Constitution required a two-thirds vote of the Legislature, rather than a simple majority vote, for proposed changes to any public retirement system that have actuarial costs.

Louisiana has four state retirement systems: the Louisiana State Employees Retirement System, the Teachers Retirement System of Louisiana, the Louisiana School Employees Retirement System, and the Louisiana State Police Retirement System.

Morvant said the intent and purpose of Act 483 was “a pretty noble one” — to reduce unfunded accrued liability in the state’s retirement plans. But, he said, the Legislature “ignored” its own actuary.

The judge issued his ruling after hearing conflicting testimony from that actuary — Louisiana legislative auditor chief actuary Paul Richmond — and David Driskoll, an actuary with Buck Consultants, which has a contract with the state Division of Administration.

Richmond testified that the cash balance plan was “going to be somewhat more costly” than the current defined benefit plan. Driskoll testified his firm concluded the cash balance plan will result in cost savings to the state.

“We felt very confident that Buck was correct,” Division of Administration Steven Procopio testified, referring to Buck Consultants.

The cash balance plan 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 while the employer, in this case the state, would contribute 4 percent.

All but 1 percent of the investment earnings would go toward an individual’s pension. The 1 percent would be held as a reserve to guard against investment losses.

The defined benefit plan that state employees have today guarantees lifetime benefits at a certain level based on years of service and compensation. Jindal contends that plan is too expensive for the state.

The Louisiana State Employees Retirement System, or LASERS, opposed the cash balance plan, arguing it would not provide sufficient retirement income for state employees who have no Social Security safety net.

LASERS Executive Director Cindy Rougeou testified Thursday it would cost LASERS an estimated $645,000 to implement the cash balance plan.

Jindal has argued that the cash balance plan would help stem increasing state retirement system financial liabilities while providing a sustainable pension benefit for employees.

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.

Pension Plans Gaining Payees, Losing Payers

By Marsha Shuler
The Advocate
Capitol news bureau

An increase in state employee and teacher retirements would require higher pension contributions from financially strapped state government and parish school systems in the coming fiscal year, pension plan chiefs said Tuesday.

Executive directors of the Teachers Retirement System of Louisiana, the Louisiana School Employees Retirement System, the Louisiana State Employees Retirement System and the Louisiana State Police Retirement System talked about the situation which is increasing costs and system liabilities during a Louisiana House informational meeting.

In the State Police system, there’s one active employee for each retiree drawing a check. The School Employees system has more retirees than active system members contributing. The teachers system reports a reduction of about 4,000 active members in the last two years, while the state employees
system lost 6,000 active members.

“You are spreading costs over fewer and fewer people,” said State Police retirement actuary Charles Hall. Subsequently, the employer is paying with a higher contribution rate.

For instance, the state contribution toward State Police pension costs is 70 percent of a $57.8 million payroll, according to a chart provided by the State Police system. The system has a $343.68 million unfunded accrued liability meaning it’s that short of the funds needed to pay promised benefits for its members.

“It’s going to be difficult to see in my mind a reduction in employer contributions,” said Irwin Felps, executive director of the State Police system.

The reduction of active pension system participants has come as state employees ranks have been cut because of Jindal administration budget cuts and the privatization of many state functions.

In 2012, Gov. Bobby Jindal also tried to alter retirement plans for existing employees. Teachers have opted out of the classroom instead of dealing with new classroom teaching and tenure policies.

Charles Bujol, executive director of the Louisiana School Employees Retirement System, said there are more retired members now than active ones “which creates actuarial problems.”

The system has an $875 million unfunded accrued liability, Bujol said. “The employer contribution rate increases because of the reduction in active members, even though we have reduced the UAL by $29 million,” he said. “Our actual debt went down but the employer contribution rate went up.”

Bujol said the escalating contribution rate is “a considerable financial burden” on the school systems.

Between June 30, 2010, and June 30, 2012, there has been nearly a 4,000 decrease in the system’s active members, said Maureen H. Westgard, executive director at Teachers Retirement System of Louisiana.

“That has had an increase in the (employer) contribution rate,” said Westgard. She said school systems will pay a 0.5 percent additional contribution rate “directly related to that decrease in positions ... It does have a direct impact on the costs.”

In addition, the TRSL system board voted to adjust downward expectations from investment earnings, Westgard said. That too will boost school system contributions, she said.

“The additional costs are going to come down on the school boards. We are sending them a big bill next year,” said state Rep. Sam Jones, D-Franklin.

The Teachers Retirement System of Louisiana has a $10.9 billion unfunded accrued liability.

Westgard said the initial UAL of the teachers system was $4.169 billion when voters approved a constitutional amendment committing to the state to pay it off by 2029. Because the state back-loaded payments to eradicate the debt interest payments have ballooned that original debt by $3.39 billion, she said.

Westgard said come 2014 the state will begin paying on the principal of the debt.

LASERS has a $7.1 billion unfunded accrued liability. It, too, has grown because of interest payments on the original debt. LASERS executive director Cindy Rougeou said its valuation shows that “at June 30, 2010 we had 58,881 actives. By June 30, 2012 we had 52,352.”

Senate Retirement to Discuss COLAs at December 11 Meeting

The Senate Retirement Committee will meet Tuesday, December 11 at 10:00 a.m. in the John J. Hainkel, Jr. Room to continue a study of cost-of-living adjustments (COLAs) for retired members of public retirement systems. 

In previous meetings, Senator Elbert Guillory made a point of saying that false hope should not be given that a COLA was imminent. However, after seeing information provided by LASERS, comparing the LASERS COLAs to those paid by Social Security, he noted that the situation was "not acceptable." The comparative information showed that the value of LASERS benefits with COLAs was considerably lower than the Social Security benefits. Senator Guillory stated that a solid funding approach must be developed and funding cannot be an afterthought.

LASERS will provide information from the December 11 meeting as it becomes available. 

Pay Raise for some State Workers Dead

A proposal to raise the minimum pay of at least 7,400 employees as part of attempts to better compete with the private sector is dead for now according to Civil Service Director Anne Soileau.

Gov. Bobby Jindal and his money arm, the Division of Administration, headed by Commissioner Angèle Davis, must sign-off on the proposal, and that has not happened.

In addition, Soileau said no money has been inserted in the governor’s proposed state budget for the new fiscal year that begins July 1 to cover the pay plan’s cost.

Three pay options were submitted to Jindal’s budget planners that could bring anywhere from 3 percent to 10 percent raises to certain employees.

Soileau said earlier that Civil Service struggles to fill essential jobs because of higher pay offered in the private sector.

LASERS Seeks to Consolidate Law Enforcement Plans

The Louisiana State Employees’ Retirement System wants to replace the seven plans covering law enforcement officers with a single blanket policy.

LASERS Executive Director Cindy Rougeou said several current plans pertain to different employee groups, including probation and parole officers, peace officers, bridge police, Alcohol and Tobacco Control agents, and Department of Wildlife and Fisheries agents.

The proposed legislation, to be introduced in the next legislative session, is intended to bring all these “hazardous duty” employees under one comprehensive plan instead of continuing to address each agency with piecemeal policies, Rougeou said.

Department of Revenue Secretary Cynthia Bridges, a LASERS board member, oversees the state Office of Alcohol and Tobacco Control.

Bridges said the comprehensive plan would put all hazardous duty officers on the same level. No group is expected to lose any benefits under the new plan, she said.

Rougeou said it may take a couple legislative sessions to get the plan to pass, but, “Unless we start, then it will never happen.”

The proposed law would only apply to hazardous duty employees hired on or after Jan. 1, 2009. LASERS also is working on a transition plan for those in current hazardous duty plans who want to transfer to the new plan.

State Employees slated for first general pay raise since 1990

Louisiana’s state employees will start seeing a $1,500 annual pay raise in their pay checks beginning next month according to this story in Thursday’s Baton Rouge Advocate.

The raise, the first general increase since 1990, amounts to
72-cents an hour. The pay increase will be retroactive to July 1, the
beginning of the state budget year.

The state Civil Service Commission on Wednesday adopted pay schedules that allow for implementation of the pay increase for some 60,000 classified employees.

Gov. Kathleen Blanco issued an executive order to implement the raise for an estimated 36,000 full-and part-time employees who are in the unclassified
service.

Civil Service Commission member Burl Cain called the pay increase “historic” because the pay raises are a flat amount that all employees will get, not the usual percentage increase.

“We did the flat rate which gives the largest percentage to the folks that make the least amount of money,” said Cain, also warden of Louisiana State Penitentiary at Angola.

LASERS-Did you know?

Membership in LASERS is mandatory for all state employees whose employing agencies are LASERS participants, except those exempted by state law.

Some examples of excluded employees include:

- employees who receive a per diem allowance instead of earned compensation

- students and interns

- independent contractors

LASERS-Did you know?

LASERS members do not pay Social Security Tax.

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