LASERS Responds to James Varney Piece in Times Picayune

Cindy Rougeou,
LASERS Executive Director

In his opinion piece "Pension Reform Cowardice," Mr. Varney makes so many misstatements and hyperbole; it is difficult to know where to start in response. These errors include, but are not limited to the following: "public employees should be limited to 401(K) plans; Louisiana hasn't adopted sensible reforms; a 2012 law placed new hires in a defined contribution plan but, due to unions, lobbyists, etc., it was repealed; the system is unsustainable; state workers draw handsome pensions which are extraordinarily generous entitlements."

The facts: Act 75 of 2005 enacted sweeping retirement reform, creating a new retirement plan for LASERS rank-and-file new hires, including increased employee contributions, a 5-year average compensation calculation, and required employees work longer before retiring. In 2010, Act 992 created another such plan, which included a new uniform hazardous duty service plan that LASERS had sought for years. Those Acts alone are expected to save LASERS $800 million.

Louisiana's public employees do not participate in the private sector defined benefit plan, Social Security. Placing public workers solely in a 401(K) defined contribution plan could be financially catastrophic for our state. And the 2012 law (the Cash Balance Plan), while not in fact a defined contribution plan, was found by the independent Legislative Auditor to actually cost more than the current retirement plan. It was, in fact, not repealed but found unconstitutional by unanimous vote of the Louisiana Supreme Court because it did not pass with the required two-thirds vote of the legislature.

As to sustainability, the debt owed to LASERS was reduced by about $700 million last year; our five-year market return is 14.3 percent; our 30-year actuarial return exceeds eight percent; we have added $4.6 billion to the fund over a four-year period; and principal and interest are now being paid on the unfunded accrued liability. LASERS was recently recognized as a top ten performing pension system nationally for the decade.

The truth is, since 2005, Louisiana has been on the leading edge of pension reform, passing laws that other states are just now considering. Another fact, LASERS retirees do not draw handsome or extraordinarily generous entitlements. The average annual rank-and-file benefit is about $23,000. The average annual benefit for those rank-and-file retiring in 2013 was about $25,000. And these pensions have been earned by a career of public service. They are certainly not an entitlement and they are certainly not generous.

Cindy Rougeou,

LASERS Executive Director

Cash Balance Plan Passed Unconstitutionally

On Friday, June 28, 2013, the Louisiana Supreme Court unanimously ruled that the Cash Balance Plan enacted in 2012 did not receive the requisite two-thirds vote of the legislature and was therefore unconstitutional. The ruling was in a lawsuit brought by the Retired State Employees Association and upheld the decision of Judge William Morvant of the Nineteenth Judicial District Court. A copy of the opinion of the Court can be viewed here.

The Cash Balance Plan was originally enacted to apply to state employees hired starting July 1, 2013. However, implementation of the plan was suspended to July 1, 2014, during the 2013 legislative session. Given the Supreme Court's ruling, the plan will no longer take effect.

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.”

2013 Legislative Session Ends

The 2013 Regular Session of the Louisiana Legislature officially closed at 6:00 p.m. on June 6. If you were following the proposed retirement legislation, the LASERS Board of Trustees took positions on 10 bills. In the final outcome, none of the bills impacted active or retired LASERS members.

The LASERS Board supported two resolutions, HCR 2 (Harrison) and SCR 1 (Cortez). HCR 2 unanimously passed and will suspend implementation of the provisions of the Cash Balance Plan to July 1, 2014. SCR 1 was a companion resolution and it did not complete the legislative process.

The LASERS Board supported SB 4 (E. Guillory), but it was withdrawn by the author after amendments adding contingencies to the funding method change were included. This measure would have changed the LASERS actuarial funding method from projected unit credit to entry age normal.

SB 17 (E. Guillory) was also supported by the LASERS Board, but failed to advance. It would have created the State Retirement Fund and allocated two percent of revenue collections in excess of Fiscal Year 2011-2012 levels to the Fund for payment of the UAL and COLAs. 

  

Six bills were opposed by the LASERS Board and all of them failed to move forward:

HB 35 (Barrow) would have provided for a 25 years at any age retirement eligibility for employees of hospitals operated as part of the LSU Health Sciences Center which were subject to closures; 

HB 57 (Pearson) would have increased the employee contribution rate for all members by two percent to pay the system's unfunded accrued liability (UAL).  It provided for a 60-month final average compensation (FAC) and 15 percent anti-spiking for all LASERS members; 

HB 61 (Badon) would have provided for a "divided benefit" for members whose actual earnings in a calendar month are 30 percent or more above his average monthly earnings for the immediately preceding 12 months; 

HB 729 (Pearson), which was a substitute for HB 68, would have re-enacted the Cash Balance Plan and made changes regarding membership, withdrawals, interest, transfers, reciprocals, disability and survivor benefits, reemployment, purchases and dual plan membership; 

SB 7 (Peacock) would have provided for a 60-month FAC and 15 percent anti-spiking for all LASERS members; 

SB 11 (E. Guillory) would have increased employee contributions by three percent beginning July 1, 2013, provided for a 60-month FAC, and 15 percent anti-spiking for all LASERS Members. 

For more details about each of these bills, visit the LASERS website or the Louisiana Legislature website. 

Legislative Update on Cash Balance Plan Bills

Yesterday, the Senate voted 35-0 to suspend implementation of the current Cash Balance Plan (CBP) which was passed during the 2012 Legislative Session. The CBP was to go into effect July 1, but with the unanimous passage of HCR 2 (Harrison), it will be delayed until July 1, 2014. The LASERS Board of Trustees supported suspension of the plan until the Internal Revenue Service can make a determination on the equivalency of the plan to Social Security.

HB 729 (Pearson) which is a substitute bill for HB 68 (Pearson) was scheduled to be heard yesterday on the House floor. However, it was returned to the calendar and is subject to call. This bill recreates the Cash Balance Plan and places a 10 percent cap on interest which can be earned by the members. The LASERS Board opposes this measure due to the lack of retirement security offered to members who have no Social Security safety net and the failure of the legislation to address many of LASERS administrative concerns.

New pension plan delayed

Marsha Shuler
Capitol News Bureau 

The Louisiana Senate gave final approval Wednesday to a year’s delay in Gov. Bobby Jindal’s new pension plan for future state employees.

The Senate voted 35-0 for a House-passed resolution suspending the law scheduled to go into effect July 1.
House Concurrent Resolution 2 sponsored by state Rep. Joe Harrison, R-Napoleonville, won overwhelming support through the legislative process.

The Jindal administration originally opposed the delay, but reversed course with the filing of the special resolution that can suspend a law without the governor’s approval.

The administration has filed what it calls a “clean up” bill to fix flaws.

“It resets the clock. There are a lot of issues to work out and we need some more time,” said state Sen. Fred Mills, R-St. Martinville.

Jindal’s 401(k)-type “cash balance” retirement plan was approved during the 2012 Legislature.

“Cash balance” is being challenged in court over claims it is unconstitutional. A state district judge sided with the Retired State Employees of Louisiana Association that the measure required a two-thirds vote for passage which it did not get. The case is pending before the Louisiana Supreme Court.

Also pending is an Internal Revenue Service determination on whether the pension plan provides a benefit that is equivalent to that of Social Security. An adverse determination would require the new state employees to be enrolled in Social Security, thereby adding to costs of both employees and government agencies.

The Louisiana State Employees Retirement System opposed the adoption of the plan, noting that it would not provide financial security for state employees who do not have Social Security as a safety net.

Under the “cash balance” plan employees would contribute 8 percent of their pay toward retirement and the state as employer 4 percent.

Interest earned from investments would be credited to the employee’s retirement account with 1 percent withheld to guard against investment losses. As written there would be a 10 percent cap on investment earnings.


The employee could never lose money because of the reserve fund that would make up the difference.

Original report here. 

Measure to suspend Jindal pension plan advances

Marsha Shuler
Capitol News Bureau

An effort to delay implementing Gov. Bobby Jindal’s 401(k)-type pension plan for new state government hires is one step away from final legislative passage.

The House Retirement Committee on Wednesday approved a Senate-passed resolution suspending the “cash balance” law until July 1, 2014.

The law has been challenged in the Louisiana Supreme Court and an IRS ruling is pending that could prove costly. If the IRS decides Jindal’s plan fails to provide a benefit equal to Social Security, both the state and the employee would have to pay more.

A state Senate panel passed a similar House-passed resolution.

Now, all that’s needed is for either chamber to pass one of the instruments that would suspend the law until 2014. Suspension resolutions cannot be vetoed by the governor.

Also Wednesday, the state House Retirement Committee voted 7-5 to advance legislation rewriting Jindal’s cash balance plan to fix flaws identified since its passage in 2012.

The amended version of the bill makes the pension plan optional for Louisiana judges but makes it mandatory for state employees.

The legislation had stalled in committee previously on a 6-6 tie vote.

Opponents argued that there was no reason to press House Bill 68 during the current legislative session, noting the resolution the panel had just approved would suspend the law for a year. The attempt to fix problems made the legislation worse and made the employee benefit even less equivalent to Social Security, said state Rep. Sam Jones, D-Franklin. “We are in the process of creating more damage,” he said.

Higher education community representatives lined up to tell the committee that the plan as structured would further damage efforts to recruit faculty.

Steven Procopio, chief of state at the state Division of Administration, said the legislation should not be delayed.

He said the existing pension plan for state employees, including those who work on college campuses, is not financially sustainable. The state’s four retirement systems have $18.5 billion in long-term liabilities, which is called the unfunded accrued liability, or UAL.

“We do have a serious UAL issue, retirement issue,” Procopio said. “It’s been put off too long.”

Procopio argued that HB68 could actually delay implementation of “cash balance” longer because of a bill provision that sets the date as six months after the state receives a ruling from the IRS that it is Social Security equivalent.

If the IRS determines it is not, there would be added expense to the state and employee for enrollment in Social Security.

Under the “cash balance” plan employees would contribute 8 percent of their pay toward retirement and the state as employer 4 percent.

Interest earned from investments would be credited to the employee’s retirement account with 1 percent withheld to guard against investment losses. As written there would be a 10 percent cap on investment earnings.

The employee could never lose money because of the reserve fund that would make up the difference.
Cindy Rougeou, executive director at Louisiana State Employees Retirement System, said from an administrative standpoint the bill had a lot of problems.

“Besides the nuts and bolts issues,” Rougeou said, LASERS still opposed the legislation because of the “lack of security” it offers to employees in their retirement.

Original report here. 

Five Retirement Bills Impacting LASERS Considered Wednesday

The House Retirement Committee met on Wednesday, May 15 and took action on the following bills impacting LASERS:

HCR 108 (Stokes) was reported favorably with amendments. This bill requires the state and statewide public retirement systems to report relative to the promulgation and distribution of forms related to pension forfeiture.The deadline to report was changed from May 20 to July 1, 2013. LASERS is already in compliance with this requirement.

SB 14 (Martiny) was reported favorably. This bill provides relative to upgrading accrual rates and no longer impacts LASERS.

HB 61 (Badon) was passed over at the request of the author. This bill creates a divided benefit for purposes of calculating the final average compensation (FAC) and was opposed by the LASERS Board and the other retirement systems.

SCR 1 (Cortez) was reported favorably. This bill suspends implementation of the current Cash Balance Plan until July 1, 2014. The LASERS Board supports this bill.

HB 68 (Pearson) was favorably reported by a vote of 7 to 5. This bill recreates the Cash Balance Plan and places a 10 percent cap on interest which can be earned by the members. Testimony was provided by LASERS Executive Director Cindy Rougeou and LASERS attorney Bob Klausner to explain the opposition to the bill expressed by the LASERS Board of Trustees. Primary concerns included the lack of retirement security offered to members who have no Social Security safety net and the failure of the legislation to address many of LASERS administrative concerns. Others providing testimony in opposition to the bill included a number of LSU professors, various teacher organizations, and the RSEA.

Agenda for House Retirement Committee Meeting on Wednesday, May 15

The House Retirement Committee is scheduled to meet Wednesday, May 15, at 9:00 a.m. Five bills which would impact LASERS are on the agenda.

HB 61 (Badon) provides for a "divided benefit" for members whose actual earnings in a calendar month are 30 percent or more above his average monthly earnings for the immediately preceding 12 months. The LASERS Board opposes this bill.

HB 68 (Pearson) re-enacts the Cash Balance Plan and makes changes regarding membership, withdrawals, interest, transfers, reciprocals, disability and survivor benefits, reemployment, purchases and dual plan membership. The LASERS Board opposes this legislation because of the lack of retirement security offered to members who have no Social Security safety net. The bill also fails to address many of LASERS administrative concerns.

HCR 108 (Stokes) requests the state and statewide public retirement systems to appear before the House and Senate committees on retirement and report relative to the promulgation and distribution of forms regarding pension forfeiture.

SB 14 (Martiny) allows a member to upgrade their accrual rate on transferred service to the accrual rate of the receiving system by paying the actuarial cost of the upgrade.  The bill allows for reverse transfers in certain instances.  (This measure has been amended, and the new reverse transfer provisions do not apply to state employees.) The LASERS Board was neutral on the original bill.

SCR 1 (Cortez) suspends the provisions of the Cash Balance Plan until July 1, 2014. This bill has already passed in the Senate Chamber. The LASERS Board supports this measure.

Please note that meeting schedules and agendas are subject to change. Check the LASERS website daily for updates and for detailed information about the proposed legislation which would impact LASERS.

Senate Retirement Committee to Meet Monday, May 13

The Senate Retirement Committee is scheduled to meet Monday, May 13 at 1:00 p.m. Two bills impacting LASERS are on the agenda.

HCR 2 (Harrison) suspends the provisions of the Cash Balance Plan.

SB 17 (E. Guillory) creates the State Retirement Fund and allocates two percent of revenue collections in excess of Fiscal Year 2011-2012 levels to the Fund for payment of the UAL and COLAs. When this bill was originally considered, Senator Guillory deferred it for two weeks to allow time for further discussion on other mechanisms of funding.

The LASERS Board of Trustees supports both HCR 2 and SB 17.

Please note that meeting schedules and agendas are subject to change. Check the LASERS website daily for updates and for detailed information about the proposed legislation which would impact LASERS.

Legislative Session Update

The House Retirement Committee met yesterday and one bill impacting LASERS was on the agenda.

HB 35 (Barrow) failed to be reported favorably with a 3 to 6 vote. This measure would have added a 25 years at any age retirement eligibility for employees of the LSU Hospitals which are set for closure. If passed, HB 35 would have resulted in an additional $28 million in unfunded accrued liability to LASERS. The LASERS Board opposed this bill.

HB 68 (Pearson) was originally scheduled to be on the agenda, but was removed. This bill, which would re-enact the Cash Balance Plan with some changes, is still pending in the House Retirement Committee. The LASERS Board opposes this legislation because of the lack of retirement security offered to members who have no Social Security safety net. The bill also fails to address many of LASERS administrative concerns.

On Monday, the House and Senate each passed resolutions, without opposition, to suspend the provisions of the Cash Balance Plan until July 1, 2014 (HCR 2 and SCR 1).  These resolutions will now move to the opposite chamber. HCR 2 is scheduled to be heard by the Senate Retirement Committee on Monday. The LASERS Board supports both of these resolutions.

Senate Backs Cash Balance Delay

Marsha Shuler

Capitol news bureau

The Louisiana Senate on Monday afternoon endorsed an one-year delay in the start of Gov. Bobby Jindal’s 401(k) type pension plan for new state employee hires.

The Senate voted 34-0 for Senate Concurrent Resolution 1 which would suspend the law until June 30, 2014.

State Sen. Page Cortez, R-Lafayette, said the delay is needed because the state has not received word from the IRS whether the plan meets the test of being equivalent to Social Security.

If the so-called “cash balance” plan fails to meet the test, state employees would have to be enrolled in Social Security and the employee and employer — the state — make extra contributions.

A retirement system actuary has filed papers with the IRS indicating that the “cash balance” plan may fall short in providing sufficient pension income for some employees.

The cash balance plan is also under constitutional challenge over it not receiving the required two-thirds vote for legislative passage. The case is pending in the Louisiana Supreme Court.

Two LASERS Opposed Bills Voluntarily Deferred

The House Retirement Committee met Thursday afternoon and considered two bills which would impact LASERS.

HB 57 and HB 68, sponsored by Rep. Pearson, were both voluntarily deferred.

HB 57 would increase the employee contribution rate for all members by two percent to pay toward the debt, owed to the system by the state. It also would provide for a 60-month final average compensation (FAC) and 15 percent anti-spiking for all LASERS members. The LASERS Board opposes this bill.

HB 68 was heard by the committee as a substitute bill that would amend and reenact the Cash Balance Plan. The substitute bill would provide a lesser benefit to the member than is currently contained in the Cash Balance Plan that was enacted last year.  That plan is currently under review by the state Supreme Court. Two motions failed with a tie vote of 6-6. One motion was to approve the measure with amendments and the other to involuntarily defer the bill. Rep. Pearson then voluntarily deferred the measure. LASERS Executive Director Cindy Rougeou and Deputy Director Maris LeBlanc provided testimony expressing LASERS concerns with the bill. In particular, Rougeou pointed out the lack of retirement security offered by the Cash Balance Plan for LASERS members who have no Social Security safety net. The Cash Balance Plan would create a new retirement plan for certain LASERS future members. The LASERS Board opposed the bill.

Cash Balance Plan Locked in Panel

The Advocate

Marsha Shuler

The Jindal administration’s proposed revamp of a 401(k)-type pension plan for new state employees ran into trouble Thursday.

The state House Retirement Committee refused to approve what was billed as a “clean up” measure to one approved by the Legislature last year which has encountered constitutional problems.

The measure got locked up in tie 6-6 votes after a top state employee pension official said the revision would actually provide “a lesser benefit” than what is in the law under challenge. The panel declined to pass it nor involuntarily defer the revamp which would have effectively killed the bill.

House Bill 68 sponsor Retirement Committee Chairman Rep. Kevin Pearson, R-Slidell, then moved to voluntarily defer the measure.

Gov. Bobby Jindal pushed the so-called “cash balance” plan during the 2012 legislative session for state employees, including those in higher education, hired after July 1, 2013.

It was only major part of a pension revamp package to make it through the legislative process. Other parts that impacted current state employees died.

The Retired State Employees Association of Louisiana filed a lawsuit contending the legislation did not get the two-thirds vote required under the state constitutional if pension law changes result in a cost. A state district court judge agreed. The issue is on appeal to the Louisiana Supreme Court.

The revised bill offered by Pearson would have eliminated the cost attached.

Cindy Rougeou, executive director at the Louisiana State Employees Retirement System, said the cash-balance plan became cost-neutral “because a lesser benefit is being provided” through the imposition of a cap on the interest that a employee could receive from investment of employee and employer contributions.

Rougeou said LASERS continues to oppose the measure because of the “lack of retirement security” for pension system members who have no Social Security to fall back on.

House Retirement Committee Meeting Scheduled for Thursday, May 2

The House Retirement Committee is scheduled to meet Thursday, May 2 upon adjournment. Two bills impacting LASERS are on the agenda.

HB 57 (Pearson) increases the employee contribution rate for all members by two percent to pay the system's unfunded accrued liability (UAL). The bill provides for a 60-month final average compensation (FAC) and 15 percent anti-spiking for all LASERS members. The LASERS Board opposes this bill.

HB 68 (Pearson) re-enacts the Cash Balance Plan and makes changes regarding membership, withdrawals, interest, transfers, reciprocals, disability and survivor benefits, reemployment, purchases and dual plan membership.  The LASERS Board opposed the bill in its original form. Though a substitute bill has been submitted, many of LASERS concerns remain. 

Please note that meeting schedules and agendas are subject to change. Check the LASERS website daily for updates and for detailed information about the proposed legislation which would impact LASERS.

House Retirement Committee Scheduled to Meet Thursday; Four Bills Impacting LASERS on the Agenda

The House Retirement Committee is scheduled to meet Thursday, April 25 upon adjournment. Four bills impacting LASERS are on the agenda.

HB 35 (Barrow) provides for a 25 years at any age retirement eligibility for certain state hospital employees who are employed at a hospital operated as part of the LSU Health Sciences Center, if their jobs are affected by a layoff plan approved by the State Civil Service Commission or the director of the State Civil Service. The LASERS Board opposes this bill.

HB 60 (Talbot) provides that members who retire on or after July 1, 2013, and return to state service in a position making them eligible for any state or statewide retirement system shall have benefits suspended and shall not earn service credit or supplemental benefits. The LASERS Board is neutral on this bill.

HB 61 (Badon) provides for a "divided benefit" for members whose actual earnings in a calendar month are 30 percent or more above his average monthly earnings for the immediately preceding 12 months. The LASERS Board opposes this bill.

HCR 2 (Harrison) suspends the provisions of the Cash Balance Plan. The LASERS Board voted to support this bill if the tax qualification condition is removed.

Please note that meeting schedules and agendas are subject to change. Check the LASERS website daily for updates and for detailed information about the proposed legislation which would impact LASERS.

Outcome from Monday, April 22 Legislative Meetings

The Senate Retirement Committee met Monday, April 22 and the following action was taken on three bills impacting LASERS.

  

SCR 1 (Cortez) was favorably reported. This bill suspends implementation of the Cash Balance Plan for a year to allow time to obtain the Social Security equivalence ruling. The LASERS Board of Trustees supports this bill.

  

SB 7 (Peacock) failed to advance by a vote of two to four. This bill would have applied a 60-month final average compensation (FAC) to current members of state and statewide retirement systems. Testimony on the bill was provided by LASERS Trustee Judge William Kleinpeter, LASERS Executive Director Cindy Rougeou, and Robert Klausner on behalf of LASERS. The LASERS Board of Trustees opposed this bill.

  

SB 17 (Guillory) was voluntarily deferred for two weeks to allow time for a committee to be constituted to find a mechanism of providing funds to assist in reducing the UAL. This bill creates the State Retirement Fund and allocates two percent of revenue collections in excess of Fiscal Year 2011-2012 levels to the Fund for payment of the UAL and COLAs. The LASERS Board of Trustees supports this bill.

To see a complete list of bills impacting LASERS and their progress, check our website daily. 

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. 

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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.