Legislature approves retirement plan
By Marsha Shuler
Capitol news bureau
May 31, 2012 - The Advocate
The Louisiana Legislature on Wednesday passed Gov. Bobby Jindalfs proposed
401(k)-type pension plan for future state employees.
The plan, called cash balance, would replace the existing retirement, which
is defined benefit, for new government hires.
Opponents complained that the cash balance plan would not provide financial
security for government employees and end up costing state taxpayers.
gWe are telling a generation we are going to set up something for you where
you are going to be worse off than the generation who proceeded you,h said state
Rep. Sam Jones, D-Franklin.
Proponents, such as House Speaker Chuck Kleckley, countered that the state
pension system is broken and putting too much of a financial drain on the state
budget. gThis bill helps correct some of those challenges,h said Kleckley,
R-Lake Charles.
The measure, House Bill 61, is the first of Jindalfs pension system revamp
package to go to the governorfs desk.
Jindal issued a prepared statement late Wednesday thanking his supporters in
the Legislature.
Final legislative approval came as the state Senate, then the House agreed to
a conference committee report to resolve differences between the two
chambers.
The state Senate gave quick approval on a 26-8 vote.
Then, the Louisiana House voted 67-37 for the measure after opponents failed
to scuttle the bill for the current legislative session.
The measure would move state employees, including those in higher education,
hired beginning July 1, 2013, into a cash balance retirement plan. Contributions
from employees and from employers — state government agencies — would be
invested by state retirement systems, with individual accounts credited with
investment earnings each year.
The cash balance plan would differ from traditional private-sector
401(k)-type plans in that state government employee accounts would be protected
and not lose the money they contributed if investments sour.
State employees today have a gdefined benefith plan that guarantees lifetime
benefits at a certain level based on years of service and compensation. Jindal
contends that is too expensive for the state.
Speaker Kleckley took the microphone before the vote to urge the measurefs
passage. gOur retirement system is broken,h he said.
Kleckley said the long-term liabilities of Louisianafs four statewide pension
systems is $18.5 billion. The cash balance plan for future employees would help
the state address those pension liabilities by moving away from a retirement
benefits system thatfs too costly, he said.
Most of the pension systemsf long-term liabilities stem from past
administrationfs granting benefits but not funding them. Investment losses as a
result of the economic downturn that began in 2007 also contributed.
State Rep. Jeff Thompson, R-Bossier City, said the cash balance plan provides
an opportunity for the state to get away from a gdefined benefits system, which
is flawed and is costing our state and you can insert ... taxpayers and
neighbors anytime you see state.h
Thompson said the cash balance plan is similar to what is seen in the private
sector. gIt provides some security,h he said.
State Rep. James Armes, D-Leesville, said the plan provides little security
for state government employees who unlike private sector workers cannot receive
federal Social Security benefits.
gWe are going to have a problem finding employees,h said Armes. gWe are
taking their benefits away and placing them in the hands of those on Wall Street
who got us in trouble to begin with.h
State Rep. Eddie Lambert, R-Prairieville, said the legislation should be
sidelined and a decision made on whether new employees should be enrolled in
Social Security gand whether we are going to be in the retirement business or
not.h
State Rep. Jones said the cash balance plan would end up giving an employee
60 percent of the pension benefits they would get under todayfs system at a cost
that the Legislaturefs retirement actuary concludes is going to be more than
todayfs plan.
gHow is that better?h asked Jones.
The House roll call vote was not available at press time.