The Louisiana House endorsed Gov. Bobby Jindal’s proposal to move to a 401(k)-type pension plan for future state employees Wednesday night, amid criticism that it does not provide enough retirement security.
The legislation had stalled on Tuesday after the House approved an amendment that would require new state employees on the “cash balance” plan to be enrolled in Social Security too.
On Wednesday, the House reversed course, stripping the Social Security provision, then approving the measure on a 55-45 vote. House Bill 61 now moves to the state Senate.
House Democratic leader state Rep. John Bel Edwards, D-Amite, claimed the legislation constitutionally required 70 votes — a two-thirds majority — because it added to state pension costs. Edwards said the simple majority vote subjects the legislation to a legal challenge.
The measure would move state employees, including those in higher education, hired beginning July 1, 2013, into a cash balance retirement plan. Current employees could opt to join it. 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 plan would differ from traditional private-sector 401(k)-type plans because the employee accounts would be protected from losses.
State employees today have a “defined benefit” plan with guaranteed lifetime benefits based on years of service and compensation. Jindal contends that is too expensive for the state.
The legislation, sponsored by state Rep. Kevin Pearson, R-Slidell, is the first in Jindal’s multi-bill pension package to clear either legislative chamber. Other bills that would require state employees to contribute more while working longer for reduced benefits are pending in the Louisiana Senate.
Jindal claims the changes are necessary to bring pension system costs under control and reduce liabilities that are putting a drain on the state budget.
State Rep. Joel Robideaux, R-Lafayette, proposed stripping the Social Security provision, and getting the governor’s Division of Administration to study the feasibility of enrolling cash balance plan members in Social Security. The DOA’s findings would be reported to a special retirement panel early next year.
“Let’s get Social Security off the table,” Robideaux said. He said state representatives should be voting on “Do we want to go from a defined benefit to a plan that is more fiscally responsible for the state of Louisiana and the taxpayers?”
Robideaux said the Louisiana State Employees’ Retirement System’s liabilities have grown from $3.3 billion to $6.5 billion in the last eight years “with us doing everything we could to hold the line on the unfunded accrued liability.” He said much of the liability growth came because of the stock market crash and investment losses.
“This bill is trying to correct that growth,” he said.
But opponents said employees would need Social Security under the cash balance plan because fiscal analysis shows they are projected to get 15 percent to 35 percent less than they do today in retirement. Pension money could run out and retirees be left with nothing to live on, they said.
In addition, opponents said the potential pension system liability for the state still exists because the plan also rests on the success of the investment market.
“Not having the safety net of the ultimate portability plan is a shame. It’s something we should not stoop to,” said state Rep. Sam Jones, D-Franklin.
State Rep. Joe Harrison, R-Napoleonville, who got the House to adopt the Social Security provision, said state employees would be exposed to the same situation as those who lost retirement income in the stock market and are now working at fast food restaurants and as greeters at department stores.
Harrison asked the House to reject the measure and move forward developing a well-thought-out plan to address the state retirement system debts.
The House voted to strip the Social Security provision on a 63-39 vote.
Before approving HB61, the House without objection added an amendment that would require the state to look at state employee pay and potential changes in rates.
“There is no doubt when you compare the current employee today and the plan they are on that I think in many cases, most cases, this is a lesser of a plan,” said state Rep. Major Thibaut, D-New Roads. “What I am concerned about is the retention and the attractiveness (of state jobs).”
“Possibly we need to change the pay scale for employees that come in and go under the new plan,” Thibaut said. He said the extra money could give the employees a chance to make other personal retirement plans.
Voting FOR a “cash balance” retirement plan for future state employees (55): Speaker Kleckley and state Reps. , Abramson, Adams, Anders, Arnold, Barras, Berthelot, Billiot, S. Bishop, Broadwater, Burford, T. Burns, Carmody, Carter, Champagne, Chaney, Connick, Cromer, Danahay, Dove, Fannin, Foil, Garofalo, Geymann, Harris, Henry, Hensgens, Hodges, Hollis, Huval, N. Landry, Leopold, Ligi, Lopinto, Lorusso, Miller, Moreno, Jay Morris, Jim Morris, Pearson, Ponti, Pylant, Richardson, Robideaux, Schexnayder, Schroder, Seabaugh, Shadoin, St. Germain, Talbot, Thibaut, Thompson, Whitney, P. Williams and Willmott.
V oting AGAINST HB61 (45): State Reps. Armes, Badon, Barrow, W. Bishop, Brossett, Brown, H. Burns, Burrell, Cox, Dixon, Edwards, Franklin, Gaines, Greene, Guillory, Harrison, Havard, Hazel, Hill, Hoffmann, Honore, Howard, Hunter, G. Jackson, K. Jackson, James, Jefferson, Johnson, Jones, Lambert, T. Landry, Leger, Mack, Montoucet, Norton, Ortego, Pierre, Pope, Price, Reynolds, Richard, Ritchie, Smith, Thierry and A. Williams.
Did NOT Vote (5): State Reps. Gisclair, Guinn, LeBas, Pugh and Simon.
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