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, or TRSL, 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 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.
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