Retirees sue state, call pension vote illegal
A group representing retired state employees filed suit Thursday alleging that Gov. Bobby Jindal’s new 401(k)-type retirement plan for future state workers is unconstitutional because it did not get the required legislative vote to become law.
The Retired State Employees Association of Louisiana contends that House Bill 61, the so-called “cash balance” plan that became Act 483 of the 2012 legislative session, required a two-thirds vote of the Legislature because the Legislature’s actuary determined the retirement plan for new hires had a cost attached to it.
The Senate passed the measure on a vote of 26-8, then the House voted 68-36. At the time, House Speaker Chuck Kleckley, R-Lake Charles, ruled that a simple majority vote would suffice.
The association claims the bill needed 70 votes in the House to pass.
“If legislators think they can pass laws in violation of the constitution or state statutes, we don’t know where that line will be drawn,” RSEA Executive Director Frank Jobert Jr. said Thursday. “It’s not just a retirement issue.”
The new retirement plan is for state employees hired on or after July 31, 2013.
State employees today have a “defined benefit” plan that guarantees lifetime benefits at a certain level based on years of service and compensation. Jindal contends that plan is too expensive for the state.
“We’re confident that the bill was constitutionally passed,” Shannon Bates, a spokeswoman for the governor, said Thursday. “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.”
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.
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.
RSEA President Benny Harris said the association’s board of directors “could not let the defined benefit retirement plan ... fall by the wayside on their watch by virtue of a defective piece of legislation, without a proper legal challenge in the courts.”
Proponents of the cash balance plan argue that the state pension system is broken and putting too much of a financial drain on the state budget.
Opponents, such as the Louisiana State Employees Retirement System, or LASERS, complain that the cash balance plan will not provide financial security for government employees and end up costing state taxpayers.
LASERS contends it will not provide sufficient retirement income for state employees who have no Social Security safety net.
Jindal maintains the plan will help stem increasing state retirement system financial liabilities while providing a sustainable pension benefit for employees.