Pension plans gaining payees, losing payers
An increase in state employee and teacher retirements would require higher pension contributions from financially strapped state government and parish school systems in the coming fiscal year, pension plan chiefs said Tuesday.
Executive directors of the Teachers Retirement System of Louisiana, the Louisiana School Employees Retirement System, the Louisiana State Employees Retirement System and the Louisiana State Police Retirement System talked about the situation which is increasing costs and system liabilities during a Louisiana House informational meeting.
In the State Police system, there’s one active employee for each retiree drawing a check. The School Employees system has more retirees than active system members contributing. The teachers system reports a reduction of about 4,000 active members in the last two years, while the state employees
system lost 6,000 active members.
“You are spreading costs over fewer and fewer people,” said State Police retirement actuary Charles Hall. Subsequently, the employer is paying with a higher contribution rate.
For instance, the state contribution toward State Police pension costs is 70 percent of a $57.8 million payroll, according to a chart provided by the State Police system. The system has a $343.68 million unfunded accrued liability meaning it’s that short of the funds needed to pay promised benefits for its members.
“It’s going to be difficult to see in my mind a reduction in employer contributions,” said Irwin Felps, executive director of the State Police system.
The reduction of active pension system participants has come as state employees ranks have been cut because of Jindal administration budget cuts and the privatization of many state functions.
In 2012, Gov. Bobby Jindal also tried to alter retirement plans for existing employees. Teachers have opted out of the classroom instead of dealing with new classroom teaching and tenure policies.
Charles Bujol, executive director of the Louisiana School Employees Retirement System, said there are more retired members now than active ones “which creates actuarial problems.”
The system has an $875 million unfunded accrued liability, Bujol said. “The employer contribution rate increases because of the reduction in active members, even though we have reduced the UAL by $29 million,” he said. “Our actual debt went down but the employer contribution rate went up.”
Bujol said the escalating contribution rate is “a considerable financial burden” on the school systems.
Between June 30, 2010, and June 30, 2012, there has been nearly a 4,000 decrease in the system’s active members, said Maureen H. Westgard, executive director at Teachers Retirement System of Louisiana.
“That has had an increase in the (employer) contribution rate,” said Westgard. She said school systems will pay a 0.5 percent additional contribution rate “directly related to that decrease in positions ... It does have a direct impact on the costs.”
In addition, the TRSL system board voted to adjust downward expectations from investment earnings, Westgard said. That too will boost school system contributions, she said.
“The additional costs are going to come down on the school boards. We are sending them a big bill next year,” said state Rep. Sam Jones, D-Franklin.
The Teachers Retirement System of Louisiana has a $10.9 billion unfunded accrued liability.
Westgard said the initial UAL of the teachers system was $4.169 billion when voters approved a constitutional amendment committing to the state to pay it off by 2029. Because the state back-loaded payments to eradicate the debt interest payments have ballooned that original debt by $3.39 billion, she said.
Westgard said come 2014 the state will begin paying on the principal of the debt.
LASERS has a $7.1 billion unfunded accrued liability. It, too, has grown because of interest payments on the original debt. LASERS executive director Cindy Rougeou said its valuation shows that “at June 30, 2010 we had 58,881 actives. By June 30, 2012 we had 52,352.”