The Jindal administration’s planned pension system for future state employees will be more costly than originally thought under a valuation approved by the Louisiana State Employees Retirement System on Friday.
The LASERS board — over the objections of Gov. Bobby Jindal’s aides — voted to recommend a revised employer contribution rate upward to the Public Retirement Systems Actuarial Committee, which adopts official valuations of each state and statewide system each year.
The rate went from 26.4 percent to 27.8 percent because of a problem with the 401(k)-type pension plan the Legislature approved last year.
The action came a day after a state judge ruled that the so-called “cash balance” plan set to go into effect July 1 was not legally passed by the 2012 Legislature. An appeal is expected to be filed with the Louisiana Supreme Court to try to throw out the ruling and get the plan back on track.
LASERS Executive Director Cindy Rougeou said the increase is tied to a provision of the law dealing with “refunds” that was not written as intended “and will actually have the effect of the cash-balance plan being a little more expensive.”
The problem is rooted in language related to when people leave the system and how much money they can take out, said Maris LeBlanc, deputy director for LASERS.
The law allows a member with five years of service or more to withdraw both employee and employer contributions, LeBlanc said. With less than five years, employees can only draw out their contributions, she said.
The cash balance law does not specify that a member must be active in the system, LeBlanc said. So, someone with two years of employment could depart but not take money out of the retirement system then wait three years and claim both employee and employer shares, she said.
Attorneys for the state’s four statewide retirement systems “are confident that is the correct interpretation of the law as written,” Rougeou said.
She said it would be simple to fix the problem in the legislative session that opens April 8, then the valuation could be adjusted back down. But the valuation had to be done based on current laws, she said.
Liz Murrill, attorney for the Division of Administration, protested the increased valuation.
Late Friday, Commissioner of Administration Kristy Nichols called the LASERS board action “an obstructionist tactic to not implement” the cash balance plan.
Nichols said it was clear throughout the legislative process that a member would vest after five years and be able to draw both employee and employer contributions when they leave.
“We found it highly unusual to revise the evaluation,” Nichols said. “If there’s ambiguity in the law, you always follow the intent.”