The Jindal administration will seek an expedited hearing by the Louisiana Supreme Court on whether a 401(k)-type pension plan for new state employee hires was legally passed, administration lawyer Liz Murrill said Tuesday.
“We will try to fast track that, but that’s on the Supreme Court schedule,” Murrill told the Teachers Retirement System of Louisiana’s board.
The constitutionality of the law is just one of the issues surrounding the so-called “cash balance” plan that is supposed to go into effect July 1.
A state district judge ruled that the law’s passage constitutionally required a two-thirds vote, which it did not achieve through the legislative process.
Maureen Westgard, executive director of Teachers Retirement System of Louisiana, said the legal determination as well as issues of involving the IRS and Social Security status of the plan must be resolved soon if the July 1 date is to be met.
Adverse determinations could expose plan participants to tax liabilities and require some employees to be enrolled in Social Security with additional contributions required.
Murrill said the state’s request for a determination of the tax status and Social Security equivalency of the cash-balance plan has been transferred to the office of chief counsel that deals with Social Security issues.
“They are processing it. It’s moving. We are hoping they expedite it,” said Murrill.
In addition, Westgard said there are 13 policy areas that have been identified where there’s a need for clarification of what is meant by the cash balance statute.
Legislation has been filed for consideration in the legislative session that opens April 8 to fix the problem areas, she said.
“This will help from an administrative standpoint,” Westgard said.
Because there are so many issues up in the air, two legislators have filed resolutions aimed at suspending the law for a year.
Legislators can approve the delay on a majority vote. The resolution could not be vetoed by the governor.
Cash balance would be the pension plan for new hires of the Louisiana State Employees Retirement System and Teachers Retirement System of Louisiana members who are in higher education.
Gov. Bobby Jindal pushed the pension change as part of a package of legislation aimed at reducing escalating state expenses associated with statewide retirement systems. He said the current retirement plans are unsustainable as structured.
Discussion of the status of the cash balance plan came as the Teachers Retirement System of Louisiana’s legislative committee met to review proposed legislative changes that would impact its operations.
The board postponed until April taking positions on the bills because “we lack the financial information we need on most of them,” legislative committee Chairman Bill Baker said.