The Louisiana Senate gave final approval Wednesday to a year’s delay in Gov. Bobby Jindal’s new pension plan for future state employees.
The Senate voted 35-0 for a House-passed resolution suspending the law scheduled to go into effect July 1.
House Concurrent Resolution 2 sponsored by state Rep. Joe Harrison, R-Napoleonville, won overwhelming support through the legislative process.
The Jindal administration originally opposed the delay, but reversed course with the filing of the special resolution that can suspend a law without the governor’s approval.
The administration has filed what it calls a “clean up” bill to fix flaws.
“It resets the clock. There are a lot of issues to work out and we need some more time,” said state Sen. Fred Mills, R-St. Martinville.
Jindal’s 401(k)-type “cash balance” retirement plan was approved during the 2012 Legislature.
“Cash balance” is being challenged in court over claims it is unconstitutional. A state district judge sided with the Retired State Employees of Louisiana Association that the measure required a two-thirds vote for passage which it did not get. The case is pending before the Louisiana Supreme Court.
Also pending is an Internal Revenue Service determination on whether the pension plan provides a benefit that is equivalent to that of Social Security. An adverse determination would require the new state employees to be enrolled in Social Security, thereby adding to costs of both employees and government agencies.
The Louisiana State Employees Retirement System opposed the adoption of the plan, noting that it would not provide financial security for state employees who do not have Social Security as a safety net.
Under the “cash balance” plan employees would contribute 8 percent of their pay toward retirement and the state as employer 4 percent.
Interest earned from investments would be credited to the employee’s retirement account with 1 percent withheld to guard against investment losses. As written there would be a 10 percent cap on investment earnings.
The employee could never lose money because of the reserve fund that would make up the difference.