Despite fears to the contrary, layoffs of state employees have helped strengthen the retirement system for state workers, the head of the largest pension system for state government employees said Monday.
State government has been reducing its workforce over the past few years.
The executive director of Louisiana State Employees’ Retirement System, Cindy Rougeou, said having fewer people contributing to the system initially had raised some worries.
“At the time, I don’t think anyone really knew how the reduction in the state workforce would affect the state retirement system,” Rougeou told the Press Club of Baton Rouge.
She appeared with Legislative Auditor Daryl Purpera before an audience of about 25 people.
Rougeou said her staff and financial advisers recently conducted an evaluation of the situation.
“What we have actually seen is a positive financial impact upon LASERS,” she said.
LASERS has about 45,000 retirees, people collecting pensions, and 46,000 active members, she said.
“We actually have approximately 8,000 fewer members than we had last year,” Rougeou said.
Unlike the Social Security system, LASERS is not a pay-as-you-go system. Instead the state retirement system pays the cost of benefits as they are incurred, she said.
State employer layoffs result in a much smaller state payroll.
Law requires the state government agency, the employer, to contribute to its employees’ pensions at a set percentage of payroll, she said.
So, the amount of money LASERS receives goes down but the percentage of the contribution rises.
Still, with fewer state government employees, state government will be paying LASERS about $24 million less in employer contributions, Rougeou said.
“What we’re seeing are folks retiring earlier than they anticipated,” Rougeou said.
In 2012, the average annual benefit for a retired state employee was about $29,000. But for those who retire in 2013, the average pension is about $25,000, she said.
“The rank and file benefit is not generous. It is too often talked as such,” she said.