Colleges and universities seek pension relief

The chairman of the Louisiana House Retirement Committee wants to change a state law that he says is hampering college and university faculty recruitment.

State Rep. Kevin Pearson said Thursday that he’s working on a change to the Optional Retirement Plan — popular among academics — that will at least guarantee a benefit equal to Social Security.

Employees who choose the optional plan are contributing 8 percent but their employers are only contributing 3.8 percent. And that’s where the problem lies.

Louisiana higher education’s employer match is the lowest in the country. The next-lowest rate in the country is 6.4 percent, Pearson said.

“How can you really attract somebody from out of state when your employer matches 3.8 percent?” Pearson asked.

The ORP, which is an alternative to the traditional defined benefit plan, is provided through a private carrier.

Employee and employer contributions are invested by the private carrier in options chosen by the individual member.

The performance of the member’s investments determines the retirement benefit due. ORP balances can be rolled over to another IRS-qualified retirement plan or to an IRA at any time after termination of employment.

The optional plan is popular among those in the academic arena because it is portable to most other U.S. colleges and universities.

Forty-six percent, or 7,136, of higher education employee members of the Teachers’ Retirement System of Louisiana participate in the optional plan.

Nearly half of them, 3,576, are in the LSU System. Another 2,673 are from the University of Louisiana System, 559 in the Louisiana Community and Technical College System and 296 in the Southern University System.

Pearson said private employers pay 6.2 percent into Social Security for their employees who also pay 6.2 percent.

“We have a duty to provide a benefit at least equivalent to Social Security for those who have chosen this,” said Pearson, R-Slidell.

Jason Droddy, LSU director of external affairs, said LSU has trouble hiring in the national marketplace because of the poor employer contribution rate.

“You can’t do it,” Droddy said.

Droddy said 60 percent of LSU’s faculty are enrolled in the Optional Retirement Plan. Statewide, he said, 43 percent of those employed in higher education choose the plan.

“It’s a vastly popular plan in the real environment in which we work,” Droddy said. “Not only is it a retirement problem but it is a competition problem for us.”

Pearson filed House Bill 6, which would establish a minimum employer contribution rate for the Teachers’ Retirement System of Louisiana option plan.

Under the bill, the employer contribution rate would be the greater of the employer normal cost for higher education members participating in the traditional defined benefit plan plus amortization costs or 6.25 percent of pay plus amortization costs.

An actuarial note estimated that employer, i.e., college, costs would increase by $11.7 million in the coming year with the contribution increase called for in Pearson’s bill.

Pearson postponed consideration of the measure when it came up for a hearing Thursday before the House Retirement Committee.

“I really need a little more time to work on this with the schools,” he said.

“I do believe we will do this this year,” Pearson said.