Gov. Bobby Jindal’s proposal to move to a new 401(k)-type pension plan for future state employees ran into trouble Tuesday night in the House of Representatives.
The House voted 55-46 for an amendment that would enroll new employees in Social Security, a move that would add to retirement expenses.
Approval of the change came as the measure was nearing a vote after about three hours of debate.
House Bill 61 sponsor state Rep. Kevin Pearson, R-Slidell, stopped debate after the amendment passed and returned the measure to the calendar before the House could vote on the bill. Pearson said he would bring HB61 up again Wednesday.
The legislation is part of a package of bills pushed by Jindal, who claims pension changes are needed to reduce the state’s financial exposure. Jindal said taxpayers are responsible for $18.9 billion in liabilities of Louisiana’s four statewide pension systems that provide retirement benefits for state government employees, teachers, school employees and State Police.
HB61 would implement a “cash balance” retirement plan for state employees, including those in higher education, beginning July 1, 2013. Employees would have investment accounts made up of employee and employer contributions as well as investment earnings on those dollars. It would differ from a traditional 401(k) because the individual’s account would be protected from investment losses.
State employees are currently offered a “defined benefit” retirement plan that guarantees a regular payment for life, based on years worked and salary earned, which Pearson told the Louisiana House is too costly to continue.
Critics of the “cash balance” plan contend state employees could end up being wards of the state if their investment earnings run out before they die and they have no Social Security safety net.
State Rep. Joe Harrison, R-Napoleonville, offered the amendment that would enroll new employees participating in the cash-balance plan into Social Security.
“People are looking for security ... If it takes Social Security, that’s what we have to do,” Harrison said.
Harrison said new state employees should have the same benefits as private sector employees are offered. “If you are trying to compete in the private sector for employees we need to run this state we need this,” he said.
Pearson said Social Security is a tax. “We won’t want to go into Social Security for our state employees because it’s not that great a plan,” Pearson said.
As debate opened on the bill, Pearson told his House colleagues the cash balance plan would stop the growth of new pension system debt associated with future members of the Louisiana State Employees Retirement System and higher education members of the Teachers Retirement System of Louisiana.
He said the current defined benefit plan “puts every bit of the risk on the taxpayer.”
State Rep. John Bel Edwards, D-Amite, questioned why teachers, school employees and hazardous-duty employees are not included in the cash-balance plan.
“If it’s such a good plan for the employees of this state, why not?” Edwards said. He said the state employee pension system accounts for 35 percent of the $18.9 billion in pension benefits. The rest is shared by teachers, school employees and State Police. “Why pick out only state employees?,” he asked.
Pearson said K-12 teachers are local — not state employees. “That (retirement expense) is not part of the budget we control,” he said. “Hazardous duty is a different type of individual, looking at earlier retirement age because of the demands and stresses of the jobs,” he said. “This is not necessarily a system designed for them.”
Before Pearson sidelined the legislation, the House added provisions designed to protect disability and survivors benefits and help with administration of the plan which would be optional for current employees.
As debate opened, Edwards challenged House Speaker Chuck Kleckley’s ruling that only a majority vote was needed for passage of the legislation when a two-thirds vote was called for earlier. The House voted 63-37 to uphold Kleckley’s ruling.
Voting FOR an amendment to provide Social Security for future state employees (55): State Reps. Abramson, Anders, Armes, Badon, Barrow, Berthelot, Billiot, W. Bishop, Brossett, Brown, Burrell, Cox, Dixon, Edwards, Foil, Franklin, Gaines, Greene, Guillory, Harrison, Havard, Hazel, Hill, Honore, Howard, Hunter, G. Jackson, K. Jackson, James, Jefferson, Johnson, Jones, Lambert, T. Landry, LeBas, Leger, Mack, Montoucet, Moreno, Norton, Ortego, Pierre, Pope, Price, Reynolds, Richard, Ritchie, Schexnayder, Smith, St. Germain, Thibaut, Thierry, A. Williams, P. Williams and Willmott.
Voting AGAINST the Harrison amendment to HB61 (46): Speaker Kleckley and state Reps. Adams, Arnold, Barras, S. Bishop, Broadwater, Burford, H. Burns, T. Burns, Carmody, Carter, Champagne, Chaney, Connick, Cromer, Danahay, Dove, Fannin, Garofalo, Geymann, Guinn, Harris, Henry, Hensgens, Hodges, Hoffmann, Hollis, Huval, N. Landry, Leopold, Ligi, Lopinto, Lorusso, Miller, Jay Morris, Jim Morris, Pearson, Ponti, Pylant, Robideaux, Schroder, Seabaugh, Shadoin, Talbot, Thompson and Whitney.
NOT Voting (4): State Reps. Gisclair, Pugh, Richardson and Simon.