By Marsha Shuler
Capitol news bureau
June 01, 2012
The Louisiana Legislature on Wednesday passed Gov. Bobby Jindal’s proposed 401(k)-type pension plan for future state employees.
The plan, called cash balance, would replace the existing retirement, which is defined benefit, for new government hires.
Opponents complained that the cash balance plan would not provide financial security for government employees and end up costing state taxpayers.
“We are telling a generation we are going to set up something for you where you are going to be worse off than the generation who proceeded you,” said state Rep. Sam Jones, D-Franklin.
Proponents, such as House Speaker Chuck Kleckley, countered that the state pension system is broken and putting too much of a financial drain on the state budget. “This bill helps correct some of those challenges,” said Kleckley, R-Lake Charles.
The measure, House Bill 61, is the first of Jindal’s pension system revamp package to go to the governor’s desk.
Jindal issued a prepared statement late Wednesday thanking his supporters in the Legislature.
Final legislative approval came as the state Senate, then the House agreed to a conference committee report to resolve differences between the two chambers.
The state Senate gave quick approval on a 26-8 vote.
Then, the Louisiana House voted 67-37 for the measure after opponents failed to scuttle the bill for the current legislative session.
The measure would move state employees, including those in higher education, hired beginning July 1, 2013, into a cash balance retirement plan. Contributions from employees and from employers — state government agencies — would be invested by state retirement systems, with individual accounts credited with investment earnings each year.
The cash balance plan would differ from traditional private-sector 401(k)-type plans in that state government employee accounts would be protected and not lose the money they contributed if investments sour.
State employees today have a “defined benefit” plan that guarantees lifetime benefits at a certain level based on years of service and compensation. Jindal contends that is too expensive for the state.
Speaker Kleckley took the microphone before the vote to urge the measure’s passage. “Our retirement system is broken,” he said.
Kleckley said the long-term liabilities of Louisiana’s four statewide pension systems is $18.5 billion. The cash balance plan for future employees would help the state address those pension liabilities by moving away from a retirement benefits system that’s too costly, he said.
Most of the pension systems’ long-term liabilities stem from past administration’s granting benefits but not funding them. Investment losses as a result of the economic downturn that began in 2007 also contributed.
State Rep. Jeff Thompson, R-Bossier City, said the cash balance plan provides an opportunity for the state to get away from a “defined benefits system, which is flawed and is costing our state and you can insert ... taxpayers and neighbors anytime you see state.”
Thompson said the cash balance plan is similar to what is seen in the private sector. “It provides some security,” he said.
State Rep. James Armes, D-Leesville, said the plan provides little security for state government employees who unlike private sector workers cannot receive federal Social Security benefits.
“We are going to have a problem finding employees,” said Armes. “We are taking their benefits away and placing them in the hands of those on Wall Street who got us in trouble to begin with.”
State Rep. Eddie Lambert, R-Prairieville, said the legislation should be sidelined and a decision made on whether new employees should be enrolled in Social Security “and whether we are going to be in the retirement business or not.”
State Rep. Jones said the cash balance plan would end up giving an employee 60 percent of the pension benefits they would get under today’s system at a cost that the Legislature’s retirement actuary concludes is going to be more than today’s plan.
“How is that better?” asked Jones.
The House roll call vote was not available at press time.