Legislature approves retirement plan

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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.

Comments

1) Comment by jeffsadow - 01/06/2012

Again, for those doing comparable tasks, the current pension system in LA produces compensation significantly better in general than for those in the private sector. This change merely introduces fairness and does not inappropriately transfer wealth from taxpayers to those they fund. The over-generous system (along with over-optimistic assumed investment returns) created the UAL; at least startting 7/1/13 this no longer will be much of contributing factor.

2) Comment by zealer99 - 31/05/2012

Sometimes I wonder if i am in the same reality. It wasn't actually necessary to make such reactionary changes if the legislature has acted responsibly during the last few decades. One of the problems with LASERS has been the increasing unfunded liability caused by using an employee's highest three years as a basis for their retirement benefit, the last five would have been better but there is no reason why their average career salary should not have been used for a basis, maybe with a different percentage applied. Another problem has been the fact that State has not been reliable in depositing the employers share of the required percentage into LASERS. Another problem is that there are too many State employees.

3) Comment by for real - 31/05/2012

Can't wait till Jindal goes to DC and starts screwing with SS., Federal Workers, cuts Fed taxes for corporations, if you are not a millionaire you don’t deserve a future.

4) Comment by for real - 31/05/2012

Retirement system is not broke, Republican Legislature Broken Jindal Robbing from poor, giving to rich Louisiana's Revenue Estimating Conference, which forecasts state income, lowered estimates for the 10th time in 5 years by nearly $211 million for this year. Why even pay these people if they are so wrong all the time? The biggest drop is in corporate tax collections, which have fallen from $940 million in the 2007-08 budget year to an expected $156 million for 2012-13, an 83 percent plunge. Sales tax income fell from $2.9 billion in the 2007-08 budget year to an estimated $2.8 billion in the upcoming 2012-13 fiscal year, a 3 percent dip. During the same time, personal income taxes will have dropped from $3.2 billion to an estimated $2.6 billion, a 19 percent decline. And Jindal keeps giving the rich out of state corporations tax cuts, corporate income tax exemptions and credits cost the state $905 million in lost revenue in 2008 and are estimated to cost $1.4 billion in 2012, according to a revenue department analysis. And every six months BJ cuts health care and education budgets using the incompetent if not deceitful Louisiana’s Revenue Estimating Conference as the reason for needed reductions. "I've been hearing this nice rosy picture about the number of jobs, corporations, everybody we're attracting to our state. When is our state going to see the positive impact? I mean we have to have budget cuts because revenues are down," Sen. Ed Murray, D-New Orleans, told Economic Development Secretary Stephen Moret in a recent budget hearing. You and I are the only ones wondering Ed. http://www.thenewsstar.com/article/20120430/NEWS01/204300307/Analysis-Revenue-doesn-t-match-picture

5) Comment by timesright - 31/05/2012

Another ALEC agenda item. Shameful!

6) Comment by squiggly - 31/05/2012

Hopefully, the next governor will undo this backward law. How many private sector employees only have their 401K plan to rely on for retirement? That is what this cash balance plan is doing.

7) Comment by sharpie - 31/05/2012

Posters on here are totally insensitive. If they had to make these comments face to face to a state employee, they wouldn't. You are right, fair is fair. Pay into SS and then at least the playing field is level. But that would cost the state even more money. The truth is, something had to be done. But rather than sit down with LASERS?RS and work together, they had to push through his bill to make him look good. Now, it really IS the worst in the nation. They have too many legal problems and push back from current employees, so this is the only way they could make him look good. Even LASERS said a cash balance plan is a viable idea, but it needed to be tweaked. Of course, once he leaves office, maybe it will be.

8) Comment by BRmoderate - 31/05/2012

If they are going to a 401K plan, let the new employees also qualify for SS. 401K's are very risky, they will need to have a safety net like all other private sector employees. Posters on here seem to think State employees are these greedy little fiends ripping dollars away from non-state employee citizens. Little do they know that most rank and file state employees just want the same benefits as everyone else...

9) Comment by LeapinLizzie12001 - 31/05/2012

Will the Governor, Senators, and Representatives be in this plan, too?

10) Comment by 8point6 - 31/05/2012

Thank you, legislature, for passing this bill.

11) Comment by biglsufan - 31/05/2012

Here's the deal, we either change the system now or have NOTHING down the road. When I say nothing, I mean roads, schools or anything else. The system can't sustain its self in the current state. What do you suggest we do, become a socialist state? Wait in bread lines? Pay 75% in taxes to pay the retirees?

12) Comment by blondredneck - 31/05/2012

Bettergovt, you must understand that your description is exactly what Mr. Jindal and company want for state employees. Their goal is to eliminate Civil Service rank and file and outsource all those jobs to the private sector for VERY lucrative contracts (well, lucrative for their cronies that get the contracts) and have the only state employees be very high paid positions given to their friends and supporters for the length of time they are in office. This plan is much better for that goal.

13) Comment by LawyerDan65 - 31/05/2012

So future State emplyees will get a 401 K - like plan, like in the private sector, but will not earn SS hours, unlike th eprivate sector, which means they will be poorer than any other retirees in the country. BTW, the actuarial report says this reduction in benefits will actually cost the State more money than the current pension system, at least according to the actuarial analysis that the legislature hires to do such calculations.

14) Comment by Warp7 - 31/05/2012

Little Hitler and the Brown Shirts finally got their way. Those discussed with what he and the rest of the Republicans did, remember tihs when you go to vote. If you sit on your hands and continue to let this state become red, expect more of the same in the future. Jindal has one agenda and that is to play to the hardcore right. His ego is so high he is blinded by ambition. The ultra right knows this and they are playing him like a puppet. As with most people that are supposed to be extremely smart, he lacks common sense. Plus, he has zero compassion.

15) Comment by qwerty - 31/05/2012

snap...I just realized. Since the ponzi scheme for the old retirement has ended, meaning no new employees to pay for benefits of those already retired and ones to retire under the old system...will their checks end? But I guess since state employees get a tax refund every time they get paid, why should we care!

16) Comment by qwerty - 31/05/2012

this sounds great...all the savings and what not. When are teachers, judges, and law enforcement (prison guards) going to go into a great system like this?

17) Comment by bettergovt - 31/05/2012

The only thing that is "broken" about the state's retirement system is the politicians that refused to properly fund it since 1949. What they created is the worst retirement plan in the nation because state employees do not qualify for social security. What they have done is insured that there will be no career state employees in the future. They will use state employment only between private sector jobs because they will have to work 30 years in the private sector to earn social security to have a safety net in case of a market crash or investment scam. If they work for the state their entire career, they will all eventually end up on medicaid and welfare or starve once their bank account is depleted. Years from now the state employees hired while this is in effect will be known as the Bobby Jindal employees and they will be the bottom of the barrel on every street corner begging for money. This session answered the question "How much will a state give to get one man on a presidential ticket?" Everything. Schools, hospitals, prisons, colleges and universities, everything.

18) Comment by dday198 - 31/05/2012

on to court