State employee and teacher retirement systems are opposing bills filed in the current legislative session that would require their members to pay more and others that would reduce benefits.
The boards of the Louisiana State Employees Retirement System and the Teachers Retirement System of Louisiana cite constitutional problems that plagued Jindal administration efforts last year.
Unlike last year’s push, the retirement revamp legislation is sponsored by individual legislators — not the administration.
The Jindal administration is focusing its pension push in the 2013 session on correcting flaws in the only major retirement change approved last year, a 401(k)-type plan for those hired beginning July 1. The cash-balance plan is under court challenge on constitutional grounds that it did not get the required number of votes for passage.
LASERS opposes the administration’s “cleanup” legislation. TRSL has taken a neutral position.
LASERS and TRSL boards are both seeking passage of a legislative resolution that would suspend the law for a year — or at least until there is a ruling on whether its benefits would be equivalent to those of Social Security. If not equivalent, both employee and employer would have to contribute to Social Security at additional cost.
“All the issues are still there, just not the volume,” said Maureen Westgard, executive director for Teachers’ Retirement System of Louisiana.
Two of the key bills being opposed by LASERS and TRSL are sponsored by Louisiana House Retirement Committee Chairman Rep. Kevin Pearson, R-Slidell, and state Senate Retirement Committee Chairman Sen. Elbert Guillory, D-Opelousas.
“I know there will be opposition. I just think I have to do something about the solvency of the (pension) plans,” Pearson said. “It’s not getting better. There are a whole bagful of issues.”
The state expenses associated with the statewide pension plans are growing because of a commitment to pay off old debts by 2024, Pearson said. The repayment plan is back-loaded, meaning escalating state payments and more of a financial drain on state revenues, he said.
“I understand they don’t want to give up more money, that they have not had a raise in five or six years,” Guillory said. But the financial strength of the system needs improvement and there is a need to provide a source of funds for retiree cost-of-living raises, he said.
Guillory also has legislation that would dedicate 2 percent of state revenue in excess of 2011-12 collections for debt payments and cost of living adjustments. State employee and teacher pension boards support the measure.
The teachers system has an unfunded accrued liability of $10.9 billion and the state employees have $7.1 billion. The UAL amount represents the dollars required to pay off all retirement system obligations over time.
The two statewide retirement boards have voted to oppose bills that would calculate the pension benefits based on the final five years average compensation instead of the current three years. The change would essentially reduce benefits since the final three years are usually the highest pay.
Both boards also oppose legislation that would increase employee contributions by 2 percent or 3 percent with the extra going to future cost-of-living raises for retirees or to pension system debt elimination, or both.
Cindy Rougeou, LASERS’ director, said the pension system’s past debt is a debt of the employer, not employees.
The increased contribution rate proposals “would bring up the same constitutional arguments brought up last year in terms of an existing contract,” said Maris LeBlanc, deputy director at LASERS.
The systems contend the legislation is unconstitutional because it breaks employment contracts and amounts to a tax on current employees to pay state retirement obligations.
Westgard said one bill by Guillory would end up with teachers paying 82 percent of normal costs of their ultimate benefit.
“Typically, employees-employers should share 50-50. Teachers already pay 59 percent of normal costs. They are paying more than their own share of their own benefit costs,” Westgard said.
The retirement systems oppose:
- House Bill 57, sponsored by Pearson, that would increase the contribution rate by 1 percent on July 1, 2015, and another 1 percent on July 1, 2017. It goes to a five-year final average compensation to calculate benefits. Dollars would go to reducing the pension systems debt.
- Senate Bill 11, sponsored by Guillory, would increase the employee contribution by 3 percent beginning July 1 and provides for a five-year final average compensation calculation. Funds would go to cost-of-living raises for retirees.
- Senate Bill 7, sponsored by state Sen. Barrow Peacock, R-Shreveport, would provide for a five-year final average compensation.