Reshaped pension proposed for future Louisiana state workers
BATON ROUGE, La. (AP) — Louisiana lawmakers will consider whether to redesign the pension system for future rank-and-file state workers, creating a plan that would feature a 401(k)-style investment account and shift some debt risks away from taxpayers.
Current employees pay into a retirement system that promises them a monthly check upon retirement based on salary and years of employment, if they reach certain eligibility benchmarks. The proposal sponsored by Senate Retirement Chairman Barrow Peacock would be a hybrid approach, keeping a scaled-back monthly check feature and adding the investment account.
Supporters say the changes for workers hired in 2020 and thereafter would lessen the buildup of debt in a system already billions in the red. They say it also would address increased turnover among state workers who often leave with little pension savings to take with them.
“It is a better retirement system with less liability to the state,” said Peacock, a Shreveport Republican.
The legislative session opens Monday. Peacock said his committee will consider the bill March 19.
Previous efforts to reconfigure the pension system have failed. But this proposal was created by the Louisiana State Employees’ Retirement System, known as LASERS, rather than against its guidance. So far, little criticism has emerged.
The Retired State Employees Association of Louisiana has taken an initial position of neutral, while it seeks further details.
Franklin Rep. Sam Jones, a Democrat who opposed previous efforts to redraw the system, said he has “hesitations,” but appreciates that LASERS is “thinking outside the box.”
“I’m going to keep an open mind on it,” he said.
Louisiana state employees aren’t in the federal Social Security system, so proposals to shift them to the 401(k) approach of private companies have repeatedly hit resistance. Former Gov. Bobby Jindal muscled one through the Legislature in 2012, only to see the courts determine it was not legally approved.
The new proposal would keep the monthly, guaranteed check approach. But that would make up a smaller portion of the pension for future hires. Eligibility to receive that check would be pushed back to age 65, rather than the current ages of 60 or 62.
Meanwhile, the employee and state would make contributions into an account, with the money invested and the worker able to manage investment choices.
Cost-of-living adjustments would be built into the plan. If employees leave early and don’t reach their retirement age on the state payroll, the investment account and its earnings would be portable, on a sliding scale in the first four years and fully after that.
Maris LeBlanc, LASERS’ chief operating officer, said under the current system, only 5 percent of employees reach the benchmarks to get a full pension. Seventy percent are expected to get no benefit, only a refund of money they paid into the retirement system because they leave state employment early, she told the Civil Service Commission.
“We feel like this is being much more fair to our employees who leave,” she said.
Peacock acknowledged the bill would have upfront costs because of its pay-as-you-go approach. But he said it would keep the state from building up larger debts.
Louisiana’s retirement systems are billions of dollars short of what they’ll need to pay off their pension obligations. LASERS’ debt is around $6.8 billion.
“If you don’t change the system for new employees, we think the current system is going to continue to dig a deeper hole,” said Robert Travis Scott, president of the nonpartisan Public Affairs Research Council of Louisiana, which has pushed for pension changes.
The switch to the new pension plan wouldn’t apply to law enforcement or other workers deemed to be in hazardous duty positions, judges, teachers or public school employees.
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