Changes to retirement system approved by House

BATON ROUGE -- The House pulled a U-turn Wednesday, first stripping an amendment it had approved Tuesday that would have killed a plan to put new state workers in a 401(k)-style retirement system before passing the largely unaltered version of the bill. Representatives approved House Bill 61, the first major element of Gov. Bobby Jindal's proposed pension overhaul to come before the House, by a 55-45 vote, nearly the same margin by which members had approved an amendment opposed by the Jindal administration the day before.

state-capitol-flag.JPGThe House Wednesday passed a largely unaltered version of a retirement system bill pushed by Gov. Bobby Jindal.

Before the bill's passage, representatives struck that amendment, which would have required new state employees to enroll in Social Security. State workers in Louisiana are not currently enrolled in the federal program and representatives sparred Wednesday over whether requiring new hires to enroll in the system would provide them with greater security or simply add costs to the state without significantly improving employees' retirements.

"The Social Security issue is simply something that kills the bill," said Joel Robidaux, R-Lafayette, who sponsored the amendment to remove the Social Security requirement. Policy and procedure got nearly equal hearings in the debate over the bill as opponents fought once again for a 70-vote threshold for passage, arguing that allowing the bill's approval with a simple majority could open it up to legal challenges.

At the heart of the issue is Jindal's proposal to enroll new employees in a "cash balance plan," a retirement system in which the state and employees both make contributions to an investment account managed by the existing state retirement systems. During years in which the systems earned money due to market gains, the employees would be credited with all but 1 percent of those improvements as interest on their investment. In years when there are market loses, the state would fill the gap to make sure the employees did not lose money, in part by using a fund built from the 1 percentage point of any market gains during good years. Employees, who could access those funds on retirement or roll them over into other retirement accounts if they left state service, would contribute 8 percent of their salaries into the system and the state would contribute 4 percent.

House Retirement Committee Chairman Kevin Pearson, the bill's sponsor, said adding Social Security on top of that would significantly increase costs to the state and its employees without providing them much benefit. When opponents argued that poor market performance could leave state workers without a safety net, the Slidell Republican noted that many who draw Social Security have to work to make ends meet.

Robidaux acknowledged that benefits under the cash balance plan would be less generous than those under the existing pension system, but said that shifting retirement risk away from the state was necessary to prevent the cost from overwhelming other priorities. The state is now on the hook for a more than $18 billion shortfall in the retirement systems that is half due to underfunding in the past. Rep. Joe Harrison, R-Houma, who proposed the Social Security amendment Tuesday, argued that cash balance plan put all retirement risks on the employee and a safety net was necessary.