BATON ROUGE, La. (AP) — A proposal to revamp the pension system for future rank-and-file state workers into a hybrid plan with a 401(k)-style investment account feature started advancing Monday in the Louisiana Senate.
The Senate Retirement Committee voted 4-1 for the bill by its chairman, Republican Sen. Barrow Peacock of Shreveport.
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. Peacock’s proposal — created by the Louisiana State Employees’ Retirement System — would shrink the monthly check and add the investment account for workers hired after Jan. 1, 2020.
Supporters said the change would lessen pension debt buildup in a system already $6.8 billion short of what is needed to cover benefits, while also giving a more portable pension benefit to state workers who often leave before they reach retirement eligibility.
“What this is is a new retirement plan for a new generation,” said Cindy Rougeou, executive director of the Louisiana State Employees’ Retirement System.
Opponents disagreed with shrinking the financial value of retirement benefits offered to state workers, who aren’t in the federal Social Security system, and shifting more of the cost risks to employees.
“We’re looking at an instrument that provides a lower benefit at a higher cost and raises the retirement age. Gee, wonder why we’re against it?” said Louis Reine, president of the Louisiana AFL-CIO.
Supporters stressed the new proposal would keep the monthly, guaranteed check approach. But that would make up a smaller portion of the pension for future hires. Also, eligibility to receive that check would be pushed back to age 65, rather than the current ages of 60 or 62.
All the committee members who voted for the bill were Republicans. The lone vote against the measure came from Sen. Ed Price, a Gonzales Democrat and vice-chairman of the committee. The proposal heads next to the Senate Finance Committee for review, because it has upfront costs to the state, about $10 million over the first five years.
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.
Cost-of-living adjustments would be built into the new hybrid 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.