La. lawmakers weigh government retirement change

Louisiana lawmakers weigh major changes to retirement plans of state government workers

• By Melinda Deslatte, Associated Press Writer
• On 10:33 am EDT, Tuesday October 20, 2009

BATON ROUGE, La. (AP) -- Louisiana lawmakers are considering a sweeping change in the retirement plans given to state government workers and teachers, a shift that would strip the guarantee of a benefit tied to salary and years of service.

The House and Senate retirement committees on Monday began mulling over an idea offered by House Speaker Jim Tucker to consider switching incoming state government workers and new teachers to a retirement offering similar to a 401(k) plan.

Employees and employers would pay into the plans, the dollars would be invested and employees would manage and choose those investments. Workers would retire with those contributions for their retirement -- which would either be bolstered by investment earnings or deflated by losses.

Tucker said he wanted lawmakers to weigh the possible change because he was worried about the outstanding, multibillion-dollar debts of the statewide retirement systems and the risks to the state.

Changing the type of retirement offering for those who get their benefits from the state would shift the risks to workers. The state would be required to put a certain amount into the retirement account, but wouldn't be vulnerable for having to fill in a large gap to pay benefits if retirement system investments tank or the stock market crashes.

Tucker, R-Terrytown, said the switch would give people the ability to make their own investment decisions and take responsibility for their retirement.

"I think people want to manage their own money," he said.

Louisiana's constitution guarantees payment of benefits for the four state systems that cover the state police, state employees, teachers and school employees. The systems are underfunded, about $12 billion short of what they need to cover the cost of benefits for everyone in the systems when they retire.

Representatives of retirement organizations, national policy groups and consulting firms outlined to the committees Monday the arguments and research about the competing types of retirement offerings.

Supporters of the current system offered to Louisiana government workers and teachers, called "defined benefit" plans, argued that hired investment managers are better equipped to make investment decisions and that workers should know what type of retirement they can expect.

Backers of the switch to a "defined contribution" plan similar to a 401(k) said that it would give the state clearly spelled out costs and could attract non-career government employees by allowing more portability in their retirement plans. A worker wouldn't have to put in a certain number of years with the state to get some sort of retirement benefit.

The committees didn't vote on a recommendation. Rep. Joel Robideaux, I-Lafayette and chairman of the House Retirement Committee, said the panels would meet again in November.

Any changes would have to be approved by the full Legislature and wouldn't have an impact on teachers, state employees or anyone else already in the statewide retirement systems. They would only affect new employees entering the systems after the change was made.

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