Jindal-backed retirement change delayed by a year
BATON ROUGE (AP) — Lawmakers have delayed the start date of Gov. Bobby Jindal’s signature retirement achievement from last year, a law that would shift future rank-and-file state workers to a 401(k)-style retirement plan.
With a 35-0 vote Wednesday, the state Senate gave final legislative passage to a one-year suspension of the law that had been slated to take effect in July.
Jindal can’t veto the suspension, which gives lawmakers time to learn the resolution of several outstanding concerns.
A district court judge has ruled the law unconstitutional, saying it didn’t get enough votes to pass. That ruling is on appeal at the Louisiana Supreme Court. Meanwhile, leaders of two state retirement systems have raised concerns about tax implications and possible costs of the changes.
The retirement change, approved by lawmakers last year, created an investment account similar to a 401(k) plan for certain state employees hired after July 1. That would stand in place of a monthly retirement payment based on salary and years of employment.
With the delay, it will apply to workers hired after July 1, 2014 — if the law is upheld by the Supreme Court.
Under the changed system, the contributions made by the employee and the state would be invested, and the account would grow at the rate of investment earnings. The employee would never lose money for investment slumps, as in a traditional 401(k) plan.
Louisiana was set to become the first state in the nation to provide only the “cash balance” retirement plan for certain employees, without also offering federal Social Security benefits.
The switch to the new pension plan would apply to rank-and-file state employees and university staff, not to law enforcement or other workers deemed to be in hazardous duty. It also wouldn’t change the retirement benefits offered to public school employees.
Supporters of the cash balance plan described the change as a way to rein in the costs of retirement programs that are billions of dollars short of the money they’ll need to pay for all benefits promised. Opponents said the new investment account wouldn’t give state workers enough of a safety net.
It’s unclear whether the change would save the state money.
Financial analysts disagree widely on its implications, with the Legislature’s retirement analyst saying the new plan could cost the state more and the analyst hired by the Jindal administration predicting hefty savings.