The Louisiana House refused Thursday to give final legislative package to the Jindal administration’s proposed new 401(k)-type pension plan for future state employees.
The House voted 49-43 to concur in state Senate changes to the so-called “cash balance” legislation – four votes shy of the majority needed to send the bill to the governor’s desk for signing into law.
The legislation now goes to a House-Senate conference committee to try to iron out differences as the June 4 end of session looms. The conference committee has three House and three Senate members.
Opponents said the plan offers little retirement security for employees who could end up living in poverty.
“There is no back-stop, no Social Security,” said state Rep. Sam Jones, D-Franklin. Under the plan, he said future retirees would get 60 percent less than they do today after 25 years of employment.
House Bill 61 sponsor Rep. Kevin Pearson, R-Slidell, urged his colleagues to approve the measure, contending the new pension plan is needed to get better control over escalating pension system debts for which the state is ultimately responsible.
Pearson said he does not know where opponents are getting information that they use to paint a dire financial picture for retirees under the plan. “There are so many mischaracterizations,” he said.
The legislation has been opposed by the AARP of Louisiana and the Louisiana State Employees Retirement System board of directors.
HB61 would impact those non-hazardous duty employees who become LASERS members after July 1, 2013, as well as new higher education employees of the Teachers Retirement System of Louisiana.
The cash balance plan is similar to a private sector 401(k) except state employee accounts would be protected from investment losses. Employees would contribute 8 percent and the state 4 percent with earnings from investments also credited to their accounts. One percent of the earnings would go into a reserve fund that could be tapped in economic downturns.
The House passed version of the plan would have allowed current state employees to opt into the cash-balance pension system. The Senate stripped that provision at the request of Gov. Bobby Jindal’s pension policy advisors. The Senate version also added to those who would be covered employees of post-secondary management boards.
The House came close to tabling the legislation on two occasions. Proponents would have had to get a two-thirds vote to bring it up again.
State Rep. Joe Harrison, R-Napoleonville, said Louisiana would be only the second state to have a cash balance plan. State employees in Nebraska have such a plan but they are also enrolled in Social Security. “I feel like we need to have something more secure if we want to get the right employees,” said Harrison.
Pearson urged passage of the measure, noting that problem areas could be worked out before the plan would go into effect in mid-2013 – after another legislative session.
Jones urged scuttling the legislation. “We have over a year before we would implement this requirement. We have time to revisit and fix this bill where its useable,” he said.