Retirement News : Seniors : Bill tackles changes in state retirement

Bill tackles changes in state retirement

Date Added: 01-05-2005

Louisiana's pension plan, which allows some state workers to retire in their late 40s, would be scaled back for future employees under a bill that won approval Thursday in a House committee.
The measure, House Bill 311, next faces action in the full House. If approved there, it would then face scrutiny in the Senate.

While the long-range plan faces major hurdles -- a key retirement board declined to support it -- the sponsor said he likes his chances.

"I think they are excellent," Rep. Pete Schneider, R-Slidell, said. Schneider is chairman of the House Retirement Committee, which approved the proposal.

Backers of the bill include the Louisiana Association of Business and Industry, a key business group. Opponents include the state AFL-CIO, the Louisiana Federation of Teachers and the state branch of the American Federation of State, County and Municipal Employees.

The bill would not affect current state employees or their benefits. It would apply to those hired on Jan. 1 and after. And it would only affect the Louisiana State Employees Retirement System, not other pension plans.

That system has about 35,000 retired members and 65,000 employees.

State law allows state workers to retire at any age after 30 years of service.

"We have people retiring as early as age 48," said Charles Hall, an actuary for several state retirement systems.

Under the bill, future state workers would have to earn 10 years of service and be at least 60 years old to be eligible for benefits.

Retirement benefits for current workers are figured by multiplying 2.5 percent of an employee's average pay times years of service. Under the bill, that figure would be 2 percent times years of service.

For instance, a current worker with 30 years of service can retire at any age with a pension equal to about 75 percent of his three-year average pay.

The proposed law would allow future workers with 30 years' in the system to retire at about 60 percent of his pay. And they could not collect a pension check until turning 60.

Also, under current law, average pay is figured by using the three consecutive years of a worker's top salary. The new law would extend that to the average pay of five years.

Schneider said the changes would eventually save the state at least $81 million a year and possibly more. Other estimates put the savings at $109 million per year.

Financial experts said it would be 15 to 20 years before those kinds of savings materialize because only future workers would be affected. All current workers and retirees would receive the same benefits that are in state law now.

"It really depends on the hiring and firing process of state government," Hall told the committee.

Schneider said the bill stemmed from hearings since the last legislative session that focused in part on ways to trim state retirement costs. He noted that earnings for public retirement systems were sluggish after the Sept. 11, 2001, terrorist attacks.

"We needed a way to be able to pay for the benefits," Schneider said after the hearing.

Kevin Torres, general counsel for the Louisiana State Employees Retirement System, said his board voted not to support the bill. Torres said the change would leave the state open to charges that it is treating retired state workers differently, which he said could jeopardize the retirement system's federal tax protections.

Current law allows state workers, after one year of service, to buy up to five years of service credit. The bill would require future state workers to have at least five years of service before any such purchase.

For More Information:

http://www.2theadvocate.com/stories/042905/pol_retire001.shtml