Benefits

La. Pension Overhaul Could Spur Lawsuits

April 2, 2012 (PLANSPONSOR.com) – Louisiana Governor Bobby Jindal’s proposed state pension system overhaul creates serious constitutional concerns, according to an independent analysis.

By Rebecca Moore editors@plansponsor.com | April 02, 2012

On the whole, plans to increase the full retirement age for current employees to 67, shift the burden of the retirement plans so that a greater cost falls on employees and change the way employee benefits are calculated could face legitimate challenges to their constitutionality, the report said, according to The Times-Picayune of New Orleans. Some employees are excluded from these changes, including teachers and hazardous-duty employees and those who would be older than 55 years old when the law takes effect.  

The Times-Picayune said that while each aspect of the plan raises different issues, two themes run through the report: provisions in the Louisiana Constitution that give membership in a public pension system the force of a contract between the worker, and the state and constitutional protections against laws that retroactively alter public contracts. The majority of the money spent on state retirement is part of a scheduled payment system set up by the legislature in the late 1980s to compensate for decades in which the state did not put enough into the system to keep it actuarially sound.   

By, in essence, changing the terms of the contractual relationship in ways that reduce the value of retirement benefits that had already been partially earned, the state could be found to have violated those constitutional provisions, according to the report.  

The analysis was conducted by Strasburger & Price, a Dallas-based law firm that the Legislative Auditor's Office retained to assist in its evaluation of the pension bills.  

The news report said the analysis will likely provide ammunition to opponents of the plan, including Democrats in the legislature and officials with the Louisiana State Employees' Retirement System, who leveled similar charges against the proposal and suggested implementing the changes would mire the state in lawsuits (see “LASERS Objects to Governor’s Proposed Pension Changes”). Administration officials, however, said all of the bills that make up the package are constitutional.

SPONSORED MESSAGES