La. House Rejects Cash Balance Plan for State Employees

May 25, 2012 ( – The Louisiana House voted against a proposal that would put state employees into a cash balance plan.

Opponents said the plan offers little retirement security for employees who could end up living in poverty. State Representative Sam Jones contends that under the plan, future retirees would get 60% less than they do today after 25 years of employment, a news report in The Advocate says. The AARP of Louisiana and the Louisiana State Employees Retirement System board of directors also oppose the legislation.  

In addition to switching to a cash balance plan for new hires, Governor Bobby Jindal proposed changing the current plan to calculate benefits using a five-year employee salary average rather than a three-year average; aligning the state retirement age with the Social Security age of 67; and granting cost-of-living adjustments only when assets exist to pay promised benefits (see “La. Governor Proposes Pension Overhaul”). He also proposed a 3% hike in the employee contribution rate.   

Pension systems affected argue the proposals are unconstitutional because they break employee contracts and require employees to pay more than their share, making it a payroll tax. A recent independent analysis agreed (see “La. Pension Overhaul Could Spur Lawsuits”).  

According to the news report, the legislation now goes to a House-Senate conference committee to try to iron out differences.