Louisiana Cash Balance Plan Faces Hurdles

June 13, 2012 (PLANSPONSOR.com) - The Louisiana State Employees Retirement System (LASERS) has hired a tax lawyer to help address issues with implementing a cash balance plan for future hires.

In addition, LASERS Executive Director Cindy Rougeou told The Advocate the system is looking at who has standing to file a lawsuit challenging the new plan. An independent analysis indicated Governor Bobby Jindal’s pension overhaul proposal would violate the Louisiana constitution because it changes the terms of a contract between employees and the state (see “La. Pension Overhaul Could Spur Lawsuits”).  

“Do we have a duty as the fiduciary to seek a court opinion before we implement it?” Rougeou asked.  

LASERS opposed the plan (see “LASERS Objects to Governor’s Proposed Pension Changes”), contending it would not provide sufficient retirement income for state employees who have no Social Security safety net.  

According to the news report, Rougeou said before the plan can be implemented, two key determinations must be made. The Social Security Administration needs to be asked whether the plan would provide an equivalent benefit to Social Security. Otherwise, affected state employees would have to be enrolled in Social Security with required employee and employer contributions. Also a determination letter from the Internal Revenue Service (IRS) must be received for the plan to be qualified for favorable tax treatment.