Last Modified: Friday, May 25, 2012 1:29 PM
BATON ROUGE (AP) — Gov. Bobby Jindal's proposal to create a new retirement plan for future rank-and-file state workers failed to win final legislative passage, narrowly rejected Thursday in a Louisiana House vote.
The proposal would create a cheaper investment account similar to a 401(k) plan for state employees hired after July 1, 2013, instead of a monthly retirement payment based on their salaries and years of employment.
Supporters say the new system, called a "cash balance" plan, would help shrink the growth in the costs of pension programs that already are billions of dollars short of the funding they'll need to pay for all benefits promised. Opponents say it wouldn't provide enough of a safety net for workers and could discourage people from applying for state jobs.
The House voted 49-43 for the pension bill. It needed 53 votes to pass. The governor's office blamed it on several lawmakers being absent for the vote.
Lawmakers can bring the measure up for another vote, but it now faces new hurdles. The House rejection sent it to a legislative conference committee, whose action needs support in both the House and Senate to receive final passage.
Critics said the cash balance plan wouldn't offer enough assurances that employees would have a livable pension benefit when they retire. Louisiana state employees aren't part of the Social Security system. The only other state that has a cash balance plan for its workers, Nebraska, also includes them in the Social Security system.
"If that plan does not come through, they end up on social services and a whole myriad of other things that we will have to provide for them," said Rep. Joe Harrison, R-Napoleonville, an opponent of the bill. "We have to have something more secure if we want to get the right employees to come here and work as state employees."
Rep. James Armes, D-Leesville, said it could leave some retirees in poverty.
The sponsor of the bill for Jindal, Rep. Kevin Pearson, called the criticism a mischaracterization of the cash balance plan. He said calculations show that nearly all state workers would have a higher benefit than they would under Social Security under the new retirement system.
"For those of you who are saying this is not a fair and equitable benefit, this is absolutely wrong," said Pearson, R-Slidell.
But questions have been raised about whether the switch would benefit the state's finances. Financial analysts disagree widely on whether the retirement plan change for new employees would cost or save the state money.
Under the proposed system, the contributions made by the employee and the state would be invested, and the account would grow at the rate of investment earnings. The employee would never lose money for investment slumps, as in a traditional 401(k) plan, however.
The state would no longer guarantee a specific level of expected investment return, or a monthly payment based on the worker's highest years of salary.
When employees leave their state jobs, they would get a lump sum payment of their account balance, including interest and credits for the investment earnings, or they could get an annuity, a fixed annual payment for life once they reach age 60. If they stop working for the state in fewer than five years, employees would get a refund only of what they paid into the system.Online: House Bill 61 can be found at www.legis.la.gov
Posted By: Terry On: 5/25/2012
Title: Jindal is a joke
Jindal is a joke...........why does he not go on the cash balance retirement plan............big liar and big hypocrite...........Jindal is the one that is breaking the states finances by hiring all his former senators who were term limited and giving them six figure salaries............the people now know what a fraud and a liar we have in the governors office