Last Modified: Friday, August 17, 2012 11:55 AM
BATON ROUGE (AP) — An organization representing Louisiana's retired state employees on Thursday challenged Gov. Bobby Jindal's new pension plan for future rank-and-file state workers.
The Retired State Employees Association of Louisiana claims the law, pushed by Jindal and passed earlier this year, is unconstitutional because it didn't get a two-thirds vote in the state House of Representatives.
The lawsuit was filed in Baton Rouge district court, according to Frank Jobert, executive director of the organization.
"If legislators think they can pass laws in violation of the Constitution or state statutes, we don't know where that line will be drawn," Jobert said in a statement. "It's not just a retirement issue."
The bill creates an investment account similar to a 401(k) plan for state employees hired after July 1, 2013, instead of a monthly retirement payment based on salary and years of employment. Louisiana is set to become the first state in the nation to provide only the "cash balance" retirement plan for certain employees.
Passage was Jindal's lone significant victory on the retirement front, after lawmakers refused most his package of proposals to change benefits for existing workers.
But the retired employees group says any provision involving members of a public retirement system that is deemed to carry a price tag requires a two-thirds vote for passage, a hurdle the bill didn't reach in the House.
That issue of the supermajority vote was raised during House debate, but House Speaker Chuck Kleckley, R-Lake Charles and a Jindal supporter, disagreed. The House voted to support Kleckley's ruling.
"We're confident that the bill was constitutionally passed," Jindal spokeswoman Shannon Bates said in a statement.
The lawsuit names the state, Jindal and Treasurer John Kennedy as defendants.
Supporters of the cash balance plan described the change as a way to rein in the growth of the pension programs that are billions of dollars short of the money they'll need to pay for all benefits promised.
Opponents said the new investment account won't give state workers enough of a safety net and could leave retirees dependent on state social service programs if their retirement checks don't meet their needs. Louisiana state employees aren't in the federal Social Security system.
It's unclear whether the change will save the state money. Financial analysts disagree widely on its implications, with the Legislature's retirement analyst saying the new plan could cost the state more and the analyst hired by the Jindal administration predicting hefty savings.
The lawsuit argues that the determination by the Legislature's retirement analyst that the cash balance plan would have a cost for the state triggered the two-thirds voting requirement because that analyst is constitutionally charged with reviewing legislation.
The switch to a cash balance plan will apply to rank-and-file state employees and university staff, not to law enforcement or other workers deemed to be in hazardous duty. It also won't change the retirement benefits offered to public school employees.
Under the changed system, the contributions made by the employee and the state will be invested, and the account will grow at the rate of investment earnings. The employee will never lose money for investment slumps, as in a traditional 401(k) plan.
"It is intuitively obvious that any bill which provides a guaranteed retirement benefit to state employees will have an actuarial cost to the state," says the lawsuit, filed by attorney Robert Tarcza of New Orleans.
Also, three statewide retirement systems will have to reprogram their computers, retrain staff and make other internal changes to comply with the law, a cost estimated to be about $600,000, the lawsuit says.