A controversial change to the Louisiana state retirement plan backed by Gov. Bobby Jindal has been struck down by the Louisiana Supreme Court, which determined the legislation didn't gather enough votes when passed in 2012.
Proposing to change the state's traditional pension into a "cash balance" retirement plan — similar to a 401(k) — the 2012 bill was passed by a simple majority by both houses of the Louisiana state legislature. However, at that time some lawmakers contested the bill required a two-thirds vote, as the change would result in increased costs to the state.
To that point, the Retired State Employees Association of Louisiana brought the suit to the 19th District Court of Baton Rogue, which struck down the proposal in January 2013. Friday's State Supreme Court ruling upheld that verdict.
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Jindal responded by saying he would work with lawmakers to tweak the plan and garner sufficient votes.
"We think the cash balance plan is good for the people of Louisiana, because it helps get our retirement liabilities under control, protects taxpayers and provides new state employees with a portable retirement account that realizes investment earnings," he said.
The "cash-balance plan" would apply only to new state workers.
The current Louisiana Public Pension is a traditional pension with fixed payments based on salary and years of service. The proposed "cash-balance plan" would earn a variable rate of return similar to a traditional 401(k). The changes would impact members of the Louisiana State Employees Retirement System, and members of the Teacher's Retirement System of Louisiana employed in higher education. Teachers in the K-12 program and some other public sector workers would be allowed to opt out of the "cash-balance plan."
According to the Public Affairs Research Council of Louisiana, the state has one of the poorest ratios of liabilities vs. assets in its system, with only 60 percent of assets required for long-term liability. The Research Council pins that liability at $18.9 billion.
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