Louisiana House Bill HB930

Louisiana 2010 Regular Session

• Introduced: 3/29/10
• Refer: 3/29/10

Caption

Relative to state retirement systems, establishes a defined contribution plan for new hires (OR -$88,536,000 FC EX)

Impact

The legislation marks a significant shift from traditional defined benefit plans, where retirement payouts are based on years of service and a predetermined formula, to defined contribution plans that provide more individualized retirement savings accounts. Under this new structure, state retirement systems will administer the defined contribution plans, where employee contributions are set at 10% and employer contributions are at 5.25% of payroll. Participants will vest into their employer contributions after five years, which should promote longer tenure among employees.

Summary

House Bill 930 establishes a defined contribution plan for new hires within the various state retirement systems in Louisiana, including the Louisiana State Employees' Retirement System (LASERS) and the Teachers' Retirement System of Louisiana (TRSL). This legislation is aimed primarily at individuals who are first hired or reemployed starting January 1, 2011, requiring their participation in the defined contribution plan while excluding them from the benefits of the existing defined benefit plans. By implementing this change, the bill seeks to modernize the state's retirement options and alleviate potential financial burdens on the state pension system.

Sentiment

Reactions to HB 930 have been mixed. Supporters argue that the defined contribution plan offers a more sustainable retirement solution, giving employees more control over their retirement funds and future planning. However, critics express concerns regarding the adequacy of retirement benefits that may arise from such plans, particularly for employees who may struggle to save adequately for retirement. The debate reflects a broader discussion on how to effectively manage state resources and ensure long-term financial security for public servants.

Contention

Key points of contention include the potential inadequacy of defined contribution benefits compared to traditional defined benefits, especially for lower-income employees and those nearing retirement. Compounding this issue is the observation that shifting to defined contribution plans can lead to unpredictable retirement outcomes based on market performance, which raises questions about fairness and accessibility of benefits for diverse employee demographics. The bill’s structure emphasizes individual responsibility, which may disadvantage those lacking financial literacy or resources to navigate retirement savings effectively.