Louisiana House Bill HB55

Louisiana 2012 Regular Session

• Introduced: 3/12/12
• Refer: 3/12/12

Caption

Provides relative to final average compensation

Impact

The shift to a five-year FAC for most employees is expected to lower the average retirement benefits slightly, which could influence the financial planning of future retirees. However, the bill allows for certain groups, particularly those in hazardous duty positions or hired before specific dates, to maintain the previous three-year FAC, thereby preserving benefits for specific demographics. Additionally, the proposed law includes provisions for the Public Retirement Systems' Actuarial Committee to adjust the employer contribution rates based on the new valuation of the systems, ensuring that funding remains adequately supported.

Summary

House Bill 55 relates to the Louisiana State Employees' Retirement System (LASERS) and the Teachers' Retirement System of Louisiana (TRSL), proposing a change in the calculation of final average compensation (FAC) from a three-year period to a five-year period for various state employees and higher education staff. The intent behind this legislation is to ensure the actuarial soundness of these retirement systems as required by the Louisiana Constitution. By adjusting the FAC calculation, the bill aims to better align the retirement benefits with longer service periods, thus promoting sustainability within the state's retirement funding mechanisms.

Sentiment

The sentiment surrounding HB 55 appears mixed among lawmakers and stakeholders. Supporters argue that the proposed changes are necessary for maintaining the fiscal health of the state’s pension systems and preventing future shortfalls. They emphasize the importance of actuarial soundness as a guiding principle. Conversely, opponents express concerns regarding the potential reduction in benefits, viewing the transition to a five-year average as a disadvantage for employees nearing retirement. This highlights the ongoing tension between the need for prudent fiscal management and the desire to provide robust retirement benefits for state workers.

Contention

Although the bill is framed as a necessary step towards maintaining the retirement system's viability, it has sparked debate regarding the implications for future retirees and the fairness of changing the compensation calculation criteria. The disparity between different employee groups creates a distinction that some legislators argue could be perceived as inequitable. Additionally, the phase-out of the three-year FAC for many employees raises questions about the balance between fiscal responsibility and guaranteeing adequate retirement security, which is a fundamental concern for public employees.