Louisiana House Bill HB56

Louisiana 2013 Regular Session

• Introduced: 4/8/13
• Refer: 4/8/13

Caption

Provides for a divided benefit for members of the Municipal Employees' Retirement System when certain earnings increases occur (OR DECREASE APV)

Impact

Should HB 56 be enacted, there will be significant implications for the calculation of retirement benefits and overall financial management of MERS. The removal of the anti-spiking provision for members with a divided benefit means that members who experience substantial pay increases will see their retirement benefits calculated differently. This change is expected to lead to a decrease in the actuarial present value of future benefit payments, which could potentially lower employer contribution requirements and overall financial liability related to the retirement system.

Summary

House Bill 56 addresses the issue of retirement benefits for members of the Municipal Employees’ Retirement System (MERS) by introducing a 'divided benefit' calculation. This calculation applies to members whose monthly earnings increase by 15% or more compared to the average over the preceding twelve months. The divided benefit is designed to ensure that retirement calculations reflect these earnings increases while maintaining a structure for normal retirement, disability, and survivor benefits. The proposed changes intend to make the retirement benefit structure more equitable and address concerns related to 'anti-spiking' effects in retirement compensation.

Sentiment

The sentiment surrounding HB 56 appears mixed, with some stakeholders expressing concern that the changes may lead to reduced retirement benefits for some members, particularly those on a bi-weekly payment schedule who experience sporadic pay spikes. Proponents of the bill argue that the updated benefit structure is necessary for more fair handling of earnings increases and will help sustain the pension fund’s long-term viability. The conversation around the bill includes fears from employees about how reduced benefits might impact their retirement security while also highlighting the aim of ensuring financial stability for the retirement system itself.

Contention

Notably, the bill has faced criticism regarding potential legal challenges it may provoke. Concerns about its constitutional validity have been raised, particularly regarding the protections of public pension benefits under state law. Several legal theories suggest it may infringe on contracts and due process rights for employees, as the diminished benefits could be seen as a reduction of previously guaranteed employees’ rights. Such contention may lead to further discussions about the balance between fiscal responsibility and protecting employee benefits.