Louisiana House Bill HB40

Louisiana 2014 Regular Session

• Introduced: 3/10/14
• Refer: 3/10/14

Caption

Provides for application of remaining funds in the La. State Employees' Retirement System experience account, after payment of a permanent benefit increase to eligible retirees and beneficiaries, to specified debt of the system (OR DECREASE APV)

Impact

The enactment of HB 40 is expected to result in an accelerated payoff of the Original Amortization Base (OAB) debt, which will now be paid off one year earlier, by 2028. The bill is structured to ensure that the schedule of amortization payments remains unchanged, which could lead to a reduced interest payment obligation on this debt. By redirecting funds from the experience account to the OAB, the state may also see a decrease in expenditures associated with maintaining the retirement system's financial obligations, effectively lowering long-term costs.

Summary

House Bill 40 proposes changes to the application of remaining funds in the Louisiana State Employees' Retirement System's experience account. Specifically, it states that after any permanent benefit increase (PBI) granted to eligible retirees and beneficiaries, any remaining balance in the experience account should be transferred back to the Regular Benefit Account to reduce specified debts of the retirement system. This adjustment aims to improve the fiscal health of the State Employees' Retirement System by addressing unfunded liabilities.

Sentiment

Discussions around HB 40 have highlighted a generally supportive sentiment among its proponents who see it as a necessary reform to the retirement funding mechanism. However, there are concerns about the implications of such adjustments, especially regarding future benefit increases. Critics warn that the anticipated reduction in available funds in the Experience Account may limit the ability of the legislature to grant future PBIs, which could lead to dissatisfaction among retirees relying on those benefits.

Contention

The primary contention surrounding HB 40 revolves around the balance between fiscal responsibility and the commitment to providing adequate retirement benefits for public employees. While supporters argue that it addresses necessary debts and improves the retirement system's solvency, opponents express concern that using these funds to reduce the OAB may jeopardize future benefit increases, thus potentially undermining the financial security of retirees. This tension underscores a critical debate on how best to manage public retirement funds while ensuring the fulfillment of promised benefits.