Provides for higher education liability payments. (6/30/15) (OR NO IMPACT APV)
If enacted, SB 18 is anticipated to impact the state's pension landscape by relieving higher education entities from ongoing financial obligations due to unfunded pension liabilities. Entities that choose to liquidate their UAL must pay a substantial lump sum to TRSL, estimated at $3,788 million if all higher education institutions participate. This payment would freeze benefits for active employees, transferring future benefits to a 'terminated vested' status. Consequently, new hires post-liquidation will not accumulate benefits within TRSL, altering the retirement plans for faculty and staff across affected institutions.
Senate Bill 18 provides a new pathway for higher education entities in Louisiana to manage their obligations under the Teachers’ Retirement System of Louisiana (TRSL). The bill allows institutions such as universities and community colleges to opt for liquidating their unfunded accrued liability (UAL) to TRSL while simultaneously freezing future pension benefit accruals for active participants in the defined benefit plan. This significant change empowers institutions to cease further contributions to TRSL, effectively shifting some financial responsibility and risk management from the state to the institutions themselves.
The sentiment surrounding SB 18 is mixed among stakeholders. Supporters argue that the bill provides much-needed financial flexibility to higher education institutions facing tight budgets and significant pension liabilities. By freezing benefits and transferring risk, institutions hope to stabilize their financial future. However, critics express concern over the long-term implications for employees, particularly regarding the loss of earned pension benefits and the potential destabilization of retirement security for future faculty hires. This tension underscores the broader debate on how to adequately fund and sustain public pension systems amidst fluctuating state revenues.
Notable points of contention include the fairness of freezing benefits for existing employees and the potential repercussions for recruitment and retention of qualified personnel in higher education. Many in the education sector have raised alarms that limiting pension accruals could deter prospective faculty and staff, thus impacting the quality of education offered. Additionally, the financial burden of the lump sum payment has raised concerns over whether such a significant shift would ultimately cost taxpayers more in the long run as institutions might struggle to meet their financial commitments without state support.