Louisiana House Bill HB19

Louisiana 2020 Regular Session

• Introduced: 1/24/20
• Refer: 1/24/20
• Refer: 3/9/20
• Report Pass: 5/7/20
• Engrossed: 5/18/20

Caption

Establishes a funding deposit account for the Municipal Police Employees' Retirement System and authorizes the board of trustees of the system to modify required employer contribution rates (RE DECREASE APV)

Impact

The passage of HB 19 is expected to significantly alter the landscape of retirement benefits for MPERS members. By creating a pre-funding account, the bill not only ensures that future COLAs can be financed through accumulated surplus contributions but also allows for flexibility in meeting the actuarial funding obligations. The legislation effectively repeals existing procedures for Gain-sharing COLAs, reallocating that financial support to COLAs from the pre-funding account instead. This shift arises amid estimates indicating a decrease in net actuarial costs associated with the retirement system, thus creating a more stable financial environment for potential future COLAs for retirees aged 65 and over.

Summary

House Bill 19 establishes a cost-of-living adjustment pre-funding account for the Municipal Police Employees' Retirement System (MPERS), aiming to provide greater control over retirement benefits financing. The proposed law allows MPERS to set the employer contribution rate up to 0.85% higher than previously mandated rates, enabling the accumulation of surplus funds intended exclusively for future cost-of-living adjustments (COLAs). This initiative seeks to enhance the financial sustainability of retirement benefits for municipal police employees, ultimately benefiting retirees by securing future COLA payments.

Sentiment

The overall sentiment among legislators regarding HB 19 appears to be supportive, focusing on the bill's potential to bolster the financial health of MPERS. During discussions, proponents highlighted the advantages of establishing a funding mechanism that prioritizes COLAs while addressing fiscal responsibility. Nevertheless, concerns were raised about restricting Gain-sharing COLAs under the new system, suggesting a mixed long-term impact on benefit availability. Overall, the sentiment leans toward favoring the stability and predictability of future benefits over immediate regulatory flexibility.

Contention

Notable contention around HB 19 centers on the transition from Gain-sharing COLAs to the proposed COLA pre-funding account. Critics express apprehension that by limiting the types of COLAs available, especially for future retirees, there may be adverse effects on pension adequacy. Moreover, while supporters view the creation of a pre-funding mechanism as a proactive approach to securing retiree benefits, critics argue that a significant change in funding structure may inadvertently limit the system’s ability to respond to fast-changing economic conditions, ultimately affecting benefit levels.