Establishes an optional hybrid retirement plan for members of the Louisiana School Employees' Retirement System (OR INCREASE APV)
The introduction of HB 28 is projected to influence the actuarial costs associated with the retirement system. While the plan aims to provide benefits that are favorable particularly for younger employees who may leave the workforce before traditional retirement age, it raises concerns regarding anti-selection risks whereby younger employees might favor the hybrid option while older employees may prefer the existing DB-only provision. The net effect is an anticipated increase in overall costs due to the different participation patterns, which may impact state budget allocations for retirement benefits.
House Bill 28 seeks to establish an optional hybrid retirement plan specifically for employees within the Louisiana School Employees Retirement System (LSERS) who are hired on or after July 1, 2021. This new plan combines elements of both a defined benefit (DB) plan and a defined contribution (DC) plan, allowing for more flexibility and choice for new employees regarding their retirement savings. The proposed hybrid plan has a DB component with equal contributions from both employer and employee, split for cost-sharing, along with a DC component that is administered by a third-party provider.
Sentiment surrounding HB 28 appears mixed among legislators and stakeholders. Proponents argue that the hybrid retirement plan provides necessary flexibility and better options for new employees, potentially leading to improved retirement savings for younger workers. Critics, however, caution that the long-term implications, especially the potential for increased costs and the effects of anti-selection, could undermine the stability of the retirement system, a concern that is reflected in the thorough actuarial notes attached to the bill.
One of the main points of contention in the discussions around HB 28 involves the potential financial ramifications on the retirement system. As the hybrid plan introduces new complexities, concerns arise about the administration of both DB and DC components and their implications for funding liabilities. Additionally, the proposal requires a shift in how local government entities approach employer contribution rates, signifying a broader impact on public sector employment and benefits.