Establishes an optional hybrid retirement plan for members of the Teachers' Retirement System of Louisiana (OR INCREASE APV)
The implementation of HB 32 is expected to affect state retirement laws, particularly in how TRSL manages its funding and liabilities. The proposed hybrid plan aims to be more attractively structured for younger employees, potentially leading to a shift in participation patterns. The actuarial analysis indicates that while it may improve some aspects of individual retirement wealth for new members, it could also lead to increased costs for the retirement system overall due to the additional complexities of managing a hybrid structure. Moreover, the expected unfunded accrued liabilities (UAL) will need to be amortized responsibly to comply with state laws.
House Bill 32 establishes an optional hybrid retirement plan for new employees within the Teachers' Retirement System of Louisiana (TRSL) who are first employed on or after July 1, 2021. This plan combines elements of traditional defined benefit (DB) pensions and defined contribution (DC) plans, allowing members to benefit from both systems. The hybrid plan is designed to provide new hires with more flexible retirement options while sharing the cost of employer and employee contributions equally for the DB component.
The general sentiment regarding HB 32 appears to be mixed. Supporters highlight the flexibility and modern approach that a hybrid plan brings, catering to a younger workforce that may prefer more portable retirement options. However, concerns have been raised about the adequacy of benefits for those who may retire under less favorable terms compared to the traditional DB plan, especially for longer-term employees. The balance of providing adequate benefits against controlling costs remains a point of contention in discussions surrounding the bill.
Key points of contention focus on how the hybrid plan could incentivize younger employees to choose it over the traditional DB plan, which benefits older employees more substantially. Additionally, the legislative discussions highlight worries about anti-selection risk, where employees may choose plans based on anticipated longevity or benefits, impacting overall funding health for the retirement system. The potential for increased employer contribution requirements alongside these shifts raises further questions about the long-term fiscal viability of TRSL.