Provides for a new retirement plan for certain new members. (2/3 - CA10s29(F)) (gov sig) (OR INCREASE APV)
The bill aims to modernize the retirement structure for state employees by offering a dual plan that adapts to evolving workforce needs and encourages employee engagement in their retirement planning. It allows participants a chance to elect to transfer between plans within two years, thereby providing flexibility. The new structure theoretically mitigates risks associated with economic changes and offers a more robust investment strategy for benefit accumulation. Furthermore, it establishes a cost-of-living adjustment provision that guarantees periodic increases for beneficiaries, enhancing financial security for retirees.
Senate Bill 438, introduced in the 2022 Regular Session, proposes a new retirement plan designated for certain new state employees under the Louisiana State Employees' Retirement System (LASERS). The bill outlines that employees starting on or after January 1, 2024, will be automatically enrolled in this New Retirement Plan, which incorporates both a defined benefit (DB) component and a defined contribution (DC) component. Employees will contribute 8% of their pay, divided equally between the DB and DC portions, and employer contributions will also support the DC component.
Overall, the sentiment around SB 438 appears mixed within the legislative discussions. Supporters argue that the new plan provides a significant improvement over the older, solely defined benefit plans, especially considering trends toward more portable retirement options in the workforce. Critics, however, have raised concerns that the shift to a defined contribution system may place too much financial risk on employees, particularly younger workers who are unfamiliar with managing retirement investments. This divergence in opinion underscores a broader debate about the balance between security and flexibility in retirement planning.
Key points of contention stem from the complexities involved in transitioning from the existing retirement plans to the New Retirement Plan. Critics worry about the adequacy of benefits provided under the new model, especially for those who may favor the stability and predictability of defined benefit arrangements. There are also concerns regarding the potential financial burdens on state employees, particularly those not well-versed in investment strategies required for effective participation in a defined contribution plan. Advocates for traditional defined benefits argue that alterations risk diminishing retirement security for public employees.