Louisiana House Bill HB33

Louisiana 2020 Regular Session

• Introduced: 1/24/20
• Refer: 1/24/20
• Refer: 3/9/20

Caption

Establishes an optional hybrid retirement plan for persons who are employed by a public postsecondary education management board (OR INCREASE APV)

Impact

The introduction of HB 33 is expected to have significant implications on state retirement laws, especially related to the Teachers' Retirement System of Louisiana (TRSL) and the Louisiana State Employees' Retirement System (LASERS). The cost structure is designed to balance the benefits between newer employees who may favor a DC plan due to shorter job tenure and those under the traditional DB plan. However, the bill is anticipated to increase the employer's contribution rates and may create disparities in benefit levels based on employee demographics and employment duration. There are also concerns about anti-selection risks, where participants might choose the retirement plan that best suits their prospective retirement timeline.

Summary

House Bill 33 establishes an optional hybrid retirement plan for employees of public postsecondary education management boards, effective for those first employed on or after July 1, 2021. The hybrid plan combines features of traditional defined benefit (DB) plans with defined contribution (DC) plans. The intention behind this bill is to provide more flexibility for new employees regarding their retirement options while also managing potential future liabilities associated with the pension system. Participants will have the opportunity to share the costs of retirement benefits through both employer and employee contributions.

Sentiment

The general sentiment surrounding HB 33 is mixed. Supporters praise it for promoting a more adaptable retirement system that can cater to the diverse needs of a changing workforce in the educational sector. However, critics caution against the potential increase in costs and liabilities, which may arise from the optional nature of the hybrid plan leading to adverse selection. This division often mirrors broader concerns in retirement policy debates about the balance between security and flexibility for employees.

Contention

Notable points of contention regarding HB 33 revolve around the financial implications of adopting a hybrid model. The change introduces a shared-cost provision, indicating that both employers and employees will equally contribute to the funding of retirement benefits. As articulated by actuarial analyses, the net cost implications indicate an expected increase in actuarial costs, which has raised apprehensions over whether this solution adequately addresses the long-term sustainability of retirement benefits without unduly straining state and local budgets.