Retirement plan information differs

• By SARAH CHACKO
• Advocate Capitol News Bureau
• Published: Oct 20, 2009 - Page: 6A

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Legislators studying changes to the state employees retirement systems received contradictory information Monday on the cost and effects of closing the pension plan.

However, the systems’ benefit structure and debt load could be too costly to change at this time anyway, national retirement experts said.

State employees and teachers participate in plans the government guarantees to provide lifelong benefits based on years of service and salary, called defined-benefit plans.

The state House and Senate retirement committees heard from the systems and other national groups about defined-contribution plans, which are similar to 401(k)s and require employees to manage their own investments. Employees retire with what they and their employer contribute to the system, along with investment earnings or losses.

The meeting stems from a study resolution by House Speaker Jim Tucker, R-Terrytown, which seeks to determine the feasibility of establishing a defined-contribution plan for all new employees hired on and after July 1, 2010, in the four state public retirement systems.

Employees and retirees would not be affected by any plan changes.

Experts from both sides of the issue disagreed Monday on whether a defined-contribution plan would save money, if its portability is a good thing, and if current benefits are too generous.

House Retirement Committee Chairman Joel Robideaux, No Party-Lafayette, said he will have staff research both sides and try to bring hard numbers to a meeting next month, when the joint committee will revisit the issue.

He said the Commission on Streamlining Government has an interest in the topic and wants to include the information in its report to Gov. Bobby Jindal and the Legislature, which is due Dec. 15.

Tucker said he was mainly approaching the topic as a way to remove the state’s responsibility for unfunded accrued liability, or debt that occurs when a system does not meet its targeted investment returns to cover its expenses.

The four state systems had a combined unfunded accrued liability of $12 billion at the end of fiscal year 2008.

“It’s something that I personally pursue from a risk management perspective,” Tucker said.

Keith Brainard, research director for the National Association of State Retirement Administrators, said that over time, the state systems have shown good returns. Only in recent years have they fallen short, he said.