2007 Regular Session Highlights
by: Laura G. Sullivan
The major legislative instruments of the 2007 Regular Legislative Session in the
public retirement arena generally focused on granting cost-of-living
adjustments, allowing retirees to return to work, shoring up the funding of the
systems, and providing equitable benefits to employees whose service involves
COST-OF-LIVING ADJUSTMENTS (COLAs)
Employee experience accounts
For the first time since 2002, the balance in the experience account of the
Teachers' Retirement System of Louisiana (Teachers') was sufficient to fund a
COLA for the retired teachers. For the second year in a row, the balance in the
Louisiana State Employees' Retirement System (LASERS') employee experience
account was sufficient to fund a cost-of-living adjustment (COLA).
The amount of a COLA paid from an experience account is statutorily limited to
the lesser of 3% or the consumer price index (CPI). For the 2006 calendar year,
the CPI was 2.5%. Although each system had an experience account balance in
excess of the amount necessary to fund the full 3%, without special measures,
the COLA for the retired state employees and teachers would be limited to 2.5%.
The experience account laws further require legislative approval through
concurrent resolution before a COLA can be granted from the funds in the
Senate Bill 116 by Senator Theunissen (Act 67) allows a 3% COLA to be
paid from the experience account of each system on July 1, 2007, pursuant to the
provisions of the experience account laws. Senate Concurrent Resolution 3 by
Senator Butch Gautreaux (enrolled) grants approval to the Teachers' board of
trustees to pay the 3% COLA. House Concurrent Resolution 7 by Representative
Schneider (enrolled) grants similar approval to the LASERS board.
House Bill 658 by Representative Kennard (enrolled) creates employee
experience accounts similar to those of the systems for Teachers' and LASERS for
the State Police Pension and Retirement System (State Police) and the Louisiana
School Employees' Retirement System (School Employees'). Having an experience
account will allow these systems to grant COLAs without regard to present
statutory restrictions discussed, as these restrictions have become skewed due
to the market volatility of the past five years.
"Regular" recurring COLAs
Nearly all of the state and statewide systems have had difficulty granting COLAs
in the past five years. To grant a COLA in a particular year, the eleven such
systems that have no experience accounts are statutorily required to achieve
investment earnings above a specified level and meet a funding percentage for
that year, which increases annually.
The State Police system this year met the statutory requirements to grant a
regular, recurring COLA. However, the structure of any COLA granted by the
board of trustees is limited by statute. Senate Bill 83 by Senator Butch
Gautreaux (Pending conference committee) allows a different structure for
this year's COLA, to raise the benefit of certain long-time retirees to a
Senator Gautreaux's Senate Bill 83, (pending conference committee)
provides that every disability retiree whose benefit is below $1200 and each
"regular" retiree with at least 20 years of service credit, who has been retired
at least 15 years, and whose benefit is less than $1200 will receive an
increase that will raise the monthly benefit to $1200 or he will receive an
increase of $300 a month, whichever is less. If a retiree who would be eligible
has died, the spouse to whom he was married at the time of his death will also
receive the increase. This bill also allows the board to grant a 2% increase to
all retirees age 65 or older and an increase of $1 for each year of service and
$1 for each year since retirement to all retirees.
House Bill 440 by Representative Schneider (enrolled) allows the
Sheriffs' Pension and Relief Fund to grant a regular, recurring COLA despite the
system's failure to meet the funding target, using the excess interest the
system earned this year. The amount of the COLA is 3% of the current benefit,
plus an additional 2% of the current benefit for those age 65 or older, payable
only to those who would be eligible for a COLA if the board were granting it
"Thirteenth check" COLAs
House Bill 415 by Representative Morris (enrolled) allows the boards of
the Municipal Police Employees' Retirement System, the Municipal Employees'
Retirement System, and School Employees' to grant a "thirteenth check" to
retirees if a "regular" recurring COLA cannot be paid based on the June 30,
2007 valuation. The amount of the check is 3% of the "normal" annual
benefit but not less than $300
BENEFITS FOR PUBLIC SAFETY EMPLOYEES
Senate Bill 58 by Senator Ellington (Pending conference committee) allows
a state trooper hired on or before June 30, 2008, with at least 10 years of
service credit in the State Police system to purchase credit for out-of-state
law enforcement time at the actuarial cost. This treats such out-of-state
service on a par with any instate law enforcement time.
House Bill 878 by Representative Kleckley (enrolled) provides enhanced
benefits for P.O.S.T.-certified alcohol and tobacco control (ATC) agents in the
Dept. of Revenue. The bill provides an accrual rate of 3⅓% for all past P.O.S.T.-certified
LASERS service and for all future service as an ATC agent. The increased
liability is funded through additional employee contributions, which increase
from 7.5% to 9% of pay, and through dedicated tobacco taxes. Any additional
costs shall be paid directly by the office of alcohol and tobacco control.
House Bill 845 by Rep. Durand (enrolled) provides enhanced benefits for
certain adult probation and parole officers employed by the Dept. of Public
Safety and Corrections (DPS) on or before Dec. 31, 2001. The bill increases
from 2½% to 3⅓% the accrual rate for future service credit and increases
from 2½% to 3% the accrual rate for past service credit. The additional
liability to the system is paid through a fee assessed on each probation and
parole officer's case files, deposited into a special fund. If the fund balance
is insufficient to cover a particular year's payment, the unpaid portion shall
be paid directly by DPS, subject to appropriation.
RETURNING TO EMPLOYMENT
Senate Bill 60 by Senator Cain (enrolled)
allows a school board to opt to reemploy a bus driver who retired on or before
June 1, 2007, and who has been retired for 12 months without the bus driver
being subject to having his retirement benefits suspended. If the bus driver is
reemployed within the 12 months following retirement, he receives his full
salary but his retirement benefits are suspended for the remainder of the 12
months. Actuarial costs of reemploying a bus driver under the provisions of
this bill are borne by the particular school board employing him, with payment
for such costs to be made before the bus driver retires again. The provisions
of the bill cease to be effective on June 1, 2010.
Anyone who elects to retire early under the "regular" LASERS early retirement
provision or under the Early Retirement and Payroll Reduction Act is subject to
certain prohibitions, among them two which relate to reemployment. The Payroll
Reduction Act prohibits any early retiree from being reemployed in a
LASERS-covered position for two years from the date of retirement.
Additionally, reemployment "Option 2", which generally allows a reemployed
retiree to repay all benefits received with interest to regain LASERS
membership, is not available to anyone who retires under an early-retirement
Senate Bill 96 by Senator Amedee (enrolled) excludes state employees who
were displaced from work due to hurricane Katrina or Rita and who elected to
retire early under the usual LASERS law or the Payroll Reduction Act from these
prohibitions regarding reemployment of early retirees. The bill allows an early
retiree covered by its provisions to be reemployed in a LASERS-covered position
within the two-year period following retirement, and upon reemployment allows
him to elect to repay the benefits and interest and regain membership in LASERS.
RETIREMENT SYSTEM FUNDING
Several bills were filed again this year in an attempt to provide additional
funding for the unfunded accrued liability (UAL) of Teachers' and LASERS and to
ensure that any new benefits have adequate funding from inception.
Senate Bill 127 by Senator Boasso (enrolled) is a constitutional
amendment that would require that creation of future benefits for state systems
with a cost would have to include a new funding source that pays the cost of
that benefit within ten years.
Senate Bills 48 and 130 by
Senator Boasso (assigned to Senate Finance) would have set up two funds in
the treasury for payments to Teachers' and LASERS, one for UAL payments and one
for supplemental COLA funding. Senate Bill 48 would have captured new
monies recognized by the Revenue Estimating Conference and deposited them into
the funds. Twenty-five percent of "surplus" from the previous year would have
gone into the UAL fund. Three percent of newly recognized money for the current
would have gone into the COLA fund. Senate Bill 130 would have provided
and extra payment by the state from general fund monies every year of 2%
of payroll of each system; roughly $100M total annually.