Judge rules La. retirement plan unconstitutional

Judge: La. governor's pension plan for new state workers ruled unconstitutional

Associated Press

BATON ROUGE, La. (AP) -- Louisiana Gov. Bobby Jindal's plan to shift future rank-and-file state workers to a 401(k)-style retirement plan is unconstitutional because it didn't receive enough support from lawmakers, a judge ruled Thursday.

"Because the Legislature did not pass this by a two-thirds majority, I think it's invalid," said state District Judge William Morvant in Baton Rouge.

Morvant sided with the Retired State Employees Association of Louisiana, which argued the pension plan change required the supermajority vote because the legislative actuary who analyzes retirement bills deemed it carried a price tag.

Neither the House nor Senate gave the bill a two-thirds vote on initial passage.

Jindal, who was out of town for a national Republican Party speech, issued a statement pledging to appeal Morvant's decision, an appeal that will go directly to the Louisiana Supreme Court.

"We are disappointed in the court's ruling and we look forward to a successful appeal. We're confident that the bill was constitutionally passed," the governor said.

The bill, approved in the 2012 legislative session, created an investment account similar to a 401(k) plan for state employees hired after July 1, 2013. That would stand in place of a monthly retirement payment based on salary and years of employment.

Under the changed system, the contributions made by the employee and the state would be invested, and the account would grow at the rate of investment earnings. The employee would never lose money for investment slumps, as in a traditional 401(k) plan.

Louisiana was set to become the first state in the nation to provide only the "cash balance" retirement plan for certain employees, without also offering federal Social Security benefits.

Passage of the cash balance plan was Jindal's lone significant victory on the retirement front in the last legislative session, after lawmakers refused most of his package of proposals to change benefits for existing workers.

The issue of the two-thirds vote was raised during House debate on the cash balance retirement plan, but House Speaker Chuck Kleckley, R-Lake Charles and a Jindal supporter, disagreed. The House voted to support Kleckley's ruling. Kleckley issued a statement Thursday saying he still believes the bill only needed a simple majority vote.

"The constitution is clear, and the Legislature didn't follow the rules," said Robert Klausner, a lawyer for the Retired State Employees Association. "If they want to pass the cash balance plan, they just have to do it the right way."

The switch to the new pension plan would apply to rank-and-file state employees and university staff, not to law enforcement or other workers deemed to be in hazardous duty. It also wouldn't change the retirement benefits offered to public school employees.

Supporters of the cash balance plan described the change as a way to rein in the costs of retirement programs that are billions of dollars short of the money they'll need to pay for all benefits promised. Opponents said the new investment account wouldn't give state workers enough of a safety net.

It's unclear whether the change would save the state money.

Financial analysts disagree widely on its implications, with the Legislature's retirement analyst saying the new plan could cost the state more and the analyst hired by the Jindal administration predicting hefty savings.

The competing analysts — called actuaries in retirement lingo — testified Thursday about the statistical models and assumptions they used to reach their differing conclusions.

Morvant, a Republican, said the governor's goal was a "noble one" to try to shrink the state's retirement costs, but he said the administration didn't follow the proper procedure for passing the bill.

Under a constitutional requirement adopted in 2010, any benefit change to a public retirement system that has a cost can only be enacted if two-thirds of the House and Senate agree.

Morvant ruled that the determination by the Legislature's chief actuary, Paul Richmond, that the cash balance plan would have a cost for the state triggered the two-thirds voting requirement because that analyst is constitutionally charged with reviewing legislation.

"I know of no authority for the Legislature to receive the constitutionally-mandated note from the legislative (actuary) and say, 'Great, we got it, now we can ignore it,'" the judge said.

Lawyers for the Jindal administration had argued that because the Legislature had competing financial analyses of the cash balance bill, lawmakers could decide which one to use in determining how to handle the legislation.

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