State employees who can’t make it on the new, stripped-down retirement benefits under consideration in Baton Rouge will just have to apply for food stamps and go on welfare, according to State Senator Elbert Guillory (D-Opelousas).
“We cannot afford to protect people from making bad decisions in their lives,” said Sen. Guillory about a bill that eliminates state pensions in favor of a market-driven “cash balance” retirement plan for newly hired state employees.
The Senate voted 23-11 for HB 61 by Rep. Kevin Pearson (R-Slidell), which will affect employees hired on or after July 1, 2013. It will impact the retirement plans of rank-and-file members of the Louisiana State Employees Retirement System and higher education members of the Teachers Retirement System of Louisiana. Click here to see how Senators voted on the bill.
Both LASERS and TRSL opposed the bill, and have threatened lawsuits challenging its constitutionality.
Opponents say the bill will have a crushing effect on future retirees, giving them less retirement security than they would have under federal Social Security, which does not apply to public employees in Louisiana.
Under the plan, retirees would contribute eight percent of their salary to the plan, and the state would kick in at least four percent (private employers who pay Social Security must contribute 6.2 percent). Currently, the state’s retirement contribution is over 20 percent of the employee salary.
Money in the plan would be invested by the retirement systems. Employees would be credited with money earned when investments perform well. Unlike 401(k) investments, employees would be protected from actual losses if the market sinks.
When they retire, employees could either convert their balance to an annuity that pays regular amounts over time, or take it in a lump sum. Unlike the state’s current defined benefit retirement systems, which guarantee an income for life, retirees could spend all of the money saved under SB 61.
Because state employees do not have the safety net provided by Social Security, some senators questioned the morality of a plan that could leave retirees destitute if they outlive their savings.
“We cannot afford to protect people from making bad decisions in their lives,” Sen. Guillory said, echoing Ebenezer Scrooge’s famous response when asked for charity at Christmas: “Are there no prisons? And the Union workhouses. Are they still in operation…those who are badly off must go there.”
For more information, read Advocate reporter Marsha Shuler’s account here, and Times-Picayune reporter Jeff Adelson’s story here.