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| Posted by | Message | BRhuskyfan80 
Washington Fan
Baton Rouge
Member since Dec 2011
2915 posts
| Rep Pearson just got owned on HB61 - state employee cash balance plan (Posted on 5/1/12 at 7:01 pm)
He has been touting this as a way to mirror the private sector but unsuccessfully dodged questions as to why his cash balance plan is nothing like the private sector (1% off the top for "down years", a 5 year vesting requirement just to get your interest back, its mandatory, and employees have no control over how it is invested, can't borrow against it, etc)
So, Rep Harrison puts out an amendment that says the state must participate in Social Security for employees on the cash balance plan since that's what the private sector does and the amendment actually passed, thus killing his bill. 
In addition to this, they misconstrued the meaning of "member" so that it would not require a 2/3rds vote, which means it'd probably be struck down anyway. They claim that member as defined in the constitution doesn't include future members since they aren't members (yet).
| | Back to top | Share on  | LSULaw2009 
LSU Fan
Baton Rouge
Member since Feb 2008
799 posts
| re: Rep Pearson just got owned on HB61 - state employee cash balance plan (Posted on 5/2/12 at 1:55 am to BRhuskyfan80)
I'm not sure what was more amazing/ fun to watch. The debate on HB 61 or the debates on HB1 and HB 822 in the House Appropriations Committee earlier in the day.
In a matter of like 2 minutes the House Appropriations Committee successfully voted to essentially terminate the recently re-created Inspector General's Office by taking the office and all of its appropriations completely out of the appropriations bill (HB1).
The committee also lit into the Commissioner of Administration and his crew during debate over HB 822, including one member (I believe it was Rep. Pope) at one point telling the Commissioner and his crew to stop smirking and just answer the question he had asked (which had also been previously asked by another committee member and both times the Commissioner largely passed over without answering directly), because until they did he was just going to keep asking it.
| | Back to top | | BRhuskyfan80
Washington Fan
Baton Rouge
Member since Dec 2011
2915 posts
| re: Rep Pearson just got owned on HB61 - state employee cash balance plan (Posted on 5/2/12 at 7:59 pm to LSULaw2009)
and naturally, they come back today with an amendment to strike out the previous amendment and it passed! LOL I guess you cant say they voted against it, since they voted for it before they repealled it.
Politicians are truly a special breed. I love how they claim they want to make it like the private sector (since that's what people want to hear) yet it's nothing like it. In fact, it would be illegal if I had this scheme for my employees on several fronts.
| | Back to top | | LSULaw2009
LSU Fan
Baton Rouge
Member since Feb 2008
799 posts
| re: Rep Pearson just got owned on HB61 - state employee cash balance plan (Posted on 5/2/12 at 10:21 pm to BRhuskyfan80)
The bill if it becomes an act might get challenged on grounds that it didn't have the 2/3 vote which opponents argued is required under Article X, Section 29 of the La. Constitution. The house got creative in their interpretation to allow a majority vote (which it barely got) but the court's may very well strike it down and require the 2/3 (which it likely won't be able to get.)
The feds may also very well strike it down as well as an unqualified plan (which is probably part of the reason for delaying the start of this plan under the bill until after the 2013 regular session, so the Legislature can repeal it next summer if Feds won't sign off).
| | Back to top | | BRhuskyfan80
Washington Fan
Baton Rouge
Member since Dec 2011
2915 posts
| re: Rep Pearson just got owned on HB61 - state employee cash balance plan (Posted on 5/2/12 at 10:50 pm to LSULaw2009)
quote:
The bill if it becomes an act might get challenged on grounds that it didn't have the 2/3 vote which opponents argued is required under Article X, Section 29 of the La. Constitution.
This was pointed out, but the pundits said that the word "members" in the constitution doesn't mean members unless they're currently members and since future members aren't currently members then it doesn't apply. I can't help but think about Bill Clinton on this one.
quote:
The feds may also very well strike it down as well as an unqualified plan
Right. On two grounds.
1. The cash balance plan is illegal in the private sector because it is touted as a 401k-like defined contribution plan, but doesn't even meet the standards that are set by the Pension Protection Act of 2006. No private sector entity could get away with this.
2. The state was able to get out of Social Security because it had a defined benefit with minimum benefit calculations, COL increases, and insurance for the disabled and widowed. This cash balance plan offers a very very SMALL insurance so I think the feds could make a case that the state can not opt out of SS for employees on this plan.
The state is going to lose a lot of money on this deal, but some politicians are going to get a lot of good publicity with their base. If they have to pay 4%+ for the match and 6.2% for SS then it'll cost more than the defined benefit plan that everyone says is outrageously expensive.
| | Back to top | | LSULaw2009
LSU Fan
Baton Rouge
Member since Feb 2008
799 posts
| re: Rep Pearson just got owned on HB61 - state employee cash balance plan (Posted on 5/2/12 at 11:19 pm to BRhuskyfan80)
There is also a potential issue that was addressed but ignored earlier today, as under this plan the systems through Public Retirement Systems' Actuarial Committee control the expected rate of return thus dictate the level of risk that assumed in investing the employee 8% and 4% state match. The argument is that with no minimum threshold required , there is nothing to prevent the state who controls everything from just going extremely low risk on investing and getting a return rate that covers little more than the 1% that they are going to take off the top each year to cover any potential losses in down years, to avoid potential risk of covering losses greater than the accumulated 1% collected off the top.
Also as was raised today, there is a risk of greater cost with this plan, because a 10 year employee in a down year is guaranteed the full value of all of his/her 10 years of 8% and 4% match payments plus all interest earned up to the end of the prior fiscal year.
Further, after 5 years, the amount owed is actually due to the member at the end of the fiscal year if they wish to leave state service and take it all out and roll it into a private 401K, etc. Thus the state, instead of a potential UAL increase in down years which can be offset over time on debts not immediately due and further limited to only losing employee contributions if an employee leaves prior to retirement, is suddenly faced with the potential of much greater debt that must be paid immediately at the beginning of the next fiscal year.
This will not go well for the state if a 2008 situation occurs again in say 10-20 years. This is a big reason the Legislative actuary in the Auditor's office said there is actually a real potential for increased cost under this new system.
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