LAKE CHARLES, LA (KPLC-TV) – The Lake Charles chapter of Retired State Employees held a meeting at the Civic Center to discuss upcoming legislation that could have an impact on their retirement plans.
Last fall, the state streamlining commission asked the legislature to pass legislation that would change the retirement benefit for new state workers, such as teachers, state troopers, bus drivers and school janitors, hired after July 1st, from a defined benefit plan to a defined contribution plan.
Under a defined benefit plan, the pension retirees receive is based on a simple formula of years of service and earnings.
Under a defined contribution plan, a savings program such as a 401 (k), is created for each state worker. The amount in each state worker's savings account is based on the amount each worker contributes to it. Employers may or may not match the worker's contribution.
The streamlining commission said switching to a defined contribution plan would save the state tens of millions of dollars. Louisiana Treasurer John Kennedy has also gone on record saying the pros of the contribution plan outweigh the cons.
But the Retired State Employees Association (RSEA) and the Louisiana State Employees' Retirement System (LASERS) have come out against the contribution plan.
"It will be a disaster for our retirement system and our retirees," said Alan Reynolds, executive director of RSEA. "This would change all of that to potentially set up a savings account for each employee and each employee would be responsible for managing that account themselves."
LASERS Executive Director, Cindy Rougeou, said savings accounts that would be created under the contribution plan would be highly risky.
"[State retirees] having to live entirely on some type of 401 (k) plan, look at how the market is so volatile," said Rougeou, noting that state retirees do not receive social security." I just think that would be a very slippery slope."
Reynolds said if the state were to adopt a contribution plan, it would not just impact new hires, but current retirees.
"It will effect current retirees in the sense that those new members won't be contributing to the define benefit plan that exists now," said Reynolds, noting the state would have to come up with a way to make up for the new workers not paying into the system.
Both RSEA and LASERS were asking state retirees at the Lake Charles meeting to get involved by contacting their legislators in Baton Rouge.