Today’s analysis of Gov. Bobby Jindal’s “cash balance” plan shows that there is no need to switch to a new retirement system for future teachers and state employees. The analysis showed that the new system would add to the state’s costs while shifting more risk to state workers, university employees and their families.
“The actuary’s report clearly shows that the cash balance proposal is a lose-lose for Louisiana,” said Jan Moller, director of the Louisiana Budget Project. “It’s bad for taxpayers and bad for state employees.”
House Bill 61 by Rep. Kevin Pearson, R-Slidell, would force all new members of the Louisiana State Employee Retirement System and higher education employees enrolled in the Teachers Retirement System of Louisiana, into a new “cash balance” retirement plan starting in 2013.
The new model would represent an especially risky bet for future state employees, who do not pay into the Social Security system and whose families would be uniquely vulnerable if they die or become disabled before they retire. In such cases, taxpayers would still be asked to pay the freight.
According to the analysis:
An individual to whom these risks have been transferred is not likely to have the reserves, the ability, or enough time to overcome the hardships that he or she will incur should any one of these hazards result in a financial hardship. Because there is no Social Security coverage, such a member may very well become a ward of the state because he or she has no other available resources. Any savings that may be perceived from the transfer of risk from the state to the individual may be fleeting.
For more information on the Louisiana Budget Project, visit www.labudget.org.