Governor Bobby Jindal signed a landmark pension reform law today that will create a cash-balance plan for certain new state employees. Governor Jindal emphasized that the cash-balance plan combines the best features of defined benefit and defined contribution plans and sets the stage for a more sustainable retirement system. The legislation -- HB 61 by Rep. Kevin Pearson -- was part of the Governor's 2012 legislative package.
Governor Jindal said, "This new law is a game-changer for Louisiana's retirement systems. As the most important piece of our pension reform package, the cash-balance plan will help get our debt under control, protect taxpayers and provide new state employees with a portable retirement account that realizes investment earnings."
Under the cash-balance plan, participants receive an investment account that can never lose value. In the good years, the participants share in investment gains. In the bad years, the participants are protected from investment losses. Taxpayers bear less risk because the retirement benefit is tied to market performance, and the pension system retains 1 percent from investment gains to act as a buffer against investment losses. The cash-balance benefits are also portable meaning that a participant who withdraws from state service after five years can take the entire account balance. The legislation was carried by Sen. Elbert Guillory on the Senate side.