BATON ROUGE, La. (AP) — State officials are seeking advice from the IRS on whether Louisiana's new state pension system would meet federal rules.

Gov. Bobby Jindal's administration is seeking an opinion on whether a cash balance retirement plan would provide benefits equivalent to Social Security, the Advocate reports (

Right now, Louisiana state employees are not enrolled in the federal Social Security system, meaning that the state doesn't have to pay the employer's share of Social Security taxes. If the new system isn't judged equivalent, the state and employees could have to enroll in Social Security and start paying taxes. The new pension plan, meant to save the state money, will take effect for state employees hired after July 1, 2013.

The Louisiana State Employees Retirement System board also voted to seek opinions Friday, although LASERS Executive Director Cindy Rougeou said it was unclear if it would go ahead after Jindal issued his order.

"It is the responsibility of the employer — the state of Louisiana — to provide the equivalent benefit. They are the ones going to be on the hook for paying for Social Security," LASERS Executive Director Cindy Rougeou said.

The board also warned that with IRS approval, employee contributions and system earnings could be subject to taxes.

The board opposed the plan, saying it would not provide enough retirement income for state employees who have no Social Security safety net. The only other state with a cash balance system is Nebraska, where employees also have Social Security.

If problems arise on either front, the Legislature would have "lots of time" to fix them in the 2013 regular session, said Senate Retirement Committee Chairman Elbert Guillory, D-Opelousas, a LASERS board member.

Cash balance would be the plan for new nonhazardous-duty state employees as well as those working in higher education. LASERS and the Teachers Retirement System of Louisiana are affected the most.

The plan would operate similar to a 401(k) plan except funds would be protected from investment losses. An employee would contribute 8 percent of pay while the state would put in an amount equal to 4 percent of an employee's pay. All but 1 percent of investment earnings would be attributed to the account. The 1 percent would be set aside in a reserve to cover future investment losses. The reserve fund is not mandated in the new law.

Jindal argued that the plan would help stem increasing state retirement system financial liabilities while providing a sustainable pension benefit for employees.


Information from: The Advocate,