TalkingPoints:
A DefinedBenefit (DB)retirementplan,or pension,usesapredeterminedformulatocalculatetheamountofthe employee’sretirementbenefit.Boththeemployerandemployeecontributetotheplan.Retiredteachersin Louisianareceiveaguaranteedamountbasedonthisformulaeverymonthfortheremainderoftheirlives,as guaranteedbythestateconstitution.Pensionsprovideamodestyetreliablesourceofretirementincome.
WhatabouttheUnfundedAccruedLiability(UAL)ordebt?
•Sinceitwascreatedin1936,theTeachers’RetirementSystemofLouisiana(TRSL)hashadanunfunded accruedliability(UALordebt).Overtheyears,benefitspromisedwerenotfullyfundedmainlybecausethere wasnorequirementthattheemployercontributionsneededtoproperlyfundthesebenefitshadtobepaid.
•In1987,Louisianavoterspassedaconstitutionalamendmentrequiringtheretirementsystemtobeproperly fundedandpayoffthedebtaccruedasof1988.
•Sincethe1987constitutionalamendment,morethanadozenpensionreformshavebeenpassed-all designedtomaintainthefinancialhealthofthesystemandensureitssustainabilityoverthelong-term.These reformsareprojectedtohavealong-termsavingsof$5billionforthestate.
•Duetoourcurrentpensionreforms,thenewdebtiseliminatedannuallythroughtheinvestmentreturns. •TheIUALoftheretirementsystemwillbepaidoffby2029.
OurCurrentPensionReforms
•Since2009,thestatehasenactedsignificantpensionreform,including:
•RestructuringtheUALpaymentplantomakepaymentsmorelevelandsteermoreoftheretirement system’sexcessinvestmentearningstowardreducingtheUAL.Almost$1billioninexcessearningshave beendirectedtotheUAL.
•DedicatingadditionalexcessinvestmentreturnstotheUAL.
•Raisingtheretirementeligibilityageto62forindividualshiredonorafterJuly1,2015.
•Adoptingamethodtoprojectlong-termfundingneedsthatallowsforgreaterbudgetstability.
•Duetoourcurrentreforms,theUALdebtoftheretirementsystemwillbepaidoffby2029.
•Theexpectedlong-termreductionincostsfromtheseandotherlegislativereformsis$5billion.
BottomLine
•TheUALisdecreasing,andthestateismakingitsrequiredcontributionstothesystem.
•TRSLisontracktomeetUALpayoffdeadlines,andTRSL’sfundedratioisincreasing.
•TRSLmaintainsahighlydiverseinvestmentportfolio.
•InFY2021,TRSLpaid$2.3billioninretirementbenefits;almost90%wenttoLouisianaresidents.
•TRSLisa sustainable retirementplanthatcreateseconomicsecurityforretireesandhelpsstabilizethe economy,whichisonereasonLRTAsupportsthecurrentdefinedbenefitplan.