§542.1. Supplemental cost-of-living increase for 2007; payment from experience account

A. The legislature hereby acknowledges that providing generous retirement benefits for our state employees is an important element of the complete compensation package the state offers such employees for their public service. In order to maintain the purchasing power of a retiree's benefit, periodic increases in the benefit amount are necessary to offset the increases in the cost of ordinary living expenses. When the timing of such increases is infrequent or erratic, it becomes difficult for such increases to protect the retiree from falling behind financially.

B. The legislature recognizes that while providing periodic cost-of-living increases is necessary to preserve the standard of living of our retired state employees, such increases have a price which is ultimately paid by the taxpayers through allocation of employer contributions to the system. Increases should therefore be limited to a reasonable level to prevent the expense of such increases from causing an undue burden on the state fisc and, by extension, on the taxpayers. Additionally, such increases are not meant to function as pay raises but merely to maintain the standard of living of the recipients, keeping pace with the Consumer Price Index for All Urban Consumers, U.S. city average for all items (CPI-U).

C.(1) The legislature has provided for an employee experience account, a mechanism for determining each year whether a cost-of-living increase may be granted and the amount of any such increase that is permitted. The provisions of R.S. 11:542 prohibit any cost-of-living increase paid from experience account funds from being in excess of three percent, helping to limit the expense of granting each such increase to a reasonable level. Additionally, if the growth in the CPI-U for the preceding calendar year is less than three percent, then the statutorily permissible increase from the experience account is also of this lesser percent.

(2) For an increase payable on July 1, 2007, the application of the experience account mechanism results in a determination that, if the system properly complies with all other requirements of the experience account statute and subject to the approval of the legislature, the board of trustees of the Louisiana State Employees' Retirement System may grant an increase to eligible retirees, survivors, and beneficiaries equal to the CPI-U for the 2006 calendar year of two and one-half percent.

D.(1) Considering the factual and policy statements in Subsections A, B, and C of this Section, and taking into account that retired state employees did not receive a cost-of-living increase for three consecutive years due to market conditions and the deficit in the experience account, the legislature finds that, for the July 1, 2007, cost-of-living increase payable pursuant to the experience account statute, permitting the board to grant the maximum three-percent increase allowable pursuant to the provisions of the experience account statute without regard to the CPI-U helps preserve the purchasing power of retired state employees, their survivors, and beneficiaries without creating an undue financial burden on the state or the taxpayers.

(2) Notwithstanding the provisions of R.S. 11:542(B)(2) and (C)(1) and (2) limiting any increase granted from experience account funds and payable July 1, 2007, to two and one-half percent, the board of trustees of the Louisiana State Employees' Retirement System is authorized to grant from the funds in the experience account a supplemental cost-of-living increase of one-half of one percent, which may be paid beginning July 1, 2007, provided all other requirements of R.S. 11:542 are met and the total level of the increase granted does not exceed three percent.

E. Except for the authority to grant a supplemental one-half of one percent increase payable July 1, 2007, nothing in this Section shall be construed to grant the board of trustees of the Louisiana State Employees' Retirement System any additional authority to grant or to recommend to the legislature that it be permitted to grant a cost-of-living increase greater than the increase as calculated pursuant to the provisions of R.S. 11:542 as they exist on June 30, 2007.

Acts 2007, No. 67, §1, eff. June 30, 2007; Acts 2008, No. 220, §4, eff. June 14, 2008.