LSU is taking steps to implement a change in state pension law designed to help colleges in faculty recruitment and retention efforts.
The new law — signed by Gov. Bobby Jindal on Friday — requires colleges and universities to increase over time their contribution to the Optional Retirement Plan to at least 6.2 percent — the same that employers contribute under Social Security.
The old law included a formula to determine the employer contribution rate that resulted in Louisiana having the lowest in the country at 3.66 percent. The rate declined from 6.95 percent of payroll in fiscal year 2008-09 to 3.66 percent in fiscal year 2014-15. All the while, employees were paying 8 percent.
Higher education officials complained that it was a deterrent in faculty recruitment.
LSU already has drafted a plan to get to the 6.2 percent with gradual increases to its contribution starting in July. The 6.2 percent would be achieved by 2018-19.
All state higher education boards are supposed to provide by July 1 a resolution to the Teachers Retirement System of Louisiana spelling out how much their system will contribute.
Initially, the LSU contribution would be 5.18 percent. The contribution would then edge up to 5.43 percent the following year, 5.69 percent the next, 5.94 percent thereafter, then hit 6.2 percent.
The LSU Board of Supervisors is planning to vote on the schedule at its meeting next week in New Orleans.
The estimated cost of the full phase-in would be about $5 million, according to LSU System documents.
LSU faculty have complained at past board meetings about the continuous reduction in school contribution to the Optional Retirement Plan.
ORP is an alternative to the Teachers’ Retirement System of Louisiana’s traditional defined benefit plan.
Forty-six percent, or 7,136, of higher education employee members of TRSL participate in the optional plan. Nearly half of them, 3,576, are in the LSU System.
Employee and employer contributions are invested by a private carrier in options chosen by the individual pension system member. The performance of the individual’s investment determines the retirement benefits due.
The plan is popular among academics because they can carry the pension plan to most other U.S. colleges and universities.
Each higher education board would have authority to set the contribution rate for its institutions at whatever the system needs to do to attract and keep faculty. But the boards would have to hit the 6.2 percent by 2018.