Could the Baton Rouge Housing Authority pay all contributions to a supplemental employee retirement plan?

Plain-English summary

The Baton Rouge Housing Authority asked whether it could pay all contributions to a supplemental retirement plan for its employees, who participated in Social Security rather than the state employees' retirement system. The Attorney General said it could. It found authority for political subdivisions to support employee pension and insurance programs and knew of no law requiring employees to contribute a share to this supplemental plan.

The AG added one compensation limit: contributions for an employee whose salary was fixed by law or otherwise could not make total compensation exceed that fixed salary. It recommended review of the plan with the Internal Revenue Service and the state Division of Social Security before implementation.

Currency note

This opinion was issued in 2002. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Common questions

Could the authority pay the entire supplemental contribution?
The AG said yes. It knew of no prohibition on the authority paying all contributions for this employee plan.

What if an employee's salary was fixed by law?
The opinion cautioned that the authority's contributions could not cause that employee's total compensation to exceed the fixed salary.

Did the AG require employee matching contributions?
No. The opinion described matching as typical for a supplemental plan but said the authority could pay 100% of the contributions.

Did the AG recommend review before starting the plan?
Yes. It recommended review with the IRS and the state Division of Social Security, and noted that the authority planned to consult the Civil Service Commission.

Background and statutory framework

The authority described employees who were classified civil servants but not members of the Louisiana State Employees' Retirement System. The AG cited the state's constitutional and statutory authority for public employee pension and insurance programs, then addressed the proposed employer-funded supplemental plan.

Citations and references

• La. R.S. 42:871
• La. R.S. 42:1301

Source

• Landing page: https://www.ag.state.la.us/Opinions
• Original PDF: https://www.ag.state.la.us/Opinion/Download/02-0403

Original opinion text

~t~te o~ ~-~oui~i~n~
One American Place
301 Mare Street, Suite 600
DEPARTMENT OF JUSTICE
P.O. Box q4005
CIVIL DI~/I$1ON
TEL : 12251 342-7013
BATON ROUGE
FAX: (225) 342-2090

RICHARD P. IEYOUB
70804-9005
ATTORNEY GENERAL

DEC 0 2 2002
Opinion Number 02-0403

90-A-1 Public Finance & Contracts
92-A-2-(g) Retirement - State Employees Article 7, Section 14 of Louisiana Constitution
Mr. Mark E. Falcon, Attorney for
La. R.S. 42:871, La. R.S. 42:1301
Baton Rouge Housing Authority
Baton Rouge Housing Authority may pay 100% of retirement
Avant & Falcon
contributions on behalf of its employees for a supplemental
429 Government Street
retirement plan.
Baton Rouge, LA 70802

Dear Mr. Falcon:

As outlined in your request, the Baton Rouge Housing Authority is considering paying 100% of retirement contributions on behalf of its employees to a private retirement fund that will in essence be a supplemental retirement plan. The employees of the Baton Rouge Housing Authority are classified civil servants of the state; however, they are not members of the Louisiana State Employees’ Retirement System.
Rather, the
employees’ primary retirement plan is social security. The Authority would like to pay 100% of the retirement contributions as a means to recruit and retain employees. It questions if it may do so without violating Louisiana law.

In short, we believe the Authority may do so. As a political subdivision of the state, the Authority may contribute public funds to pension and insurance programs for the benefit of its employees.1 Additionally, political subdivisions are authorized by statute to purchase annuities, life insurance or mutual funds, as part of a group plan, that qualify for deferred federal taxation benefits as provided by the Internal Revenue Code.2 Public employees may also participate in the Louisiana Public Employees Deferred Compensation Plan.3 Typically, a supplemental retirement plan involves contributions by the employee with matching contributions by the employer.
The Authority’s
employees have not participated in the supplemental retirement plan because they are not financially able to do so.

Clearly, Louisiana law authorizes the use of public funds for pension and insurance programs for the benefit of public employees. We are unaware of any law that prohibits the Authority from paying all of the contributions to a supplemental retirement plan. We do caution, however, that any contributions made by the Authority for an employee whose salary is fixed by law or otherwise cannot cause the employee’s total compensation to exceed the fixed salary. We also recommend that, prior to the

Article 7, Section 14 of the Louisiana Constitution La. R.S. 42:871
La. R.S. 42:1301

Page 2

Opinion Number 02-0403
Mr. Mark E. Falcon, Attorney for
Baton Rouge Housing Authority
Page -2-

implementation of any plan, the Authority review it with the Internal Revenue Service
and the Department of the Treasury, Division of Social Security. We understand also
that the Authority will review the plan with the Civil Service Commission.

With kindest regards,

Yours very truly,

RICHARD P. IEYOUB
Attorney General

BY:
TINA VICARI GRANT
Assistant Attorney General

RPI/TVG/dam