§ 11:3385.1 — Deferred Retirement Option Plan

Louisiana § 11:3385.1

• Jurisdiction: Louisiana
• Title 11: Consolidated Public Retirement Systems

Text

§3385.1. Deferred Retirement Option Plan
A.(1) As used in this Section the term "DROP account" shall mean the notional
account maintained and reconciled for recordkeeping purposes under the Deferred
Retirement Option Plan as an ancillary payment option.
(2) In lieu of terminating employment and accepting a service retirement allowance
under R.S. 11:3381 and 3384, any member of this system who has not less than twelve years
of creditable service in this system and who is eligible to receive a service retirement benefit
may elect to participate in the Deferred Retirement Option Plan and defer the receipt of
benefits as an ancillary form of payment in accordance with the provisions of this Section.
B. For purposes of this Section, creditable service shall include service credit
reciprocally recognized under R.S. 11:142, but for eligibility purposes only.
C. The participation period in the Deferred Retirement Option Plan shall not exceed
sixty months and shall automatically terminate at the expiration of sixty months. A member
may terminate his participation in the Deferred Retirement Option Plan at any time by
written notification to the board of trustees.
D. A member may participate in the Deferred Retirement Option Plan only once.
E. Within a reasonable period of time after properly filing an application to
participate in the Deferred Retirement Option Plan, neither employee nor employer
contributions shall be payable on behalf of the member into the system during the
participation period. Compensation and creditable service shall be determined on the
effective date of commencement of participation in the Deferred Retirement Option Plan or
as otherwise permitted under applicable law. During the participation period, a member is
prohibited from accruing additional creditable service under the system.
F. A member who participates in the Deferred Retirement Option Plan shall not be
eligible to receive a cost-of-living increase from the retirement system while participating
and shall not be eligible until his employment which makes him eligible to be a member of
this system has been terminated for at least one full year.
G. During the participation period, the monthly retirement benefit that would have
been payable from this system, had the member elected to cease employment and receive
a service retirement allowance, shall be credited to the DROP account. The member's DROP
account shall at all times, until distributed in its entirety, be subject to the annual benefit
limitations under Internal Revenue Code Section 415(b) and applicable Treasury Regulations
as applied to governmental plans.
H.(1) During the participation period, or until termination of employment, if earlier,
the member's DROP account shall not be subject to any fees, charges, or similar expenses
of any kind for any purpose nor shall the DROP account accrue or earn any interest or
earnings of any kind during such period of participation.
(2)(a) Beginning January 1, 2015, and continuing each year thereafter, upon
expiration of the participation period or termination of employment, if earlier, and each year
until the member's DROP account is distributed in its entirety, interest shall be allocated
annually to all member DROP accounts based on a five-year rolling average of the composite
rate of return of the pension fund as determined by the system actuary, less an administrative
fee as determined by the board of trustees. Prior to January 1, 201 5, interest shall be
allocated each year based on the one-year composite rate of return of the pension fund, less
an administrative fee determined by the board of trustees, not to exceed two percent. The
balance of a member's DROP account shall not be diminished or impaired, except as
otherwise provided in Subparagraph (c) of this Paragraph.
(b) Notwithstanding the provisions of Subparagraph (a) of this Paragraph, upon
expiration of the participation period or termination of employment if earlier, a member's
DROP account shall be placed in liquid asset money market investments at the discretion of
the board of trustees. The DROP account shall be credited with interest at the actual rate of
return earned on such money market investments.
(c) Notwithstanding the provisions of Subparagraph (a) or (b) of this Paragraph, if
a member participating in the Deferred Retirement Option Plan on or after January 1, 2016,
upon expiration of the participation period or termination of employment if earlier, makes
an irrevocable written election to waive the guarantees contained in Subparagraphs (a) and
(b) of this Paragraph and to authorize the fund to debit his DROP account if the fund's
investment portfolio experiences a negative earning rate and to permanently reduce the value
of his DROP account if the fund assets are devalued by a negative earning rate, that member's
DROP account may earn interest at a rate based on a five-year rolling average of the
composite rate of return of the fund's investment portfolio as determined by the actuary, less
a two percent administrative fee assessed by the board of trustees.
I. At any time after termination of employment and after filing an application on a
form acceptable by the board of trustees, a member who participated in the Deferred
Retirement Option Plan may elect to receive, in addition to other applicable benefits,
withdrawals from his DROP account plus any interest earned less any administrative fees
established by the board of trustees, in any form of payment approved by the board of
trustees. The board of trustees shall distribute the member's monthly benefits and DROP
account withdrawals within a reasonable period of time after receipt of the written request.
J. If a member dies before distribution of his DROP account is made in its entirety,
the member's named beneficiary may elect to receive the balance of the member's DROP
account in any form of payment approved by the board of trustees in addition to any normal
survivor benefits payable to survivors of retirees under this retirement system. If there is no
valid designation of a beneficiary, the member's DROP account shall be distributed in any
form of payment approved by the board of trustees to the following individuals in the
following order:
(1) The surviving spouse.
(2) The surviving child or children, to be shared equally.
(3) The surviving parents.
(4) The deceased member's estate.
K.(1) After commencement of the participation period, the member may change the
distribution option originally selected or the beneficiary designated pursuant to R.S. 11:3385
only as provided by the laws or rules of the system.
(2) The member may change the beneficiary designated to receive the balance of the
member's DROP account at any time by filing a beneficiary designation in writing on a form
acceptable to the board of trustees.
L. Upon termination of participation in the plan but not employment, credits to the
DROP account shall cease, and no retirement benefits shall be paid to the member until
employment is terminated. No payment shall be made based on credits in the account until
employment is terminated. During such period of continued employment, employer and
employee contributions shall resume, and the member shall accrue additional creditable
service and an additional retirement benefit based solely on any additional service rendered
since termination of participation in the Deferred Retirement Option Plan, using the normal
method of computation of the benefits, as permitted under applicable law or the
administrative code adopted by the board, subject to the following:
(1) If the member's period of additional service is less than his average compensation
period at the commencement of participation in the Deferred Retirement Option Plan, the
average compensation figure used to calculate the additional benefit shall be that used to
calculate his original benefit. If his period of additional service is equal to or longer than his
average compensation period at the commencement of participation in the Deferred
Retirement Option Plan, the average compensation figure used to calculate the additional
benefit shall be based on his compensation during the period of additional service.
(2) Both the distribution option originally selected and the beneficiary designated
pursuant to R.S. 11:3385 when the member commenced participation in the Deferred
Retirement Option Plan shall apply to any additional benefits accrued based on additional
creditable service earned. If the beneficiary designated pursuant to R.S. 11:3385 predeceases
the member, the member shall designate a new beneficiary for any additional benefits
accrued.
(3) If the member is found by the board to have a disability pursuant to R.S. 11:3376,
the board's service-connected disability determination shall apply to all benefits paid to and
accrued by the member based on all creditable service rendered as a member and to the
DROP account.
(4)(a) The additional benefit shall not exceed an amount which, when combined with
the original benefit, equals one hundred percent of the average of any three highest
consecutive years of compensation earned by a member electing to retire under the old
system both during participation and after leaving the Deferred Retirement Option Plan.
(b) The additional benefit shall not exceed an amount which, when combined with
the original benefit, equals one hundred percent of the average of any four highest
consecutive years of compensation earned by a member retiring under the new system with
an average compensation period of four years, both during participation and after leaving the
Deferred Retirement Option Plan.
(c) For any member whose average compensation period is longer than four years,
the additional benefit shall not exceed an amount which, when combined with the original
benefit, equals one hundred percent of the average of the highest consecutive months of
compensation for any period equal to the average compensation period applicable when the
member entered the Deferred Retirement Option Plan, both during participation and after
leaving the Deferred Retirement Option Plan.
M. In lieu of terminating employment and accepting a service retirement allowance
under R.S. 11:3381 and 3384, any member of this system who has not less than twelve years
of creditable service in this system, and who is eligible to receive a service retirement
benefit, may elect to participate in the Deferred Retirement Option Plan on a retroactive
basis, and receive a lump-sum benefit of up to five years, based upon the value of the pension
benefit on the retroactive date selected.
N. Notwithstanding any other provision of law to the contrary, a member electing
to participate in the Deferred Retirement Option Plan provided by this Section shall not be
eligible to receive an initial lump-sum benefit as set forth in R.S. 11:3385.2.
O. Any appeal of a determination made pursuant to the provisions of this Section
shall be lodged and conducted pursuant to the laws and rules of the system.
NOTE: See Acts 2013, Nos. 296, §2 and 298, §2, regarding calculation of
benefits for persons retiring or entering DROP from July 1, 2013 through
June 30, 2014.
NOTE: Acts 2014, No. 811 changed terminology referring to persons with
disabilities throughout the La. Revised Statutes and codes of law, and included a
listing of terms that were deleted and their respective successor terms (See Acts
2014, No. 811, §36). The Act provides that it is not the intent of the legislature that
changes in terminology effected therein alter or affect in any way the substance,
interpretation, or application of any law or administrative rule; further provides that
nothing in the Act shall be construed to expand or diminish any right of or benefit for
any person provided by any law or administrative rule (See Acts 2014, No. 811,
§35(C) and (D)).

Legislative History

Acts 1995, No. 1035, §1, eff. June 29, 1995; Acts 1997, No. 607, §1; Acts 1999, No. 1377, §1; Acts 2003, No. 782, §1, eff. June 27, 2003; Acts 2003, No. 1104, §1, eff. July 2, 2003; Acts 2003, No. 1110, §1; Acts 2004, No. 609, §1, eff. July 5, 2004; Acts 2007, No. 304, §1; Acts 2008, No. 834, §1; Acts 2013, No. 296, §1, eff. July 1, 2013; Acts 2013, No. 298, §1, eff. July 1, 2013; Acts 2014, No. 608, §1; Acts 2014, No. 811, §4, eff. June 23, 2014; Acts 2016, No. 652, §1, eff. June 17, 2016.