RS 1312.1 - Back-Deferred Retirement Option Program
A.(1) There is hereby created an optional retirement benefit program for members of the system called the "Back-Deferred Retirement Option Program" which shall be referred to in this Chapter as "Back-DROP".
(2) In lieu of receiving a normal retirement benefit pursuant to R.S. 11:1307 through 1310, an eligible member of the system may elect to retire and have his benefits structured, calculated, and paid as provided in this Section.
B. An active, contributing member of the system shall be eligible for Back-DROP only if both of the following are satisfied:
(1) The member has accrued more service credit than the minimum required for eligibility for a normal retirement benefit.
(2) The member has attained an age that is greater than the minimum required for eligibility for a normal retirement benefit, if applicable.
C. At the time of retirement, a member who elects to receive a Back-DROP benefit shall select a Back-DROP period to be specified in whole months. The duration of the Back-DROP period shall not exceed the lesser of thirty-six months or the number of months of creditable service accrued after the member first attained eligibility for normal retirement. The Back-DROP period shall be comprised of the most recent calendar days corresponding to the member's employment for which service credit in the system accrued.
D.(1) The Back-DROP benefit shall have two portions: a monthly benefit portion and a lump-sum portion.
(2) The member's Back-DROP monthly benefit shall be calculated pursuant to the provisions applicable for service retirement set forth in R.S. 11:1307 through 1310, subject to the following conditions:
(a) For purposes of this Paragraph, creditable service shall not include service credit reciprocally recognized pursuant to R.S. 11:142.
(b) Accrued service credit at retirement shall be reduced by the Back-DROP period.
(c) The sum of the Back-DROP period and the accrued service credit used to calculate the member's monthly benefit shall not exceed thirty years.
(d) Final average compensation shall be calculated by excluding all earnings during the Back-DROP period.
(e) Employer contributions received by the retirement system during the Back-DROP period and any interest that has accrued on employer and employee contributions received during the period shall be retained by the system and shall not be refunded to the member or to the employer.
(f) Employee contributions received by the retirement system during the Back-DROP period shall, at the member's election, be refunded to the member without interest or deposited directly into the member's Back-DROP account.
(g) The member's Back-DROP monthly benefit shall be calculated based upon the member's age and service and the system statutes and other plan provisions in effect on the last day of creditable service before the Back-DROP period.
(h) At retirement, the member's maximum monthly retirement benefit payable as a life annuity shall be equal to the Back-DROP monthly benefit.
(3) In addition to the monthly benefit received pursuant to Paragraph (2) of this Subsection, the member shall be paid a lump-sum benefit equal to the Back-DROP maximum monthly retirement benefit multiplied by the number of months selected as the Back-DROP period.
(4) The Back-DROP lump sum shall, at the member's election, be distributed to the member or transferred to an individual account for self-directed investments as further provided in Subsection E of this Section.
(5) Cost-of-living adjustments shall not be payable on the member's Back-DROP lump sum.
E.(1) In lieu of receiving a lump-sum benefit payment as provided in Paragraph (D)(4) of this Section, the member may elect to transfer the lump-sum payment into a self-directed account managed by a third-party provider.
(2) The board may hire a third-party provider to manage the self-directed accounts authorized by this Subsection. The third-party provider shall act as an agent of the system for purposes of investing balances in the self-directed accounts of the participants as directed by the participants. The participants shall be given investment options that comply with federal law for self-directed plans; however, the provider shall have as an investment option a stable value fund that preserves the participant's principal.
(3) By electing to participate in the self-directed plan, the Back-DROP participant expressly waives his rights as set forth in Article X, Section 29 of the Constitution of Louisiana as they relate to the benefit in his Back-DROP account. Any participant who elects to transfer the lump-sum Back-DROP payment into a self-directed account agrees to all of the following:
(a) That the benefits payable to the participant are not the obligation of the state or the system and that any returns and other rights of the participant in the account are the sole liability and responsibility of the participant and the provider to which the lump sum has been transferred.
(b) That he and the provider shall be responsible for complying with all applicable provisions of the Internal Revenue Code.
(c) That if any violation of the Internal Revenue Code occurs as a result of the participant's decision to transfer his Back-DROP lump-sum payment into a self-directed account, it shall be the sole responsibility and liability of the participant and the provider and not of the state or the system.
(4) There shall be no liability on the part of and no cause of action of any nature shall arise against the state, the system, or the agents or employees of the state or the system for any action taken by the participant or for choices the participant makes in relation to the investment options in which he chooses to place his account balance.
Acts 2009, No. 480, §1, eff. Oct. 1, 2009; Acts 2019, No. 78, §1, eff. June 30, 2019.