RS 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.
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.
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)).