La. Consolidated Public Retirement § 11:2178.1

Current with changes from the 2024 Legislative Session

Section 11:2178.1 - Back-Deferred Retirement Option Plan

(1) There is hereby created a plan named the "Back-Deferred Retirement Option Plan" which shall be referred to in this Chapter as "Back-DROP".

(2) In lieu of receiving a service retirement allowance pursuant to this Chapter, an active contributing member who has accrued more years of service than are required for a regular service retirement and which are sufficient to qualify for the Back-DROP period selected may make an irrevocable election at the time of retirement to receive a Back-DROP benefit. The member may qualify for Back-DROP only once. A member or retiree who has participated in the Deferred Retirement Option Plan and who has not rescinded all of his participation period shall not be eligible to enroll in the Back-DROP.

(3) A member who elects to retire pursuant to R.S. 11:2178(C)(5) shall not be eligible to receive a Back-DROP benefit.

B. At the time of retirement, the member shall select a Back-DROP period to be specified in whole months. 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 became eligible for regular retirement. However, members who have thirty or more years of service may select a Back-DROP period not to exceed the lesser of forty-eight months or the number of months of creditable service accrued after the member first became eligible for regular retirement. The Back-DROP period shall be the most recent calendar period corresponding to the member's accrued creditable service.

C. The member's Back-DROP monthly benefit accrual shall be calculated based on the provisions applicable for service retirement set forth in R.S. 11:2178(C), subject to the following conditions:

(1) For purposes of this Subsection, creditable service shall not include service credit reciprocally recognized under R.S. 11:142.

(2) Accrued service at retirement, utilized for the purpose of calculating the Back-DROP monthly benefit, shall be reduced by the Back-DROP period.

(3) Final average compensation, utilized for the purpose of calculating the Back-DROP monthly benefit, shall be calculated by excluding all earnings during the Back-DROP period.

(4) Employer contributions received by the retirement fund during the Back-DROP period and any interest that has accrued on employer and employee contributions received during the period shall remain with the retirement fund and shall not be refunded to the member or to the employer. Upon separation from service, employee contributions received by the retirement fund during the Back-DROP period shall be credited to the member's Back-DROP account for distribution with the other proceeds of the Back-DROP account.

(5) The member's Back-DROP monthly benefit shall be calculated based upon the member's age, service, and the plan provisions in effect on the last day of creditable service before the Back-DROP period.

(6) At retirement, the member's maximum monthly retirement benefit payable as a life annuity shall be equal to the Back-DROP monthly benefit.

(7) The member may elect to receive a reduced monthly benefit in accordance with the provisions of R.S. 11:2178(I) based upon the member's age and the age of the member's beneficiary as of the actual effective date of retirement. No change in the option selected or beneficiary shall be permitted after the option is filed with the board of trustees.

(8) In addition to the monthly benefit received pursuant to 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.

NOTE: Subparagraph (C)(9)(a) as amended by Acts 2004, No. 854, Section 1, effective July 1, 2004.

(9)

(a) The member may defer receipt of all or a part of the lump-sum Back-DROP payment. With respect to any individual who was eligible to participate in Back-DROP before January 1, 2004, any portion of the Back-DROP payment which is deferred by the member shall be deposited in the member's Back-DROP account which shall earn interest at a rate based upon a ten-year U.S. Treasury security, with interest to be credited to the individual's account balance on an annual basis. The unpaid account balance shall be remitted to the member upon thirty days' written notice. With respect to any individual who becomes eligible to participate in Back-DROP on or after January 1, 2004, all amounts which remain credited to the individual's subaccount after termination of participation in the plan shall be placed in liquid asset money market investments at the discretion of the board of trustees. Such accounts may be credited with interest at the actual rate of return earned on such account investments less one-fourth of one percent per annum, or at the option of the system, the funds may be credited to subaccounts as herein established:

(i) The contributing period shall mean that time period when funds are being credited to the participant's subaccount which is maintained by the fund.

(ii) After the contributing period ends, the balance of the subaccount may then be transferred to a self-directed subaccount. The period following the contributing period shall be known as the investment period. Both subaccounts shall be within Back-DROP established in this Section. Management of the monies shall be by the fund during the contributing period. When the monies are transferred to the self-directed subaccount for the investment period, the fund is authorized to hire a third-party provider. The third-party provider shall act as an agent of the fund for purposes of investing balances in the self-directed subaccounts of the participant as directed by the participant. The participant shall be given such options as comply with federal law for self-directed plans.

(iii) The participant in the self-directed portion of this plan agrees that the benefits payable to the participant are not the obligations of the state or the fund and that any returns and other rights of the plan are the sole liability and responsibility of the participant and the designated provider to which contributions have been made. Furthermore, each participant, in accordance with this provision, shall expressly waive his rights as set forth in Article X, Section 29(A) and (B) of the Louisiana Constitution as it relates to his subaccount in the self-directed portion of the plan. By participating in the self-directed portion of the plan, the participant agrees that he and the provider shall be responsible for complying with all applicable provisions of the Internal Revenue Code. The participant also agrees that if any violation of the Internal Revenue Code occurs as a result of the participant's participation in the self-directed portion of the plan, it shall be the sole responsibility and liability of the participant and the provider, not the state or the fund. There shall be no liability on the part of and no cause of action of any nature shall arise against the state, the fund, or its agents or employees for any action taken by the participant for choices the participant makes in relationship to the funds in which he chooses to place his subaccount balance.

NOTE: Subparagraph (C)(9)(a) as amended by Acts 2004, No. 807, Section 1, effective July 1, 2004.

(9)

(a) The member may defer receipt of all or a part of the lump-sum Back-DROP payment. Effective January 1, 2005, the Board of Trustees shall provide for the transfer of Deferred Retirement Option Plan and Back-DROP balances to a third party, fixed income investment manager. Participants shall have the option to opt out of this program and to take a distribution of Deferred Retirement Option Plan or Back-DROP assets, if otherwise eligible, or to rollover the assets to another qualified retirement plan.

(b) At retirement, the member may make a one-time. irrevocable election to have all or a part of the lump-sum Back-DROP benefit paid as an annuity subject to such conditions as the board of trustees may approve.

(c) In the event a member who elects to defer receipt of all or part of the lump-sum Back-DROP payment predeceases his spouse, the surviving spouse may make a one-time irrevocable election to have all or a part of the lump-sum Back-DROP benefit paid as an annuity at a rate equal to seventy-five percent of the interest rate available to retirees and subject to such other conditions as the board of trustees may approve. Surviving spouses with Back-DROP funds on deposit with the pension fund as of July 1, 2012, shall have until June 30, 2013, to make this election. For those Back-DROP participants who die on or after July 1, 2012, their surviving spouses shall have ninety days from the date of the retiree's death to make this election.

(10) Cost-of-living adjustments shall not be payable based on the Back-Drop account, lump-sum benefit, or annuity payments.

(11) Upon the member's death, any remaining unpaid account balance in the Back-DROP account shall be paid to the member's named beneficiary or, if none, to the member's estate.

(12) Upon the death of a member who selected the maximum option pursuant to R.S. 11:2178(I), the member's named beneficiary or, if none, the member's estate shall receive the deceased member's remaining contributions, less the Back-DROP benefit amount.

(13) Upon the death of a member who selected Option 1 pursuant to R.S. 11:2178(I) the member's named beneficiary or, if none, the member's estate shall receive the member's annuity savings fund balance as of the member's date of retirement reduced by that portion of the Back-DROP account balance and his previously paid retirement benefits that are attributable to the member's annuity payments as provided by the annuity savings fund.

(14) For the purpose of determining compliance with the maximum income provisions of Section 415(b) of the Internal Revenue Code or any successor provision, a Back-DROP benefit calculation shall be performed by the board actuary to determine the value of the Back-DROP benefit if calculated as an annuity for the life expectancy of the member or member and beneficiary if a joint and survivor benefit option has been selected. This sum, on an annual basis, shall be added to the normal monthly benefit payable to determine if the total monthly benefit received from the system is in compliance with the maximum benefit limits contained in Section 415(b) of the Internal Revenue Code or any successor provision.

La. Consolidated Public Retirement § 11:2178.1

Acts 2001, No. 867, §1, eff. July 1, 2001; Acts 2003, No. 962, §1, eff. Jan. 1, 2004; Acts 2003, No. 1250, §1, eff. July 1, 2003; Acts 2004, No. 807, §1, eff. July 1, 2004; Acts 2004, No. 854, §1, eff. July 1, 2004; Acts 2004, No. 866, §1, eff. July 1, 2004; Acts 2007, No. 230, §1; Acts 2008, No. 406, §1, eff. July 1, 2008; Acts 2012, No. 530, §1, eff. June 30, 2012.

Acts 2001, No. 867, §1, eff. 7/1/2001; Acts 2003, No. 962, §1, eff. 1/1/2004; Acts 2003, No. 1250, §1, eff. 7/1/2003; Acts 2004, No. 807, §1, eff. 7/1/2004; Acts 2004, No. 854, §1, eff. 7/1/2004; Acts 2004, No. 866, §1, eff. 7/1/2004; Acts 2007, No. 230, §1; Acts 2008, No. 406, §1, eff. 7/1/2008; Acts 2012, No. 530, §1, eff. 6/30/2012.

Subparagraph (C)(9)(a) as amended by Acts 2004, No. 854, Section 1, effective July 1, 2004.

Subparagraph (C)(9)(a) as amended by Acts 2004, No. 807, Section 1, effective July 1, 2004.

See Acts 2001, No. 867, §3 relative to termination of DROP program and eligibility for DROP and Back-DROP.

See Acts 2004, No. 866, §2, making Act effective when Acts 2004, No. 782, becomes effective.

See Acts 2004, No. 854, §2, making Act effective when Acts 2004, No. 782, becomes effective.

Also see Acts 2004, No. 782, §2, relative to the Sheriffs' Pension and Relief Fund increasing the employee contribution rate to cover one-half of the additional costs of benefits provided by Acts 2004, Nos. 854 and 866.