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Regular Session, 2011
SENATE BILL NO. 12
BY SENATOR GAUTREAUX AND REPRESENTATI VE PEARSON
Prefiled pursuant to Article III, Section 2(A)(4)(b)(i) of the Constitution of Louisiana.
RETIREMENT BENEFITS. Provides relative to eligibility and benefit calculation for state
and statewide retirement systems. (7/1/11)
AN ACT1
To enact Part III of Chapter 4 of Subtitle I of Title 11 of the Louisiana Revised Statutes of2
1950, to be comprised of R.S. 11:381 - 392, relative to state and statewide retirement3
systems; to provide for contributions, eligibility, and benefits; to provide for an4
effective date; and to provide for related matters.5
Notice of intention to introduce this Act has been published.6
Be it enacted by the Legislature of Louisiana:7
Section 1. Part III of Chapter 4 of Subtitle I of Title 11 of the Louisiana Revised8
Statutes of 1950, to be comprised of R.S. 11:381 - 392, is hereby enacted to read as follows:9
PART III. TIER 2 FOR STATE AND STATEWIDE RETIREMENT SYSTEMS10
§381. Tier 2 creation11
There is hereby created within each state and statewide public12
retirement system or fund, a second tier of benefits to be known as "Tier 2".13
The current provisions of each system, including any subplans, shall be known14
as "Tier 1". Participation in Tier 2 shall be at the option of the employing15
agency, and shall apply to all the agency's employees for benefits accrued on or16
after the date the agency begins participating in Tier 2, regardless of whether17 SB NO. 12
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all agency employees are in Tier 1 of a single system or subplan before1
participation in Tier 2 begins.2
§382. Tier 2 definitions3
As used in this Part, the following terms have the meanings ascribed4
below unless a different meaning is clearly required by the context:5
(1)"Average compensation" shall mean the average annual earned6
compensation for the sixty highest months of successive employment or for the7
highest sixty successive joined months of employment where interruption of8
service occurred; however, average compensation for part-time employees who9
do not use sixty months of full-time employment for average compensation10
purposes shall be based on the base pay the part-time employee would have11
received had he been employed on a full-time basis. The earnings to be12
considered for the thirteenth through the twenty-fourth month shall not exceed13
one hundred fifteen percent of the earnings of the first through the twelfth14
month. The earnings to be considered for the twenty-fifth through the thirty-15
sixth month shall not exceed one hundred fifteen percent of the earnings of the16
thirteenth through the twenty-fourth month. The earnings to be considered for17
the thirty-seventh through the forty-eighth month shall not exceed one hundred18
fifteen percent of the earnings of the twenty-fifth through the thirty-sixth19
month. The earnings for the final twelve months shall not exceed one hundred20
fifteen percent of the earnings of the thirty-seventh through the forty-eighth21
month. The limitations on the computation of average compensation contained22
in this Paragraph shall not apply to any twelve-month period during which23
compensation increased by more than fifteen percent over the previous twelve-24
month period solely because of an increase in compensation by a uniform25
systemwide increase adopted by the state Department of Civil Service and26
approved by the governor or because of a pay adjustment enacted by the27
legislature.28
§383. Tier 2 participation29 SB NO. 12
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An agency choosing to change its participation in a retirement system1
from Tier 1 to Tier 2 shall notify its employees and the retirement system of the2
choice. For a retirement system with a plan year beginning July first, the3
agency shall provide notice on or before the December thirty-first prior to the4
change. For any retirement system with a plan year beginning on another date,5
the agency shall provide notice at least one hundred eighty days before the plan6
year begins. A change may be made only at the beginning of a plan year.7
§384. Tier 2 employee subplans8
A. For each system, Tier 2 shall have a benefit structure with two9
subplans, one for persons employed in hazardous duty positions and the other10
for employees who are not employed in hazardous duty positions.11
B. An employee whose employer participates in Tier 2 shall be in the12
hazardous duty subplan if a new person employed in the same position in Tier13
1 of the retirement system is:14
(1) Covered by the State Police Pension and Retirement System.15
(2) Covered by the Hazardous Duty Services Plan of the Louisiana State16
Employees' Retirement System.17
(3) Covered by the Municipal Police Employees' Retirement System, the18
Firefighters' Retirement System, the Sheriffs' Pension and Relief Fund, or the19
Municipal Employees' Retirement System and receives extra compensation20
pursuant to R.S. 33:2002, 2218.2, or 2218.8.21
C. Any other employee whose employer participates in Tier 2 shall be22
in the nonhazardous duty subplan.23
§385. Tier 2 nonhazardous subplan24
A. The provisions of this Section shall apply to employees in the Tier 225
nonhazardous subplan.26
B. Each employee shall contribute an additional one-half of one percent27
of pay above the employee contribution rate applicable to employees in Tier 128
of the system or subplan of the system.29 SB NO. 12
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C.(1) An employee shall be eligible to retire without benefit reduction if1
he has five or more years of service credit and has attained the age of sixty-five2
years or more.3
(2) An employee may retire with an actuarially-reduced benefit at any4
age if he has twenty-five or more years of service credit.5
D. An employee shall receive a maximum retirement allowance equal to6
two and one-half percent of his average compensation for each year of service7
credit.8
§386. Tier 2 hazardous subplan9
A. The provisions of this Section shall apply to employees in the Tier 210
hazardous subplan.11
B. Each employee shall contribute an additional one percent of pay12
above the employee contribution rate applicable to employees in Tier 1 of the13
system or subplan of the system.14
C.(1) An employee who is in service in Tier 2 at his retirement shall be15
eligible to retire without benefit reduction if he has twelve or more years of16
service credit and has attained the age of fifty-seven years or more.17
(2) An employee who separates from service before he is eligible to18
receive an unreduced benefit pursuant to Paragraph (1) of this Subsection may19
receive an unreduced benefit if he has twelve or more years of service credit and20
has attained the age of sixty years or more.21
(3) An employee may retire with an actuarially-reduced benefit if he has22
twenty or more years of service credit at any age.23
(4) An employee with fewer than twelve years of service credit but more24
than five years may retire pursuant to the provisions of R.S. 11:385, with his25
benefit calculated as provided in that Section.26
D. Except as provided in Paragraph (C)(4) of this Section, an employee27
in Tier 2 shall receive a benefit equal to three percent of his average28
compensation for each year of service credit.29 SB NO. 12
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§387. Tier 2 retirement options1
A. Upon application for retirement any member may elect to receive his2
benefit in a retirement allowance payable throughout his life, or he may elect3
at that time to receive the actuarial equivalent of his retirement allowance in a4
reduced retirement allowance payable throughout life, pursuant to any5
retirement option provided for Tier 1 members of the system.6
B. No member of Tier 2 shall be eligible to participate in any deferred7
retirement option plan or program or any similar retirement option that8
requires continued employment for participation. However, a Tier 2 member9
may participate in any initial benefit option, initial lump sum benefit option,10
back-deferred retirement option plan or program, or any similar retirement11
option designed to provide a reduced annuity in exchange for a lump-sum12
payment which is selected upon separation from service.13
§388. Tier 2 withdrawal of contributions14
An employee who separates from employment covered by the retirement15
system who has service credit in Tier 2 of more than four years but less than16
five years may apply for a refund of his Tier 2 employee contributions. The17
employee's refund pursuant to this Section shall include four percent annual18
interest.19
§389. Disability benefit; calculation20
Eligibility for disability benefits and calculation of the benefit amount21
shall generally be governed by the provisions of Tier 1; however, for22
calculations pursuant to the provisions of Tier 1 which utilize an accrual rate,23
the Tier 2 rate applicable to the member's service shall be substituted for the24
accrual rate applicable to the Tier 1 calculation.25
§390. Combining Tier 1 and Tier 2 benefits26
The eligibility for retirement and benefit calculation for an employee27
who has service credit in a retirement system in both Tier 1 and Tier 2 shall be28
governed by the provisions of R.S. 11:142 for reciprocal recognition of service29 SB NO. 12
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credit.1
§390. Payment of Tier 1 costs2
A. An employing agency terminating its participation in Tier 1 of the3
retirement system shall remit to the retirement system its proportionate share4
of any unfunded actuarial accrued liability of Tier 1. The amounts required to5
be remitted pursuant to this Section shall be determined by the system's actuary6
as of ending date for the plan year immediately prior to the date the employer7
begins participation in Tier 2, and shall account for any legacy costs8
attributable to the employing agency's retirees.9
B. The amounts due pursuant to this Section shall, at the option of the10
employing agency, be paid either in a lump sum or in equal monthly payments11
with interest at the retirement system's actuarial valuation rate amortized over12
the longer of ten years or the amortization period utilized in the retirement13
system's most recent valuation approved by the Public Retirement Systems'14
Actuarial Committee.15
§391. Application16
The provisions of the applicable Tier 1 system or subplan shall apply to17
Tier 2 for any matter on which this Part is silent. In case of any conflict18
between the provisions of Tier 1 and Tier 2, Tier 2 shall prevail.19
Section 2. This Act shall become effective on July 1, 2011; if vetoed by the governor20
and subsequently approved by the legislature, this Act shall become effective on July 1,21
2011, or on the day following such approval by the legislature, whichever is later.22
The original instrument and the following digest, which constitutes no part
of the legislative instrument, were prepared by Laura Gail Sullivan.
DIGEST
Proposed law provides for a second tier of benefits in each state and statewide retirement
system, at the option of the employer, known as "Tier 2". Provides that the current
provisions of each retirement system, including any subplans, shall be known as "Tier 1".
The state retirement systems are:
(1) Louisiana State Employees' Retirement System (LASERS) SB NO. 12
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(2) Teachers' Retirement System of Louisiana (TRSL)
(3) Louisiana School Employees' Retirement System (LSERS)
(4) State Police Pension and Retirement System (State Police)
The statewide retirement systems are:
(1) Assessors' Retirement Fund (ARF)
(2) Clerks' of Court Retirement and Relief Fund (Clerks)
(3) District Attorneys' Retirement System (DARS)
(4) Firefighters' Retirement System (FRS)
(5) Municipal Employees' Retirement System (MERS)
(6) Municipal Police Employees' Retirement System (MPERS)
(7) Parochial Employees' Retirement System (PERS)
(8) Registrars of Voters Employees' Retirement System (ROVERS)
(9) Sheriffs' Pension and Relief Fund (Sheriffs)
Proposed law provides that participation in Tier 2 shall be at the option of the employing
agency. Provides that participation shall apply to all the agency's employees for benefits
accrued on or after the date the agency begins participating in Tier 2, regardless of whether
all agency employees are in a single system or subplan in Tier 1.
Proposed law provides that an agency opting into Tier 2 from Tier 1 shall notify its
employees and the retirement system. For retirement systems with a plan year beginning
July 1st, requires the agency to provide notice on or before the December 31st prior to the
switch. For retirement systems with a plan year beginning on another date, requires the
agency to provide notice at least 180 days before the plan year begins. Provides that a switch
from Tier 1 to Tier 2 may only be made at the beginning of a plan year.
Proposed law provides that Tier 2 shall have a hazardous duty subplan and a nonhazardous
duty subplan. Provides that the hazardous duty subplan shall apply to Tier 2 for:
(1)members of State Police;
(2)employees otherwise eligible for the LASERS Tier 1 "Haz Plan"; and
(3)employees covered by MERS, MPERS, FRS, and Sheriffs who receive supplemental
pay pursuant to present law.
Provides that the nonhazardous duty subplan applies for all other Tier 2 members.
Nonhazardous subplan
Proposed law provides for Tier 2 nonhazardous employees to contribute an additional 0.5%
of pay above the contribution rate required for employees in Tier 1 of the system.
Proposed law provides for eligibility for an unreduced retirement benefit with five years of
service credit at age 65. Provides for retirement with 25 years of service at any age, with an SB NO. 12
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actuarially-reduced benefit.
Proposed law provides for a maximum retirement allowance calculation as follows:
2.5% x 60-month average compensation x years of service.
Provides for a 15% antispiking provision.
Hazardous subplan
Proposed law provides for Tier 2 hazardous employees to contribute an additional 1.0% of
pay above the contribution rate required for employees in Tier 1 of the system.
Proposed law provides for eligibility for an unreduced retirement benefit with 12 years of
service credit at age 57, if the employee is in service at his retirement. Provides that an
employee who separates from service before he is eligible to receive an unreduced benefit
pursuant to proposed law may receive an unreduced benefit if he has 12 or more years of
service credit and has attained the age of 60 years or more. Provides for retirement with 20
years of service at any age, with an actuarially-reduced benefit.
Proposed law provides that a participant in the Tier 2 hazardous subplan with fewer than 12
years of service credit but more than five years may retire pursuant to the provisions of
proposed law for Tier 2 nonhazardous subplan members.
Proposed law provides for a maximum retirement allowance calculation as follows:
3.0% x 60-month average compensation x years of service.
Provides for a 15% antispiking provision.
Retirement options
Proposed law provides that upon application for retirement any Tier 2 member may elect to
receive his benefit in a retirement allowance payable throughout his life, or he may elect at
that time to receive the actuarial equivalent of his retirement allowance in a reduced
retirement allowance payable throughout life, pursuant to any retirement option provided for
Tier 1 members of the system pursuant to present law.
Proposed law provides that no member of Tier 2 shall be eligible to participate in any
deferred retirement option plan or program or any similar retirement option that requires
continued employment for participation. Provides, however, a Tier 2 member may
participate in any initial benefit option, initial lump sum benefit option, back-deferred
retirement option plan or program, or any similar retirement option designed to provide a
reduced annuity in exchange for a lump-sum payment which is selected upon separation
from service.
Other provisions
Proposed law provides that an employee who separates from employment covered by the
retirement system who has Tier 2 service credit of more than four years but less than five
years may apply for a refund of Tier 2 contributions. Specifies that the employee's refund
pursuant to proposed law shall include 4% annual interest.
Proposed law provides that eligibility for retirement and benefit calculation for an employee
who has service credit in both Tier 1 and Tier 2 of a retirement system shall be governed by
the provisions of present law for reciprocal recognition of service credit.
Proposed law provides that an employing agency terminating its participation in Tier 1 of SB NO. 12
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the retirement system shall remit to the retirement system its proportionate share of any
unfunded actuarial accrued liability of Tier 1. Provides that the amounts required to be
remitted pursuant to proposed law shall be determined by the actuary employed by the
retirement system as of plan year ending immediately prior to the date the employer begins
participation in Tier 2, and shall account for any legacy costs attributable to the employing
agency's retirees.
Proposed law provides that the amounts due pursuant to proposed law shall, at the option of
the employing agency, be paid either in a lump sum or in equal monthly payments with
interest at the retirement system's actuarial valuation rate amortized over the longer of ten
years or the amortization period utilized in the retirement system's most recent valuation
approved by the Public Retirement Systems' Actuarial Committee.
Proposed law provides that the provisions of present law for the applicable Tier 1 system or
subplan shall apply to Tier 2 for any matter on which proposed law is silent. In case of any
conflict between the provisions of proposed law and present law, proposed law shall prevail.
Effective July 1, 2011.
(Adds R.S. 11:381-392)