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Regular Session, 2012
SENATE BILL NO. 42
BY SENATOR CORTEZ
RETIREMENT BENEFITS. Provides for a sixty-month average compensation period for
members of state retirement systems. (6/30/12)
AN ACT1
To amend and reenact R.S. 11:403(5), 450(B) and (D)(3) and (4), 612(1), and 701(5)(b)2
through (e) and to enact R.S. 11:102(D) and 701(5)(f), relative to state retirement3
systems; to provide with respect to employer contributions; to provide with respect4
to benefit calculation; to provide with respect to system funding; to provide5
transitional provisions; to provide an effective date; and to provide for related6
matters.7
Notice of intention to introduce this Act has been published.8
Be it enacted by the Legislature of Louisiana:9
Section 1. R.S. 11:403(5), 450(B) and (D)(3) and (4), 612(1), and 701(5)(b) through10
(e) are hereby amended and reenacted and R.S. 11:102(D) and 701(5)(f) are hereby enacted11
to read as follows:12
§102. Employer contributions; determination; state systems13
* * *14
D. (1) Notwithstanding any provision of this Section, R.S. 11:102.1, or15
R.S. 11:102.2 to the contrary, a new amortization base shall be created called16
the "2012 Schedule" for the Louisiana State Employees' Retirement System and17 SB NO. 42
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for the Teachers' Retirement System of Louisiana. The initial outstanding1
balance of the base shall be a credit amount equal to the difference in (1) the2
actuarial accrued liabilities calculated prior to implementation of the provisions3
of the Act which originated as SLS 12RS-87 of the 2012 Regular Session of the4
Legislature and (2) the actuarial accrued liabilities calculated under the5
provisions of the Act that originated as SLS 12RS-87 of the 2012 Regular6
Session of the Legislature, based on the June 30, 2012, actuarial valuation.7
Credits to the 2012 Schedule shall be made each year in accordance with the8
following:9
(a) Interest at the rate of investment return on the actuarial value of10
assets.11
(b) Annual employer contributions determined in the following manner:12
(i) The initial payment, for Fiscal Year 2013-2014 shall be set equal to13
ninety-five percent of the difference between the normal cost determined prior14
to implementation of the provisions of this Act which originated as Senate Bill15
___ of the 2012 Regular Session of the Legislature and the normal cost16
determined under the provisions of the Act which originated as Senate Bill ____17
of the 2012 Regular Session of the Legislature based on the June 30, 2012,18
actuarial valuation.19
(ii) Each subsequent payment thereafter shall be equal to the prior year's20
payment reduced by four percent of the initial year's payment.21
(2) The 2012 Schedule shall be debited for the full amount of the balance22
in the 2012 Schedule on June thirtieth of the fiscal year in which the balance in23
the 2012 Schedule first exceeds the balance of the amortization base labeled24
"2009 Change in Liability" in the system's June 30, 2011, valuation. The 200925
Change in Liability amortization base shall at that time be credited with an26
amount sufficient to set the outstanding balance to zero. Any residual amount27
from the 2012 Schedule shall be applied to reduce the largest then-outstanding28
amortization base whereupon the payment schedule for that base shall be29 SB NO. 42
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recalculated.1
* * *2
§403. Definitions3
The following words and phrases used in this Chapter shall have the4
following meanings, unless a different meaning is clearly required by the context:5
* * *6
(5)(a)(i) "Average compensation", for a member whose first employment7
making him eligible for membership in the system began on or before June 30, 2006,8
and for any person who receives an additional benefit pursuant to R.S.9
11:444(A)(2)(b) or (c), 557, 582, or 602 or R.S. 24:36 whose first employment10
making him eligible for membership in one of the state systems occurred on or11
before December 31, 2010, means the average annual earned compensation of a state12
employee for the thirty-six highest months of successive employment, or for the13
highest thirty-six successive joined months of employment where interruption of14
service occurred; however, average compensation for part-time employees who do15
not use thirty-six months of full-time employme nt for average compensation16
purposes shall be based on the base pay the part-time employee would have received17
had he been employed on a full-time basis.18
(ii) The earnings to be considered for the thirteenth through the19
twenty-fourth month shall not exceed one hundred twenty-five percent of the20
earnings of the first through the twelfth month. The earnings to be considered for the21
final twelve months shall not exceed one hundred twenty-five percent of the earnings22
of the thirteenth through the twenty-fourth month. Nothing in this Subparagraph,23
however, shall change the method of determining the amount of earned24
compensation received.25
(b)(i) "Average compensation", for a member whose first employment26
making him eligible for membership in the system began on or after July 1, 2006,27
and subject to the limitations provided in this Subparagraph, means the average28
annual earned compensation of a state employee member for the sixty highest29 SB NO. 42
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months of successive employment or for the highest sixty successive joined months1
of employment where interruption of service occurred; however, average2
compensation for part-time employees who do not use sixty months of full-time3
employment for average compensation purposes shall be based on the base pay the4
part-time employee would have received had he been employed on a full-time basis.5
This Item shall also be applicable to any judge, court officer, governor, lieutenant6
governor, clerk or sergeant-at-arms of the House of Representatives, secretary or7
sergeant-at-arms of the Senate, or state treasurer whose first employment making8
him eligible for membership in one of the state systems occurred on or after January9
1, 2011.10
(ii) (b) The member's earnings to be considered for persons to whom Item11
(i) of this Subparagraph applies for the thirteenth through the twenty-fourth month12
shall not exceed one hundred fifteen percent of the earnings of the first through the13
twelfth month. The earnings to be considered for the twenty-fifth through the thirty-14
sixth month shall not exceed one hundred fifteen percent of the earnings of the15
thirteenth through the twenty-fourth month. The earnings to be considered for the16
thirty-seventh through the forty-eighth month shall not exceed one hundred fifteen17
percent of the earnings of the twenty-fifth through the thirty-sixth month. The18
earnings for the final twelve months shall not exceed one hundred fifteen percent of19
the earnings of the thirty-seventh through the forty-eighth month. The limitations20
on the computation of average compensation contained in this Item Subparagraph21
shall not apply to any twelve-month period during which compensation increased by22
more than fifteen percent over the previous twelve-month period solely because of23
an increase in compensation by a uniform systemwide increase adopted by the state24
Department of Civil Service and approved by the governor or because of a pay25
adjustment enacted by the legislature. This Item shall also be applicable to any26
judge, court officer, member of the Louisiana Legislature, governor, lieutenant27
governor, clerk or sergeant-at-arms of the House of Representatives, secretary or28
sergeant-at-arms of the Senate, or state treasurer whose first employment making29 SB NO. 42
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him eligible for membership in one of the state systems occurred on or after January1
1, 2011.2
(iii) The provisions of this Subparagraph shall not apply to any person who3
receives an additional benefit pursuant to R.S. 11:444(A)(2)(b) or (c), 557, 582, or4
602 or R.S. 24:36 whose first employment making him eligible for membership in5
one of the state systems occurred on or after January 1, 2011.6
* * *7
§450. Termination of participation8
* * *9
B. Upon termination of participation in the plan but not employment, credits10
to the account shall cease and no retirement benefits shall be paid to the participant11
until employment is terminated. The balance in the participant's subaccount shall be12
placed in a self-directed subaccount in the name of the participant as provided for in13
R.S. 11:451.1, and the participant shall then be bound by the provisions of said14
Section. No payment shall be made based on credits in the subaccount until15
employment is terminated as defined in this Section. The participant may continue16
employment after termination of participation in the plan for the sole purpose of17
accruing a supplemental benefit, and employer and employee contributions shall18
resume. Correction officers, probation and parole officers, and security officers of19
the Department of Public Safety and Corrections; peace officers of the Department20
of Public Safety and Corrections, office of state police, other than state troopers, as21
provided in R.S. 11:444(A)(2)(b); and personnel employed by the Department of22
Revenue, office of alcohol and tobacco control, as provided in R.S. 11:444(A)(2)(c),23
who have ended their participation in the Deferred Retirement Option Plan but not24
employment shall make contributions at the rate established in R.S. 11:62(5)(b).25
* * *26
D. Monthly retirement benefits payable to a participant after termination of27
participation in the plan and employment shall be calculated as follows:28
* * *29 SB NO. 42
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(3) If the participant continues employment after termination of participation1
in the plan for a period of less than thirty-six sixty months, his monthly retirement2
benefit shall equal his base benefit plus a supplemental benefit based upon the3
service credit for the additional employment, based upon the final average4
compensation used to calculate the monthly credit. If the employment is for less than5
three months, then the service credit shall be rounded to the nearest tenth.6
(4) If the participant continues employment after termination of participation7
in the plan for a period of thirty-six sixty months or more, his monthly retirement8
benefit shall equal his base benefit plus a supplemental benefit based upon the9
service credit for the additional employment, based upon the final average10
compensation for the period of employment after termination of participation in the11
plan.12
* * *13
§612. Application; definitions14
Terms not specifically defined in this Section shall have the meanings15
provided in R.S. 11:403 unless a different meaning is clearly required by the context.16
For purposes of this Subpart:17
(1) "Average compensation" means the average annual earned compensation18
of a member for the sixty highest months of successive employment, or for the19
highest sixty successive joined months of employment where interruption of service20
occurred; however, average compensation for part-time employees who do not use21
sixty months of full-time employment for average compensation purposes shall be22
based on the base pay the part-time employee would have received had he been23
employed on a full-time basis. The earnings to be considered for the thirteenth24
through the twenty-fourth month shall not exceed one hundred fifteen percent of the25
earnings of the first through the twelfth month. The earnings to be considered for the26
twenty-fifth through the thirty-sixth month shall not exceed one hundred fifteen27
percent of the earnings of the thirteenth through the twenty-fourth month. The28
earnings to be considered for the thirty-seventh through the forty-eighth month shall29 SB NO. 42
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not exceed one hundred fifteen percent of the earnings of the twenty-fifth through1
the thirty-sixth month. The earnings for the final twelve months shall not exceed one2
hundred fifteen percent of the earnings of the thirty-seventh through the forty-eighth3
month. The limitations on the computation of average compensation contained in4
this Paragraph shall not apply to any twelve-month period during which5
compensation increased by more than fifteen percent over the previous twelve-month6
period solely because of an increase in compensation by a uniform systemwide7
increase adopted by the state Department of Civil Service and approved by the8
governor or because of a pay adjustment enacted by the legislature. shall be defined9
as provided in R.S. 11:403.10
* * *11
§701. Definitions12
As used in this Chapter, the following words and phrases have the meanings13
ascribed to them in this Section unless a different meaning is plainly required by the14
context:15
* * *16
(5)17
* * *18
(b) "Average compensation", for any member who is an academic or19
administrative employee of a public institution of higher education, or who is20
an employee of the Board of Regents, the Board of Trustees for State Colleges21
and Universities, the Board of Supervisors of Louisiana State University and22
Agricultural and Mechanical College, or the Board of Supervisors of Southern23
University and Agricultural and Mechanical College, or their successors, or any24
other constitutionally established board which manages institutions of higher25
education, means his average earnable compensation for the sixty highest26
successive months of employment, or the highest sixty successive joined months27
where interruption of service occurred. The computation of such average28
compensation shall be in accordance with the following guidelines:29 SB NO. 42
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(i) The amount for the first through the twelfth month shall not exceed1
the compensation for the immediately preceding twelve months by more than2
fifteen percent.3
(ii) The amount for the thirteenth through the twenty-fourth month4
shall not exceed the lesser of the maximum allowable compensation amount or5
the actual compensation amount for the first through twelfth month by more6
than fifteen percent.7
(iii) The amount for the twenty-fifth through the thirty-sixth month8
shall not exceed the lesser of the maximum allowable compensation amount or9
the actual compensation amount for the thirteenth through twenty-fourth10
month by more than fifteen percent.11
(iv) The amount for the thirty-seventh through the forty-eighth month12
shall not exceed the lesser of the maximum allowable compensation amount or13
the actual compensation amount for the twenty-fifth through the thirty-sixth14
month by more than fifteen percent.15
(v) The amount for the final twelve months shall not exceed the lesser16
of the maximum allowable compensation amount or the actual compensation17
amount for the thirty-seventh through the forty-eighth month by more than18
fifteen percent.19
(c) The thirty-six or sixty months used for average compensation, as the case20
may be, cannot cover a period when the member receives more than three years or21
five years of service credit respectively.22
(c) (d)(i) The limitations on the computation of average compensation in this23
Paragraph shall not apply to any of the twelve-month periods where compensation24
increased by more than the amount allowable in Subparagraph (a) of this Paragraph25
over the previous twelve-month period solely because of an increase in26
compensation by legislative act, by city/parish systemwide salary increase, or by a27
systemwide increase at a college or university.28
(ii) Any active member or retiree whose average compensation includes or29 SB NO. 42
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would include earnable compensation received between June 30, 1995, and June 30,1
1997, as the result of a legislative act, a city/parish systemwide salary increase, or2
a systemwide increase at a college or university shall have his average compensation3
calculated without regard to the limitations on the computation of average4
compensation imposed in this Paragraph for that period. The provisions of this Item5
shall only apply to any such member or retiree whose employer filed with this6
system on or before July 1, 1998, a written request or application for coverage under7
this Subparagraph.8
(iii) Any retiree to whom Item (ii) of this Subparagraph applies, whose9
benefits are based, or by reason of Item (ii) of this Subparagraph would be based, on10
a calculation of average compensation which includes earnable compensation11
between June 30, 1995, and June 30, 1997, shall have his benefits recalculated in12
accordance with this Subparagraph and, if an increase in benefits results, the retiree13
shall be paid such an amount to restore any prior benefits that would have been paid14
if the benefits had originally been calculated in accordance with this Subparagraph.15
(d) (e) Provided, however However, in any case where a classroom teacher16
changes employment to that of a classroom teacher in another parish, the amount for17
the twelve months of earnings in the position of a classroom teacher in the second18
parish of employment shall not exceed the compensation for the immediately19
preceding twelve months by more than twenty-five percent.20
(e) (f) Notwithstanding any other provision of law to the contrary, "average21
compensation" shall not include any amount in excess of the limitation provided in22
R.S. 11:785.1.23
* * *24
Section 2. The provisions of R.S. 11:403(5), 450(D)(3) and (4), 612(1) and 701(5)25
as amended by this Act shall not cause the average compensation expressed in dollars of any26
member retiring or entering the Deferred Retirement Option Plan on or after the effective27
date of this Act to be less than such member's average compensation expressed in dollars as28
it existed before the effective date of this Act.29 SB NO. 42
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Section 3. The provisions of this Act shall not apply to any person whose date of1
retirement or entry into the Deferred Retirement Option Plan occurs on or before December2
31, 2012.3
Section 4. Any final judgment rendered by a court of law declaring the provisions4
of this Act to be unconstitutional as applicable to members of the Louisiana State5
Employees' Retirement System or the Teachers' Retirement System of Louisiana who have6
attained a vested right with regard to the benefit provisions applicable to such members on7
the effective date of this Act, shall cause the provisions of this Act to be applicable solely8
to members of such system who have not attained such a vested right on the effective date9
of this Act.10
Section 5. This Act shall be implemented according to the provisions of this Section.11
(A) For transitional purposes, the provisions of R.S. 11:403(5), 612(1), and12
701(5)(b) through (e) shall be phased in as follows: 13
(1) For members retiring before January 1, 2013, the provisions of R.S. 11:403(5),14
612(1), and 701(5)(b) through (e) shall apply as they existed before the effective date of this15
Act.16
(2) For those members retiring on or after January 1, 2013, and on or before17
December 31, 2014, the period used to calculate monthly average final compensation shall18
be thirty-six months plus the number of whole months since January 1, 2013. 19
(B) For transitional purposes, the provisions of R.S. 11:450(D)(3) shall be phased20
in as follows:21
(1) For members entering the Deferred Retirement Option Plan before January 1,22
2014, the period of additional service required and utilized to calculate a revised final23
average compensation for the supplemental benefit after Deferred Retirement Option Plan24
participation shall be equal to thirty-six months plus the number of whole months from25
January 1, 2012, to the date of Deferred Retirement Option Plan entry. 26
(2) For members entering the plan on or after January 1, 2014, the provisions of R.S.27
11:450(D)(3) and (4) shall apply as provided in this Act. 28
Section 6. This Act shall become effective on June 30, 2012; if vetoed by the29 SB NO. 42
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governor and subsequently approved by the legislature, this Act shall become effective on1
June 30, 2012, or on the day following such approval by the legislature, whichever is later.2
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 60-month final average compensation for certain members of
state retirement systems.
Effective June 30, 2012.
(Amends R.S. 11:403(5), 450(B) and (D)(3) and (4), 612(1), and 701(5)(b) through (e); adds
R.S. 11:102(D) and 701(5)(f))