HLS 20RS-215 ORIGINAL
2020 Regular Session
HOUSE BILL NO. 28
BY REPRESENTATIVE IVEY
RETIREMENT/SCHOOL EMPS: Establishes an optional hybrid retirement plan for
members of the Louisiana School Employees' Retirement System
1 AN ACT
2To amend and reenact R.S. 11:62(4)(introductory paragraph), 102(B)(1) and (3)(a) and
3 (E)(1), 247(A)(1), (D), and (E), and 1145.1(B) and to enact R.S. 11:62(4.1), 102.7,
4 and Chapter 7 of Subtitle II of Title 11 of the Louisiana Revised Statutes of 1950,
5 comprised of R.S. 11:1399.1 through 1399.11, relative to benefits for public
6 employees whose first employment making them eligible for membership in the
7 Louisiana School Employees' Retirement System occurs on or after a date certain;
8 to provide with respect to membership, credits, eligibility, accruals, and benefits of
9 such members; to provide with respect to employee and employer contributions; to
10 provide relative to system assets and liabilities attributable to such members; and to
11 provide for related matters.
12 Notice of intention to introduce this Act has been published
13 as provided by Article X, Section 29(C) of the Constitution
14 of Louisiana.
15Be it enacted by the Legislature of Louisiana:
16 Section 1. R.S. 11:62(4)(introductory paragraph), 102(B)(1) and (3)(a) and (E)(1),
17247(A)(1), (D), and (E), and 1145.1(B) are hereby amended and reenacted and R.S.
1811:62(4.1), 102.7, and Chapter 7 of Subtitle II of Title 11 of the Louisiana Revised Statutes
19of 1950, comprised of R.S. 11:1399.1 through 1399.11, are hereby enacted to read as
20follows:
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1 §62. Employee contribution rates established
2 Employee contributions to state and statewide public retirement systems shall
3 be paid at the following rates, except as otherwise provided by law:
4 * * *
5 (4) Louisiana School Employees' Retirement System members in Tier 1:
6 * * *
7 (4.1) Louisiana School Employees' Retirement System members in the
8 hybrid retirement plan – the amount calculated pursuant to R.S. 11:102.7.
9 * * *
10 §102. Employer contributions; determination; state systems
11 * * *
12 B.(1) Except as provided in R.S. 11:102.1, 102.2, 102.3, 102.4, and 102.5,
13 and 102.7 and in Paragraph (5) of this Subsection, for each fiscal year, commencing
14 with Fiscal Year 1989-1990, for each of the public retirement systems referenced in
15 Subsection A of this Section, the legislature shall set the required employer
16 contribution rate as follows:
17 (a) for each system or plan For each plan except the hybrid plans, the rate
18 shall be set equal to the actuarially required employer contribution, as determined
19 pursuant to the provisions of this Section, divided by the total projected payroll of
20 all active members of each particular system or such plan for the fiscal year.
21 (b) For the hybrid plans, the rate shall be set equal to the actuarially required
22 employer contribution, as determined under Paragraph (3) of this Subsection, divided
23 by the total projected payroll of all active members of the hybrid plan for the fiscal
24 year.
25 (c) Each entity funding a portion of a member's salary shall also fund the
26 employer's contribution on that portion of the member's salary at the employer
27 contribution rate specified in this Section.
28 * * *
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1 (3) With respect to each state public retirement system, the actuarially
2 required employer contribution for each fiscal year, commencing with Fiscal Year
3 1989-1990, shall be that dollar amount equal to the sum of:
4 (a) The employer's normal cost for that fiscal year, computed as of the first
5 of the fiscal year using the system's actuarial funding method as specified in R.S.
6 11:22 and taking into account R.S. 11:102.7 and the value of future accumulated
7 employee contributions and interest thereon, such employer's normal cost rate
8 multiplied by the total projected payroll for all active members to the middle of that
9 fiscal year. For the Louisiana State Employees' Retirement System, effective for the
10 June 30, 2010, system valuation and beginning with Fiscal Year 2011-2012, the
11 normal cost shall be determined in accordance with Subsection C of this Section.
12 For the Teachers' Retirement System of Louisiana, effective for the June 30, 2011,
13 system valuation and beginning with Fiscal Year 2012-2013, the normal cost shall
14 be determined in accordance with Subsection D of this Section.
15 * * *
16 E.(1) Except as provided in Paragraphs (2) and (3) of this Subsection and in
17 R.S. 11:102.5, effective July 1, 2004, and beginning with Fiscal Year 2000-2001, the
18 amortization period for the changes, gains, or losses of the Louisiana School
19 Employees' Retirement System provided in Items (B)(3)(d)(i) through (iv) of this
20 Section shall be thirty years from the year in which the change, gain, or loss
21 occurred. The outstanding balances of amortization bases established pursuant to
22 Items (B)(3)(d)(i) through (iv) of this Section before Fiscal Year 2000-2001, shall
23 be amortized as a level-dollar amount from July 1, 2004, through June 30, 2029.
24 Beginning with Fiscal Year 2003-2004, and for each fiscal year thereafter, the
25 outstanding balances of amortization bases established pursuant to Items (B)(3)(d)(i)
26 through (iv) of this Section shall be amortized as a level-dollar amount. Beginning
27 with Fiscal Year 2021-2022, the outstanding balances of amortization bases
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1 established pursuant to (B)(3)(d)(i) through (iv) of this Section shall also be
2 calculated in accordance with the provisions of R.S. 11:102.7.
3 * * *
4 §102.7. Contribution rates for hybrid plan members
5 A. For the purposes of this Section, the following terms shall have the
6 following meanings unless another meaning is clearly required by context:
7 (1) "New member" shall mean any member who has opted into the hybrid
8 plan.
9 (2) "Tier" shall mean any formal subset of new members classified by
10 similar benefit provisions.
11 B. Notwithstanding any provision of law to the contrary, new members shall
12 share the following costs equally with their employer:
13 (1) The normal cost of the new member's benefit, which shall include the
14 total monthly credit to the new member's defined contribution account.
15 (2) Any change in the new member's normal cost.
16 (3) The proportional share of the amortization cost for liability schedules
17 created on or after July 1, 2021.
18 C. For each tier, the dollar amount of costs provided for in Subsection B of
19 this Section shall be calculated each year by adding together the following:
20 (1) The normal cost for the new members in such tier computed at the
21 interest rate specified in R.S. 11:1399.5.
22 (2) That fiscal year's payment, computed as of the first of that fiscal year and
23 projected to the middle of that fiscal year at the interest rate specified in R.S.
24 11:1399.5 and using the amortization method specified in R.S. 11:102, 102.1, 102.2,
25 102.3, and 102.4, and this Section, necessary to amortize that portion of any
26 unfunded accrued liability created on or after July 1, 2020, that is attributable to
27 members in the tier.
28 (3) That fiscal year's payment, computed as of the first of that fiscal year and
29 projected to the middle of that fiscal year at the interest rate specified in R.S.
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1 11:1399.5, necessary to amortize the prior year's over or underpayment of employee
2 contributions as a level dollar amount over a period of five years.
3 D. Employee contributions for each tier shall be calculated each year by
4 dividing one half of the dollar amount total from Subsection C of this Section by the
5 projected payroll of all new members in the tier.
6 E. Employer contributions shall be calculated as otherwise provided in R.S.
7 11:102.
8 * * *
9 §247. Automatic cost-of-living adjustments
10 A.(1) Upon application for retirement or participation in the Deferred
11 Retirement Option Plan, any member of a state or statewide retirement system or any
12 member of a state retirement system who is not a member of the hybrid plan, may
13 elect to receive an actuarially reduced retirement allowance plus an annual two and
14 one-half percent cost-of-living adjustment. Such an election shall be irrevocable
15 after the effective date of retirement or after the beginning date of participation in the
16 Deferred Retirement Option Plan. The retirement allowance together with the cost-
17 of-living adjustment shall be certified by the system actuary to be actuarially
18 equivalent to the member's maximum or optional retirement allowance and shall be
19 approved by the system's board of trustees.
20 * * *
21 D. Upon application for retirement or participation in the Deferred
22 Retirement Option Plan and upon certifying that he is contemplating availing himself
23 of the provisions of this Section, a an eligible member of a state or statewide
24 retirement system may request that the system provide actuarial estimates of the
25 benefits that such member would receive pursuant to Subsection A of this Section
26 for the fifth, tenth, and fifteenth year following the member's anticipated retirement
27 date. The system shall provide such actuarial estimates to the member upon request.
28 E. This Section shall not be applicable to recipients of disability retirement
29 benefits pursuant to R.S. 11:461 et seq. All other eligible persons receiving
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1 disability retirement benefits pursuant to the provisions of this Title shall be eligible
2 to elect this retirement option upon conversion to a service retirement, if applicable,
3 under the provisions of this Title for each state or statewide retirement system.
4 * * *
5 §1145.1. Experience account
6 * * *
7 B.(1) In accordance with the provisions of this Section, the board of trustees
8 may recommend to the president of the Senate and the speaker of the House of
9 Representatives that the system be permitted to grant a permanent benefit increase
10 to retirees who are not members of the hybrid plan and to and beneficiaries of such
11 members whenever the conditions in this Section are satisfied. The board of trustees
12 shall not grant a permanent benefit increase unless such permanent benefit increase
13 has been approved by the legislature.
14 (2) No member of the hybrid plan shall be eligible for a benefit adjustment
15 pursuant to the provisions of this Section nor shall any beneficiary who receives
16 benefits based on the death or disability of such a member be eligible for a benefit
17 adjustment pursuant to the provisions of this Section.
18 * * *
19 CHAPTER 7. HYBRID PLAN FOR THE LOUISIANA SCHOOL EMPLOYEES'
20 RETIREMENT SYSTEM
21 §1399.1. Hybrid plan creation
22 A. There is hereby created within the Louisiana School Employees'
23 Retirement System a hybrid plan.
24 B. The provisions of Chapter 3 of this Subtitle shall be known as "Tier 1".
25 C. The defined contribution portion of the hybrid plan shall be administered
26 by the Department of the Treasury.
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1 §1399.2. Definitions
2 The following terms shall have the following meanings, unless another
3 meaning is clearly required by context. Terms not otherwise defined shall have the
4 same meaning as in Tier 1.
5 (1) "Particularized unfunded accrued liability" shall mean liability applicable
6 to actuarial changes, gains, and losses, excluding experience and investment gains
7 and losses, first recognized in the June 30, 2021, valuation or in any later valuation,
8 attributable to one or more, but not all, plans in a system.
9 (2) "Shared unfunded accrued liability" shall mean liability applicable to all
10 plans in a system for actuarial changes, gains, and losses, including experience and
11 investment gains and losses, which are independent of the existence of the individual
12 plans within a system.
13 §1399.3. Hybrid plan membership
14 A. Members of the Louisiana School Employees' Retirement System whose
15 first employment making them eligible for membership in the system occurs on or
16 after July 1, 2021, may become members of the hybrid plan. Members in the hybrid
17 plan shall participate simultaneously in a defined benefit plan and in a defined
18 contribution plan.
19 B. If a retired member of the hybrid plan returns to active service in a
20 position covered by the system from which he is receiving benefits, payment of his
21 defined benefit retirement shall cease during his period of reemployment. However,
22 such reemployment shall have no effect on payments received under the defined
23 contribution component of the plan.
24 §1399.4. Contributions and credits
25 A.(1) Each member shall contribute to the retirement system the amount
26 calculated pursuant to R.S. 11:102.7.
27 (2) Employer contributions to each retirement system shall be as provided
28 in R.S. 11:102 and 102.7.
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1 B.(1) Each hybrid plan member's defined contribution account shall be
2 credited with an amount equal to ten percent of pay monthly.
3 (2) Every active member of the hybrid plan shall also accrue service credit
4 in the defined benefit portion of the plan each month as provided in R.S. 11:1399.5.
5 C.(1) With regards to the defined contribution portion of the hybrid plan,
6 upon receipt of employee and employer contributions, the system shall promptly
7 transfer to the Department of the Treasury an amount equal to one half of the normal
8 cost percentage calculated pursuant to R.S. 11:102.7, which shall be credited to the
9 employee's account.
10 (2) With regards to the defined benefit portion of the hybrid plan, the
11 remainder of the employee and employer contributions shall be applied to the
12 defined benefit normal cost and unfunded accrued liability costs as provided in R.S.
13 11:102.7.
14 §1399.5. Defined benefit portion
15 A.(1) Defined benefits in the plan shall accrue at one percent of the
16 member's average compensation for each year of creditable service in the plan.
17 (2) A member's accrued defined benefit shall not exceed one hundred percent
18 of his average compensation.
19 B. The interest rate used to value normal cost and accrued liabilities
20 attributable to the plan shall be six percent. The provisions of this Subsection shall
21 apply to particularized liabilities of the plan as well as to any portions of shared
22 unfunded accrued liability attributable to the hybrid plan.
23 C.(1) Upon retirement, a hybrid plan member shall receive a maximum
24 defined benefit retirement allowance from his retirement system that is equivalent
25 to the percentage of his average compensation accrued each year for his creditable
26 service in the plan pursuant to Paragraph (A)(1) of this Section multiplied by his
27 years of creditable service in the plan.
28 (2) Notwithstanding the provisions of Paragraph (1) of this Subsection, upon
29 retirement, a hybrid plan member may elect to receive his defined benefit in a
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1 retirement allowance payable throughout his life or may elect to receive the actuarial
2 equivalent of his retirement allowance in a reduced retirement allowance payable
3 throughout life pursuant to any retirement option available to members of Tier 1 of
4 his system, including initial lump sum payment options.
5 (3) Notwithstanding the provisions of Paragraph (2) of this Subsection, no
6 member of the hybrid plan shall be eligible to participate in any deferred retirement
7 option plan or program or any similar retirement option that requires continued
8 employment for participation, nor shall such a member be eligible to participate in
9 any back-deferred retirement option plan or program.
10 §1399.6. Defined contribution portion
11 A.(1) Each member shall have a defined contribution plan account
12 maintained and administered by a qualified private provider as determined pursuant
13 to Subsection B of this Section.
14 (2) Each member may elect to contribute extra amounts to his defined
15 contribution account, up to applicable Internal Revenue Code limits on elective
16 deferrals.
17 B.(1) The Department of the Treasury shall select no more than three
18 companies from which contracts will be purchased for the provision of defined
19 contribution accounts for employees. In setting the criteria for this selection, the
20 Department of the Treasury shall consider, among other things, the following:
21 (a) The portability of the contracts offered or to be offered by the company,
22 based on the number of states in which the designated company provides contracts
23 under similar plans.
24 (b) The nature and extent of the rights and benefits to be provided by the
25 contracts for participating employees and their beneficiaries.
26 (c) The relation of the rights and benefits to the amount of the contributions
27 to be made pursuant to the provisions of this Chapter.
28 (d) The suitability of the rights and benefits to the needs and interests of
29 participating employees.
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1 (e) The ability of the designated company or companies to provide the rights
2 and benefits under such contracts.
3 (2) The Department of the Treasury shall select from the funds offered by
4 each provider a minimum of ten and a maximum of twenty-five funds in a range of
5 risk and return profiles that will be offered to its members. At least one of the
6 investment options selected by the Department of the Treasury from each provider
7 shall be a fund with a guaranteed rate of return.
8 C. Upon retirement, a minimum of seventy-five percent of the value of the
9 member's account balance shall be annuitized by the company maintaining the
10 account. The member shall select the percentage of his account balance to be
11 annuitized. A member who does not elect to annuitize his entire account balance
12 may withdraw some or all of his remaining account balance as: one or more lump-
13 sum payments; a trustee-to-trustee, single-sum transfer between qualified plans; or
14 a payment made directly to an individual retirement account.
15 D. Upon death or retirement, whichever occurs first, a member with at least
16 five years of participation in the defined contribution plan shall have a vested right
17 to all employer contributions made to his account and to interest on the employee
18 and employer contributions. The rights of members terminating service prior to
19 retirement shall be as follows:
20 (1) In the event of termination prior to attaining five years of participation
21 in the defined contribution plan, the member shall be entitled to a return of all
22 employee contributions, without interest thereon. All interest and employer
23 contributions shall be forfeited to the member's retirement system.
24 (2) In the event of termination after a member attains five years of
25 participation in the defined contribution plan but prior to retirement, the member
26 shall leave his account balance with the system and exercise the rights granted
27 pursuant to Subsection C of this Section upon attaining the first age at which he may
28 begin to draw an unreduced retirement benefit.
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1 E. A member who has not terminated employment or retired may not
2 withdraw funds from his defined contribution account prior to retirement or borrow
3 against such funds.
4 F. Interest shall be credited on any balance in the member's account as long
5 as there is a balance in the account.
6 §1399.7. Retirement eligibility
7 A member of the Louisiana School Employees' Retirement system shall be
8 eligible for retirement if he has:
9 (1) Five years or more of service, at age sixty-five or thereafter.
10 (2) Twenty years of service credit at age fifty-five, exclusive of military
11 service and unused annual and sick leave, but any person retiring under this
12 Subparagraph shall have his defined benefit, inclusive of military service credit and
13 allowable unused annual and sick leave, actuarially reduced from the earliest age that
14 he would normally become eligible for a regular retirement benefit under
15 Subparagraph (a) of this Paragraph.
16 §1399.8. Disability and death benefits
17 A.(1) The defined benefit plan disability and death benefits shall be as
18 otherwise determined and provided in Tier 1; however, the accrual rate used to
19 calculate any such benefits shall not exceed the member's accrual rate in the hybrid
20 plan.
21 (2) If the hybrid plan member has not met the eligibility requirements for
22 survivors' benefits in the applicable Tier 1 plan, the system shall give his designated
23 beneficiary or his estate the option to receive the portion of the account balance the
24 member would otherwise have been entitled to as a lump-sum payment; a trustee-to-
25 trustee, single-sum transfer between qualified plans; or a payment made directly to
26 an individual retirement account.
27 B. A member receiving disability benefits based on defined benefit plan
28 provisions shall be entitled to access to his defined contribution account as provided
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1 in R.S. 11:1399.6(C), including interest on contributions as provided in R.S.
2 11:1399.6(D).
3 C. If distributed as death benefits, a deceased member's defined contribution
4 account shall be divided as follows:
5 (1) If there is a surviving spouse and no minor children, the spouse shall
6 have the same options with respect to the account balance that the member would
7 have had.
8 (2) If there is a surviving spouse and at least one minor child or child with
9 a disability, the surviving spouse shall receive an annuity based on one-half of the
10 account balance and the other half of the account balance shall be divided on a pro
11 rata basis between the remaining minor children and children with a disability and
12 annuitized.
13 (3) If there is no surviving spouse but there is at least one minor child or
14 child with a disability, the account shall be divided on a pro rata basis between the
15 minor children and children with a disability and annuitized.
16 D. If any disability retiree of the hybrid retirement plan who is under his
17 normal retirement age is restored to active service, his defined benefit retirement
18 allowance and ability to access his defined contribution account shall cease, he shall
19 again become a member of the retirement system, and he shall contribute thereafter
20 at the current rate in effect at the time he is restored to service, and if he contributes
21 for at least three years after restoration to active service, the period of time on
22 disability shall be counted as accredited service for purposes of establishing
23 retirement eligibility in the defined benefit portion of the plan, but not for
24 computation of benefits. Any prior service certificate on which his service was
25 computed at the time of his retirement shall be restored to full force and effect and,
26 in addition, upon his subsequent retirement he shall be credited with all his service
27 as a member. The remaining value of any annuity paid to the rehabilitated member
28 from his defined contribution account balance shall be converted back to a lump sum
29 and deposited into the member's defined contribution account. Contributions to the
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1 defined contribution account shall resume and be added to the balance in the account
2 at the time of restoration to active service.
3 §1399.9. Cost-of-living adjustments on defined benefit
4 A.(1) Each qualifying retiree and beneficiary of a hybrid plan member shall
5 have the defined benefit portion of his benefit increased permanently on July first in
6 each odd-numbered calendar year. The amount of the increase shall be the lesser of:
7 (a) Two percent of the benefit amount.
8 (b) An amount equal to the consumer price index for all urban consumers for
9 the South as calculated by the United States Department of Labor, Bureau of Labor
10 Statistics, for the twelve-month period ending on the May thirtieth immediately
11 preceding the payment of the benefit increase.
12 (2) To be eligible for the permanent benefit increases provided in this
13 Subsection, a retiree:
14 (a) Shall have been separated from employment and receiving a benefit for
15 at least one year.
16 (b) Shall have attained his normal retirement age.
17 (3) A nonretiree survivor or beneficiary shall be eligible for the permanent
18 benefit increases provided in this Section:
19 (a) If the benefits have been received by the retiree or the beneficiary or both
20 combined for at least one year.
21 (b) If the retiree would have attained age sixty-five.
22 (4) The provisions of Subparagraph (3)(b) of this Subsection shall not apply
23 to any person who receives benefits based on the death of a disability retiree.
24 B. Each permanent benefit increase provided pursuant to this Section shall
25 be payable based on the amount, not to exceed fifty thousand dollars, of the
26 recipient's annual benefit.
27 C. Each time the system actuary performs an experience study, he shall also
28 evaluate whether and to what extent contributions required to fund the benefits
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1 provided for in this Section meet or exceed such liabilities. This assessment shall be
2 based on stochastic modeling.
3 §1399.10. Commingling of assets and accounting
4 Assets of the defined benefits portion of a hybrid plan shall be commingled
5 with assets of the other system plans for investment purposes. Assets of this plan
6 shall be available to fund benefits of all plans within the system, including this plan.
7 A fictitious account for this tier of benefits shall be established for the purposes of
8 accounting for assets and liabilities of this plan and determining funding
9 requirements of this plan.
10 §1399.11. Applicability
11 The provisions of the applicable Tier 1 system or plan shall apply to the
12 hybrid plan for any matter on which this Chapter is silent. In case of any conflict
13 between the provisions of Tier 1 and this Chapter, this Chapter shall prevail.
14 Section 2. The cost of this Act, if any, shall be funded with additional employer
15contributions in compliance with Article X, Section 29(F) of the Constitution of Louisiana.
DIGEST
The digest printed below was prepared by House Legislative Services. It constitutes no part
of the legislative instrument. The keyword, one-liner, abstract, and digest do not constitute
part of the law or proof or indicia of legislative intent. [R.S. 1:13(B) and 24:177(E)]
HB 28 Original 2020 Regular Session Ivey
Abstract: Establishes an optional hybrid retirement plan for members of the La. School
Employees' Retirement System (LSERS) whose first employment making them
eligible for membership in a state system occurred on or after July 1, 2021.
Present law establishes four state retirement systems – the La. State Employees' Retirement
System, the Teachers' Retirement System of La., the La. School Employees' Retirement
System, and the State Police Retirement System – and provides a defined benefit retirement
plan for members of each system. Proposed law establishes an optional hybrid retirement
plan (Hybrid Plan) – consisting of a combination of a defined benefit pension and a defined
contribution (DC) account – that is available to members of LSERS whose first employment
making them eligible for membership in a state system occurs on or after July 1, 2021
(hereafter referred to as "new members").
Cost Sharing
Present law establishes a fixed rate at which members must contribute to each state and
statewide retirement system. Proposed law retains present law for those who are not new
members. Further establishes a floating rate for new members based on an equal division
of the cost of the plan for new members.
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Present law establishes the formula by which employer contribution rates are calculated each
year. Generally requires the employer to fund 100% of unfunded accrued liability (UAL)
payments. Proposed law requires new members who opt into the Hybrid Plan to split
equally the cost of their benefit accruals (the "Normal Cost") and the cost of any UAL
attributable to their plan.
COLAs
Present law provides a mechanism for paying cost-of-living adjustments (COLAs) to retirees
of state retirement systems using investment gains over and above certain pre-determined
levels. Proposed law retains present law for those who are not new members. For new
members who opt into the Hybrid Plan, proposed law establishes a pre-funded COLA
mechanism, the cost of which is split between new members and employers. Upon
retirement (or death), in every odd-numbered year, a qualifying new member or beneficiary
of such will receive a COLA equal to the lesser of:
(1)2%.
(2)The CPI-U for the South as calculated by the U.S. Dept. of Labor, Bureau of Labor
Statistics, for the 12-month period ending on the May 30th immediately preceding
the payment of the benefit increase.
Further provides that such COLA shall only be paid on the first $50,000 of a retiree or
beneficiary's benefit amount.
Proposed law establishes the following qualifications for a COLA:
(1)Any retiree who has received a benefit for at least one year and who has attained at
least his normal retirement age.
(2)Any nonretiree beneficiary who has received a benefit for at least one year
(aggregated with any time the deceased member may have received a benefit) if the
deceased member would have attained his normal retirement age.
(3)Any disability retiree or any beneficiary who receives benefits based on the death of
a disability retiree if benefits have been received for at least one year.
Regular Retirement Benefits
Defined Benefit Plan
Present law provides a retirement benefit that combines average compensation with a
percentage multiplier for each year of service. This calculation can be rendered as:
Accrual Rate x Years of Service x Average Compensation
Present law for LSERS provides an accrual rate of 2.5% of average compensation for each
year of a member's service. Proposed law retains present law for those who are not hybrid
plan members. Further establishes a 1% accrual rate for regular retirement benefit
calculations for hybrid plan members.
Present law establishes a five-year vesting period for the right to a benefit from the defined
benefit plan. Proposed law retains present law for all members, regardless of the date of
hire.
DC Plan
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Proposed law establishes a DC account for each new member who opts into the Hybrid Plan.
Requires the Dept. of the Treasury (department) to select up to three third-party providers
who will administer the DC accounts for new members. Establishes criteria for the
department to use in evaluating potential third-party providers. Requires the department to
select from the funds offered by each provider a minimum of 10 and a maximum of 25 fund
options in a range of risk and return profiles that will be offered to new members in the DC
plan. Requires at least one investment option to be a fund with a guaranteed rate of return.
Proposed law provides that new member DC accounts for LSERS shall be credited with 10%
of pay each month.
Proposed law establishes a five-year vesting period for the right to employer contributions
and interest credited to the new member's account. The new member's right to access
interest on employee and employer contributions made to the DC account is triggered by the
member's retirement (regular or disability) or death, whichever occurs first.
Proposed law provides that if a member terminates employment prior to attaining five years
of participation in the DC plan, the employee is entitled to a return of all employee
contributions, without interest. All interest and employer contributions will be forfeited to
the system.
Proposed law further provides that if a member terminates employment after attaining five
years of participation in the DC plan, but prior to retirement, he must leave his account
balance with the third-party provider until the first age at which he may begin to draw an
unreduced retirement benefit and may then exercise all options in proposed law for members
who retire from the system.
Proposed law provides that upon retirement, a member must annuitize at least 75% of his
DC account balance with the third-party provider. The member may choose the percentage
of his account, up to 25%, that will not be annuitized. Any portion of the account that is not
annuitized may be withdrawn in one or more lump-sum payments or rolled to another
qualified retirement account, such as an IRA.
Proposed law prohibits a new member who has not terminated employment or retired from
withdrawing funds from his DC account or borrowing against such funds.
Retirement Eligibility
Present law for LSERS provides that a member hired on or after July 1, 2015, is eligible for
regular retirement if he has:
(1)Five years of service at age 62 or thereafter.
(2)20 years of service at any age, actuarially reduced.
Proposed law provides that a hybrid plan member is eligible for regular retirement if he has:
(1)Five years of service at age 65 or thereafter.
(2)20 years of service at age 55 or thereafter, actuarially reduced.
Disability & Death Benefits
Proposed law provides that disability and death benefits for new members shall be calculated
as though the member had been hired prior to July 1, 2021 (Tier 1); however, restricts the
accrual rate used in any such calculation to the hybrid plan rate applicable to the member.
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are additions. HLS 20RS-215 ORIGINAL
HB NO. 28
Proposed law provides that if the new member did not meet the eligibility requirements for
the applicable Tier 1 survivors benefits, his designated beneficiary or his estate shall receive
the DC account balance the member would otherwise have been entitled to as a lump-sum
or a transfer to another qualified retirement plan.
Proposed law provides that if a member does meet the Tier 1 survivor benefit qualifications,
his DC account shall be divided as follows:
(1)If there is a surviving spouse and at least one minor child or child with a disability,
the surviving spouse shall receive an annuity based on one half of the account
balance. The other half of the account balance shall be divided pro rata between the
minor children and children with disabilities and annuitized.
(2)If there is no surviving spouse but there is at least one minor child or child with a
disability, the account shall be divided pro rata between the minor children and
children with disabilities and annuitized.
Proposed law provides that a member receiving disability benefits from the defined benefit
plan may access and annuitize his DC account, including employer contributions and all
interest.
Proposed law provides that if a disability retiree who is under his normal retirement age is
restored to active service, his disability benefit payments and access to the balance of his DC
account shall cease. He shall resume contributions to the retirement system and if he
continues in service for at least three years after restoration, the period of time spent on
disability shall be counted toward normal retirement eligibility, but will not count towards
calculation of benefits. Requires the remaining value of any annuity based on the DC
account balance to be converted back into a lump sum and deposited into the member's
account. Further provides that contributions to the member's DC account shall resume and
be added to the balance in the account at the time he is restored to active service.
Applicability of Tier 1 Provisions
Proposed law provides that the provisions of Tier 1 that the member would have been
enrolled in but for his date of hire shall apply in any case where the provisions of the Hybrid
Plan are silent.
(Amends R.S. 11:62(4)(intro. para.), 102(B)(1) and (3)(a) and (E)(1), 247(A)(1), (D), and
(E), and 1145.1(B); Adds R.S. 11:62(4.1), 102.7, and 1399.1-1399.11)
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are additions.