HLS 20RS-212 ORIGINAL
2020 Regular Session
HOUSE BILL NO. 34
BY REPRESENTATIVE IVEY
RETIREMENT/TEACHERS: Establishes an optional hybrid retirement plan for employees
of charter schools
1 AN ACT
2To amend and reenact R.S. 11:102(B)(1) and (3)(a), (D)(2)(a) and (b), (4), (5), and (6)(a),
3 (b), and (c), 247(A)(1), (D), and (E), 883.1(C), and 927(A) and (B)(2)(a) and (b) and
4 (3)(a)(i) and to enact R.S. 11:62(14), 102(D)(3)(d), 102.7, and Chapter 7 of Subtitle
5 II of Title 11 of the Louisiana Revised Statutes of 1950, comprised of R.S. 11:1399.1
6 through 1399.11, relative to benefits for public employees whose first employment
7 by a charter school occurs on or after a date certain; to provide with respect to
8 membership, credits, eligibility, accruals, and benefits of such members; to provide
9 with respect to employee and employer contributions; to provide relative to system
10 assets and liabilities attributable to such members; and to provide for related matters.
11 Notice of intention to introduce this Act has been published
12 as provided by Article X, Section 29(C) of the Constitution
13 of Louisiana.
14Be it enacted by the Legislature of Louisiana:
15 Section 1. R.S. 11:102(B)(1) and (3)(a), (D)(2)(a) and (b), (4), (5), and (6)(a), (b),
16and (c), 247(A)(1), (D), and (E), 883.1(C), and 927(A) and (B)(2)(a) and (b) and (3)(a)(i)
17are hereby amended and reenacted and R.S. 11:62(14), 102(D)(3)(d), 102.7, and Chapter 7
18of Subtitle II of Title 11 of the Louisiana Revised Statutes of 1950, comprised of R.S.
1911:1399.1 through 1399.11, are hereby enacted to read as follows:
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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 (14) Charter school employees in the hybrid retirement plan - the amount
6 calculated pursuant to R.S. 11:102.7.
7 * * *
8 §102. Employer contributions; determination; state systems
9 * * *
10 B.(1) Except as provided in R.S. 11:102.1, 102.2, 102.3, 102.4, and 102.5,
11 and 102.7 and in Paragraph (5) of this Subsection, for each fiscal year, commencing
12 with Fiscal Year 1989-1990, for each of the public retirement systems referenced in
13 Subsection A of this Section, the legislature shall set the required employer
14 contribution rate as follows:
15 (a) for each system or plan For each plan except the hybrid plans, the rate
16 shall be set equal to the actuarially required employer contribution, as determined
17 pursuant to the provisions of this Section, divided by the total projected payroll of
18 all active members of each particular system or such plan for the fiscal year.
19 (b) For the hybrid plans, the rate shall be set equal to the actuarially required
20 employer contribution, as determined under Paragraph (3) of this Subsection, divided
21 by the total projected payroll of all active members of the hybrid plan for the fiscal
22 year.
23 (c) Each entity funding a portion of a member's salary shall also fund the
24 employer's contribution on that portion of the member's salary at the employer
25 contribution rate specified in this Section.
26 * * *
27 (3) With respect to each state public retirement system, the actuarially
28 required employer contribution for each fiscal year, commencing with Fiscal Year
29 1989-1990, shall be that dollar amount equal to the sum of:
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1 (a) The employer's normal cost for that fiscal year, computed as of the first
2 of the fiscal year using the system's actuarial funding method as specified in R.S.
3 11:22 and taking into account R.S. 11:102.7 and the value of future accumulated
4 employee contributions and interest thereon, such employer's normal cost rate
5 multiplied by the total projected payroll for all active members to the middle of that
6 fiscal year. For the Louisiana State Employees' Retirement System, effective for the
7 June 30, 2010, system valuation and beginning with Fiscal Year 2011-2012, the
8 normal cost shall be determined in accordance with Subsection C of this Section.
9 For the Teachers' Retirement System of Louisiana, effective for the June 30, 2011,
10 system valuation and beginning with Fiscal Year 2012-2013, the normal cost shall
11 be determined in accordance with Subsection D of this Section.
12 * * *
13 D.
14 * * *
15 (2)(a) Except as provided in Subparagraph (b) of this Paragraph and in R.S.
16 11:102.5, effective July 1, 2004, and beginning with Fiscal Year 2000-2001, the
17 amortization period for the changes, gains, or losses of the system provided in Items
18 (B)(3)(d)(i) through (iv) of this Section shall be thirty years from the year in which
19 the change, gain, or loss occurred. The outstanding balances of amortization bases
20 established pursuant to Items (B)(3)(d)(i) through (iv) of this Section before Fiscal
21 Year 2000-2001, shall be amortized as a level-dollar amount from July 1, 2004,
22 through June 30, 2029. Beginning with Fiscal Year 2003-2004, and for each fiscal
23 year thereafter, the outstanding balances of amortization bases established pursuant
24 to Items (B)(3)(d)(i) through (iv) of this Section shall be amortized as a level-dollar
25 amount. Effective for the June 30, 2011, system valuation and beginning with Fiscal
26 Year 2012-2013, amortization payments for changes in actuarial liability shall be
27 determined in accordance with this Subsection. Beginning with Fiscal Year 2021-
28 2022, the outstanding balances of amortization bases established pursuant to
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1 (B)(3)(d)(i) through (iv) of this Section shall also be calculated in accordance with
2 the provisions of R.S. 11:102.7.
3 (b) Notwithstanding the provisions of Subparagraph (a) of this Paragraph,
4 effective for the June thirtieth valuation following the fiscal year in which the system
5 first attains a funded percentage of seventy or more pursuant to R.S. 11:883.1 and
6 for every year thereafter, the amortization period for the changes, gains, or losses of
7 the system provided in Items (B)(3)(d)(i) through (iv) of this Section occurring in
8 that year or thereafter shall be twenty years from the year in which the change, gain,
9 or loss occurred. Beginning with Fiscal Year 2021-2022, the outstanding balances
10 of amortization bases established pursuant to (B)(3)(d)(i) through (iv) of this Section
11 shall also be calculated in accordance with the provisions of R.S. 11:102.7.
12 * * *
13 (3) The provisions of this Paragraph and Paragraphs (4) through (9) of this
14 Subsection shall be effective for the June 30, 2011 system valuation and beginning
15 Fiscal Year 2012-2013. For purposes of this Subsection, "plan" or "plans" shall
16 mean a subgroup within the system characterized by the following employee
17 classifications:
18 * * *
19 (d) Members of the hybrid plan.
20 (4) Effective for the June 30, 2011, system valuation and beginning with
21 Fiscal Year 2012-2013, the normal cost calculated pursuant to Subparagraph
22 (B)(3)(a) of this Section and R.S. 11:102.7, shall be calculated separately for each
23 particular plan within the system. An employer shall pay employer contributions for
24 each employee at the rate applicable to the plan of which that employee is a member.
25 (5) Effective for the June 30, 2011, system valuation and beginning with
26 Fiscal Year 2012-2013, changes in actuarial liability due to legislation, changes in
27 governmental organization, or reclassification of employees or positions shall be
28 calculated individually for each particular plan within the system based on each
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1 plan's actuarial experience as further provided in Subparagraph (6)(c) of this
2 Subsection and R.S. 11:102.7.
3 (6) For each plan referenced in Paragraph (3) of this Subsection, the
4 legislature shall set the required employer contribution rate equal to the sum of the
5 following:
6 (a) The particularized normal cost rate. The normal cost rate for each fiscal
7 year shall be the employer's normal cost for employees in the plan computed by
8 applying the method specified in Paragraph (B)(1) and Subparagraph (B)(3)(a) of
9 this Section and R.S. 11:102.7 to the plan.
10 (b) The shared unfunded accrued liability rate. A single rate shall be
11 computed for each fiscal year, applicable to all plans for actuarial changes, gains, and
12 losses existing on June 30, 2011, or occurring thereafter, including experience and
13 investment gains and losses, which are independent of the existence of the plans
14 listed in Paragraph (3) of this Subsection, the payment and rate therefor shall be
15 calculated as provided in this Subsection and Paragraphs (B)(1) and (3) of this
16 Section and R.S. 11:102.7.
17 (c) The particularized unfunded accrued liability rate. For actuarial changes,
18 gains, and losses, excluding experience and investment gains and losses, first
19 recognized in the June 30, 2011, valuation or in any later valuation, attributable to
20 one or more, but not all, plans listed in Paragraph (3) of this Subsection or to some
21 new plan or plans, created, implemented, or enacted after July 1, 2011, a
22 particularized contribution rate shall be calculated as provided in this Subsection and
23 Paragraphs (B)(1) and (3) of this Section and R.S. 11:102.7.
24 * * *
25 §102.7. Contribution rates for hybrid plan members
26 A. For the purposes of this Section, the following terms shall have the
27 following meanings unless another meaning is clearly required by context:
28 (1) "New member" shall mean any member who has opted into the hybrid
29 plan.
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1 (2) "Tier" shall mean any formal subset of new members classified by
2 similar benefit provisions.
3 B. Notwithstanding any provision of law to the contrary, new members shall
4 share the following costs equally with their employer:
5 (1) The normal cost of the new member's benefit, which shall include the
6 total monthly credit to the new member's defined contribution account.
7 (2) Any change in the new member's normal cost.
8 (3) The proportional share of the amortization cost for liability schedules
9 created on or after July 1, 2021.
10 C. For each tier, the dollar amount of costs provided for in Subsection B of
11 this Section shall be calculated each year by adding together the following:
12 (1) The normal cost for the new members in such tier computed at the
13 interest rate specified in R.S. 11:1399.5.
14 (2) That fiscal year's payment, computed as of the first of that fiscal year and
15 projected to the middle of that fiscal year at the interest rate specified in R.S.
16 11:1399.5 and using the amortization method specified in R.S. 11:102, 102.1, 102.2,
17 102.3, and 102.4, and this Section, necessary to amortize that portion of any
18 unfunded accrued liability created on or after July 1, 2020, that is attributable to
19 members in the tier.
20 (3) That fiscal year's payment, computed as of the first of that fiscal year and
21 projected to the middle of that fiscal year at the interest rate specified in R.S.
22 11:1399.5, necessary to amortize the prior year's over or underpayment of employee
23 contributions as a level dollar amount over a period of five years.
24 D. Employee contributions for each tier shall be calculated each year by
25 dividing one half of the dollar amount total from Subsection C of this Section by the
26 projected payroll of all new members in the tier.
27 E. Employer contributions shall be calculated as otherwise provided in R.S.
28 11:102.
29 * * *
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1 §247. Automatic cost-of-living adjustments
2 A.(1) Upon application for retirement or participation in the Deferred
3 Retirement Option Plan, any member of a state or statewide retirement system or any
4 member of a state retirement system who is not a member of the hybrid plan, may
5 elect to receive an actuarially reduced retirement allowance plus an annual two and
6 one-half percent cost-of-living adjustment. Such an election shall be irrevocable
7 after the effective date of retirement or after the beginning date of participation in the
8 Deferred Retirement Option Plan. The retirement allowance together with the cost-
9 of-living adjustment shall be certified by the system actuary to be actuarially
10 equivalent to the member's maximum or optional retirement allowance and shall be
11 approved by the system's board of trustees.
12 * * *
13 D. Upon application for retirement or participation in the Deferred
14 Retirement Option Plan and upon certifying that he is contemplating availing himself
15 of the provisions of this Section, a an eligible member of a state or statewide
16 retirement system may request that the system provide actuarial estimates of the
17 benefits that such member would receive pursuant to Subsection A of this Section
18 for the fifth, tenth, and fifteenth year following the member's anticipated retirement
19 date. The system shall provide such actuarial estimates to the member upon request.
20 E. This Section shall not be applicable to recipients of disability retirement
21 benefits pursuant to R.S. 11:461 et seq. All other eligible persons receiving
22 disability retirement benefits pursuant to the provisions of this Title shall be eligible
23 to elect this retirement option upon conversion to a service retirement, if applicable,
24 under the provisions of this Title for each state or statewide retirement system.
25 * * *
26 §883.1. Experience account
27 * * *
28 C.(1) In accordance with the provisions of this Section, the board of trustees
29 may recommend to the president of the Senate and the speaker of the House of
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1 Representatives that the system be permitted to grant a permanent benefit increase
2 to retirees who are not members of the hybrid plan and to and beneficiaries of such
3 members whenever the conditions in this Section are satisfied. The board of trustees
4 shall not grant a permanent benefit increase unless such permanent benefit increase
5 has been approved by the legislature.
6 (2) No member of the hybrid plan shall be eligible for a benefit adjustment
7 pursuant to the provisions of this Section nor shall any beneficiary who receives
8 benefits based on the death or disability of such a member be eligible for a benefit
9 adjustment pursuant to the provisions of this Section.
10 * * *
11 §927. Contributions
12 A. Regardless of the date of employment making him eligible for
13 membership in an applicable state retirement system, each Each participant shall
14 contribute monthly to the optional retirement plan the same amount which he would
15 be required to contribute to the Tier 1 regular retirement plan of the Teachers'
16 Retirement System of Louisiana if he were a member of that retirement plan.
17 Participant contributions may be made by employer pick-up in accordance with the
18 provisions of Section 414(h)(2) of the United States Internal Revenue Code or any
19 amendment thereto. The entirety of each participant's contribution, less any monthly
20 fee established by the board to cover the cost of administration and maintenance of
21 the optional retirement plan, shall be remitted to the appropriate designated company
22 or companies for application to the participant's contract or contracts.
23 B.
24 * * *
25 (2)(a) Beginning July 1, 2014, and continuing through Fiscal Year 2017-
26 2018, each higher education board created by Article VIII of the Constitution of
27 Louisiana and each employer institution and agency under its supervision and control
28 shall contribute to the Teachers' Retirement System of Louisiana on behalf of each
29 participant in the optional retirement plan the sum of:
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1 (i) The amounts calculated pursuant to R.S. 11:102(D)(6)(b), (c), and (d) for
2 Tier 1 plans.
3 (ii) An amount equal to or greater than the equivalent of the employer's
4 portion of the Tier 1 normal cost contribution of the regular retirement plan.
5 (b) Beginning July 1, 2018, each higher education board created by Article
6 VIII of the Constitution of Louisiana and each employer institution and agency under
7 its supervision and control shall contribute to the Teachers' Retirement System of
8 Louisiana on behalf of each participant in the optional retirement plan the sum of:
9 (i) The amounts calculated pursuant to R.S. 11:102(D)(6)(b), (c), and (d) for
10 Tier 1 plans.
11 (ii) An amount not less than six and two-tenths percent of pay.
12 * * *
13 (3)(a) Beginning July 1, 2014, for each employer that is not a higher
14 education board created by Article VIII of the Constitution of Louisiana or an
15 employer institution under the supervision and control of such a board, each such
16 employer institution and board shall contribute to the Teachers' Retirement System
17 of Louisiana on behalf of each participant in the optional retirement plan the greater
18 of:
19 (i) The amount it would have contributed if the participant were a member
20 of the Tier 1 regular retirement plan of the Teachers' Retirement System of Louisiana
21 pursuant to R.S. 11:102(D)(3).
22 * * *
23 CHAPTER 7. HYBRID PLAN FOR CHARTER SCHOOL EMPLOYEES
24 §1399.1. Hybrid plan creation
25 A. There is hereby created a hybrid plan for charter school employees:
26 B. The provisions of the applicable system in effect on June 30, 2021,
27 including any special plans, shall be known as "Tier 1".
28 C. The defined contribution portion of the hybrid plans shall be administered
29 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. Persons who are employed by a charter school, whose first employment
15 occurs on or after July 1, 2021, may become members of the hybrid plan. Members
16 in the hybrid plan shall participate simultaneously in a defined benefit plan and in
17 a defined contribution plan.
18 B. If a retired member of the hybrid plan returns to active service in a
19 position covered by the system from which he is receiving benefits, payment of his
20 defined benefit retirement shall cease during his period of reemployment. However,
21 such reemployment shall have no effect on payments received under the defined
22 contribution component of the plan.
23 §1399.4. Contributions and credits
24 A.(1) Each member shall contribute to the retirement system the amount
25 calculated pursuant to R.S. 11:102.7.
26 (2) Employer contributions to each retirement system shall be as provided
27 in R.S. 11:102 and 102.7.
28 B.(1) Each hybrid plan member's defined contribution account shall be
29 credited with an amount equal to ten percent of pay monthly.
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1 (2) Every active member of the hybrid plan shall also accrue service credit
2 in the defined benefit portion of the plan each month as provided in R.S. 11:1399.5.
3 C.(1) With regards to the defined contribution portion of the hybrid plan,
4 upon receipt of employee and employer contributions, the system shall promptly
5 transfer to the Department of the Treasury an amount equal to one half of the normal
6 cost percentage calculated pursuant to R.S. 11:102.7, which shall be credited to the
7 employee's account.
8 (2) With regards to the defined benefit portion of the hybrid plan, the
9 remainder of the employee and employer contributions shall be applied to the
10 defined benefit normal cost and unfunded accrued liability costs as provided in R.S.
11 11:102.7.
12 §1399.5. Defined benefit portion
13 A.(1) Defined benefits in the plan shall accrue at one percent of the
14 member's average compensation for each year of creditable service in the plan.
15 (2) A member's accrued defined benefit shall not exceed one hundred percent
16 of his average compensation.
17 B. The interest rate used to value normal cost and accrued liabilities
18 attributable to the plan shall be six percent. The provisions of this Subsection shall
19 apply to particularized liabilities of the plan as well as to any portions of shared
20 unfunded accrued liability attributable to the hybrid plan.
21 C.(1) Upon retirement, a hybrid plan member shall receive a maximum
22 defined benefit retirement allowance from his retirement system that is equivalent
23 to the percentage of his average compensation accrued each year for his creditable
24 service in the plan pursuant to Paragraph (A)(1) of this Section multiplied by his
25 years of creditable service in the plan.
26 (2) Notwithstanding the provisions of Paragraph (1) of this Subsection, upon
27 retirement, a hybrid plan member may elect to receive his defined benefit in a
28 retirement allowance payable throughout his life or may elect to receive the actuarial
29 equivalent of his retirement allowance in a reduced retirement allowance payable
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1 throughout life pursuant to any retirement option available to members of Tier 1 of
2 his system, including initial lump sum payment options.
3 (3) Notwithstanding the provisions of Paragraph (2) of this Subsection, no
4 member of the hybrid plan shall be eligible to participate in any deferred retirement
5 option plan or program or any similar retirement option that requires continued
6 employment for participation, nor shall such a member be eligible to participate in
7 any back-deferred retirement option plan or program.
8 §1399.6. Defined contribution portion
9 A.(1) Each member shall have a defined contribution plan account
10 maintained and administered by a qualified private provider as determined pursuant
11 to Subsection B of this Section.
12 (2) Each member may elect to contribute extra amounts to his defined
13 contribution account, up to applicable Internal Revenue Code limits on elective
14 deferrals.
15 B.(1) The Department of the Treasury shall select no more than three
16 companies from which contracts will be purchased for the provision of defined
17 contribution accounts for employees. In setting the criteria for this selection, the
18 Department of the Treasury shall consider, among other things, the following:
19 (a) The portability of the contracts offered or to be offered by the company,
20 based on the number of states in which the designated company provides contracts
21 under similar plans.
22 (b) The nature and extent of the rights and benefits to be provided by the
23 contracts for participating employees and their beneficiaries.
24 (c) The relation of the rights and benefits to the amount of the contributions
25 to be made pursuant to the provisions of this Chapter.
26 (d) The suitability of the rights and benefits to the needs and interests of
27 participating employees.
28 (e) The ability of the designated company or companies to provide the rights
29 and benefits under such contracts.
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1 (2) The Department of the Treasury shall select from the funds offered by
2 each provider a minimum of ten and a maximum of twenty-five funds in a range of
3 risk and return profiles that will be offered to its members. At least one of the
4 investment options selected by the Department of the Treasury from each provider
5 shall be a fund with a guaranteed rate of return.
6 C. Upon retirement, a minimum of seventy-five percent of the value of the
7 member's account balance shall be annuitized by the company maintaining the
8 account. The member shall select the percentage of his account balance to be
9 annuitized. A member who does not elect to annuitize his entire account balance
10 may withdraw some or all of his remaining account balance as: one or more lump-
11 sum payments; a trustee-to-trustee, single-sum transfer between qualified plans; or
12 a payment made directly to an individual retirement account.
13 D. Upon death or retirement, whichever occurs first, a member with at least
14 five years of participation in the defined contribution plan shall have a vested right
15 to all employer contributions made to his account and to interest on the employee
16 and employer contributions. The rights of members terminating service prior to
17 retirement shall be as follows:
18 (1) In the event of termination prior to attaining five years of participation
19 in the defined contribution plan, the member shall be entitled to a return of all
20 employee contributions, without interest thereon. All interest and employer
21 contributions shall be forfeited to the member's retirement system.
22 (2) In the event of termination after a member attains five years of
23 participation in the defined contribution plan but prior to retirement, the member
24 shall leave his account balance with the system and exercise the rights granted
25 pursuant to Subsection C of this Section upon attaining the first age at which he may
26 begin to draw an unreduced retirement benefit.
27 E. A member who has not terminated employment or retired may not
28 withdraw funds from his defined contribution account prior to retirement or borrow
29 against such funds.
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1 F. Interest shall be credited on any balance in the member's account as long
2 as there is a balance in the account.
3 §1399.7. Retirement eligibility
4 A member of the hybrid plan shall be eligible for retirement if he has:
5 (1) Five years or more of service, at age sixty-five or thereafter.
6 (2) Twenty years of service credit at age fifty-five, exclusive of military
7 service and unused annual and sick leave, but any person retiring under this
8 Subparagraph shall have his defined benefit, inclusive of military service credit and
9 allowable unused annual and sick leave, actuarially reduced from the earliest age that
10 he would normally become eligible for a regular retirement benefit under
11 Subparagraph (a) of this Paragraph.
12 §1399.8. Disability and death benefits
13 A.(1) The defined benefit plan disability and death benefits shall be as
14 otherwise determined and provided in Tier 1; however, the accrual rate used to
15 calculate any such benefits shall not exceed the member's accrual rate in the hybrid
16 plan.
17 (2) If the hybrid plan member has not met the eligibility requirements for
18 survivors' benefits in the applicable Tier 1 plan, the system shall give his designated
19 beneficiary or his estate the option to receive the portion of the account balance the
20 member would otherwise have been entitled to as a lump-sum payment; a trustee-to-
21 trustee, single-sum transfer between qualified plans; or a payment made directly to
22 an individual retirement account.
23 B. A member receiving disability benefits based on defined benefit plan
24 provisions shall be entitled to access to his defined contribution account as provided
25 in R.S. 11:1399.6(C), including interest on contributions as provided in R.S.
26 11:1399.6(D).
27 C. If distributed as death benefits, a deceased member's defined contribution
28 account shall be divided as follows:
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1 (1) If there is a surviving spouse and no minor children, the spouse shall
2 have the same options with respect to the account balance that the member would
3 have had.
4 (2) If there is a surviving spouse and at least one minor child or child with
5 a disability, the surviving spouse shall receive an annuity based on one-half of the
6 account balance and the other half of the account balance shall be divided on a pro
7 rata basis between the remaining minor children and children with a disability and
8 annuitized.
9 (3) If there is no surviving spouse but there is at least one minor child or
10 child with a disability, the account shall be divided on a pro rata basis between the
11 minor children and children with a disability and annuitized.
12 D. If any disability retiree of the hybrid retirement plan who is under his
13 normal retirement age is restored to active service, his defined benefit retirement
14 allowance and ability to access his defined contribution account shall cease, he shall
15 again become a member of the retirement system, and he shall contribute thereafter
16 at the current rate in effect at the time he is restored to service, and if he contributes
17 for at least three years after restoration to active service, the period of time on
18 disability shall be counted as accredited service for purposes of establishing
19 retirement eligibility in the defined benefit portion of the plan, but not for
20 computation of benefits. Any prior service certificate on which his service was
21 computed at the time of his retirement shall be restored to full force and effect and,
22 in addition, upon his subsequent retirement he shall be credited with all his service
23 as a member. The remaining value of any annuity paid to the rehabilitated member
24 from his defined contribution account balance shall be converted back to a lump sum
25 and deposited into the member's defined contribution account. Contributions to the
26 defined contribution account shall resume and be added to the balance in the account
27 at the time of restoration to active service.
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1 §1399.9. Cost-of-living adjustments on defined benefit
2 A.(1) Each qualifying retiree and beneficiary of a hybrid plan member shall
3 have the defined benefit portion of his benefit increased permanently on July first in
4 each odd-numbered calendar year. The amount of the increase shall be the lesser of:
5 (a) Two percent of the benefit amount.
6 (b) An amount equal to the consumer price index for all urban consumers for
7 the South as calculated by the United States Department of Labor, Bureau of Labor
8 Statistics, for the twelve-month period ending on the May thirtieth immediately
9 preceding the payment of the benefit increase.
10 (2) To be eligible for the permanent benefit increases provided in this
11 Subsection, a retiree:
12 (a) Shall have been separated from employment and receiving a benefit for
13 at least one year.
14 (b) Shall have attained his normal retirement age.
15 (3) A nonretiree survivor or beneficiary shall be eligible for the permanent
16 benefit increases provided in this Section:
17 (a) If the benefits have been received by the retiree or the beneficiary or both
18 combined for at least one year.
19 (b) If the retiree would have attained age sixty-five.
20 (4) The provisions of Subparagraph (3)(b) of this Subsection shall not apply
21 to any person who receives benefits based on the death of a disability retiree.
22 B. Each permanent benefit increase provided pursuant to this Section shall
23 be payable based on the amount, not to exceed fifty thousand dollars, of the
24 recipient's annual benefit.
25 C. Each time the system actuary performs an experience study, he shall also
26 evaluate whether and to what extent contributions required to fund the benefits
27 provided for in this Section meet or exceed such liabilities. This assessment shall be
28 based on stochastic modeling.
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HB NO. 34
1 §1399.10. Commingling of assets and accounting
2 Assets of the defined benefits portion of a hybrid plan shall be commingled
3 with assets of the other system plans for investment purposes. Assets of this plan
4 shall be available to fund benefits of all plans within the system, including this plan.
5 A fictitious account for this tier of benefits shall be established for the purposes of
6 accounting for assets and liabilities of this plan and determining funding
7 requirements of this plan.
8 §1399.11. Applicability
9 The provisions of the applicable Tier 1 system or plan shall apply to the
10 hybrid plan for any matter on which this Chapter is silent. In case of any conflict
11 between the provisions of Tier 1 and this Chapter, this Chapter shall prevail.
12 Section 2. The cost of this Act, if any, shall be funded with additional employer
13contributions 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 34 Original 2020 Regular Session Ivey
Abstract: Establishes an optional hybrid retirement plan for employees of charter schools
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. (TRSL), 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 – for persons employed by a charter school 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.
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
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HB NO. 34
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 provides an accrual rate of average compensation for each year of a member's
service. Proposed law retains present law for those who are not new members. Further
establishes a 1% accrual rate for regular retirement benefit calculations for new 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
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
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HB NO. 34
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 TRSL 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 TRSL 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.
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.
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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. 11:102(B)(1) and (3)(a), (D)(2)(a) and (b), (4), (5), and (6)(a), (b), and (c),
247(A)(1), (D), and (E), 883.1(C), and 927(A) and (B)(2)(a) and (b) and (3)(a)(i); Adds R.S.
11:62(14), 102(D)(3)(d), 102.7, and 1399.1-1399.11)
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