§1456.1. Back-Deferred Retirement Option Program

A.(1) There is hereby created an optional retirement benefit program for members of the fund called the "Back-Deferred Retirement Option Program" which shall be referred to in this Chapter as "Back-DROP".

(2) In lieu of receiving a normal retirement benefit pursuant to R.S. 11:1421 through 1423, an eligible member of the fund may elect to retire and have his benefits structured, calculated, and paid as provided in this Section.

B. An active, contributing member of the fund shall be eligible for Back-DROP only if all of the following apply:

(1) The member has accrued more service credit than the minimum required for eligibility for a normal retirement benefit.

(2) The member has attained an age that is greater than the minimum required for eligibility for a normal retirement benefit, if applicable.

(3) The member has revoked his participation, if any, in the Deferred Retirement Option Plan pursuant to R.S. 11:1456.2.

C. At the time of retirement, a member who elects to receive a Back-DROP benefit shall select a Back-DROP period to be specified in whole months. The duration of the Back-DROP period shall not exceed the lesser of thirty-six months or the number of months of creditable service accrued after the member first attained eligibility for normal retirement. The Back-DROP period shall be comprised of the most recent calendar days corresponding to the member's employment for which service credit in the fund accrued.

D.(1) The Back-DROP benefit shall have two portions: a lump-sum portion and a monthly benefit portion.

(2) The member's Back-DROP monthly benefit shall be calculated pursuant to the provisions applicable for service retirement set forth in R.S. 11:1421 through 1423, subject to the following conditions:

(a) For purposes of this Paragraph, creditable service shall not include service credit reciprocally recognized pursuant to R.S. 11:142.

(b) Accrued service at retirement shall be reduced by the Back-DROP period.

(c) Final average compensation shall be calculated by excluding all earnings during the Back-DROP period.

(d) Contributions received by the retirement fund during the Back-DROP period and any interest that has accrued on employer and employee contributions received during the period shall remain with the fund and shall not be refunded to the member or to the employer.

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

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

(g) The member may elect to receive a reduced monthly benefit in accordance with the options provided in R.S. 11:1423 based upon the member's age and the age of the member's beneficiary as of the actual effective date of retirement. No change in the option selected or beneficiary shall be permitted after the option is filed with the board of trustees.

(3) In addition to the monthly benefit received pursuant to Paragraph (2) of this Subsection, the member shall be paid a lump-sum benefit equal to the Back-DROP maximum monthly retirement benefit multiplied by the number of months selected as the Back-DROP period.

(4) Cost-of-living adjustments shall not be payable on the member's Back-DROP lump sum.

(5) Upon the death of a member who selected the maximum option pursuant to R.S. 11:1423, the member's named beneficiary or, if none, the member's estate shall receive the deceased member's remaining contributions, less the Back-DROP benefit amount.

(6) Upon the death of a member who selected Option 1 pursuant to R.S. 11:1423, the member's named beneficiary or, if none, the member's estate, shall receive the member's annuity savings fund balance as of the member's date of retirement reduced by the portion of the Back-DROP account balance and his previously paid retirement benefits that are attributable to the member's annuity payments as provided by the annuity savings fund.

E.(1) In lieu of receiving a lump-sum benefit payment as set forth in Paragraph (D)(3) of this Section, the member may elect to transfer the lump-sum payment into a self-directed account managed by a third-party provider.

(2) The board may hire a third-party provider to manage the self-directed accounts authorized by this Subsection. The third-party provider shall act as an agent of the fund for purposes of investing balances in the self-directed accounts of the participant as directed by the participant. The participant shall be given such options as comply with federal law for self-directed plans.

(3) Any participant who elects to transfer the lump-sum Back-DROP payment into a self-directed account agrees that the benefits payable to the participant are not the obligations of the state or the fund and that any returns and other rights of the plan are the sole liability and responsibility of the participant and the designated provider to which contributions have been made. Furthermore, each participant, in accordance with this provision, shall expressly waive his rights as set forth in Article X, Section 29(E)(5) of the Constitution of Louisiana as it relates to his Back-DROP account with the third-party provider. By electing to transfer the Back-DROP lump-sum payment into an account with a third-party provider, the participant agrees that he and the provider shall be responsible for complying with all applicable provisions of the Internal Revenue Code. The participant also agrees that if any violation of the Internal Revenue Code occurs as a result of the participant's decision to transfer his Back-DROP lump-sum payment into a self-directed account, it shall be the sole responsibility and liability of the participant and the provider and not of the state or the fund.

(4) There shall be no liability on the part of and no cause of action of any nature shall arise against the state, the fund, or the agents or employees of the state or the fund for any action taken by the participant or for choices the participant makes in relationship to the self-directed account funds in which he chooses to place his account balance.

Acts 2008, No. 398, §1, eff. Oct. 1, 2008; Acts 2014, No. 143, §1, eff. May 22, 2014.