DROP Interest Rate Approved

The rate of interest to be paid on eligible (non-Self Directed Plan) DROP accounts for the fiscal year that ended June 30, 2015, is 10.14 percent. Interest is paid on the LASERS investment earnings, which are then smoothed as part of the System's annual valuation. The Public Retirement Systems' Actuarial Committee (PRSAC) approved the interest rate at its January 21, 2016 meeting. The interest has been posted to accounts, and statements will be mailed in January 2016.

Participants in the Self-Directed DROP plan do not receive this interest, but participate in earnings or losses based upon the choices they have made in their investment allocations through Empower Retirement. Eligible LASERS members will receive DROP annual statements in January 2016.

Panel sets pension contribution rates

report from The Advocate
by Marsha Shuler

Parish school boards and state government won’t have to come up with extra contributions to fund pension plans for their employees in the new budget year.

The Public Retirement Systems’ Actuarial Committee on Tuesday sidelined proposals that would have caused school boards to contribute $100 million more than anticipated and the state an extra $40 million in the fiscal year that starts July 1.

The recommendations came from the Legislative auditor’s office actuary as he looked at the financial health of the pension plans both of which have substantial long-term debts.

The panel instead opted to adopt evaluations proposed by the actuary for the Teachers’ Retirement System of Louisiana and the Louisiana State Employees Retirement System — numbers that have been used in state government and school board budgeting.

The committee’s action means that school board contributions to the teachers retirement system will be $1.15 million in the new fiscal year while the state will put up $760.45 million. The state contribution amounts to about $20 million less than the current fiscal year.

“State agencies and school boards already prepared their budgets for the upcoming year. They prepared them based on the only evaluation that they had (from the retirement systems),” said state Sen. Elbert Guillory, R-Opelousas. “The change in the contribution rate now would require … cuts in line items, employee cuts, pay increase proposals would have to be canned, layoffs. The word chaos would not be inappropriate.”

The legislative actuary’s valuation took a more conservative approach to investment earnings than the systems’ actuary. The difference would have resulted in higher employer contributions being required under the legislative actuary’s plan — a thought that set off shock waves, particularly among parish school board executives.

The actuarial committee is tasked under state law with adopting the annual actuarial valuations and required contributions to the state employee and teachers retirement systems.

It considers analysis done by both the systems and Legislature’s actuaries.
Guillory and others said the panel needs the analysis much earlier because of potential ramifications of decisions that are made.

“When we receive evaluations substantially different it makes it difficult. The timing is very awkward,” said committee member Charles Hall, a pension actuary.

Guillory said he wants the panel to start getting information by Oct. 1 on the retirements plans status.

“I think over the next six months this committee needs to lay the groundwork where we need to go and get this done in a much more timely fashion in the future,” agreed Legislative Auditor Daryl Purpera, panel chairman.


Purpera said he is concerned about pension plan debts which will start being reflected on the state financial statement in 2015.

DROP Interest Rate Approved

The rate of interest to be paid on eligible (non-Self Directed Plan) DROP accounts for the fiscal year that ended June 30, 2012 is 4.7 percent.

The Public Retirement Systems' Actuarial Committee (PRSAC) approved the interest rate at its March 7, 2013 meeting.

To be eligible for interest, a DROP participant must have completed their accumulation period (usually 36 months after starting DROP) sometime during the 2011-2012 fiscal year.

Participants in the Self Directed DROP plan do not receive this interest, but participate in earnings or losses based upon the choices they have made in their investment allocations through Great West.

Eligible LASERS members will receive DROP annual statements in April 2013.

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Learn About the LASERS Self-Directed Plan: Make Your Reservation Today

Attend a special seminar on Tuesday, November 13, in Baton Rouge offered by Great-West Retirement Services. Material will include the latest information regarding Deferred Retirement Option Plan (DROP) and Initial Benefit Option (IBO) Accounts. You'll also find out more about protecting your retirement savings and withdrawal options. Reservations by phone are required by November 9, 2012.

DROP Account Legislation Being Clarified in Court

A state district judge has set a May 18th hearing date in the case seeking to clarify questions involving House Bill 89 (Act 217 of 2008) by Representative Jean M. Doerge of Minden. 19th Judicial District Judge William Morvant will hear motions for summary judgment.

Act 714 allows members to choose whether their Deferred Retirement Option Plan (DROP) account will be managed by LASERS or by the third party provider (Great-West) during the interest accruing time of the account.

The bill also allows those who entered DROP on/after January 1, 2004 to elect to keep their DROP account in the self-directed plan through the third party provider or to move the account back to LASERS and earn interest at the System’s realized rate of return.

The Act also includes language that directs the System to file a lawsuit for declaratory judgment as to whether DROP accounts are protected by the Louisiana Constitution and whether a LASERS member who is eligible to participate in DROP may waive the applicable provisions in the constitution.

The issue arose from an Attorney General’s opinion that states funds in DROP accounts are retirement benefits and therefore are protected by the constitution. The constitution provides that retirement benefits shall not be diminished or impaired. As such, LASERS could not charge DROP accounts with a negative interest rate.

LASERS filed its petition for a declaratory judgment in August, as instructed by the legislature. Act 714 is effective on July 1, 2009, or 60 days after a final judgment, whichever is later.

LASERS-Did you know?

DROP/IBO account funds may be paid to you monthly, yearly, in a lump sum, or rolled over to an IRA or other qualified plan.

The money in your DROP/IBO account must be withdrawn within your expected lifetime in accordance with IRS rules.

LASERS-Did you know?

DROP/IBO account funds may be paid to you monthly, yearly, in a lump sum, or rolled over to an IRA or other qualified plan.

The money in your DROP/IBO account must be withdrawn within your expected lifetime in accordance with IRS rules

LASERS-Did you know?

The age of a LASERS member and any possibility for an increase in salary should be heavily considered when a member is choosing between the Deferred Retirement Option Program (DROP) or the Initial Benefit Option (IBO)

DROP may not be the best choice for a member who may receive substantial annual salary increases. DROP could be the best choice for a member who does not anticipate a dramatic increase in salary.

2007 DROP Interest Rate

The DROP interest rate for Fiscal Year 2006-2007 is 13.71 percent.

The Public Retirement Systems’ Actuarial Committee (PRSAC) determined the rate for eligible DROP accounts at its February 1, 2008, meeting. Self-directed DROP accounts are not eligible.

The rate of interest your account will earn is equal to the actuarial rate of return on LASERS investments for the prior fiscal year minus 0.5 percent. The rate of return for the fiscal year ended June 30, 2007, is calculated and established by the LASERS actuary after the end of each fiscal year.

Members’ DROP accounts will be credited with interest for each month of the fiscal year ended June 30, 2007, based on the balance in the account at the end of each month.

DROP interest rates are not guaranteed. Previous positive returns are neither indicators nor guarantees that DROP accounts will always earn these rates.

LASERS-Did you know?

LASERS provides a retirement option of 20 years at any age.

However, you will be ineligible for the IBO and the DROP. The retirement benefit is actuarially reduced based on the number of months you are away from regular retirement and your age. The closer you are to regular eligibility, the less your reduction.

LASERS-Did you know?

Pension benefits, including DROP funds received or accumulated during marriage, are community property. A LASERS retiree should be aware that an ex-spouse might be entitled to a portion of the retirement benefit according to that spouse's community property interest.

LASERS requires that a certified true copy of the Court Order be on file before any community assets are divided.

LASERS-Did you know?

The age of a LASERS member and any possibility for an increase in salary should be heavily considered when a member is choosing between the Deferred Retirement Option Program (DROP) or the Initial Benefit Option (IBO)

DROP may not be the best choice for a member who may receive substantial annual salary increases. DROP could be the best choice for a member who does not anticipate a dramatic increase in salary.

LASERS-Did you know?

The Initial Benefit Option (IBO) became available to LASERS new retirees in 1996.

This option is selected at retirement and allows the member to receive up to 36 months of the maximum benefit in a lump sum. However, this option eliminates the monthly benefit Option 1 as a retirement choice and reduces future monthly benefits. This option is not available to DROP participants, disability retirees, or 20-year retirees.

LASERS-Did you know?

LASERS provides a retirement option of 20 years at any age.

However, you will be ineligible for the Initial Benefit Option (IBO) and the Deferred Retirement Option Plan (DROP). The retirement benefit is actuarially reduced based on the number of months you are away from regular retirement and your age. The closer you are to regular eligibility, the less your reduction.

Alabama DROP gives big boost to highest paid

What was billed as a way to keep veteran educators and seasoned state employees on the job rather than take early retirement may just be boosting the salary for higher paid employees according to this story from the Alabama Birmingham News.

Yet, five years after state lawmakers created DROP, the Deferred Retirement Option Plan, no one can say whether it stopped the loss of teachers and experienced principals.

What is not in doubt is that DROP has resulted in big paydays for a sizable number of those who entered into the program already among the state's highest paid - including lobbyists for non state organizations who long ago were made eligible for state medical and retirement benefits. Executive officers and employees of non state organizations such as the Alabama Education Association, the PTA, the school board association and others have been eligible for state retirement and other benefits under laws that date from the 1930s.

DROP allows those eligible for state retirement to continue working in exchange for a lump-sum payment when they do step down. They draw a lower pension payment in the years after retirement.

Since its beginning in 2002, DROP has paid or is in process of paying just over $272 million to just over 2,550 participants, according to records from the Retirement Systems of Alabama, which administers the plan.

Of that number, 1,401 accumulated payments ranging from a few dollars to $99,000. The bulk are from the ranks of lower-paid support workers and some teachers.

"Participation in the program by those at the lower end of the pay schedule has not been as strong as we had hoped. We really don't know why that is, but it is what it is," said Marc Reynolds Jr., deputy director of the RSA. "I think the program is far from something that only the better-paid people are using but it's fair to say that employees at the upper end have participated in fairly strong numbers."

Rep. Charles Newton, D-Greenville, who was one of only a handful of state lawmakers to vote against authorizing DROP in 2002, said he's still not convinced it's worth it.

"I'm just not sure how you put a value on human experience," Newton said. "It's obviously a good thing to have experience in the classrooms, in the halls at DHR, behind the wheel of our Alabama State Trooper cars. But we're talking about a lot of money here and is it resulting in doing what we hoped it would do or is it just providing a nice payday for some folks who were already making a lot of money?"

LASERS-Did you know?

The age of a LASERS member and any possibility for an increase in salary should be heavily considered when a member is choosing between the Deferred Retirement Option Program (DROP) and the Initial Benefit Option (IBO).

DROP may not be the best choice for a member who may receive substantial annual salary increases. DROP could be the best choice for a member who does not anticipate a dramatic increase in salary.

LASERS-Did you know?

Pension benefits, including DROP funds received or accumulated during marriage, are community property. A LASERS retiree should be aware that an ex-spouse might be entitled to a portion of the retirement benefit according to that spouse's community property interest.

LASERS requires that a certified true copy of the Court Order be on file before any community assets are divided.

LASERS-Did you know?

LASERS provides a retirement option of 20 years at any age.

However, you will be ineligible for the IBO and the DROP. The retirement benefit is actuarially reduced based on the number of months you are away from regular retirement and your age. The closer you are to regular eligibility, the less your reduction.

LASERS-Did you know?

DROP/IBO account funds may be paid to you monthly, yearly, in a lump sum, or rolled over to an IRA or other qualified plan.

The money in your DROP/IBO account must be withdrawn within your expected lifetime in accordance with IRS rules. You must terminate employment with the State of Louisiana for at least 30 consecutive days to begin withdrawals from your DROP/IBO account.

HB 439

The Governor's Office announced Tuesday that Governor Blanco has signed into law House Bill 439 [Rep. Doerge], which permits repayments of some DROP disbursements by eligible members of LASERS and the Teachers' Retirement System of Louisiana (TRSL).

Under the provisions of HB 439:

Any retiree who received a qualified hurricane distribution prior to January 1, 2007, pursuant to the Katrina Emergency Tax Relief Act of 2005 or the Gulf Opportunity Zone Act of 2005, may contribute all or part of such qualified hurricane distribution within three years from the date on which such qualified hurricane distribution was received, but only to the extent that such qualified hurricane distribution was eligible for tax-free rollover treatment.