A. In lieu of terminating employment and accepting a service retirement allowance under La. Rev. Stat. 11:2220, any member of this system who has at least twelve years of creditable service and has attained at least age fifty-five or at least twenty years of creditable service and who is eligible to receive a service retirement allowance may elect to participate in the Deferred Retirement Option Plan and defer the receipt of benefits in accordance with the provisions of this Section.

            B. For purposes of this Section, creditable service for eligibility purposes only shall include service credit reciprocally recognized under La. Rev. Stat. 11:142.

            C. The duration of participation in the plan shall be specified and shall not exceed three years. However, if employer contributions on behalf of a participant are suspended during the participation period as a result of interruption of employment, benefit payments into the participant’s subaccount within the plan shall be suspended until payment of employer contributions is restored, and the member’s participation period shall be extended by the number of months his benefit payments were suspended. In such a case, the participation period may exceed three calendar years but shall not exceed thirty-six nonconsecutive months of participation.

            D. A member may participate in the plan only once.

            E.(1)(a) Upon the effective date of the commencement of participation in the plan, membership in the system shall terminate and neither employee nor employer contributions shall be payable, except that for employees who commence participation in the plan on or after July 1, 2021, employer contributions shall continue to be payable.

            (b) A participant in the plan shall be classified as a “deferred retirement option plan participant” and, as such, shall be treated as an active member of this system, except with respect to the following:

            (i) Contributions as provided in Subparagraph (a) of this Paragraph.

            (ii) The payment of survivor benefits as provided in La. Rev. Stat. 11:2220(B).

            (iii) A deferred retirement option plan participant shall be treated as retired for purposes of eligibility to serve in an active member position on the board of trustees.

            (2) For purposes of this Section, compensation and creditable service shall remain as they existed on the effective date of commencement of participation in the plan.

            (3) The monthly retirement benefits that would have been payable, had the member elected to cease employment and receive a service retirement allowance, shall be paid into the deferred retirement option plan account.

            (4) Upon termination of employment, deferred benefits shall be payable as provided by Subsection H.

            F. A person who participates in this plan shall not be eligible to receive a cost-of-living adjustment while participating and shall not be eligible until his employment which makes him eligible to be a member of this system has been terminated for at least one full fiscal year.

            G.(1) With respect to any individual who was eligible to participate in the Deferred Retirement Option Plan prior to January 1, 2004, after a person terminates his participation in this plan, his individual account balance in the plan shall earn interest at a rate of one-half of one percent below the percentage rate of return of the system’s investment portfolio as certified by the actuary in his yearly valuation report, said interest to be credited to his individual account balance on an annual basis. After June 30, 2019, any person covered by the provisions of this Paragraph may make an irrevocable election to transfer his account to the self-directed program established pursuant to Paragraph (4) of this Subsection by agreeing in writing to the provisions of Subparagraph (4)(c) of this Subsection.

            (2)(a) With respect to any individual who becomes eligible to participate in the Deferred Retirement Option Plan on or after January 1, 2004, and before July 1, 2019, except as provided in Subparagraph (b) of this Paragraph and Paragraph (3) of this Subsection, all amounts which remain credited to the individual’s account after termination of participation in the plan shall be placed in liquid asset money market investments at the discretion of the board of trustees. Such account balance may be credited with interest at the actual rate of return earned on such account balance investments less one-fourth of one percent per annum.

            (b)(i) At the option of the board of trustees, the amounts which remain credited to the individual’s account may be transferred to an account with a third-party provider established pursuant to the provisions of Paragraph (4) of this Subsection.

            (ii) As soon as practicable after June 30, 2019, the board shall transfer all individual accounts established pursuant to this Paragraph to the stable value fund of the third-party provider selected in accordance with the provisions of Paragraph (4) of this Subsection.

            (c) After his account has been transferred to the stable value fund, any person covered by the provisions of this Paragraph may make an irrevocable election to participate in the self-directed portion of the program established pursuant to Paragraph (4) of this Subsection by informing the board of his election to do so and agreeing in writing to the provisions of Subparagraph (4)(c) of this Subsection.

            NOTE: Subparagraph (G)(3)(a) terminated June 30, 2019.

            (3)(a)(i) Notwithstanding any provision of Paragraph (2) of this Subsection to the contrary, any individual who became eligible to participate in the Deferred Retirement Option Plan on or after January 1, 2004, and before July 1, 2019, may make an irrevocable written election to waive his rights protected by the Constitution of Louisiana relative to the interest earned by his Deferred Retirement Option Plan account. For any person who makes such an irrevocable election, upon termination of participation in the plan, his individual account balance in the plan shall earn interest at a rate of one-half of one percent below the percentage rate of return of the system’s investment portfolio for each fiscal year as certified by the system’s actuary in his yearly valuation report. However, by making such an election, the person shall expressly acknowledge that his account shall be debited in the event the system’s investment portfolio experiences a rate of return of less than a positive one-half of one percent, including a negative earnings rate. The member shall further expressly acknowledge his consent to having the value of his account balance permanently reduced as a result of the devaluation of system assets caused by such a rate. As a precondition of making this election, the member shall expressly acknowledge his understanding of the possibility of such account reductions. If an account is required to be debited and insufficient monies are available in the account for this purpose, the member’s monthly retirement benefit shall be suspended or reduced until such time as such debit has been recouped in full by the system.

            (ii) The provisions of this Subparagraph shall apply prospectively only, beginning July 1, 2008, and shall terminate June 30, 2019.

            (b) Any individual who does not elect to waive his rights pursuant to Subparagraph (a) of this Paragraph shall continue to be governed by the provisions of this Subsection which are otherwise applicable to individuals who became or become eligible to participate in the Deferred Retirement Option Plan on or after January 1, 2004, and before July 1, 2019.

            (c) The board of trustees may make, alter, amend, and promulgate rules necessary for the implementation and administration of this Paragraph.

            (d) After June 30, 2019, any person covered by the provisions of this Paragraph may make an irrevocable election to transfer his account to the self-directed program established pursuant to Paragraph (4) of this Subsection by agreeing in writing to the provisions of Subparagraph (4)(c) of this Subsection.

            (4)(a) The board of trustees shall select a third-party provider to administer a self-directed investment program for Deferred Retirement Option Plan accounts. As provided in Item (2)(b)(ii) of this Subsection, the board shall transfer the existing money market accounts to the third-party provider as soon as practicable after June 30, 2019.

            (b) The third-party provider selected shall act as an agent of the system for the purpose of investing the balance in the self-directed account of the participant as directed by the participant. The participant shall be given investment options that comply with federal law for self-directed plans; however, the provider shall have as an investment option a stable value fund that preserves the participant’s principal.

            (c) By participating in the self-directed portion of the program, the participant agrees to all of the following:

            (i) That he expressly waives his rights protected by the Constitution of Louisiana relative to the interest earned by his Deferred Retirement Option Plan account.

            (ii) That he and the provider shall be responsible for complying with all applicable provisions of the Internal Revenue Code and that he and the provider, and not the state or the system, bear the sole responsibility and liability for any violation of the Internal Revenue Code that occurs as a result of his participation in the self-directed portion of the program.

            (iii) That there shall be no liability on the part of and no cause of action of any nature shall arise against the state, the system, or its agents or employees for any action taken by the participant for choices he makes in relation to the investments in which he chooses to place his account balance.

            (iv) The benefits payable to the participant are not the obligation of the state or the system, and any returns and other rights of the plan are the sole liability and responsibility of the participant and the provider.

            (5)(a) With respect to any individual who becomes eligible to participate in the Deferred Retirement Option Plan on or after July 1, 2019, by participating in the plan, he expressly agrees to the provisions of Subparagraph (4)(c) of this Subsection.

            (b) All amounts which remain credited to the individual’s account after termination of participation in the plan shall be transferred to the stable value fund of the third-party provider.

            H. Upon termination of employment, a participant in the plan may keep his funds on deposit until he chooses to withdraw them. When the participant elects to make a withdrawal from his account, he shall receive, at his option, a lump-sum payment of the account balance, a partial lump-sum payment from the account, or a true annuity based upon his account, or he may elect any other method of payment approved by the board of trustees. The monthly benefits that were being paid into the account during the period of participation shall begin being paid to the retiree.

            I.(1) If a participant dies during the period of participation in the plan, the following shall apply:

            (a) If the participant’s designated beneficiary of the plan account is the participant’s surviving spouse, and:

            (i) The surviving spouse will not receive a monthly survivor annuity because of the participant’s death, then the surviving spouse shall receive a lump-sum payment of the participant’s account balance within ninety days of the death of the participant.

            (ii) The surviving spouse will receive a monthly survivor annuity because of the participant’s death, then the surviving spouse may elect to keep the funds on deposit until the spouse elects to withdraw the funds. Upon such election to withdraw, the surviving spouse shall receive, at the surviving spouse’s option a lump-sum payment of the participant’s account balance, a partial lump-sum payment thereof, or a true annuity based upon the account balance, or the surviving spouse may elect any other method of payment approved by the board of trustees as if the participant had retired on the date of death; in addition, the normal benefits payable to the designated beneficiary under the option selected shall be payable. The surviving spouse may designate a beneficiary, who will be required to receive a lump-sum payment of the surviving spouse’s account balance within ninety days of the death of the surviving spouse.

            (b) If the participant’s designated beneficiary of the plan account is other than the participant’s surviving spouse, and:

            (i) The beneficiary will not receive a monthly survivor annuity because of the participant’s death, then the beneficiary shall receive a lump-sum payment of the participant’s account balance within ninety days of the death of the participant.

            (ii) The beneficiary will receive a monthly survivor annuity because of the participant’s death, then the beneficiary shall receive the participant’s plan account balance under any method that will cause a total distribution of the account over a period not to exceed five years, whether by lump-sum payment of the participant’s account balance, or partial lump-sum payments, or other substantially equal payments. In addition, the normal benefits payable to the designated beneficiary under the option selected shall become payable. The designated beneficiary may designate a beneficiary, who will be required to receive a lump-sum payment of the designated beneficiary’s account balance within ninety days of the death of the designated beneficiary.

            (c) If a participant whose account is not invested with the third-party provider pursuant to Paragraph (G)(4) of this Section dies after June 30, 2019, while participating in the plan and the designated beneficiary of his plan account balance is not required to withdraw that account balance in a lump-sum, the account balance shall be transferred to the stable value fund of the self-directed program unless the beneficiary elects to invest some or all of the account balance in the self-directed portion of the program pursuant to the requirements set forth in Paragraph (G)(4) of this Section.

            (d) If there is no designated beneficiary, a lump-sum payment of the participant’s account balance shall be paid to his estate.

            (2)(a) If a participant terminates employment prior to the end of the specified period of participation he shall receive, at his option, a lump-sum payment from the account equal to the balance in the account or a true annuity based upon his account balance, or he may elect any other method of payment if approved by the board of trustees.

            (b) The monthly benefits that were paid into the account during the period of participation shall begin being paid to the retiree.

            J. If employment is not terminated at the end of the period specified for participation, payments into the account shall cease. Payment from the account shall not be made until employment is terminated; nor shall the monthly benefits being paid into the account during the period of participation be payable to the individual until he terminates employment.

            K. The following shall also apply if employment is not terminated at the end of the period of participation:

            (1) If employment is not terminated at the end of the period specified for participation, the participant shall resume active contributing membership in the system.

            (2) Upon termination of employment, the monthly benefits which were being paid to the account shall begin to be paid to the participant. He may not change the optional allowance which was originally selected pursuant to La. Rev. Stat. 11:2224 when he began participation in the plan.

            (3) Upon termination of employment, he shall receive an additional retirement benefit based on his additional service rendered since termination of participation in the plan, using the normal method of computation of benefit, subject to the following:

            (a) If his period of additional service was shorter than his average compensation period, the average final compensation figure used to calculate the additional benefit shall be that used to calculate his original benefit.

            (b) If his period of additional service was equal to or longer than his average final compensation period, the average final compensation figure used to calculate the additional benefit shall be based on his compensation during the period of additional service.

            (c) The option used shall be that applicable to the original benefit, as provided in Paragraph (2) of this Subsection.

            (d) The additional benefit shall not exceed an amount which, when combined with the original benefit, equals one hundred percent of the average final compensation figure used to compute the additional benefit.

            (4)(a) If the participant dies or acquires a disability during the period of additional service, he shall be considered as having terminated employment on the date of death or commencement of disability.

            (b) In the event he dies, his designated beneficiary, or if none, his estate, shall receive payment from his account in accordance with the provisions of Subsection I of this Section.

            L. A retiree whose benefit has been suspended pursuant to the provisions of La. Rev. Stat. 11:2220(A)(2)(a) shall not be eligible to participate in the Deferred Retirement Option Plan.

            M. For purposes of La. Rev. Stat. 17:1681 and 1681.1, any member who is killed or who acquires a permanent disability solely as the result of injuries sustained in the course and scope of the performance of his official duties, while participating in the Deferred Retirement Option Plan or during continued employment after participation in the Deferred Retirement Option Plan has ended, shall be considered as having died in service or retired for disability purposes, provided satisfactory proof of such fatal or disabling injury is furnished to the retirement system by the member’s employing municipality.

            N. The board of trustees shall promulgate rules in accordance with the Administrative Procedure Act to approve any other methods of payment authorized by but not expressly provided in this Section. Once promulgated, the rules shall be considered plan provisions for purposes of compliance with requirements of the Internal Revenue Code and associated regulations.

            Acts 1984, No. 475, §1; Acts 1985, No. 82, §1; Acts 1985, No. 459, §1; Acts 1990, No. 420, §1; Redesignated from La. Rev. Stat. 33:2375.1 by Acts 1991, No. 74, §3, eff. June 25, 1991; Amended by Acts 1991, No. 58, §1, eff. July 1, 1991; Acts 1992, No. 496, §1, eff. July 1, 1992; Acts 1992, No. 554, §1, eff. July 1, 1992; Acts 1993, No. 862, §1, eff. June 23, 1993; Acts 1997, No. 900, §1, eff. Jan. 1, 1997; Acts 1999, No. 1300, §1, eff. July 12, 1999; Acts 2001, No. 1161, §1, eff. June 29, 2001; Acts 2003, No. 962, §§1, 2, eff. Jan. 1, 2004; Acts 2008, No. 827, §1, eff. July 8, 2008; Acts 2013, No. 220, §3, eff. June 11, 2013; Acts 2014, No. 811, §4, eff. June 23, 2014; Acts 2019, No. 78, §1, eff. June 30, 2019; Acts 2020, No. 124, §1, eff. July 1, 2020.

NOTE: Acts 2014, No. 811 changed terminology referring to persons with disabilities throughout the La. Revised Statutes and codes of law, and included a listing of terms that were deleted and their respective successor terms (See Acts 2014, No. 811, §36). The Act provides that it is not the intent of the legislature that changes in terminology effected therein alter or affect in any way the substance, interpretation, or application of any law or administrative rule; further provides that nothing in the Act shall be construed to expand or diminish any right of or benefit for any person provided by any law or administrative rule (See Acts 2014, No. 811, §35(C) and (D)).