DROP/IBO Options

The retirement formula discussed earlier calculates the maximum benefit to which you are entitled. These benefits are payable to you for your lifetime and are payable to survivors as provided in the section on survivor benefits.

 
Additional retirement options are available. Depending upon the method chosen, the monthly benefit may be reduced.

 

Deferred Retirement Option Plan – Old DROP – Only For Members Eligible Prior to 10/01/2009

The Louisiana Legislature first authorized the Deferred Retirement Option Plan (DROP) in 1990, amended later in 1995. This particular DROP benefit expired on September 30, 2009. If you were eligible for DROP as of 09/30/09, you had the option to participate in this program.

 
Under this plan, you could participate for up to three years but were only allowed to enter DROP during a “window of opportunity”. If that window of opportunity passed, you were ineligible to participate.

 

Employment After Old DROP

You may have chosen to continue working when DROP participation ended. If you are a “Return to Work After DROP” member under the old plan, monthly credits to the DROP account stopped at the end of the period.

 

If you entered DROP on or after July 1, 2003:

You must make a one-time irrevocable election to:
• roll your monies to a self-directed account with Great West (similar to the LA Deferred Compensation Program), a third party administrator for LSPRS. You will direct your account into the funds of your choice and earn investment income based on those choices. The state tax exemption will apply if you make this choice., or
• roll your account to an independent money manager. Please note that your state tax exemption will not apply to an account rolled to an outside manager.; or
• place your account into a money market account chosen by LSPRS. This account will earn interest monthly based on current money market rates of return. The state tax exemption does apply to this account.

 

If you entered DROP prior to July 1, 2003

You may choose to:
• Leave your DROP account with LSPRS and earn an interest rate equal to LSPRS’s average actuarial rate of return for the preceding three fiscal years minus 0.5 percent. This interest rate changes from year to year and is set at the end of each fiscal year based on investment earnings. For example, if LSPRS’s average actuarial rate of return was 8 percent, then the interest rate for DROP accounts would be 7.5 percent. After the interest rate is established, interest will be credited to your DROP account (usually toward the end of each calendar year). If the funds in your DROP account are withdrawn before the end of the fiscal year, the interest will be calculated and paid to you once the rate is established.; or
• make a one-time irrevocable election to roll your monies to a self-directed account with Great West (similar to the LA Deferred Compensation Program), a third party administrator for LSPRS. You will direct your account into the funds of your choice and earn investment income based on those choices. The state tax exemption will apply if you make this choice., or
• roll your account to an independent money manager. Please note that your state tax exemption will not apply to an account rolled to an outside manager.; or
• place your account into a money market account chosen by LSPRS. This account will earn interest monthly based on current money market rates of return. The state tax exemption does apply to this account.

 
As a Return-To-Work After DROP employee, both employer and employee contributions are once again remitted to LSPRS based on your earnings in post-DROP employment. LSPRS will calculate a supplemental retirement benefit which includes the additional post-DROP service and unused leave accrued before, during, and after DROP participation.

 
If employment after DROP participation lasts more than 36 months (12 months for those hired before September 8, 1978), LSPRS will calculate a new final average compensation for the supplemental service only.

 

When Employment Ends After Old DROP

You will begin receiving a monthly retirement benefit after all state police employment ends. This will include adjustments for additional service credit earned after DROP participation and the conversion of eligible unused sick and annual leave.

 

Death After DROP Begins

If you die while participating in DROP, or while still employed after DROP, your surviving spouse will receive a benefit as if you were retired on the date of death.

 
If death occurs while you are employed, LSPRS will convert your unused sick and annual leave to retirement credit and your benefit will be adjusted as if you left state police employment immediately before death.

 
Your DROP account balance will be payable to your designated DROP beneficiary, or, if none, in accordance with state law governing inheritance and estate matters.

 

Supplemental Retirement Benefit For Old DROP

Once you leave state police service, LSPRS calculates your supplemental retirement benefit based on the following factors:
• If the additional service was less than 36 months (12 months for those hired before September 8, 1978), the supplemental benefit is computed using your final average compensation established prior to the beginning of DROP participation. If the additional service after DROP is more than 36 months (12 months for those hired before September 8, 1978), the supplemental benefit is computed using the 36 or 12 highest successive earning months during the additional service, depending on your date of hire.
• A supplemental benefit takes into considerationany unused sick and annual leave based on the balances at the time of termination. The supplemental benefit is calculated using the same final average compensation as the additional service. If there is no supplemental service, the final average compensation established prior to the beginning of DROP is used for the calculation.

 

Cost-of-Living Adjustments

You are not eligible for cost-of-living adjustments granted to retirees during the participation period or during the period of continued employment after DROP. DROP participants become eligible for the adjustments only after state police employment has ended for at least one full year and the individual has become eligible under the COLA rules.

 

The DROP Account Important Reminders

• Your DROP account is not subject to fees, costs or expenses of any kind.
• You cannot withdraw money from your DROP account until employment ends.
• Your DROP account is exempt from levies, garnishments, or attachments, and is un-assignable, except for division pursuant to an approved division order, such as at divorce.

 

Tax Liability on DROP Funds

DROP account funds, including interest, are subject to federal income tax upon withdrawal. You do not pay state income tax on DROP disbursements unless you have chosen to roll the funds to an outside independent money manager.

 

DROP Account Withdrawals

You may elect to withdraw funds from your DROP account when your employment ends. Amounts withdrawn from your DROP account are subject to federal income tax in the year you receive them.

 
Note: If you retire in the year of your 50th birthday or after, you will not be subject to the 10% penalty for an early lump sum distribution.

 
You may also choose to leave your money in the DROP account and withdraw it later. However, you must begin distributions before the age of 70½ , or, LSPRS will calculate the amount required for distribution pursuant to the IRS and make that disbursement to you.

 

DROP Statements

You will receive quarterly DROP account statements reflecting all deposits and/or withdrawals. LSPRS will mail the statement to the home address provided at retirement.

 

Is My DROP Account Community Property?

The DROP account is subject to Louisiana’s community property laws. In the case of divorce, death, or marriage, DROP account funds will be administered according to the applicable state law. LSPRS must be provided with an appropriate court order prior to dividing benefits and making payment to a non-member spouse.

 

Retirement Benefit Re-Computation For Old DROP Members Who Participated on or before June 30, 2011

Act 1160 relative to the re-computation of the pre-DROP benefit and the pre-DROP final average compensation applies to you if (1) you participated in DROP on or before June 30, 2001, 2) continued in state police employment after participation in DROP without a break in service, and (3) remained in such continuous employment on or after July 1, 2001. These special provisions do not apply to members who retired on or before July 1, 2001.

 
If You Entered DROP With 25 Years or More of Hard State Trooper Service:

• Pre-DROP Benefit – If you meet the criteria set forth in (1), (2), and (3) above, and you entered DROP with 25 years or more of hard state trooper service, you are eligible for a re-computation of your pre-DROP benefit at 3 1/3% multiplied by the number of years of service to your credit prior to your effective date of participation in DROP, and further multiplied by your final average salary as computed when you entered DROP.

• Post-DROP Benefit – Your post-DROP benefit will be calculated at 31/3% multiplied by the number of years of service to your credit after DROP participation, and further multiplied by your final average compensation. The final average compensation used will be the average determined at the beginning of DROP, or, a new current final average if you worked for an additional 12 or 36 months (based on your hire date).

 
If You Entered DROP With Less Than 25 Years of Hard State Trooper Service:

• Pre-DROP Benefit – If you meet the requirements stated above and you entered DROP with less than 25 years of hard state trooper service, you may also be eligible for a re-computation of your final average compensation based on your hard 25th year of trooper service (or your highest 12-month average if you have not reached your 25th year) for the purpose of determining your new pre-DROP benefit. This re-computation of the final average salary will be based on any 12-month period of service (but limited to the first 25 years) while a member of LSPRS regardless of hire date.

• Post-DROP Benefit – Your Post-DROP benefit will be calculated at 31/3% multiplied by the number of years of service to your credit after DROP participation, and further multiplied by the greater of 1) your final average salary as determined when we recomputed your pre-DROP benefit, or 2) your current final average compensation based on a 12-month average regardless of hire date.

 
The sum of any re-computed pre and post DROP retirement benefit shall not exceed 100% of your current final average compensation.

 
For purposes of determining the average compensation based on the first 25 years, (1) “state trooper service” does not include military service purchased, actuarially transferred service, or reciprocally recognized service, or any form of purchase of service credit, and (2) “average salary” does not include overtime, expenses, clothing allowances, or any remuneration resulting from military service.

 
If you are eligible for a re-computation under Act 1160, this does not change the amounts credited to your DROP account. The re-computation is for the monthly benefit amount you receive upon retirement only.

 

BACK DROP Plan-Only For Members Eligible for DROP After 10/01/2009

Effective October 1, 2009, Back DROP replaced the former DROP program. Instead of entering DROP during a window of time and continuing to work during participation, an eligible member may elect to take a Back DROP at the time of retirement. The member must decide prior to separation from DPS and must choose a Back DROP period in whole months not to exceed 36 months (or the number of months that have elapsed since you first became eligible to retire, if less). The Back DROP period must be the most recent calendar period. This Back-DROP benefit has two portions: a lump sum benefit and a monthly benefit, both described below.

 

Eligibility

A member must have earned more years of creditable service than required for a regular retirement to take advantage of the Back DROP. Leave may not be used to determine eligibility for Back DROP. You may use transferred and purchased service to reach eligibility. A member must also attain an age that is greater than the minimum required for eligibility for a normal retirement benefit, if applicable.

 
Example: Mr. John Doe has attained eligibility based on 25 years of service at any age. If John Doe has 26 years of service he may take a one year Back DROP. If John Doe has 27 years of service he may take a two year Back DROP. If he has 28 years of service he may take a three year Back DROP.

 
Ms. Jane Doe has attained eligibility based on 10 years of service at age 50. If Ms. Doe retires at age 51 she may take a one year Back DROP. If Ms. Doe retires at age 52 she may take a two year Back DROP. If Ms. Doe retires at age 53 she may take a three year Back DROP.

 
If you participated in a previous old DROP program, you are not eligible to take a Back DROP.

 

Application

You must contact LSPRS to request Back DROP estimates. LSPRS will provide estimates for a one, two and three year Back DROP if you are eligible for the maximum.

 
You must be within two years of retirement to request a Back DROP estimate.

 

Computation

The computation used to calculate the Back DROP benefit is the same computation used to calculate the regular retirement benefit, with the following exceptions:

• Service credit is reduced by the Back DROP period
• Computation of the final average salary will exclude the Back DROP period
• All employee contributions submitted during the Back DROP period will be refunded to the member, usually in December of the year retired, or deposited directly into the member’s Back-DROP account, at the member’s option.
• All employer contributions and any interest that has accrued on the employer and employee contributions during this period of time are forfeited.
• The sum of the Back-DROP period and the accrued service credit used to calculate the member’s monthly benefit shall not exceed thirty years.

 

Benefit/Account

The member will begin to receive the monthly benefit on the last working day of each month.

 
The lump sum amount will be credited to the member’s account and is equal to the monthly benefit times the number of months selected as the Back-DROP period.

 
With regard to the lump sum Back DROP account, the member must make a one-time irrevocable election to:

• to roll your monies to a self-directed account with Great West (similar to the LA Deferred Compensation Program), a third party administrator for LSPRS. You will direct your account into the funds of your choice and earn investment income based on those choices. The state tax exemption will apply if you make this choice., or
• roll your account to an independent money manager. Please note that your state tax exemption will not apply to an account rolled to an outside manager.; or
• place your account into a money market account chosen by LSPRS. This account will earn interest monthly based on current money market rates of return. The state tax exemption does apply to this account.
• request a distribution, noting that the appropriate federal income tax must be withheld and the distribution may be considered an early lump sum distribution.

 

Initial Benefit Option (IBO)

Only members who have not participated in the Deferred Retirement Option Plan may select the IBO. Disability retirees are not eligible for this option.

 
Under this option, you may elect to receive part of your future retirement benefits in a lump sum payment. The lump sum cannot exceed an amount equal to 36 months of your maximum monthly retirement benefit. You may elect to receive the maximum lump sum amount or any amount less than the 36 month maximum.

 
This option may only be selected at retirement and pays you a lump sum amount in addition to a monthly retirement benefit. The monthly benefit is actuarially reduced depending on the lump sum amount you receive.

 
You may receive the “initial benefit” in a lump sum payment or it may be deposited in an interest-bearing account similar to the DROP accounts. The account will accrue interest from inception.

 
The primary differences between DROP and IBO are 1) the lump sum amount is payable upon retirement instead of accumulated over a DROP participation period, and 2) the monthly benefit is actuarially reduced based on the amount received.

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