BASIC (08-10)

PR 09005.021 Louisiana

A. PR 11–110 Treatment of the Plan A and Plan B of the Parochial Employees’ Retirement System of Louisiana in Regard to Government Pension Offset Exemption for the Last 60 Months of Covered Employment — REPLY

DATE: May 24, 2011

1. SYLLABUS

The Parochial Employees’ Retirement System of Louisiana (PERS) Plan A was designed for employers who are not covered under Social Security, and PERS Plan B was designed for employers who are covered under Social Security. A claimant may receive separate pensions from both Plan A and Plan B based on different periods of employment. This opinion provides a determination that if the 60-month exemption to the Government Pension Offset applies to a payment from PERS Plan B the 60-month exemption does not apply to a payment received from PERS Plan A.

2. OPINION

QUESTION PRESENTED

This memorandum responds to your request for an opinion regarding the applicability of the Government Pension Offset (GPO) exemption for the last 60 months of covered employment (hereinafter called the 60-month exemption) to the Parochial Employees’ Retirement System of Louisiana (PERS) Plan A and Plan B. Specifically, you asked whether payments that Karen St. Pierre (the claimant) receives from PERS Plan A and Plan B should be subject to the 60-month exemption to the GPO, or whether the 60-month exemption should apply only to the payments the claimant receives from PERS Plan B.

SHORT ANSWER

After reviewing the facts and relevant law, and after consulting with the Office of Income Security Programs (OISP), who received advice from the Office of Program Law (OPL), we have determined that the 60-month exemption to the GPO should only apply to payments the claimant receives from PERS Plan B.

BACKGROUND

As we understand the facts, the claimant is entitled to a pension from PERS based on work performed where Social Security taxes were deducted from her pay (“covered work”) and also based on work where Social Security taxes were not deducted from her pay (“non-covered work”). The claimant’s total employment history under PERS is as follows:

  • From April 27, 1987, to February 28, 1998, the claimant worked for the Plaquemines Parish government. During her employment with Plaquemines Parish, the claimant was covered under PERS Plan A but was not covered under Social Security; thus, this is non-covered work.

  • From February 28, 1998, to February 2, 1999, the claimant did not work for an employer that participated in PERS.

  • From February 2, 1999, to March 2010, the claimant worked for Ascension Parish government. During her employment with Ascension Parish, the claimant was covered under both PERS Plan B and Social Security; thus, this is covered work.

The claimant retired effective March 1, 2010, and on November 17, 2010, the claimant filed an application for auxiliary spouse’s benefits on her husband’s record. The claimant currently receives a monthly pension from PERS. She receives separate pension payments from PERS Plan A and from PERS Plan B, and PERS did not combine the years she worked for Plaquemines Parish and Ascension Parish in figuring the pension amounts.

DISCUSSION

A. PERS Plan A and Plan B

In 1952, the Louisiana legislature established PERS as a retirement system for the purpose of providing retirement allowances and other benefits. See La. Rev. Stat. Ann. § 11:1901 (eff. Jan. 1, 1953) (formerly codified at La. Rev. Stat. Ann. § 33:6102, pursuant to La. Acts. 1952, No. 205 § 2). Prior to January 1, 1980, PERS had a “regular plan” and a “supplemental plan.” See La. Rev. Stat. Ann. § 11:1901. Effective January 1, 1980, PERS revised the system and replaced the regular and supplement plans with Plan A and Plan B, and the law stated that Plan A and Plan B were “two separate and distinct accounts.” See id. Plan A was designed for employers who were not covered under Social Security, and Plan B was designed for employers who were covered under Social Security. See PERS Summary of Principal Features Through the 2010 Louisiana Legislature (PERS Summary). The law provided that the reserves, funds, securities, and assets under Plan A and Plan B must remain separate and distinct and must not be commingled. See La. Rev. Stat. Ann. § 11:1901. Effective July 1, 1997, PERS added Plan C, which is a separate and distinct account from Plan A and Plan B. See id.

For an individual like the claimant who has non-concurrent service in different plans within PERS, the individual’s retirement benefits are computed using the highest 36 consecutive months of earnings, regardless of the plan in which earnings were accrued. See Correspondence from PERS regarding Retirements. However, the benefit accruals from each plan are determined separately, and the computation of the monthly retirement allowances for participants in Plan A and Plan B are different. Cf. La. Stat. Ann. Rev. §§ 11:1941-1942 with La. Stat. Ann. Rev. §§ 11:1961-1962.

B. The GPO Exemption

As you know, the GPO reduces a spouse’s Social Security benefit if the spouse also receives a government pension from work that Social Security did not cover. See 42 U.S.C. § 402(k)(5); 20 C.F.R. §§ 404.304(e), 404.408a. There are, however, several exemptions from the GPO. See id. The Social Security Protection Act of 2004 (Pub. L. 108-203) established a new exemption to the GPO, providing that the GPO will not apply if both a government retirement system and Social Security cover the individual during the individual’s last 60 months of federal, state, or local government service before retirement. See Pub. L. 108-203, codified at 42 U.S.C. § 402(k)(5)(A); Program Operators Manual System (POMS) GN 02608.102. The Act provides that an individual will be exempt from the GPO if she receives a pension based in part on non-covered work if the pension is based in part on covered employment during the last 60 months she was “employed by such entity.” See 42 U.S.C. § 402(k)(5)(A).

As described above, the claimant’s work at Plaquemines Parish from 1987 to 1998 was covered by a state pension plan (i.e., PERS Plan A) but was not covered by Social Security. The claimant’s work at Ascension Parish from 1999 to 2010 was covered by both a state pension plan (i.e., PERS Plan B) and Social Security. The claimant retired in October 2010; thus, she meets the 60-month exemption to the GPO because her last 60 months of government service was in work that both a government retirement system and Social Security covered.

The question we must address is whether the 60-month exemption to the GPO should also apply to the other pension payments the claimant receives from PERS. In particular, should the 60-month exemption to the GPO apply to the claimant’s PERS payments under Plan A that are based on her work while in non-covered employment, or does the 60-month exemption only apply to payments the claimant receives from PERS Plan B.

The claimant receives separate pensions for work from different employers. The claimant was employed by two separate entities for non-concurrent periods of time. Based on guidance from OISP and OPL, we determine that the GPO exemption of the claimant’s PERS Plan B payments does not extend to her PERS Plan A payments. See 42 U.S.C. § 402(k)(5)(A). The claimant had two separate, distinct, and discontinuous periods of employment with Plaquemines Parish and Ascension Parish. She receives separate pension payments from PERS Plan A and from PERS Plan B, and PERS did not combine the years she worked for Plaquemines Parish and Ascension Parish figuring the pension amounts. The claimant’s work for Ascension Parish was not a continuation of, or part of, her work for Plaquemines Parish. Therefore, the 60-month exemption to the GPO should only apply to payments the claimant receives from PERS Plan B, and the GPO should apply to payments the claimant receives from PERS Plan A.

CONCLUSION

In summary, we determine that the 60-month exemption to the GPO should only apply to payments the claimant receives from PERS Plan B and should not apply to the payments the claimant receives from PERS Plan A.

Michael M~

Regional Chief Counsel

By _____________

Anne L. H~

Assistant Regional Counsel

B. PR 11-038 Treatment of the Deferred Retirement Option Plan for Members of the Municipal Police Employees’ Retirement System — REPLY

DATE: September 27, 2010

1. SYLLABUS

When a Deferred Retirement Option Plan (DROP) is determined to be part of the regular retirement plan and not a separate plan, payments from each plan are considered one pension for WEP and GPO purposes. This opinion provides a determination that since the date of its inception on July 1, 1990, SSA should treat Municipal Police Employees’ Retirement System’s (MPERS) DROP as part of the overall MPERS retirement system and not as a separate system or plan.

2. OPINION

This memorandum responds to your request for an opinion regarding whether the Social Security Administration (agency) should treat the Municipal Police Employees’ Retirement System’s (MPERS’s) Deferred Retirement Option Plan (DROP) as a separate retirement plan from MPERS or whether it is part of MPERS. After reviewing the facts and relevant law, we have determined that, since the date of its inception in 1990, the agency should treat MPERS’s DROP as part of the overall MPERS retirement system and not as a separate plan.

In 1973, the Louisiana legislature created MPERS for the purpose of providing retirement allowances and other benefits for municipal policemen in the state of Louisiana. See La. Rev. Stat. Ann. § 11:2211 (formerly codified at La. Rev. Stat. Ann. § 33:2371, pursuant to La. Acts 1973, No. 189 § 1). Effective July 1, 1990, Louisiana authorized a DROP as an option under MPERS. See La. Rev. Stat. Ann. § 11:2221 (enacted by La. Acts 1990, No. 420, § 1, formerly codified at La. Rev. Stat. Ann. § 33:2375.1). In lieu of terminating employment and accepting a retirement allowance, any member of MPERS who has at least 12 years of credible service and has attained at least age 55, or at least 20 years of creditable service and who is eligible for regular retirement, may elect to participate in the DROP and defer the receipt of retirement benefits. See La. Rev. Stat. Ann. § 11:2221. Generally, the DROP is an optional benefit program of MPERS that provides a mechanism for members who are eligible for normal retirement to continue working for three years or less, accumulate money in an individual account based on the monies that the participant would otherwise have received as a monthly retirement benefit, and upon actual retirement, receive either a lump sum payment from the DROP account or any other method of payment from the DROP account that MPERS’s board of trustees approves. See id.

Louisiana law specifies that MPERS must credit all of its assets according to the purpose for which the assets are held to one of its five funds, and that the DROP account is one of those five funds. See La. Rev. Stat. Ann. § 11:2227(A), (G). The law also provides that MPERS maintains each of the DROP participant’s subaccounts. See La. Rev. Stat. Ann. § 11:2257(F)(2)(a). Thus, the DROP is a program for members of MPERS, and the agency should treat the DROP account as part of the overall MPERS retirement system and not as a separate plan.

Since 1998, courts in Louisiana have treated the DROP plans as part of the public employee’s retirement plan. Courts made these rulings in the context of dividing retirement benefits at divorce. The main issue in these cases was not whether the DROP plans were part of the overall retirement system, nonetheless, the cases shed light on how Louisiana state courts view the DROP plans in relation to the overall retirement plans of public employees. For instance, in 1998, the Louisiana Supreme Court noted that employees in the Louisiana State Employees Retirement System (LASERS) were eligible to participate in the DROP, which allowed payment of earned retirement benefits into a DROP account based on a “fictitious retirement” while the employee continued to work. Bailey v. Bailey, 708 So.2d 354, 355 (La. 1998). The court noted that the statutory provisions governing LASERS’s DROP program referred repeatedly to the DROP benefits as “retirement benefits” and that such benefits were “fixed” as of the date of entry into the DROP. Id. at 358-59. Hence, the court ruled that the DROP funds were part of an employee spouse’s retirement benefits and were to be apportioned, like other retirement benefits, at divorce. Id. at 357-58.

Another Louisiana court observed that the Teachers’ Retirement System of Louisiana’s (TRSLA’s) DROP funds are “derived from the retirement benefits” and are apportioned like the other retirement benefits at divorce. Sullivan v. Sullivan, 801 So.2d 1093, 1096 (La.App. 2001). Likewise, another Louisiana court noted that a teacher’s retirement benefits under TRSLA “obviously included her DROP benefits, which are taken in lieu of a retirement allowance and treated as one ‘subaccount’ in the retirement system.” McKinstry v. McKinstry, 824 So.2d 1260, 1262 (La.App. 2002). Thus, Louisiana courts have traditionally treated the DROP plans as part of a public employee’s retirement plan.

In summary, since MPERS’s DROP’s inception in 1990, the DROP has been a part of the overall MPERS retirement system and not a separate system or plan.

Michael M~

Regional Chief Counsel

By _____________

Anne L. H~

Assistant Regional Counsel

C. PR 11-029 Treatment of the Deferred Retirement Option Plan and Back-Deferred Retirement Option Plan for Members of the District Attorneys’ Retirement System, Louisiana — REPLY

DATE: December 9, 2010

1. SYLLABUS

When a Deferred Retirement Option Plan (DROP) is determined to be part of the regular retirement plan and not a separate plan, payments from each plan are considered one pension for WEP and GPO purposes. This opinion provides a determination that since the date of its inception on June 25, 1991, SSA should treat Members of the District Attorneys’ Retirement System’s (DARS) DROP as part of the DARS overall retirement system and not as a separate system or plan.

2. OPINION

This memorandum responds to your request for an opinion regarding whether the Social Security Administration (agency) should treat the District Attorneys’ Retirement System’s (DARS’s) regular Deferred Retirement Option Plan (DROP) and Back-Deferred Retirement Option Plan (Back-DROP) as separate retirement plans from DARS, or whether they are part of DARS. After reviewing the facts and relevant law, we have determined that, since the date of DARS’s regular DROP’s inception in 1991 until its termination date in 2008, the agency should treat it as part of the overall DARS retirement system and not as a separate plan. In addition, since the date of DARS’s Back-DROP’s inception on July 1, 2008, the agency should treat it as part of the overall DARS retirement system and not as a separate plan.

In 1956, the Louisiana legislature created DARS for the purpose of providing retirement allowances and other benefits for district attorneys and their assistants in each parish. See La. Rev. Stat. Ann. § 11:1582 (formerly codified at La. Rev. Stat. Ann. § 16:1002, pursuant to La. Acts 1956, No. 56 § 2). In 1991, Louisiana authorized the regular DROP as an optional benefit program under DARS. See La. Acts 1991, No. 75, § 1 (initially codified at La. Rev. Stat. Ann. §§ 16:1050-16:1054, recodified at La. Rev. Stat. Ann. §§ 11:1639-11:1643). In 2008, the legislature repealed La. Rev. Stat. Ann. §§ 11:1639-11:1643 and provided that, on July 1, 2008, statutory authority ceased for enrolling members of DARS in the regular DROP. See La. Rev. Stat. Ann. § 11:1644; La. Acts 2008, No. 835, §§ 1-3. In its place, the legislature created the Back-DROP, effective July 1, 2008. See La. Rev. Stat. Ann. § 11:1644 (pursuant to La. Acts 2008, No. 835, §§ 1-3).1

Generally, as an optional benefit program of DARS, the regular DROP provided a mechanism for members who were eligible for normal retirement to continue working for a finite period of time.2 See La. Acts 1991, No. 75, § 1. Until July 1, 2008, the law provided that in lieu of terminating employment and accepting a service retirement, any member of DARS who was eligible for normal retirement could elect to participate in the regular DROP and defer the receipt of retirement benefits. See La. Acts 1991, No. 75, § 1 (initially codified at La. Rev. Stat. Ann. §§ 16:1050-16:1054, recodified at La. Rev. Stat. Ann. §§ 11:1639-11:1643). While the regular DROP participant continued to work, he or she accumulated money in a separate account based on the monies that the participant would otherwise have received as a monthly retirement benefit. See id. When the legislature established the regular DROP account as an optional benefit program of DARS, it referred to the regular DROP as “part of the system fund.” Id. DARS maintained subaccounts within the regular DROP account reflecting the credits attributed to each participant in the regular DROP. Id. When the participant actually retired, he or she could choose to receive a lump sum payment from the regular DROP account. See id. The law provided that during an individual’s participation in the regular DROP, his or her membership in DARS continued, and he or she was in inactive status. Id. The law refers to the regular DROP as an optional program for DARS “members.” See id. Therefore, the regular DROP and is a program for DARS members, and the agency should treat the regular DROP as part of the overall DARS retirement system.

Unlike the regular DROP, the Back-DROP provides for a type of retirement benefit structure or calculation that a member elects to take at the time of the member’s separation from employment to retire. See La. Rev. Stat. Ann. § 11:1644. Effective July 1, 2008, the law provides that in lieu of receiving a normal retirement allowance, an eligible member of DARS may elect at the time of retirement to receive a Back-DROP benefit. See La. Rev. Stat. Ann. § 11:1644(A)(2)(a). The Back-DROP benefit is calculated based on a retrospective period of time during which the participant was working and after which the participant had qualified for regular retirement; the participant does not continue working after electing to receive a Back-DROP benefit. See La. Rev. Stat. Ann. § 11:1644. The duration of the Back-DROP period shall not exceed the lesser of 36 months or the number of months of creditable service accrued after the member first became eligible for regular retirement. See La. Rev. Stat. Ann. § 11:1644(B). Significantly, the law refers to the Back-DROP as an optional program for DARS “members.” See id. Thus, the Back-DROP is a program for DARS members, and the agency should treat the Back-DROP as part of the overall DARS retirement system.

Since 1998, Louisiana courts have treated the DROPs as part of the public employee’s retirement plan. Courts made these rulings in the context of dividing retirement benefits at divorce. Although the main issue in these cases was not whether the DROPs are part of the overall retirement system, nonetheless, the cases shed light on how Louisiana state courts view the DROPs in relation to the overall retirement plans of public employees. For instance, in 1998, the Louisiana Supreme Court noted that employees in the Louisiana State Employees Retirement System (LASERS) were eligible to participate in the DROP, which allowed payment of earned retirement benefits into a DROP account based on a “fictitious retirement” while the employee continued to work. Bailey v. Bailey, 708 So.2d 354, 355 (La. 1998). The court noted that the statutory provisions governing LASERS’s DROP program referred repeatedly to the DROP benefits as “retirement benefits” and that such benefits were “fixed” as of the date of entry into the DROP. Id. at 358-59. Hence, the court ruled that the DROP funds were part of an employee spouse’s retirement benefits and were to be apportioned, like other retirement benefits, at divorce. Id. at 357-58.

Another Louisiana court observed that the Teachers’ Retirement System of Louisiana’s (TRSLA’s) DROP funds are “derived from the retirement benefits” and are apportioned like the other retirement benefits at divorce. Sullivan v. Sullivan, 801 So.2d 1093, 1096 (La.App. 2001). Likewise, another Louisiana court noted that a teacher’s retirement benefits under TRSLA “obviously included her DROP benefits, which are taken in lieu of a retirement allowance and treated as one ‘subaccount’ in the retirement system.” McKinstry v. McKinstry, 824 So.2d 1260, 1262 (La.App. 2002). Hence, Louisiana courts treat the DROPs as part of a public employee’s retirement plan.

In summary, we have determined since the date of DARS’s regular DROP’s inception in 1991, the agency should treat it as part of the overall DARS retirement system and not as a separate system or plan. In addition, since DARS’s Back-DROP’s effective date of July 1, 2008, the agency should treat it as part of the overall DARS retirement system and not as a separate system or plan

Michael M~

Regional Chief Counsel

By _____________

Anne L. H~

Assistant Regional Counsel

D. PR 11-028 Treatment of the Deferred Retirement Option for Members of the Registrars of Voters Employees’ Retirement System, Louisiana — REPLY

DATE: December 9, 2010

1. SYLLABUS

When a Deferred Retirement Option Plan (DROP) is determined to be part of the regular retirement plan and not a separate plan, payments from each plan are considered one pension for WEP and GPO purposes. This opinion provides a determination that since the date of its inception on June 25, 1991, SSA should treat Members of the Registrars of Voters Employees’ Retirement System’s (ROVERS) DROP as part of the overall ROVERS retirement system and not as a separate system or plan.

2. OPINION

This memorandum responds to your request for an opinion regarding whether the Social Security Administration (agency) should treat the members of the Registrars of Voters Employees’ Retirement System’s (ROVERS’s) Deferred Retirement Option Plan (DROP) as a separate retirement plan from ROVERS, or whether it is part of ROVERS. After reviewing the facts and relevant law, we have determined that, since the date of ROVERS’s DROP’s inception in 1990, the agency should treat it as part of the overall ROVERS retirement system and not as a separate plan.

In 1954, the Louisiana legislature created ROVERS for the purpose of providing retirement allowance and other benefits for registrars of voters, their deputies, and their permanent employees in each parish. See La. Rev. Stat. Ann. § 11:2032 (formerly codified at La. Rev. Stat. Ann. § 18:1652, pursuant to La. Acts 1954, No. 215 § 2). In 1990, Louisiana authorized a DROP as an optional benefit program under ROVERS. See La. Rev. Stat. Ann. § 11:2144 (formerly codified at codified at La. Rev. Stat. Ann. § 18:1844, pursuant to La. Acts 1990, No. 13, § 1).

Generally, as an optional benefit program of ROVERS, the DROP provides a mechanism for members who are eligible for normal retirement to continue working for a finite period of time. 3 See La. Rev. Stat. Ann. § 11:2144. The law provides that in lieu of terminating employment and retiring, any member of ROVERS who was eligible for normal retirement may elect to participate in the DROP and defer the receipt of retirement benefits for a finite period of time. See La. Rev. Stat. Ann. § 11:2144(A). While the DROP participant continues to work, he or she accumulates money in a separate account based on the monies that the participant would otherwise have received as a monthly retirement benefit. See id. During the employee’s participation in the DROP, the employee stops contributing to his or her retirement, but the employer continues to make contributions. See id. When the participant actually retires, he or she may choose to receive a lump sum payment from the DROP account, or a benefit structured in a different manner. See id.

The law provides that once the member begins participating in the DROP, “active membership” in ROVERS terminates. See La. Rev. Stat. Ann. § 11:2144(E). Significantly, the law refers to the DROP as an optional program for ROVERS “members.” See La. Rev. Stat. Ann. § 11:2144. Thus, the DROP is a program for ROVERS members, and the agency should treat them as part of the overall ROVERS retirement system.

Since 1998, Louisiana courts have treated the DROPs as part of the public employee’s retirement plan. Courts made these rulings in the context of dividing retirement benefits at divorce. Although the main issue in these cases was not whether the DROPs are part of the overall retirement system, nonetheless, the cases shed light on how Louisiana state courts view the DROPs in relation to the overall retirement plans of public employees. For instance, in 1998, the Louisiana Supreme Court noted that employees in the Louisiana State Employees Retirement System (LASERS) were eligible to participate in the DROP, which allowed payment of earned retirement benefits into a DROP account based on a “fictitious retirement” while the employee continued to work. Bailey v. Bailey, 708 So.2d 354, 355 (La. 1998). The court noted that the statutory provisions governing LASERS’s DROP program referred repeatedly to the DROP benefits as “retirement benefits” and that such benefits were “fixed” as of the date of entry into the DROP. Id. at 358-59. Hence, the court ruled that the DROP funds were part of an employee spouse’s retirement benefits and were to be apportioned, like other retirement benefits, at divorce. Id. at 357-58.

Another Louisiana court observed that the Teachers’ Retirement System of Louisiana’s (TRSLA’s) DROP funds are “derived from the retirement benefits” and are apportioned like the other retirement benefits at divorce. Sullivan v. Sullivan, 801 So.2d 1093, 1096 (La.App. 2001). Likewise, another Louisiana court noted that a teacher’s retirement benefits under TRSLA “obviously included her DROP benefits, which are taken in lieu of a retirement allowance and treated as one ‘subaccount’ in the retirement system.” McKinstry v. McKinstry, 824 So.2d 1260, 1262 (La.App. 2002). Hence, Louisiana courts treat the DROPs as part of a public employee’s retirement plan.

In summary, we have determined since the date of ROVERS’s DROP’s inception in 1990, the agency should treat it as part of the overall ROVERS retirement system and not as a separate system or plan.

Michael M~

Regional Chief Counsel

By _____________

Anne L. H~

Assistant Regional Counsel

E. PR 11-027 Treatment of the Deferred Retirement Option for Members of the Clerks’ of Court Retirement and Relief Fund, Louisiana — REPLY

DATE: December 9, 2010

1. SYLLABUS

When a Deferred Retirement Option Plan (DROP) is determined to be part of the regular retirement plan and not a separate plan, payments from each plan are considered one pension for WEP and GPO purposes. This opinion provides a determination that since the date of its inception on June 25, 1991, SSA should treat Members of the Clerks’ of Court Retirement and Relief Fund’s (CCRRF) DROP as part of the overall CCRRF retirement system and not as a separate system or plan.

2. OPINION

This memorandum responds to your request for an opinion regarding whether the Social Security Administration (agency) should treat the members of the Clerks’ of Court Retirement and Relief Fund’s (CCRRF’s) Deferred Retirement Option Plan (DROP) as a separate retirement plan from CCRRF, or whether it is part of CCRRF. After reviewing the facts and relevant law, we have determined that, since the date of CCRRF’s DROP’s inception in 1993, the agency should treat it as part of the overall CCRRF retirement system and not as a separate plan.

In 1950, the Louisiana legislature created the CCRRF for the purpose of providing regular, disability, and survivor benefits for clerks of court, their deputies, and other employees, and the beneficiaries of such clerks of court, their deputies, and other employees. See La. Rev. Stat. Ann. § 11:1501 (formerly codified at La. Rev. Stat. Ann. § 13:931, pursuant to La. Acts 1950, No. 51 §§ 1, 4). In 1993, Louisiana authorized a DROP as an optional benefit program under CCRRF. See La. Rev. Stat. Ann. § 11:1530 (pursuant to La. Acts 1993, No. 168, § 1).

Generally, as an optional benefit program of CCRRF, the DROP provides a mechanism for members who are eligible for normal retirement to continue working for a period of time not to exceed three years. See La. Rev. Stat. Ann. § 11:1530. The law provides that in lieu of terminating employment and accepting a retirement, any member of CCRRF who is eligible for normal retirement may elect to participate in the DROP and defer the receipt of retirement benefits. See La. Rev. Stat. Ann. § 11:1530(C). While the DROP participant continues to work, he or she accumulates money in a separate account based on the monies that the participant would otherwise have received as a monthly retirement benefit. See id. During the employee’s participation in the DROP, the employee shall cease contributing to his or her retirement, but the employer shall continue to make contributions. Id. When the participant actually retires, he or she may choose to receive a lump sum payment from the DROP account. See id.

The law provides that once the member begins participating in the DROP, “active membership and participation” in CCRRF shall terminate, and “inactive membership and participation” in the DROP shall commence. See La. Rev. Stat. Ann. § 11:1530(E). Significantly, the law provides that the DROP account “shall be a part of the system fund.” See La. Rev. Stat. Ann. § 11:1530(A). The law provides that the CCRRF shall maintain “subaccounts” within the DROP account reflecting the credits attributed to each participant in the plan, but the monies in the account “shall remain a part of the fund until disbursed to a participant in accordance with the plan provisions.” See La. Rev. Stat. Ann. § 11:1530(B). Thus, the DROP is a program for CCRRF members, and the agency should treat them as part of the overall CCRRF retirement system.

Since 1998, Louisiana courts have treated the DROPs as part of the public employee’s retirement plan. Courts made these rulings in the context of dividing retirement benefits at divorce. Although the main issue in these cases was not whether the DROPs are part of the overall retirement system, nonetheless, the cases shed light on how Louisiana state courts view the DROPs in relation to the overall retirement plans of public employees. For instance, in 1998, the Louisiana Supreme Court noted that employees in the Louisiana State Employees Retirement System (LASERS) were eligible to participate in the DROP, which allowed payment of earned retirement benefits into a DROP account based on a “fictitious retirement” while the employee continued to work. Bailey v. Bailey, 708 So.2d 354, 355 (La. 1998). The court noted that the statutory provisions governing LASERS’s DROP program referred repeatedly to the DROP benefits as “retirement benefits” and that such benefits were “fixed” as of the date of entry into the DROP. Id. at 358-59. Hence, the court ruled that the DROP funds were part of an employee spouse’s retirement benefits and were to be apportioned, like other retirement benefits, at divorce. Id. at 357-58.

Another Louisiana court observed that the Teachers’ Retirement System of Louisiana’s (TRSLA’s) DROP funds are “derived from the retirement benefits” and are apportioned like the other retirement benefits at divorce. Sullivan v. Sullivan, 801 So.2d 1093, 1096 (La.App. 2001). Likewise, another Louisiana court noted that a teacher’s retirement benefits under TRSLA “obviously included her DROP benefits, which are taken in lieu of a retirement allowance and treated as one ‘subaccount’ in the retirement system.” McKinstry v. McKinstry, 824 So.2d 1260, 1262 (La.App. 2002). Hence, Louisiana courts treat the DROPs as part of a public employee’s retirement plan.

In summary, we have determined since the date of CCRRF’s DROP’s inception in 1993, the agency should treat it as part of the overall CCRRF retirement system and not as a separate system or plan. .

Michael M~

Regional Chief Counsel

By _____________

Anne L. H~

Assistant Regional Counsel

F. PR 11–025 Treatment of the Deferred Retirement Option Plan and Back-Deferred Retirement Option Plan for Members of the Assessors’ Retirement Fund, Louisiana — REPLY

DATE: December 7, 2010

1. SYLLABUS

When a Deferred Retirement Option Plan (DROP) is determined to be part of the regular retirement plan and not a separate plan, payments from each plan are considered one pension for WEP and GPO purposes. This opinion provides a determination that since the date of its inception on June 25, 1991, SSA should treat Members of the Assessor’s Retirement Fund’s (ARF) DROP as part of the overall ARF retirement system and not as a separate system or plan.

2. OPINION

This memorandum responds to your request for an opinion regarding whether the Social Security Administration (agency) should treat the Assessors’ Retirement Fund’s (ARF’s) Deferred Retirement Option Plan (DROP) and Back-Deferred Retirement Option Plan (Back-DROP) as separate retirement plans from ARF, or whether they are part of ARF. After reviewing the facts and relevant law, we have determined that, since the date of ARF’s regular DROP’s inception in 1991 until its termination date in 2008, the agency should treat it as part of the overall ARF retirement system and not as a separate plan. In addition, since the date of ARF’s Back-DROP’s inception on October 1, 2008, the agency should treat it as part of the overall ARF retirement system and not as a separate plan.

In 1950, the Louisiana legislature created ARF for the assessors and assessors’ employees in all parishes throughout the state of Louisiana. See La. Rev. Stat. Ann. § 11:1401 (formerly codified at La. Rev. Stat. Ann. § 47:1913, pursuant to La. Acts 1950, No. 91 § 1). In 1991, Louisiana authorized a DROP as an option under ARF. See La. Acts 1991, No. 63, § 1 (codified at La. Rev. Stat. Ann. § 11:1456). In 2008, the legislature repealed La. Rev. Stat. Ann. § 11:1456 and provided that, on September 30, 2008, statutory authority for enrolling members of ARF in the regular DROP ceased. See La. Rev. Stat. Ann. § 11:1456.2; La. Acts 2008, No. 398, §§ 3-4. In its place, the legislature created the Back-DROP, effective October 1, 2008. See La. Rev. Stat. Ann. § 11:1456.1 (added by La. Acts 2008, No. 398, § 1).4

Generally, the DROP is an optional benefit program of ARF that provides a mechanism for members who are eligible for normal retirement to continue working for a finite period of time.5 See La. Acts 1991, No. 63, § 1. While the DROP participant is working he or she accumulates money in a separate account based on the monies that the participant would otherwise have received as a monthly retirement benefit. See id. Upon the participant’s actual retirement, the participant may choose to receive a lump sum payment from the DROP account. See id.

Regarding the regular DROP, until September 30, 2008, the law provided that in lieu of terminating employment and accepting a service retirement, any member of ARF who was eligible for normal retirement could elect to participate in the DROP and defer the receipt of retirement benefits. See La. Acts 1991, No. 63, § 1 (codified at La. Rev. Stat. Ann. § 11:1456). The law provided that once the member began participating in the DROP plan, “active membership” in the regular ARF plan ceased and “inactive membership” began. Id.

Regarding the Back-DROP, effective October 1, 2008, the law provides that in lieu of receiving a normal retirement allowance, an eligible member of ARF may elect at the time of retirement to receive a Back-DROP benefit. See La. Rev. Stat. Ann. § 11:1456.1. The duration of the Back-DROP period shall not exceed the lesser of 36 months or the number of months of creditable service accrued after the member first became eligible for regular retirement. See La. Rev. Stat. Ann. § 11:1456.1. The Back-DROP provides for a type of retirement benefit structure or calculation that a member elects to take at the time of the member’s separation from employment to retire, whereas the regular DROP is a plan that a member elects to enter into and continue working during the DROP participation period. See id.; La. Acts 1991, No. 63, § 1. Significantly, the law refers to both the regular DROP and the Back-DROP as optional programs for ARF “members.” See id.; La. Acts 1991, No. 63, § 1. Thus, the DROP and Back-DROP are programs for ARF members, and the agency should treat them as part of the overall ARF retirement system.

Since 1998, Louisiana courts have treated the DROPs as part of the public employee’s retirement plan. Courts made these rulings in the context of dividing retirement benefits at divorce. Although the main issue in these cases was not whether the DROPs are part of the overall retirement system, nonetheless, the cases shed light on how Louisiana state courts view the DROPs in relation to the overall retirement plans of public employees. For instance, in 1998, the Louisiana Supreme Court noted that employees in the Louisiana State Employees Retirement System (LASERS) were eligible to participate in the DROP, which allowed payment of earned retirement benefits into a DROP account based on a “fictitious retirement” while the employee continued to work. Bailey v. Bailey, 708 So.2d 354, 355 (La. 1998). The court noted that the statutory provisions governing LASERS’s DROP program referred repeatedly to the DROP benefits as “retirement benefits” and that such benefits were “fixed” as of the date of entry into the DROP. Id. at 358-59. Hence, the court ruled that the DROP funds were part of an employee spouse’s retirement benefits and were to be apportioned, like other retirement benefits, at divorce. Id. at 357-58.

Another Louisiana court observed that the Teachers’ Retirement System of Louisiana’s (TRSLA’s) DROP funds are “derived from the retirement benefits” and are apportioned like the other retirement benefits at divorce. Sullivan v. Sullivan, 801 So.2d 1093, 1096 (La.App. 2001). Likewise, another Louisiana court noted that a teacher’s retirement benefits under TRSLA “obviously included her DROP benefits, which are taken in lieu of a retirement allowance and treated as one ‘subaccount’ in the retirement system.” McKinstry v. McKinstry, 824 So.2d 1260, 1262 (La.App. 2002). Hence, Louisiana courts treat the DROPs as part of a public employee’s retirement plan.

In summary, we have determined since the date of ARF’s regular DROP’s inception in 1991, the agency should treat it as part of the overall ARF retirement system and not as a separate system or plan. In addition, since ARF’s Back-DROP’s effective date of October 1, 2008, the agency should treat it as part of the overall ARF retirement system and not as a separate system or plan.

Michael M~

Regional Chief Counsel

By _____________

Anne L. H~

Assistant Regional Counsel

G. PR 10-149 Treatment of the Deferred Retirement Option Plan for members of the Parochial Employees’ Retirement System of Louisiana — REPLY

DATE: August 23, 2010

1. SYLLABUS

When a Deferred Retirement Option Plan (DROP) is determined to be part of the regular retirement plan and not a separate plan, payments from each plan are considered one pension for WEP and GPO purposes. This opinion provides a determination that since the date of its inception on June 25, 1991, SSA should treat Parochial Employees’ Retirement System’s DROP as part of the overall PERS retirement system and not as a separate system or plan.

2. OPINION

This memorandum responds to your request for an opinion regarding whether the Parochial Employees’ Retirement System of Louisiana’s (PERS’s) Deferred Retirement Option Plan (DROP) is a separate retirement plan from PERS, or whether it is a subaccount of PERS. After reviewing the facts and relevant law, we have determined that, since the date of its inception on June 25, 1991, the Social Security Administration (SSA) should treat PERS’s DROP as part of the overall PERS retirement system and not as a separate system or plan.

In 1952, the Louisiana legislature established PERS as a retirement system for the purpose of providing retirement allowances and other benefits. See La. Rev. Stat. Ann. § 11:1901 (eff. Jan. 1, 1953) (formerly codified at La. Rev. Stat. Ann. § 33:6102, pursuant to La. Acts. 1952, No. 205 § 2). In 1990, Louisiana authorized DROP as an option under PERS. See La. Rev. Stat. Ann.§ 11:1938 (eff. June 25, 1991) (formerly codified at La. Rev. Stat. Ann. § 33:6134, pursuant to La. Acts 1990, No. 338, § 2). In lieu of terminating employment and accepting a retirement allowance, any member of PERS who is eligible for a normal retirement allowance may elect to participate in PERS’s DROP and defer the receipt of benefits. See La. Rev. Stat. Ann. § 11:1938(A).

Generally, the DROP is an optional benefit program of PERS that provides a mechanism for members who are eligible for regular retirement to continue working for a finite period of time,6 See La. Rev. Stat. Ann. § 11:1938. In 1990, the law provided that upon the effective date of the individual’s commencement of participation in the DROP, membership in PERS shall terminate. See La. Acts 1990, No. 338, § 2 (codified at La. Rev. Stat. Ann. § 33:6134(E)). However, in 1991, the law changed to provide that upon the effective date of the individual’s commencement of participation in the DROP, “inactive membership” in PERS began. See La. Rev. Stat. Ann. § 11:1938(E) (eff. July 18, 1991) (enacted pursuant to La. 1991, No. 674, § 1, formerly codified at La. Rev. Stat. Ann. § 33:6134(E)). The law has remained consistent that when an individual begins participating in the DROP, the participant’s ceases to pay his or her contributions to PERS, but the individual’s employer must continue to pay its contributions to PERS on behalf of the DROP participant. See id. The law provides that PERS maintains and manages the funds in the participant’s DROP subaccount. See La. Rev. Stat. Ann. § 11:1938(F)(2)(a)-(b); see also La. Rev. Stat. Ann. § 11:1902(29) (defining “system” or “retirement system” as PERS). In describing PERS’s method of financing, Louisiana law includes the DROP accounts as part of PERS’s assets. See La. Stat. Ann. Rev. § 11:2011. Thus, SSA should treat the DROP as part of the overall PERS retirement system.

In the context of dividing retirement benefits at divorce, courts in Louisiana have treated the DROP plans as part of the public employee’s retirement plan. Although the main issue in these cases was not whether the DROP plans are part of the overall retirement system, nonetheless, the cases shed light on how Louisiana state courts view the DROP plans in relation to the overall retirement plans of public employees. For instance, in 1998, the Louisiana Supreme Court noted that employees in the Louisiana State Employees Retirement System (LASERS) were eligible to participate in the DROP, which allowed payment of earned retirement benefits into a DROP account based on a “fictitious retirement” while the employee continued to work. Bailey v. Bailey, 708 So.2d 354, 355 (La. 1998). The court noted that the statutory provisions governing LASERS’s DROP program referred repeatedly to the DROP benefits as “retirement benefits” and that such benefits were “fixed” as of the date of entry into the DROP. Id. at 358-59. Hence, the court ruled that the DROP funds were part of an employee spouse’s retirement benefits and were to be apportioned, like other retirement benefits, at divorce. Id. at 357-58.

Another Louisiana court observed that Teachers’ Retirement System of Louisiana’s (TRSLA’s) DROP funds are “derived from the retirement benefits” and are apportioned like the other retirement benefits at divorce. Sullivan v. Sullivan, 801 So.2d 1093, 1096 (La. App. 2001). Likewise, another Louisiana court noted that a teacher’s retirement benefits under TRSLA “obviously included her DROP benefits, which are taken in lieu of a retirement allowance and treated as one ‘subaccount’ in the retirement system.” McKinstry v. McKinstry, 824 So.2d 1260, 1262 (La. App. 2002). Hence, Louisiana courts treat the DROP plans as part of a public employee’s retirement plan.

In summary, we have determined that since the date of the inception of PERS’s DROP on June 25, 1991, SSA should treat PERS’s DROP as part of the overall PERS retirement system and not as a separate system or plan. We note that SSA may need to update or amend several provisions in the Program Operations Manual System (POMS) to reflect this determination. See POMS GN 02608.102.B.3 (stating that a DROP is a separate pension plan), RS DAL00605.360 (discussing Louisiana’s DROP plans). .

Michael M~

Regional Chief Counsel

By _____________

Anne L. H~

Assistant Regional Counsel

H. PR 10-145 Treatment of the Deferred Retirement Option Plan for members of the Firefighters’ Retirement System — REPLY

DATE: August 23, 2010

1. SYLLABUS

When a Deferred Retirement Option Plan (DROP) is determined to be part of the regular retirement plan and not a separate plan, payments from each plan are considered one pension for WEP and GPO purposes. This opinion provides a determination that since its inception in 1991 the agency should treat Firefighters’ Retirement System’s (FRS) DROP as part of the overall FRS retirement system and not as a separate plan.

2. OPINION

This memorandum responds to your request for an opinion regarding whether the Social Security Administration (agency) should treat the Firefighters’ Retirement System’s (FRS’s) Deferred Retirement Option Plan (DROP) as a separate retirement plan from FRS or whether it is part of FRS. After reviewing the facts and relevant law, we have determined that, since the date of its inception in 1991, the agency should treat FRS’s DROP as part of the overall FRS retirement system and not as a separate plan.

In 1979, the Louisiana legislature created FRS for the purpose of providing retirement allowances and other benefits for firemen employed by any municipality, parish, or fire protection district of the state of Louisiana. See La. Rev. Stat. Ann. § 11:2251 (formerly codified at La. Rev. Stat. Ann. § 33:2151, pursuant to La. Acts 1979, No. 434 § 1). Effective June 25, 1991, Louisiana authorized a DROP as an option under FRS. See La. Rev. Stat. Ann. § 11:2257 (enacted by La. Acts 1991, No. 74, § 3, formerly codified at La. Rev. Stat. Ann. § 33:2155.1). In lieu of terminating employment and accepting a retirement allowance, any member of FRS who has not less than twenty years of creditable service and who is eligible for regular retirement may elect to participate in the DROP and defer the receipt of retirement benefits. See La. Rev. Stat. Ann. § 11:2257.

Generally, the DROP is an optional benefit program of FRS that provides a mechanism for members who are eligible for normal retirement to continue working for three years or less, accumulate money in an individual account based on the monies that the participant would otherwise have received as a monthly retirement benefit, and upon actual retirement, receive either a lump sum payment from the DROP account or any other method of payment from the DROP account that FRS’s board of trustees approves. See id.

Louisiana law specifies that all of FRS’s assets must be credited, according to the purpose for which they are held, to one of FRS’s five funds, and that the DROP account is one of those five funds. See La. Rev. Stat. Ann. § 11:2262(A), (G). The law also provides that FRS maintains each of the DROP participant’s subaccounts. See La. Rev. Stat. Ann. § 11:2257(F)(2)(b)(i). Moreover, a Louisiana Attorney General opinion states that FRS administers the DROP accounts, and that a DROP participant’s subaccounts are retirement benefits. See La. Atty. Gen. Op. No. 02-169, 2002 WL 1298170 (May 23, 2002). Thus, the DROP is a program for members of FRS, and the agency should treat the DROP account as part of the overall FRS retirement system and not as a separate plan.

Since 1998, courts in Louisiana have treated the DROP plans as part of the public employee’s retirement plan. Courts made these rulings in the context of dividing retirement benefits at divorce. Although the main issue in these cases was not whether the DROP plans were part of the overall retirement system, nonetheless, the cases shed light on how Louisiana state courts view the DROP plans in relation to the overall retirement plans of public employees. For instance, in 1998, the Louisiana Supreme Court noted that employees in the Louisiana State Employees Retirement System (LASERS) were eligible to participate in the DROP, which allowed payment of earned retirement benefits into a DROP account based on a “fictitious retirement” while the employee continued to work. Bailey v. Bailey, 708 So.2d 354, 355 (La. 1998). The court noted that the statutory provisions governing LASERS’s DROP program referred repeatedly to the DROP benefits as “retirement benefits” and that such benefits were “fixed” as of the date of entry into the DROP. Id. at 358-59. Hence, the court ruled that the DROP funds were part of an employee spouse’s retirement benefits and were to be apportioned, like other retirement benefits, at divorce. Id. at 357-58.

Another Louisiana court observed that the Teachers’ Retirement System of Louisiana’s (TRSLA’s) DROP funds are “derived from the retirement benefits” and are apportioned like the other retirement benefits at divorce. Sullivan v. Sullivan, 801 So.2d 1093, 1096 (La.App. 2001). Likewise, another Louisiana court noted that a teacher’s retirement benefits under TRSLA “obviously included her DROP benefits, which are taken in lieu of a retirement allowance and treated as one ‘subaccount’ in the retirement system.” McKinstry v. McKinstry, 824 So.2d 1260, 1262 (La.App. 2002). Thus, Louisiana courts have traditionally treated the DROP plans as part of a public employee’s retirement plan.

In summary, we have determined that since the date of FRS’s DROP’s inception in 1991, the agency should treat it as part of the overall FRS retirement system and not as a separate system or plan. We note that while the agency has amended Program Operations Manual System (POMS) GN 02608.102.B.3, it may also need to amend POMS RS DAL00605.360 to reflect this determination. See POMS GN RS DAL00605.360 (stating that OGC has determined that for coverage purposes, DROP is considered a retirement plan).

Michael M~

Regional Chief Counsel

By _____________

Anne L. H~

Assistant Regional Counsel

I. PR 10-109 Treatment of the Deferred Retirement Option Plan and Back-Deferred Retirement Option Plan for members of the Louisiana Sheriffs’ Pension and Relief Fund — REPLY

DATE: June 18, 2010

1. SYLLABUS

When a Deferred Retirement Option Plan (DROP) is determined to be part of the regular retirement plan, payments from both plans are considered one pension for WEP and GPO purposes. This opinion provides a determination that since its inception in 1990 SSA should treat the Louisiana Sheriffs’ Pension and Relief Fund (LSPRF) regular DROP as part of the overall LSPRF retirement system.

In addition, this opinion provides a determination that since its inception on July 1, 2001 SSA should treat LSPRF’s Back-DROP as part of the overall LSPRF retirement system.

2. OPINION

This memorandum responds to your request for an opinion regarding whether the Social Security Administration (SSA) should treat the Louisiana Sheriffs’ Pension and Relief Fund’s (LSPRF’s) Deferred Retirement Option Plan (DROP) and Back-Deferred Retirement Option Plan (Back-DROP) as separate retirement plans from LSPRF, or whether they are part of LSPRF. After reviewing the facts and relevant law, we have determined that, since the date of its inception in 1990, SSA should treat LSPRF’s regular DROP as part of the overall LSPRF retirement system and not as a separate plan. In addition, since the date of its inception on July 1, 2001, SSA should treat LSPRF’s Back-DROP as part of the overall LSPRF retirement system and not as a separate plan.

In 1946, the Louisiana legislature created LSPRF for each parish, and for the civil and criminal sheriffs for the parish of Orleans, and for their deputies. See La. Rev. Stat. Ann. § 11:2171 (formerly codified at La. Rev. Stat. Ann. § 33:1451, pursuant to La. Acts 1946, No. 327 § 1). In 1990, Louisiana authorized a DROP as an option under LSPRF. See La. Acts 1990, No. 12, § 1 (codified at La. Rev. Stat. Ann. § 33:1456(M), redesignated at La. Rev. Stat. Ann. § 11:2178(M)).

In 2001, the legislature repealed this provision of the law and provided that, on or after July 1, 2001, statutory authority for enrolling members of LSPRF in the regular DROP ceased. See La. Acts 2001, No. 867, § 2. In its place, the legislature created the Back-DROP, effective on July 1, 2001. See La. Rev. Stat. Ann. § 11:2178.1 (added by La. Acts 2001, No. 867, §§ 1-2). 7

Generally, the DROP and Back-DROP are optional benefit programs of LSPRF that provide a mechanism for members who are eligible for normal retirement to continue working for a finite period of time, 8 accumulate money in an individual account based on the monies that the participant would otherwise receive as a monthly retirement benefit, and, if the participant

so chooses, receive a lump sum payment from the DROP account upon actual retirement. See

La. Rev. Stat. Ann. § 11:1312.1.; La. Acts 1990, No. 12, § 1 (amended by La. Acts 1991, No. 66, § 1; La. Acts 1992, No. 895, § 1; La. Acts. 1995, No. 1113, § 1; La. Acts. 1997, No. 1394, § 1).

Regarding the regular DROP, until July 1, 2001, the law provided that in lieu of terminating employment and accepting a service retirement, any member of LSPRF who was eligible for normal retirement could elect to participate in the DROP and defer the receipt of retirement benefits. See La. Acts 1990, No. 12, § 1 (codified at La. Rev. Stat. Ann. § 33:1456(M), redesignated at La. Rev. Stat. Ann. § 11:2178(M)). The law provided that active membership in the regular LSPRF plan terminated once participation in the DROP began. See La. Acts 1990, No. 12, § 1. Regarding the Back-DROP, after July 1, 2001, the law provides that in lieu of receiving a service retirement allowance, an eligible member of LSPRF may elect at the time of retirement to receive a Back-DROP benefit. See La. Rev. Stat. Ann. § 11:2178.1(A)(2). The Back-DROP is a retirement benefit of LSPRF. See LSPRF Member Handbook, p. 22 (2007 ed.). In the regular DROP, a member of LSPRF elected to “enter” the DROP and continue working during the DROP participation period, whereas in the Back-DROP, a member elects to “take” the Back-DROP at the time of separation from employment to retire. See id. Significantly, the law refers to both the regular DROP and the Back-DROP as optional programs for “members” of LSPRF. See La. Rev. Stat. Ann. § 11:2178.1; La. Acts 1990, No. 12, § 1. Thus, the DROP and Back-DROP are programs for members of LSPRF, and SSA should treat them as part of the overall LSPRF retirement system.

Since 1998, courts in Louisiana have treated the DROP plans as part of the public employee’s retirement plan. These rulings were made in the context of dividing retirement benefits at divorce. Although the main issue in these cases was not whether the DROP plans are part of the overall retirement system, nonetheless, the cases shed light on how Louisiana state courts view the DROP plans in relation to the overall retirement plans of public employees. For instance, in 1998, the Louisiana Supreme Court noted that employees in the Louisiana State Employees Retirement System (LASERS) were eligible to participate in the DROP, which allowed payment of earned retirement benefits into a DROP account based on a “fictitious retirement” while the employee continued to work. Bailey v. Bailey, 708 So.2d 354, 355 (La. 1998). The court noted that the statutory provisions governing LASERS’s DROP program referred repeatedly to the DROP benefits as “retirement benefits” and that such benefits were “fixed” as of the date of entry into the DROP. Id. at 358-59. Hence, the court ruled that the DROP funds were part of an employee spouse’s retirement benefits and were to be apportioned, like other retirement benefits, at divorce. Id. at 357-58.

Another Louisiana court observed that the Teachers’ Retirement System of Louisiana’s (TRSLA’s) DROP funds are “derived from the retirement benefits” and are apportioned like the other retirement benefits at divorce. Sullivan v. Sullivan, 801 So.2d 1093, 1096 (La.App. 2001). Likewise, another Louisiana court noted that a teacher’s retirement benefits under TRSLA “obviously included her DROP benefits, which are taken in lieu of a retirement allowance and treated as one ‘subaccount’ in the retirement system.” McKinstry v. McKinstry, 824 So.2d 1260, 1262 (La.App. 2002). Hence, Louisiana courts treat the DROP plans as part of a public employee’s retirement plan.

In summary, we have determined since the date of its inception in 1990, SSA should treat LSPRF’s regular DROP as part of the overall LSPRF retirement system and not as a separate system or plan. In addition, since the date of its inception on July 1, 2001, SSA should treat LSPRF’s Back-DROP as part of the overall LSPRF retirement system and not as a separate system or plan. We note that SSA may need to update or amend several provisions in the Program Operations Manual System (POMS) to reflect this determination. See POMS GN 02608.102.B.3 (stating that a DROP is a separate pension plan), RS DAL00605.360 (discussing Louisiana’s DROP plans).

Michael M~

Regional Chief Counsel

By _____________

Anne L. H~

Assistant Regional Counsel

J. PR 10-108 Treatment of Deferred Retirement Option Plan for members of the Teachers’ Retirement System of Louisiana — REPLY

DATE: June 18, 2010

1. SYLLABUS

When a Deferred Retirement Option Plan (DROP) is determined to be part of the regular retirement plan and not a separate plan, payments from each plan are considered one pension for WEP and GPO purposes. This opinion provides a determination that since the date of its inception on July 1, 1992, SSA should treat Teachers’ Retirement System of Louisiana (TRSLA) DROP as part of the overall TRSLA retirement system and not as a separate system or plan.

2. OPINION

This memorandum responds to your request for an opinion regarding whether the Teachers’ Retirement System of Louisiana’s (TRSLA’s) Deferred Retirement Option Plan (DROP) is a separate retirement plan from TRSLA, or whether it is a subaccount of TRSLA. After reviewing the facts and relevant law, we have determined that, since the date of its inception on July 1, 1992, SSA should treat TRSLA’s DROP as part of the overall TRSLA retirement system and not as a separate system or plan.

In 1936, the Louisiana legislature established TRSLA as a retirement system for the purpose of providing retirement allowances and other benefits for teachers of the state of Louisiana. See La. Rev. Stat. Ann. § 11:702 (eff. Aug. 1, 1936) (formerly codified at La. Rev. Stat. Ann. § 17:572, pursuant to La. Acts 1936, No. 83 § 2). In 1991, Louisiana authorized the DROP as an option under TRSLA. See La. Rev. Stat. Ann. § 11:786 (eff. July 1, 1992) (formerly codified at La. Rev. Stat. Ann. § 17:645, pursuant to La. Acts 1991, No. 62, § 1). In lieu of terminating employment and accepting a retirement allowance, any member of TRSLA who is eligible for regular retirement may elect to participate in the DROP. See La. Rev. Stat. Ann. § 11:786.

Generally, the DROP is an optional benefit program of TRSLA that provides a mechanism for members who are eligible for regular retirement to continue working for a finite period of time, 9 accumulate money in an individual account based on the monies that the participant would otherwise receive as a monthly retirement benefit, and, if the participant so chooses, receive a lump sum payment from the DROP account upon actual retirement. See La. Rev. Stat. Ann. §§ 11:786-11:790. The law has always provided that during participation in the DROP, the participant must remain a member of TRSLA. See La. Rev. Stat. Ann. § 11:787(A)(1). The law has also been consistent that TRSLA establishes the DROP “subaccount,” and that the DROP subaccounts are part of the system fund. See La. Rev. Stat. Ann. § 11:788(A).

Courts in Louisiana have treated the DROP plans as part of the public employee’s retirement plan. These rulings were made in the context of dividing retirement benefits at divorce. Although the main issue in these cases was not whether the DROP plans are part of the overall retirement system, nonetheless, the cases shed light on how Louisiana state courts view the DROP plans in relation to the overall retirement plans of public employees. For instance, in 1998, the Louisiana Supreme Court noted that employees in the Louisiana State Employees Retirement System (LASERS) were eligible to participate in the DROP, which allowed payment of earned retirement benefits into a DROP account based on a “fictitious retirement” while the employee continued to work. Bailey v. Bailey, 708 So.2d 354, 355 (La. 1998). The court noted that the statutory provisions governing LASERS’s DROP program referred repeatedly to the DROP benefits as “retirement benefits” and that such benefits were “fixed” as of the date of entry into the DROP. Id. at 358-59. Hence, the court ruled that the DROP funds were part of an employee spouse’s retirement benefits and were to be apportioned, like other retirement benefits, at divorce. Id. at 357-58.

Another Louisiana court observed that TRSLA’s DROP funds are “derived from the retirement benefits” and are apportioned like the other retirement benefits at divorce. Sullivan v. Sullivan, 801 So.2d 1093, 1096 (La.App. 2001). Likewise, another Louisiana court noted that a teacher’s retirement benefits under TRSLA “obviously included her DROP benefits, which are taken in lieu of a retirement allowance and treated as one ‘subaccount’ in the retirement system.” McKinstry v. McKinstry, 824 So.2d 1260, 1262 (La.App. 2002). Hence, Louisiana courts treat the DROP plans as part of a public employee’s retirement plan.

In summary, we have determined that since the date of its inception on July 1, 1992, SSA should treat TRSLA’s DROP as part of the overall TRSLA retirement system and not as a separate system or plan. We note that SSA may need to update or amend several provisions in the Program Operations Manual System (POMS) to reflect this determination. See POMS GN 02608.102.B.3 (stating that a DROP is a separate pension plan), RS DAL00605.360 (discussing Louisiana’s DROP plans).

Michael M~

Regional Chief Counsel

By _____________

Anne L. H~

Assistant Regional Counsel

K. PR 10-107 Treatment of the Deferred Retirement Option Plan for members of the Municipal Employees’ Retirement System of Louisiana — REPLY

DATE: June 18, 2010

1. SYLLABUS

When a Deferred Retirement Option Plan (DROP) is determined to be part of the regular retirement plan and not a separate plan, payments from each plan are considered one pension for WEP and GPO purposes. This opinion provides a determination that since the date of its inception in 1987, SSA should treat Municipal Employees’ Retirement System’s (MERS) DROP as part of the overall MERS retirement system and not as a separate system or plan.

2. OPINION

This memorandum responds to your request for an opinion regarding whether the Municipal Employees’ Retirement System of Louisiana’s (MERS’s) Deferred Retirement Option Plan (DROP) is a separate retirement plan from MERS, or whether it is a subaccount of MERS. After reviewing the facts and relevant law, we have determined that, since the date of its inception in 1987, SSA should treat MERS’s DROP as part of the overall MERS retirement system and not as a separate system or plan.

In 1954, the Louisiana legislature established MERS as a retirement system for the purpose of providing retirement allowances and other benefits. See La. Rev. Stat. Ann. § 11:1731 (eff. Jan. 1 1955) (formerly codified at La. Rev. Stat. Ann. § 33:7152, pursuant to La. Acts. 1954, No. 356 § 2). In 1978, the legislature divided MERS into two separate and distinct accounts, known as Plan A and Plan B. See La. Rev. Stat. Ann. § 11:1731(C) (formerly codified at La. Rev. Stat. Ann. § 33:7151, pursuant to La. Acts. 1978, No. 788 § 1). In 1987, Louisiana authorized a DROP as an option under MERS for both Plan A and Plan B participants. See La. Rev. Stat. Ann. § 11:1763 (formerly codified at La. Rev. Stat. Ann. § 33:7203, pursuant to La. Acts 1978, No. 582, § 1). In lieu of terminating employment and accepting a retirement allowance, any member of MERS who is eligible for normal retirement under either Plan A or Plan B may elect to participate in the DROP. See La. Rev. Stat. Ann. § 11:1763.

Generally, the DROP is an optional benefit program of MERS that provides a mechanism for members who are eligible for normal retirement to continue working for a finite period of time, 10 accumulate money in an individual account based on the monies that the participant would otherwise receive as a monthly retirement benefit, and, if the participant so chooses, receive a lump sum payment from the DROP account upon actual retirement. See La. Rev. Stat. Ann. § 11:1763. The law provides that active membership in the regular MERS plan terminates once participation in the DROP begins. See La. Rev. Stat. Ann. § 11:1763(E). A participant’s DROP funds are credited to a separate DROP subaccount, and the subaccount shall remain a part of MERS’s regular retirement fund. See La. Rev. Stat. Ann. § 11:1862(E). The law has been consistent that MERS establishes and maintains the DROP “subaccounts.” See La. Rev. Stat. Ann. §§ 11:173(E), (F)(2)(a).

Courts in Louisiana have treated the DROP plans as part of the public employee’s retirement plan. These rulings were made in the context of dividing retirement benefits at divorce. Although the main issue in these cases was not whether the DROP plans are part of the overall retirement system, nonetheless, the cases shed light on how Louisiana state courts view the DROP plans in relation to the overall retirement plans of public employees. For instance, in 1998, the Louisiana Supreme Court noted that employees in the Louisiana State Employees Retirement System (LASERS) were eligible to participate in the DROP, which allowed payment of earned retirement benefits into a DROP account based on a “fictitious retirement” while the employee continued to work. Bailey v. Bailey, 708 So.2d 354, 355 (La. 1998). The court noted that the statutory provisions governing LASERS’s DROP program referred repeatedly to the DROP benefits as “retirement benefits” and that such benefits were “fixed” as of the date of entry into the DROP. Id. at 358-59. Hence, the court ruled that the DROP funds were part of an employee spouse’s retirement benefits and were to be apportioned, like other retirement benefits, at divorce. Id. at 357-58.

Another Louisiana court observed that the Teachers’ Retirement System of Louisiana’s (TRSLA’s) DROP funds are “derived from the retirement benefits” and are apportioned like the other retirement benefits at divorce. Sullivan v. Sullivan, 801 So.2d 1093, 1096 (La.App. 2001). Likewise, another Louisiana court noted that a teacher’s retirement benefits under TRSLA “obviously included her DROP benefits, which are taken in lieu of a retirement allowance and treated as one ‘subaccount’ in the retirement system.” McKinstry v. McKinstry, 824 So.2d 1260, 1262 (La.App. 2002). Hence, Louisiana courts treat the DROP plans as part of a public employee’s retirement plan.

In summary, we have determined that since the date of its inception on in 1987, SSA should treat MERS’s DROP as part of the overall MERS retirement system and not as a separate system or plan. We note that SSA may need to update or amend several provisions in the Program Operations Manual System (POMS) to reflect this determination. See POMS GN 02608.102.B.3 (stating that a DROP is a separate pension plan), RS DAL00605.360 (discussing Louisiana’s DROP plans).

Michael M~

Regional Chief Counsel

By _____________

Anne L. H~

Assistant Regional Counsel

L. PR 10-106 Treatment of the Deferred Retirement Option Plan for members of the Louisiana School Employees’ Retirement System — REPLY

DATE: June 18, 2010

1. SYLLABUS

When a Deferred Retirement Option Plan (DROP) is determined to be part of the regular retirement plan and not a separate plan, payments from each plan are considered one pension for WEP and GPO purposes. This opinion provides a determination that since the date of its inception on July 1, 1992, SSA should treat Louisiana School Employees’ Retirement System’s (LSERS) DROP as part of the overall LSERS retirement system and not as a separate system or plan.

2. OPINION

This memorandum responds to your request for an opinion regarding whether the Louisiana School Employees’ Retirement System’s (LSERS’s) Deferred Retirement Option Plan (DROP) is a separate retirement plan from LSERS, or whether it is a subaccount of LSERS. After reviewing the facts and relevant law, we have determined that, since the date of its inception on July 1, 1992, SSA should treat LSERS’s DROP as part of the overall LSERS retirement system and not as a separate system or plan.

In 1946, the Louisiana legislature established LSERS as a retirement system for the purpose of providing retirement allowances and other benefits for school bus drivers, school janitors, school custodians, school maintenance employees, and other school employees employed in the state public school system. See La. Rev. Stat. Ann. § 11:1001 (formerly codified at La. Rev. Stat. Ann. § 17:881, pursuant to La. Acts. 1946, No. 124 § 1). The retirement system was created as of July 31, 1946, but began full operation as of July 1, 1947. See id. In 1991, Louisiana authorized a DROP as an option under LSERS. See La. Rev. Stat. Ann. § 11:1152 (eff. July 1, 1992) (formerly codified at La. Rev. Stat. Ann. § 17:920, pursuant to La. Acts 1991, No. 56, § 1). In lieu of terminating employment and accepting a retirement allowance, any member of LSERS who is eligible for regular retirement may elect to participate in the DROP. See La. Rev. Stat. Ann. § 11:1152.

Generally, the DROP is an optional benefit program of LSERS that provides a mechanism for members who are eligible for regular retirement to continue working for a finite period of time, 11 accumulate money in an individual account based on the monies that the participant would otherwise receive as a monthly retirement benefit, and, if the participant so chooses, receive a lump sum payment from the DROP account upon actual retirement. See La. Rev. Stat. Ann. § 11:1152. The law provides that active membership in the regular LSERS plan terminates once participation in the DROP begins, and that LSERS considers the participant to be in a retired status. See La. Rev. Stat. Ann. § 11:1152(E). The law has been consistent that LSERS establishes and maintains the DROP “subaccount,” and that the DROP subaccounts are part of the system fund. See La. Rev. Stat. Ann. §§ 11:1152(E), (F)(2).

Courts in Louisiana have treated the DROP plans as part of the public employee’s retirement plan. These rulings were made in the context of dividing retirement benefits at divorce. Although the main issue in these cases was not whether the DROP plans are part of the overall retirement system, nonetheless, the cases shed light on how Louisiana state courts view the DROP plans in relation to the overall retirement plans of public employees. For instance, in 1998, the Louisiana Supreme Court noted that employees in the Louisiana State Employees Retirement System (LASERS) were eligible to participate in the DROP, which allowed payment of earned retirement benefits into a DROP account based on a “fictitious retirement” while the employee continued to work. Bailey v. Bailey, 708 So.2d 354, 355 (La. 1998). The court noted that the statutory provisions governing LASERS’s DROP program referred repeatedly to the DROP benefits as “retirement benefits” and that such benefits were “fixed” as of the date of entry into the DROP. Id. at 358-59. Hence, the court ruled that the DROP funds were part of an employee spouse’s retirement benefits and were to be apportioned, like other retirement benefits, at divorce. Id. at 357-58.

Another Louisiana court observed that Teachers’ Retirement System of Louisiana’s (TRSLA’s) DROP funds are “derived from the retirement benefits” and are apportioned like the other retirement benefits at divorce. Sullivan v. Sullivan, 801 So.2d 1093, 1096 (La.App. 2001). Likewise, another Louisiana court noted that a teacher’s retirement benefits under TRSLA “obviously included her DROP benefits, which are taken in lieu of a retirement allowance and treated as one ‘subaccount’ in the retirement system.” McKinstry v. McKinstry, 824 So.2d 1260, 1262 (La.App. 2002). Hence, Louisiana courts treat the DROP plans as part of a public employee’s retirement plan.

In summary, we have determined that since the date of its inception on July 1, 1992, SSA should treat LSERS’s DROP as part of the overall LSERS retirement system and not as a separate system or plan. We note that SSA may need to update or amend several provisions in the Program Operations Manual System (POMS) to reflect this determination. See POMS GN 02608.102.B.3 (stating that a DROP is a separate pension plan), RS DAL00605.360 (discussing Louisiana’s DROP plans).

Michael M~

Regional Chief Counsel

By _____________

Anne L. H~

Assistant Regional Counsel

M. PR 10-105 Treatment of the Deferred Retirement Option Plan for members of the Louisiana State Police Pension and Retirement System — REPLY

DATE: June 18, 2010

1. SYLLABUS

When a Deferred Retirement Option Plan (DROP) is determined to be part of the regular retirement plan and not a separate plan, payments from each plan are considered one pension for WEP and GPO purposes. This opinion provides a determination that since the date of its inception in 1990, SSA should treat Louisiana State Police Pension and Retirement System‘s (LSPRS) DROP as part of the overall LSPRS retirement system and not as a separate plan.

In addition, this opinion provides a determination that since the date of its inception on October 1, 2009, SSA should treat LSPRS’s Back-DROP as part of the overall LSPRS retirement system and not as a separate plan.

2. OPINION

This memorandum responds to your request for an opinion regarding whether the Social Security Administration (SSA) should treat the Louisiana State Police Pension and Retirement System’s (LSPRS’s) Deferred Retirement Option Plan (DROP) as a separate retirement plan from LSPRS, or whether it is part of LSPRS. After reviewing the facts and relevant law, we have determined that, since the date of its inception in 1990, SSA should treat LSPRS’s DROP as part of the overall LSPRS retirement system and not as a separate plan. In addition, since the date of its inception on October 1, 2009, SSA should treat LSPRS’s Back-DROP as part of the overall LSPRS retirement system and not as a separate plan.

In 1938, the Louisiana legislature established LSPRS as a retirement system for the purpose of providing retirement allowances and other benefits. See La. Acts. 1938, No. 293. In 1990, Louisiana authorized a DROP as an option under LSPRS. See La. Rev. Stat. Ann. § 11:1312 (formerly codified at La. Rev. Stat. Ann. § 40:1427.2, pursuant to La. Acts 1990, No. 11, § 1) (repealed by La. Acts 2009, No. 480, § 2). In 2009, the legislature repealed this provision of the law and provided that, as of September 30, 2009, statutory authority for beginning participation in LSPRS’s DROP had ceased. See La. Acts 2009, No. 480, § 2. In its place, the legislature created the Back-DROP, which is an optional retirement benefit program for members of the system, and stated that the Back-DROP was effective on October 1, 2009. See La. Rev. Stat. Ann. § 11:1312.1(A) (added by La. Acts 2009, No. 480, § 1). 12

Generally, the DROP and Back-DROP are optional benefit programs of LSPRS that provide a mechanism for members who are eligible for normal retirement to continue working for a finite period of time, 13 accumulate money in an individual account based on the monies that the participant would otherwise receive as a monthly retirement benefit, and, if the participant

so chooses, receive a lump sum payment from the DROP account upon actual retirement. See La. Rev. Stat. Ann. § 11:1312.1.; La. Acts 1990, No. 11, § 1 (amended by La. Acts 1991, No. 69, § 1; La. Acts 1995, No. 1130, § 1; La. Acts. 1995, No. 58, § 1; La. Acts 2001, No. 785, § 1; La. Acts 2003, No. 862, § 1).

Regarding the DROP, until September 30, 2009, the law provided that in lieu of terminating employment and accepting a service retirement, any member of LSPRS who was eligible for normal retirement could elect to participate in the DROP. See La. Acts 1990, No. 11, § 1. The law provided that active membership in the regular LSPRS plan terminated once participation in the DROP began. See La. Acts 1990, No. 11, § 1. In 1991, the legislature clarified that the money in the DROP “subaccount” remained part of LSPRS’s regular retirement fund. See La. Acts 1991, No. 69, § 1. The legislature’s 1991 clarification that the money in the DROP subaccount “shall remain a part of the regular retirement fund until disbursed to the person” reaffirms that the DROP account was part of LSPRS’s system fund.

Regarding the Back-DROP, after October 1, 2009, the law provided that in lieu of receiving a normal retirement benefit, an eligible member of LSPRS may elect to retire and have his or her benefits structured, calculated, and paid as provided in section 11:1312.1 of Louisiana’s Revised Statutes. See La. Rev. Stat. Ann. § 11:1312.1(A)(2). Section 11:1312.1(D)(1) of Louisiana’s Revised Statutes provides that the Back-DROP benefit has two portions: a monthly benefit portion and a lump-sum portion. See La. Rev. Stat. Ann. § 11:1312.1(D)(1). Significantly, the law refers to the Back-DROP as an optional program for “members of the system.” See La. Rev. Stat. Ann. § 11:1312.1(A)(1), (B). The “system” is defined as LSPRS. See La. Rev. Stat. Ann. § 11:1301(8). Thus, the Back-DROP is a program for members of LSPRS, and SSA should treat the Back-DROP as part of the overall LSPRS retirement system.

Since 1998, courts in Louisiana have treated the DROP plans as part of the public employee’s retirement plan. These rulings were made in the context of dividing retirement benefits at divorce. Although the main issue in these cases was not whether the DROP plans are part of the overall retirement system, nonetheless, the cases shed light on how Louisiana state courts view the DROP plans in relation to the overall retirement plans of public employees. For instance, in 1998, the Louisiana Supreme Court noted that employees in the Louisiana State Employees Retirement System (LASERS) were eligible to participate in the DROP, which allowed payment of earned retirement benefits into a DROP account based on a “fictitious retirement” while the employee continued to work. Bailey v. Bailey, 708 So.2d 354, 355 (La. 1998). The court noted that the statutory provisions governing LASERS’s DROP program referred repeatedly to the DROP benefits as “retirement benefits” and that such benefits were “fixed” as of the date of entry into the DROP. Id. at 358-59. Hence, the court ruled that the DROP funds were part of an employee spouse’s retirement benefits and were to be apportioned, like other retirement benefits, at divorce. Id. at 357-58.

Another Louisiana court observed that the Teachers’ Retirement System of Louisiana’s (TRSLA’s) DROP funds are “derived from the retirement benefits” and are apportioned like the other retirement benefits at divorce. Sullivan v. Sullivan, 801 So.2d 1093, 1096 (La.App. 2001). Likewise, another Louisiana court noted that a teacher’s retirement benefits under TRSLA “obviously included her DROP benefits, which are taken in lieu of a retirement allowance and treated as one ‘subaccount’ in the retirement system.” McKinstry v. McKinstry, 824 So.2d 1260, 1262 (La.App. 2002). Hence, Louisiana courts treat the DROP plans as part of a public employee’s retirement plan.

In summary, we have determined that since the date of its inception in 1990, SSA should treat LSPRS’s DROP as part of the overall LSPRS retirement system and not as a separate system or plan. In addition, since the date of its inception on October 1, 2009, SSA should treat LSPRS’s Back-DROP as part of the overall LSPRS retirement system and not as a separate system or plan. We note that SSA may need to update or amend several provisions in the Program Operations Manual System (POMS) to reflect this determination. See POMS GN 02608.102.B.3 (stating that a DROP is a separate pension plan), RS DAL00605.360 (discussing Louisiana’s DROP plans).

Michael M~

Regional Chief Counsel

By _____________

Anne L. H~

Assistant Regional Counsel

N. PR 10-103 Treatment of the Deferred Retirement Option Plan for members of the Louisiana State Employees Retirement System Prior to 2001 — REPLY

DATE: June 18, 2010

1. SYLLABUS

When a Deferred Retirement Option Plan (DROP) is determined to be part of the regular retirement plan and not a separate plan, payments from each plan are considered one pension for WEP and GPO purposes. This opinion provides a determination that since its effective date of January 1, 1991, SSA should consider Louisiana State Employees Retirement System’s (LASERS) DROP as part of the overall LASERS retirement system and not as a separate retirement plan.

2. OPINION

This memorandum responds to your request for an opinion regarding whether, prior to 2001, the Social Security Administration (SSA) should treat the Louisiana State Employees Retirement System’s (LASERS’) Deferred Retirement Option Plan (DROP) as a separate retirement plan from LASERS, or whether it was part of LASERS. On December 28, 2009, our office responded to a request from Bob C~, an attorney in the Office of the General Counsel’s (OGC’s) Office of Program Law, wherein we found no legal justification for treating the LASERS’ DROP as a separate retirement plan. We recommended that the DROP be treated as part of LASERS for the period of 2001 to present. You asked us to review and clarify whether LASERS’ DROP should be treated as a separate retirement plan from LASERS for the period of 1991 to 2000. After reviewing the facts and relevant law, we have confirmed that, since its effective date of January 1, 2001, SSA should consider LASERS’ DROP as part of the overall LASERS retirement system and not as a separate retirement plan. As explained below, we believe that the legislature intended to treat DROP participants as participants in LASERS.

In 1946, LASERS was established as a public trust fund to provide retirement allowances and other benefits for state officers and employees and their beneficiaries. See La. Rev. Stat. Ann. § 11:401 (effective 1946) (formerly codified at La. Rev. Stat. Ann. § 42:541, pursuant to La. Acts. 1946, No. 126 §1). In 1990, Louisiana authorized DROP as an optional benefit program under LASERS. See La. Rev. Stat. Ann. § 11:447 (effective January 1, 1991) (formerly codified at La. Rev. Stat. Ann. § 42:578, pursuant to La. Acts 1990, No. 14, § 1). Generally, DROP is an optional benefit program of LASERS that provides a mechanism for members who are eligible for regular retirement under LASERS to continue working for up to 36 months and to accumulate money in an individual account based on the monies that the employee would otherwise have received as a monthly retirement benefit. See Louisiana State Employers’ Retirement System, Publication R1006 (attached). Employees may only withdraw money from their DROP account after they terminate state employment. Id.

When Louisiana authorized DROP as an option under LASERS in 1990, the DROP legislation provided that “[i]n lieu of terminating and accepting a retirement allowance,” any member of LASERS who is eligible for regular retirement under LASERS may elect to participate in DROP instead. See La. Rev. Stat. Ann. § 11:447(A). The original legislation provided that membership in LASERS ceased once participation in DROP began, and that LASERS considered the articipant in retired status. See La. Rev. Stat. Ann. § 42:578.2(A) (1990) .14 LASERS credited to the DROP account retirement benefits that otherwise “would have been due” to participants. See La. Rev. Stat. Ann. § 42:578.2(C). Although this language implies that DROP participants were not plan participants in LASERS, other language states that the DROP account was “part of the system fund” and was “not subject to any fees, costs, or expenses of any kind.” See La. Rev. Stat. Ann. § 42:578.3(A). LASERS was required to maintain “subaccounts within this account reflecting the credits attributed to each participant in the plan, but the monies in the account shall remain a part of the fund until disbursed to a participant in accordance with the plan provisions.” See La. Rev. Stat. Ann. § 42:578.3(B). In 1993, an informational packet from LASERS concludes that the DROP provided an alternative to regular retirement “for members of LASERS.” See DROP, LASERS, Thus, in retrospect, it appears more likely than not that as of its effective date of January 1, 1991, the DROP account was part of LASERS’ overall retirement system.

Additionally, since 1998, courts in Louisiana have treated DROP plans as part of a public employee’s retirement plan. These rulings were made in the context of dividing retirement plan benefits at divorce. Although the main issue in these cases was not whether DROP plans are part of the overall retirement system, nonetheless, the cases shed some light on how Louisiana state courts view DROP plans in relation to the overall retirement plans of public employees. For instance, in 1998, the Louisiana Supreme Court noted that employees in LASERS were eligible to participate in DROP, which allowed payment of earned retirement benefits into a DROP account based on a “fictitious retirement” while the employee continued to work. Bailey v. Bailey, 708 So.2d 354, 355 (La. 1998). The court noted that the statutory provisions governing the DROP program referred repeatedly to DROP benefits as “retirement benefits” and that such benefits were “fixed” as of the date of entry into DROP. Id. at 358-59. Hence, the court ruled that DROP funds were part of an employee spouse’s retirement benefits and were to be apportioned, like other retirement benefits, at divorce. Id. at 357-58.

Another court in Louisiana observed that DROP funds are “derived from the retirement benefits” and are apportioned like the other retirement benefits at divorce. Sullivan v. Sullivan, 801 So.2d 1093, 1096 (La.App. 2001). Likewise, another Louisiana court noted that a teacher’s retirement benefits “obviously included her DROP benefits, which are taken in lieu of a retirement allowance and treated as one ‘subaccount’ in the retirement system.” McKinstry v. McKinstry, 824 So.2d 1260, 1262 (La.App. 2002). Hence, Louisiana courts treat DROP plans as part of a public employee’s retirement plan. We are not aware of contrary authority.

In summary, we conclude that, from 1991 to 2001, LASERS’ DROP should be treated as part of the overall LASERS retirement system, and not as a separate retirement plan.15 We note that SSA may need to update or amend several provisions in the Program Operations Manual System (POMS) to reflect this determination. See POMS GN 02608.102.B.3 (stating that a DROP is a separate pension plan), RS DAL00605.360 (discussing Louisiana’s DROP plans

Michael M~

Regional Chief Counsel

By _____________

Anne L. H~

Assistant Regional Counsel


Footnotes:

[1]

For members of DARS who were participating in the regular DROP on or before June 30, 2008, the member must complete his or her period of participation subject to the terms and provision in effect on the date he or she began participating in the regular DROP. See La. Acts 2008, No. 835, § 3.

[2]

Initially, DARS members could participate in regular DROP for two years, but in 1995, the legislature increased the time that DARS members could participate in regular DROP to three years. See La. Acts 1995, No. 982, § 1.

[3]

Initially, ROVERS members could participate in the DROP for two years, but in 1993, the legislature increased the time that ROVERS members could participate in DROP to three years. See La. Acts 1993, No. 929, § 1.

[4]

For members of ARF who were participating in the regular DROP on or before September 30, 2008, the member must complete his or her period of participation subject to the terms and provision in effect on the date he or she began participating in the DROP plan. See La. Rev. Stat. Ann. § 11:1456.2; La. Acts 2008, No. 398, § 3.

[5]

Initially, ARF members could participate in DROP for two years, but in 1999, the legislature increased the time that ARF members could participate in DROP to three years. See La. Acts 1999, No. 24, § 1.

[6]

Initially, PERS members could participate in DROP for two years. See La. Acts 1990, No. 338, § 2. In 1995, the legislature increased the time that PERS members could participate in DROP to three years. See La. Acts 1995, No. 1035 § 2, codified at La. Rev. Stat. Ann. § 11:1938(C) (eff. June 29, 1995).

[7]

For members of LSPRF who were participating in the regular DROP on or before June 30, 2001, the member must complete his or her period of participation subject to the terms and provision in effect on the date he or she began participating in the DROP plan. See La. Acts 2009, No. 480, § 4.

[8]

Initially, LSPRF members could participate in DROP for 2 years. See La. Acts 1990, No. 12, § 1. In 1995, the legislature increased the time that LSPRF members could participate in DROP to 3 years. See La. Acts 1995, No. 1113, § 1. In 2001, the legislature provided that the duration of the Back-DROP period shall not exceed the lesser of 36 months or the number of months of creditable service accrued after the member first became eligible for regular retirement. See La. Rev. Stat. Ann. § 11:2178.1(B).

[9]

Initially, TRSLA members could participate in DROP for 2 years. See La. Acts 1991, No. 62, § 1. In 1993, the legislature increased the time that TRSLA members could participate in DROP to 3 years. See La. Acts 1993, No. 974 § 1, eff. Jan. 1, 1994.

[10]

Initially, MERS members could participate in DROP for 2 years. See La. Acts 1978, No. 582, § 1. In 1993, the legislature increased the time that MERS members could participate in DROP to 3 years. See La. Acts 1993, No. 929 § 1, eff. July 1, 1993.

[11]

Initially, LSERS members could participate in DROP for 2 years. See La. Acts 1991, No. 56, § 1. In 1993, the legislature increased the time that LSERS members could participate in DROP to 3 years. See La. Acts 1993, No. 929 § 1, eff. July 1, 1993.

[12]

For members of LSPRS who were participating in DROP on or before September 30, 2009, the members must complete their period of participation subject to the terms and provision in effect on the date he or she began participating in the DROP plan. See La. Acts 2009, No. 480, § 4.

[13]

Initially, LSPRS members could participate in DROP for 2 years. See La. Acts 1990, No. 11, § 1. In 1995, the legislature increased the time that LSPRS members could participate in DROP to 3 years. See La. Acts 1995, No. 1130, § 1. In 2009, the legislature provided that the duration of the Back-DROP period shall not exceed the lesser of 36 months or the number of months of creditable service accrued after the member first attained eligibility for normal retirement. See La. Rev. Stat. Ann. § 11:1312.1(C).

[14]

In 2001, Louisiana changed the law to state that upon the effective date of an individual’s commenceme