Louisiana Law

Louisiana is one of nine community property states in the country. Louisiana law defines community property as those assets and debts acquired during a marriage. And while most people think of homes, vehicles, and bank accounts when they think of assets, a retirement plan is one of the most valuable, complicated assets an individual has. Louisiana law and jurisprudence both conclude that a state pension benefit, including Deferred Retirement Option Plan (DROP) or Initial Benefit Option (IBO) funds received or accumulated during marriage, are indeed community property. Any contributions made during marriage will be viewed as community property by a Louisiana court and may be subject to division; however, the law places strict regulations on how such a division is to occur. It is important for LASERS members to be aware of how their benefit may be impacted in the event of divorce.

Community Property Division

Whether you are an active employee or a retiree of LASERS, your future or present retirement benefit could be subject to a Domestic Relations Order (DRO). A DRO is a legal document presented to the court and signed by a judge that provides instructions on how to divide a plan member’s current or future benefit with an ex-spouse. The Court has recognized two methods of apportioning a LASERS retirement benefit – a fixed percentage method and the present value method. The fixed percentage method, developed in the notable case Sims v. Sims, is most commonly used. The Sims formula considers the duration of the marriage compared to the member’s total years contributing to LASERS. The formula allots 50% of the retiree’s benefit earned during the marriage to the former spouse. Unless the order specifies otherwise, an individual’s DROP and IBO accounts, and/or any lump-sum payments received will be divided using this same formula.

The law requires that a court order be on file with LASERS before any community assets are divided. If such an order is not presented to LASERS, the retiree, not LASERS, will be held responsible for the payment of funds that may have been due to a former spouse. It is also important to note that payments will not be made to an ex-spouse until the LASERS member dies, retires, or terminates and refunds their contributions.

Retirement Option Beneficiary

At the time of retirement or entry into DROP, a member must select a retirement option that will suit his or her retirement needs. A member may elect to receive their full or “maximum” benefit; or they may choose to reduce their benefit in exchange for leaving a lifetime benefit to a beneficiary, such as a spouse. A member cannot change their retirement option beneficiary except in the event of death of the beneficiary or divorce.

Louisiana law sets out narrow requirements for effectuating an option change after divorce. Louisiana Revised Statute 11§446(E) requires a retiree to obtain a Judgment of Divorce AND a court order in which the ex-spouse “irrevocably, by court order, relinquishes” his survivorship rights under the option originally selected by the retiree. This means that a community property settlement or any other post-divorce judgment must contain this specific language and be signed by a judge to be sufficient. It is also important to keep in mind that an option change only removes the current beneficiary and allows the member to “pop-up” to the maximum benefit. There is no provision in law that allows a member to name a new beneficiary after retirement.

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The impact your divorce has on your retirement benefit is critical in a number of ways. Whether you are an active member or retiree, you are encouraged to reach out to the LASERS legal team if you are divorced or in the process of getting a divorce. LASERS provides sample court orders and can answer you or your divorce attorney’s questions.