Home >Blog > Do Teachers in Louisiana Have ERISA Retirement Plans?
March 18, 2024 | J. Price McNamara
Teaching is a rewarding but challenging career that requires dedication and passion. As a teacher, you also need to think about your financial security and well-being in the long term. That's why it's important to know what kind of retirement plans you can access and how they work.
In Louisiana, teachers can choose from different retirement plans. The Employee Retirement Income Security Act (ERISA), a federal law, regulates some of these plans. This law sets certain standards and protections for retirement plans in the private sector. But does it apply to teachers in Louisiana? And what are the pros and cons of each retirement plan option?
Below, an Louisiana ERISA lawyer will answer these questions and more to guide you in making informed decisions about your retirement planning.
The Teachers' Retirement System of Louisiana (TRSL) offers its members a Defined Benefit (DB) plan, including teachers and other public school employees. This plan is a traditional pension system that provides lifetime retirement benefits based on a set formula rather than the amount of contributions made by the employee.
Members of the TRSL contribute 8.0 percent of their salary towards the retirement plan. This system pools contributions from both employees and employers to fund retirement benefits.
Three main factors determine the retirement benefits under TRSL:
The formula to calculate the annual retirement benefit for those hired before a specific date is [Years of Service] x [Formula percent] x [3-Year High Average Salary]. For those hired on or after that date, it's calculated as: [Years of Service] x [Formula percent] x [5-Year High Average Salary].
Eligibility for retirement benefits depends on when you became a TRSL member, with specific criteria regarding age and years of service:
The TRSL, a public-sector retirement system, primarily manages Louisiana teachers' retirement plans. TRSL offers a Defined Benefit plan, where an employee's pension payments are calculated based on a formula that considers factors such as salary, years of service, and age. This contrasts with Defined Contribution plans, where benefits derive from contributions to and the performance of investment funds within the account.
ERISA does not cover those TRSL offers for Louisiana teachers and public sector retirement plans. ERISA applies to private-sector employment plans and does not govern state and local governmental entities, including their pension plans. Instead, public sector plans are subject to state laws and regulations that oversee their operation, funding, and benefit structures.
Louisiana teachers' retirement plans are structured, regulated, and protected without ERISA governance under Louisiana state law. The state ensures responsible management of these plans to provide retirement, disability, and survivor benefits to teachers and other public school employees.
In Louisiana, a strong state legislative framework protects the retirement system for teachers and public education employees. This framework ensures the reliability and predictability of retirement benefits for educators. The cornerstone of this system lies in several critical regulations:
To ensure the financial health of the TRSL, the state mandates consistent contributions from both the educators themselves and their employers, which include local school boards and the state. This strategy aims to accumulate sufficient funds to cover future retirement benefits and maintain the pension system's long-term viability.
The TRSL entrusts its governance to a Board of Trustees composed of education sector representatives, appointed state officials, and financialists. This board's responsibilities include policy formulation, investment oversight, and the general administration of the fund, ensuring that decisions prioritize the beneficiaries' best interests.
State laws explicitly define the methodology for calculating retirement benefits, incorporating variables such as the duration of service, the average salary towards the end of an educator's career, and the age at retirement.
This structured formula ensures the equitable and adequate distribution of retirement, disability, and survivor benefits. It serves as a foundation for fair and consistent benefit allocation, promoting financial security for educators throughout their retirement years.
To address inflation and its impact on retired educators, the TRSL periodically considers cost-of-living adjustments (COLAs). Although these adjustments are not automatic, they represent a critical tool through the legislature that can enhance retirees' purchasing power, ensuring their financial well-being in retirement.
Additional oversight comes from the Louisiana Legislature, which conducts regular audits and assessments to confirm the retirement system's adherence to legal and regulatory standards.
Any proposed modifications to the system's structure or benefit schemes must undergo legislative scrutiny and approval, ensuring a thorough and accountable governance process.
This legislative involvement adds an extra assurance that the retirement system complies with established standards and is responsive to its members' evolving needs.
A commitment to transparency underpins the TRSL, with annual financial reports and performance summaries made publicly accessible. This commitment ensures that all stakeholders, especially the system's members, clearly understand its fiscal status and the management of its assets.
By providing comprehensive insights into investment strategies, risk management, and future projections, TRSL fosters trust and informed decision-making among its members, reinforcing the integrity of the retirement system.
Yes, Louisiana offers an alternative retirement option for certain academic and unclassified employees called the Optional Retirement Program (ORP). This program is distinct from the traditional Defined Benefit plan provided by the TRSL, catering specifically to employees in higher education and related sectors.
The ORP is a Defined Contribution plan, emphasizing flexibility and portability of benefits.
Employees opting for the ORP contribute a portion of their salary to the plan, which then undergoes investment through one of the approved carriers, such as Voya Financial, Teachers Insurance and Annuity Association (TIAA), or Corebridge Retirement Services.
The future benefits from this plan depend on the performance of these investments, unlike the TRSL-defined benefit plan, where retirement income is calculated based on a set formula related to years of service, salary, and age.
One of the main aspects of the ORP is the immediate vesting of contributions and the ability to transfer benefits if an employee moves to another institution within higher education. This plan suits individuals seeking more control over their retirement savings and those who may not have a long-term commitment to a single employer in Louisiana's public education system.
Employees have a 60-day window from their date of hire to decide whether to enroll in the ORP, making an irrevocable choice to forego the traditional pension benefits offered by TRSL.
This decision point is crucial as it sets the path for an employee's retirement planning within the state's higher education system. Those who choose the ORP over the TRSL plan waive their rights to the latter's retirement, survivor, and disability benefits.
The ORP's focus on portability and investment-based growth can be attractive for employees confident in managing their retirement savings and those who value the flexibility to move between institutions without losing their retirement contributions. However, this plan requires active engagement with the chosen investment carrier to manage and optimize the retirement accounteffectively.
In Louisiana, educators can contribute to 403(b) retirement plans, similar to 401(k) plans but specifically designed for employees of public schools and certain tax-exempt organizations.
These are defined contribution plans where employees can save for retirement by contributing to individual accounts, which then undergo investment based on the options available within the plan. The contributions made to these accounts are generally not taxed until they are withdrawn, typically after retirement, offering a tax-advantaged way to save for the future.
One of the key features of 403(b) plans is their flexibility in contributions and the potential for tax-deferred growth. Employees can decide how much of their salary to contribute within the limits set by the IRS.
The maximum amount employees can contribute from their salary to a 403(b) account is $23,000 in the current year. This represents an increase from the previous years, reflecting adjustments for economic changes.
Additionally, for employees who are 50 years of age or older by the end of the calendar year, there's an opportunity to accelerate savings through catch-up contributions.
The catch-up contribution limit is $7,500, representing an increase from $6,500 in the previous years. This allows older employees to contribute up to $30,500 to their 403(b) plans, significantly boosting their retirement savings as they approach retirement age.
The market receives these contributions and any employer contributions for investment. The employer chooses the investment options and may include mutual funds or annuities. Employees need to understand that investment options may be limited and that fees associated with these plans can vary, potentially affecting the overall growth of their retirement savings.
Retirement planning can present significant challenges for Louisiana teachers due to the complexity and variety of options available.
These challenges stem from several core areas:
To address these challenges, educators should seek professional advice from an ERISA lawyer, take advantage of educational workshops and seminars, and use online tools and resources dedicated to retirement planning. Staying proactive in understanding and planning for retirement ensures teachers can secure their financial future effectively.
For Louisiana educators seeking comprehensive insights into their retirement benefits and protections, consulting an ERISA appeal, litigation, and insurance benefits recovery attorney can change the game. With their assistance, educators can make informed decisions, address potential issues, and secure the retirement benefits they deserve.
An ERISA attorney can aid you in understanding the fine print of your retirement plans, advise on the impact of legislative changes, and provide a customized plan to appeal denied claims successfully. By doing so, you can ensure that you are making informed decisions and equipped with the knowledge and legal strategies a legal professional gives. This will allow you to handle any issues you may face with retirement planning.
Losing my own brother, then my father and sister after long, disabling illnesses just a few months apart drove a career change for me. Before that experience, I never truly understood the place you’re in. I never understood the dramatic impact that receiving (or not receiving) the disability and life insurance benefits you paid for and counted on can have on your life especially when you need to focus on family and healing. What I experienced with my own family now drives the way I view my clients and my work, and I will never forget it!
