Louisiana LASERS: Retirement Options, DROP and Refunds

Updated October 16, 2026. Quick answer: A Regular member of the Louisiana State Employees’ Retirement System (LASERS) selects one of seven retirement options when retiring, and under every option except the Maximum Option and Option 1 the one named beneficiary cannot be changed afterward. Option 4A pays the member 90% of the Maximum Option benefit and a spouse 55%. The Initial Benefit Option pays up to 36 months of benefit as a lump sum, and DROP defers retirement for up to 36 months. A refund cancels all service credit, and 20% of the taxable part is withheld unless it is rolled over.

What this page covers and what it does not

This page works from eight chapters of the LASERS Member’s Guide to Retirement, read in October 2026 (revision dates are in the source list below, from January 2017 to August 2026). It covers Regular Members, the general state employee plan, and each rule names the hire-date group it covers. Hazardous duty and other special plans, disability retirement and survivor benefits before retirement were not read. Another Louisiana system is covered at Louisiana MPERS retirement decisions.

When a Regular Member can retire, by hire date

The reduced route has a limit: “Deferred Retirement Option Plan [DROP] participation and retirement with an Initial Benefit Option [IBO] are not available to members who choose this option”.

How the benefit is figured

For every Regular Member group, “you will accrue benefits at 2.5 percent of your average compensation per year”. Hired before July 1, 1986: “If you were hired before July 1, 1986, and did not terminate employment and receive a refund of your contributions, you will receive an additional $300.00 per year added to your retirement benefit”.

A computed example from assumed inputs, not a LASERS figure: a member hired after 1986 retires with an assumed $48,000 average compensation and 20 years of service credit. At 2.5% for each of 20 years, the allowance is a computed $24,000 a year, or a computed $2,000 a month, before any option reduction.

The election: seven options and what each does for a survivor

The default for a married member: “Generally, a married member must choose a retirement option which provides a benefit for their spouse that is at least fifty percent of the benefit payable to the retiree”. A different choice is allowed, but “You may choose an option that does not leave a monthly benefit for your spouse or name another beneficiary, if your spouse agrees with the choice, and signs Form 04-04: Spousal Consent in the presence of a Notary Public”. See spousal consent to waive a joint and survivor annuity.

These are the guide’s figures for one person, not a schedule. Of the Maximum Option the guide says “Contributions are typically exhausted within two to three years after your retirement or entry into DROP”. Of Option 1: “This option is not available to members who choose the Initial Benefit Option (IBO)”. Option 2B is not in the table; the guide says “Option 2B is only available to members with a mentally handicapped child or children”. Option 4A has conditions: “Option 4A is only available to members who have been married at least two years at the time of their retirement. Only your spouse may be named as your beneficiary”. Also, “This option is not available to Disability retirees”. Ages set the reductions for Options 2A, 3 and 4B.

A computed check on the guide’s example: 90% of $895.87 is a computed $806.28 and 55% is a computed $492.73, matching Option 4A; 50% of $852.94 is a computed $426.47, matching Option 3. A computed example from an assumed $2,000 Maximum Option benefit, not a LASERS figure: Option 4A pays the member a computed $1,800 a month and a surviving spouse a computed $1,100 a month for life. The general trade-off is at single-life versus joint-and-survivor pension.

What cannot be changed, and the deadlines

The guide says “For all options other than the Maximum Option or Option 1, only one beneficiary may be named, and the beneficiary cannot be changed after your retirement”. One exception: “If your named beneficiary dies, you may request to have your retirement benefit increased to the amount that you would have received had you initially selected the Maximum Option”. After a divorce a member may ask for an actuarially reduced Maximum amount, with a court order and a nonrefundable calculation fee.

On timing, Chapter 12 says “You should submit your retirement application to LASERS at least six months before your planned retirement date”, and “Your retirement application must be received on or before your termination date for your retirement to be considered while in state service”. Also, “If there is a break in service between your date of termination and your effective date of retirement, you will be considered out of state service and your monthly benefit may be reduced”. “No retirement benefits will be paid until LASERS receives all of the required documents”.

The Self-Funded COLA: a permanent reduction

A second election is made at retirement or on entry into DROP. The guide says “you may elect to receive an actuarially reduced retirement allowance plus a 2.5 percent annual cost-of-living adjustment (COLA), which will be effective on your retirement anniversary date”. A member who is not yet 55 at that time can still select it, but it is not payable until the anniversary date after the member turns 55. “The Self-Funded COLA is not available for Disability retirement”. It adds: “The choice to take the Self-Funded COLA is irrevocable, and you will receive this actuarially reduced benefit for your lifetime”.

Its example is a member retiring at age 60 with 20.00 years of service credit and a $50,000 final average compensation, a Maximum benefit of $2,083.33 a month, cut by a printed factor of 0.792440 to $1,650.91. A computed check: $2,083.33 times 0.792440 is a computed $1,650.91, a cost of a computed $432.42 a month. The guide’s break-even for its example member, Mary: “If Mary had chosen Regular retirement with a Self-Funded COLA, her break-even point would be between year 19 and 20. Since she retired at age 60, she would reach her break-even point at age 80”. After 15 years she would have received a computed $19,751.44 less in total.

A lump sum at retirement: the Initial Benefit Option

The guide says “The Initial Benefit Option (IBO) is an optional method of retirement which allows you to receive a lump-sum equivalent of up to 36 months of your maximum retirement benefit at the time of your retirement”. “Any member who is eligible for an unreduced Regular retirement may select the Initial Benefit Option (IBO)”. “Members who take an actuarially reduced retirement, Disability retirement, or who participate in DROP are not eligible to select the IBO”, and “IBO participants cannot select retirement Option 1”. Future checks shrink: “All future monthly benefits will be reduced based on your age at retirement, and the amount of the IBO selected”.

In the guide’s example a member retires at age 52 with 30 years of service on the Maximum Option and takes the largest IBO. The guide says “Since he chose the maximum IBO amount he will receive a lump-sum payment of 36 times $3,462.50 or $124,650.00”, at a cost where “The approximate monthly cost to receive a $124,650.00 IBO would be $7.12 times 124, or $882.88”. Computed checks: 36 times $3,462.50 is a computed $124,650.00; $7.12 times 124 is a computed $882.88; and $3,462.50 less that is a computed $2,579.62 a month for life. The cost chart carries the note “Chart changes periodically”. Where the money sits depends on the date first eligible: “Members eligible for Regular retirement on or after January 1, 2004, will have their IBO transferred to the Self-Directed Plan”. See pension lump sum versus monthly annuity break-even.

DROP: working while the benefit accumulates

The guide says “The Deferred Retirement Option Plan (DROP) is an optional retirement method that allows you to defer your retirement benefit for a maximum period of 36 months while you continue to work”. On eligibility: “A Regular Member must be eligible for retirement before participating in DROP. Members who take an actuarially reduced retirement may not participate in DROP”. DROP and IBO rules in the guide are keyed to the date a member was first eligible to retire, not to hire date. For those eligible on or after January 1, 2004, “If you are eligible to retire on or after January 1, 2004, you are required to enter the Self-Directed Plan”.

For members first eligible to retire on or after January 1, 2004, the full 36 months depends on when the member starts: “You must begin DROP participation within 60 days of your first eligible date for retirement in order to participate for the full 36 months. If you enter DROP later than 60 days from your first eligible date, the 36-month participation period is reduced”. Members eligible on or before December 31, 1995 could enter “Old DROP” at any time before retirement with no defined window, and the “New DROP” plan for those eligible to retire between December 31, 1995, and December 31, 2003 is no longer available. Also, “The retirement option selected upon participation in DROP cannot be changed”, and “You may elect to participate in DROP for fewer than 36 months. However, once you have chosen a DROP end date, this end date cannot be extended. You cannot exit DROP prior to your stated ending date unless you terminate employment”. At the end, “Once a member completes the DROP participation period, they must choose to either terminate employment and retire, or continue employment and resume contributions to LASERS”. On interest: “Although LASERS DROP accounts do not earn interest during the DROP participation period, they are eligible to accrue interest once the participation period ends”. That applies to accounts held at LASERS. For members eligible to retire on or after January 1, 2004, the account moves to EMPOWER when participation ends, LASERS pays no interest on it, and the member chooses among investment options instead.

A computed check on the guide’s figures: 36 deposits of $1,600.00 come to a computed $57,600.00, matching its full-DROP account of $57,600.00.

Getting money out of a DROP or IBO account

For members eligible to retire before 2004, “If you were eligible to retire before January 1, 2004, and have a LASERS DROP or IBO account, you can make withdrawals from your account after you terminate state service”. Methods include a “Rollover to a qualified tax annuity plan or IRA”. Tax: “Lump-sum payments, one-time payments, and monthly payments where the distributions will be paid out in less than 10 years, will be subject to a mandatory 20 percent federal income tax withholding”, and “If you are under age 59½, payments may also be subject to a 10 percent early withdrawal penalty”.

For later members, “Members eligible to retire on or after January 1, 2004, automatically have their DROP/IBO accounts transferred to the third-party administrator, EMPOWER”. The guide warns that “Participation in the Self-Directed Plan (SDP) may result in the loss of principal or earnings based on market performance”.

On state tax, “All DROP/IBO Distributions from LASERS and the SDP are exempt from Louisiana state income tax”. See Louisiana retirement taxes and does Louisiana tax pensions.

Leaving before retirement: a refund or leaving the contributions

The guide says “Refunds of contributions automatically cancel all service credit in LASERS. In other words, a refund cancels your membership in the retirement system, and renders you ineligible for benefits”. Also, “The refund will only be of your contributions, not your employer’s contributions, and will not include interest”. After a return, “If you have received a refund of contributions and return to work in a LASERS-eligible position, your eligibility for retirement is based on the date you returned to State service”. The chapters read give no separate vesting rule; the service tests in the eligibility table are the only thresholds stated. See pension refund versus leaving it.

On tax, “If not rolled over, these funds are subject to a mandatory 20 percent federal withholding tax. You may also be subject to a 10 percent federal early withdrawal penalty. LASERS does not withhold Louisiana taxes on your refund”. A computed example from an assumed $10,000 taxable refund paid to the member, not a LASERS figure: 20% is a computed $2,000 withheld, leaving a computed $8,000 before any further tax or penalty.

A member who returns can repay: “In order to repay a refund, you must have 18 months of non-refunded service credit on record with LASERS”. The price: “To restore your prior service credit, you must repay the refunded amount plus the actuarially assumed rate of interest compounded annually from the date of the refund until payment is made”. “Under no circumstances can the repayment of a refund be made by paying monthly installments”.

Cost-of-living increases from the system

Chapter 21 says “COLAs are granted by the Legislature. They are not automatic and not guaranteed, and no COLA is granted unless it can be paid for in full”. Two things must happen: “There must be enough money in the COLA account to cover the full actuarial cost of the increase, and the LASERS Board of Trustees must request the COLA and the Legislature must approve it by a two-thirds vote of both houses”. The size: “A COLA may be up to 2 percent, applied to the first $60,000 of your annual benefit”, which is a computed $1,200 a year at 2 percent. The guide adds that the Board may recommend no more than 2 percent, while the Legislature may authorize a COLA above 2 percent, subject to the Governor’s approval. A Regular retiree qualifies at “At least age 62 and retired at least two years”.

What the IRS adds on tax

A refund or lump sum from a public pension is a distribution, so the IRS rules apply on top of the LASERS plan’s own. On withholding, the IRS says that a taxable eligible rollover distribution paid to you “is subject to mandatory income tax withholding (generally at a rate of 20%), even if you intend to roll it over later”, and that if you roll it over yourself “you’ll have to add funds from other sources equal to the amount withheld”. LASERS’ own refund chapter describes the same 20% withholding when a refund is not rolled over, and its DROP and IBO chapter lists a rollover to an IRA or qualified plan as a disbursement method. The rollover clock, if the money is paid to you: “you have 60 days from the date you receive it to roll it over to another eligible retirement plan”.

On early distributions the IRS says “the law imposes a 10% additional tax on certain early distributions from certain retirement plans”. Its list of exceptions includes “Distributions made to you after you separated from service with your employer after attainment of age 55” and “Distributions made to a qualified public safety employee from a governmental plan”. Whether an exception fits a particular refund depends on your own plan and facts, so confirm it with a tax preparer before you take one.

Where the sources disagree

The two chapters describe the system COLA differently. Chapter 10 (January 2026) says “There is no guarantee of system generated COLAs” and that “The amount of these COLAs are dependent upon the amount of excess investment returns deposited in the Experience Account used to fund COLAs, system funding, and legislative approval”. Chapter 21 (August 2026) says “Under Act 184 of the 2023 Regular Session, your employer funds COLAs directly” and that “This method replaced an earlier approach that depended on investment returns and did not reliably produce meaningful increases”. Ask LASERS which funding rules apply.

Chapters 12 and 13 are dated September 2018 and Chapter 14 January 2017, so confirm figures with LASERS.

What this page could not settle

• The pages read do not state the factors that reduce Options 2A, 3 and 4B, or the reduction for retiring with 20 years of service at any age.
• The chapters read give no separate vesting rule and do not say whether spousal consent is required for a refund.
• Survivor benefits payable if a member dies before retiring were not read.
• Service credit purchases other than repaying a refund, reciprocal service, unused leave, disability retirement and the special plans were not examined.
• The IBO cost chart is noted as changing periodically, so the age 52 figure may not be current.
• No active-member count is stated, because the 2026 valuation PDF that holds one is too large to archive as a cited source.

Common mistakes

• Assuming a beneficiary can be swapped after retirement; the guide allows only narrow exceptions.
• Choosing the 20-years reduced retirement and expecting DROP or the Initial Benefit Option; neither is available with it.
• Treating the Self-Funded COLA as free; it permanently reduces the monthly benefit.
• Taking a refund as harmless; it cancels all service credit, and 20% of the taxable part is withheld unless rolled over.

Related on this site: Louisiana retirement taxes, does Louisiana tax pensions, Louisiana MPERS retirement decisions, pension refund versus leaving it, single-life versus joint-and-survivor pension, spousal consent to waive a joint and survivor annuity, pension lump sum versus monthly annuity break-even and public pension retirement decisions by system.

Sources

• Louisiana State Employees’ Retirement System (LASERS), Member’s Guide to Retirement, Chapter 5, Refund of Contributions (revised March 2021): https://lasersonline.org/wp-content/uploads/2023/10/MG-05-RefundOfContributions1026.pdf
• Louisiana State Employees’ Retirement System (LASERS), Member’s Guide to Retirement, Chapter 8, Retirement Eligibility and Final Average Compensation (revised March 2021): https://lasersonline.org/wp-content/uploads/2016/07/MG-08-RetirementEligibility1026.pdf
• Louisiana State Employees’ Retirement System (LASERS), Member’s Guide to Retirement, Chapter 10, Retirement Options and the Self-Funded COLA (revised January 2026): https://lasersonline.org/wp-content/uploads/2024/01/MG-10-RetirementOptions1026.pdf
• Louisiana State Employees’ Retirement System (LASERS), Member’s Guide to Retirement, Chapter 12, Regular Retirement (revised September 2018): https://lasersonline.org/wp-content/uploads/2024/06/MG-12-RegularRetirement1026.pdf
• Louisiana State Employees’ Retirement System (LASERS), Member’s Guide to Retirement, Chapter 13, Initial Benefit Option (revised September 2018): https://lasersonline.org/wp-content/uploads/2024/06/MG-13-InitialBenefitOption1026.pdf
• Louisiana State Employees’ Retirement System (LASERS), Member’s Guide to Retirement, Chapter 14, Deferred Retirement Option Plan (revised January 2017): https://lasersonline.org/wp-content/uploads/2024/06/MG-14-DeferredRetirementOptionPlan1026.pdf
• Louisiana State Employees’ Retirement System (LASERS), Member’s Guide to Retirement, Chapter 15, DROP/IBO Account Withdrawals and the Self-Directed Plan (revised February 2024): https://lasersonline.org/wp-content/uploads/2025/03/MG-15-DROP_IBO_AccountWithdrawals1026.pdf
• Louisiana State Employees’ Retirement System (LASERS), Member’s Guide to Retirement, Chapter 21, Cost-of-Living Increases (revised August 2026): https://lasersonline.org/wp-content/uploads/2021/08/MG-21-Cost-of-LivingIncreases1026.pdf
• IRS, Topic no. 413, Rollovers from retirement plans (irs.gov): https://www.irs.gov/taxtopics/tc413
• IRS, Topic no. 558, Additional tax on early distributions from retirement plans other than IRAs (irs.gov): https://www.irs.gov/taxtopics/tc558

Sources: the primary documents linked above, read on October 16, 2026. General information from each system’s own published materials, not legal, tax or financial advice. Your own member statement and the system’s current rules decide your benefit, and a pension counsellor at the system or a fee-only adviser is the right place to confirm anything consequential.