Updated October 30, 2026. Quick answer: The Municipal Employees’ Retirement System of Louisiana (MERS, not the municipal police system) pays 3% of final compensation per year of service in Plan A and 2% in Plan B. A retiring member picks the maximum life benefit or Option 2, 3 or 4, and cannot change the beneficiary after retirement. The handbook says benefits are paid monthly, not as a lump sum, apart from DROP payments and refunds. A refund of contributions cancels all rights and credit in the system, and 20% is withheld from sheltered contributions paid directly to the member.
More on public pension COLAs for 2027: the Louisiana MERS COLA for 2027 and the 2025 increase.
What this page covers and what it does not
This page covers the Municipal Employees’ Retirement System of Louisiana (MERS), Plans A and B, the system for employees of participating municipalities. It is not the Municipal Police system, which has its own rules at Louisiana Municipal Police retirement decisions. The sources are the MERS handbook (sections dated April 2021 to June 2026) and the actuarial valuation as of June 30, 2025.
The valuation prints active members per plan: “there are 4,372 active members in Plan A” and “There are 2,142 active members in Plan B”, at June 30, 2025, under the label “Active Members (Including DROP participants)”. It prints no combined total; the sum would be a computed 6,514, not a MERS figure.
Which plan and tier you are in
The employer decides the plan: “All members of the Municipal Employees’ Retirement System are participants in either Plan A or B according to the provisions of the agreement entered into by their employer”. The handbook then splits members by hire date: “Plan A Tier 1 (defined as those members whose first employment making them eligible for membership in MERS occurred before January 1, 2013)”; Tier 2 members are those “whose first employment making them eligible for membership in MERS occurred on or after January 1, 2013”. Most rules below differ by plan and tier, so confirm both with MERS first.
When a pension can start
| Plan and tier | Normal retirement (service credit and age) |
|---|---|
| Plan A, Tier 1 | 25 years of service at any age, or 10 years and age 60 |
| Plan A, Tier 2 | 30 years and age 55, or 10 years and age 62, or 7 years and age 67 |
| Plan B, Tier 1 | 30 years of service at any age, or 10 years and age 60 |
| Plan B, Tier 2 | 30 years and age 55, or 10 years and age 62, or 7 years and age 67 |
Early retirement is actuarially reduced. In Plan A, the handbook covers a Tier 1 member who “has credit for twenty years of Plan A service” and a Tier 2 member “who has twenty-five years of Plan A service, exclusive of military service and unused annual and sick leave, may retire at any age”. The benefit “must be actuarially reduced from the member’s earliest normal retirement age assuming continuous service to that age”. The handbook’s Plan B section on early retirement addresses Tier 2 only. “The early retirement eligibility standard is not available for participation in the Deferred Retirement Option Plan.”
How the benefit is figured
Plan A: “The monthly maximum Plan A normal retirement benefit is an amount equal to three percent of the member’s final compensation (see definition) multiplied by the member’s years of creditable service”. Plan B: “The monthly Maximum Plan B normal retirement benefit is an amount equal to two percent of the member’s final compensation (see definition) multiplied by the member’s years of creditable service”. The handbook defines final compensation as “a member’s average monthly earnings during the highest paid sixty consecutive months or joined months if service was interrupted”. Its own examples use 27 years and $3,000 a month, giving $2,430 a month in Plan A and $1,620 in Plan B.
A computed example from an assumed $3,500 monthly final compensation and an assumed 20 years, not a MERS figure: Plan A is 3% x 20 years x $3,500, a computed $2,100 a month before any option reduction, and Plan B is 2% x 20 x $3,500, a computed $1,400 a month. Members pay in too: “Currently, Plan A members in Tiers 1 and 2 contribute 10% of pay”, and “Plan B members, in Tiers 1 and 2, currently contribute 5% of pay” (handbook sections dated April 2021, so confirm the current rates).
The election at retirement: Maximum, Option 2, 3 or 4
The handbook says “an applicant may elect, at the time of application for regular or disability retirement benefits, to receive the actuarial equivalent of such benefits in a reduced retirement allowance payable throughout his life with payments to his designated beneficiary after his death”. The forms are summarized below.
| Option | What the retiree receives | What the beneficiary receives |
|---|---|---|
| Maximum | The largest monthly benefit, for life | None, except a normal retiree is guaranteed at least the accumulated contributions |
| Option 2 | A reduced benefit for life | The beneficiary continues to receive the same monthly benefit, for life |
| Option 3 | A reduced benefit for life | The beneficiary receives one-half of the benefit, for life |
| Option 4 | A form the board approves, certified equivalent in value to the maximum | Depends on the form approved |
| Option 4.2 or 4.3 | A reduced benefit for life | All (4.2) or one-half (4.3) of the reduced benefit continues; if the beneficiary dies first, the retiree returns to the maximum |
“The board must approve any selection of the Option 4 mode of benefit payments.” On the pop-up forms: “If the designated beneficiary dies before the retiree dies, the benefits payable to the retiree shall be increased to the amount the retiree would have received had the retiree selected the maximum benefit”.
A computed example from an assumed $1,800 reduced monthly allowance, not a MERS figure (the handbook prints no reduction percentage): Option 2 would continue at $1,800, and Option 3 would pay a computed $900 a month. See single-life versus joint-and-survivor pension for the trade-off.
A further form adds raises. The handbook describes forms that “provide a reduced retirement allowance plus an annual two and one- half percent cost-of-living adjustment (COLA) effective on the retirement anniversary date of the retiree and shall be payable to any retiree who is age fifty-five or older”. A computed example from the same assumed $1,800, not a MERS figure: at two and one-half percent, entered as 1.025, the allowance would be a computed $1,845.00 after one increase and $1,891.13 after two.
What is irrevocable, and the deadlines
“A retiree may not change the designation of the option beneficiary after retirement.” “A retiree may not change the option selection later than sixty days after the application for retirement is received by the system.” If the beneficiary dies first, “then all benefit payments cease when the retiree dies”, apart from the Option 4 forms that provide otherwise. “If a member is married at the time of application, the member’s spouse must sign the application before it may be submitted to the system.” “Applications for normal retirement should be submitted to the system at least six weeks prior to the planned retirement date.” See spousal consent to waive a joint and survivor annuity.
No retirement lump sum, but DROP pays one
The handbook says “benefits may not be paid in a lump sum or actuarially-equivalent lump sum”. The exceptions it names are DROP payments and refunds. The general question is at pension lump sum versus monthly annuity break-even.
DROP: what to elect first and how it pays
The handbook says “a member who is eligible for normal retirement may elect to participate in the Deferred Retirement Option Plan (DROP)”. “The duration of participation in DROP must be specified and may not exceed three years.”
“The member must select the mode of benefit payment and the option beneficiary prior to DROP entry.” “These selections are irrevocable and may not be changed at a later date even if there are unexpected changes in a person’s life situation prior to terminating employment and receiving retirement benefits.”
On entry, “active contributing membership in the system terminates even though the participant continues in employment” and “retirement credit is not earned during DROP participation”. Payout “may be made as a lump sum payment from the system equal to the DROP account balance, a true annuity equal in value to the DROP account balance, or any other method of payment approved by the board”.
A computed example from an assumed $2,100 monthly benefit over the full three years, not a MERS figure: 36 months x $2,100 credits a computed $75,600 before interest. “If a lump sum DROP distribution is paid directly to the retiree by the retirement system, under most circumstances, the system is required by federal law to withhold 20% of the distribution for federal income taxes.” On that assumed amount the withholding would be a computed $15,120. “Lump sum and periodic distributions (annual or monthly) which will result in distribution of the retiree’s DROP account in less than ten years are eligible for rollover into an Individual Retirement Account (IRA) or other qualified retirement plan.” See 20% withholding on a pension lump sum.
Leaving before retirement: refund or leave the money
“A member who ceases to be an employee may apply for and be paid a refund of accumulated employee contributions.” “Payment of a refund of employee contributions cancels all rights and credit in the system.” “Neither the former member nor any other person will be entitled to any benefits on the former member’s account after a refund is paid.”
Leaving the money keeps a pension possible. “A person who has credit for ten or more years of service in Tier 1 or seven or more years in Tier 2, who ceases to be an employee prior to attaining the age required for normal retirement eligibility, and who does not withdraw his accumulated employee contributions from the system will become eligible for normal retirement benefits upon attaining the required age.” The handbook says funds on deposit “may leave the accumulated employee contributions on deposit with the system, but such funds do not accrue interest that could be paid to the former member at a subsequent time upon a request for a refund of accumulated employee contributions”. See pension refund versus leaving it.
“The requirement to become a member of the system exists regardless of whether the member withdrew their contributions made during the previous period of membership.”
How a refund is taxed and paid
“The portion of any refund equal to those employee contributions that were paid prior to January 1, 2000, may not be rolled over.” “The retirement system is required to withhold 20% of the sheltered employee contributions that are eligible for rollover if they are instead paid directly to the member.” “The 10% income tax penalty and the 20% withholding requirement can be avoided if the employee elects to rollover all sheltered employee contributions into an IRA or other qualified retirement plan.”
The handbook’s own example uses $5,000 of sheltered contributions. A computed example on that $5,000, not a MERS figure: 20% is a computed $1,000 withheld, leaving a computed $4,000 in cash before any tax owed or penalty. “Members should consult a tax accountant for advice on matters related to refunded employee contributions.”
Repaying a refund and buying service credit
A refund can be undone in part. “A former member of the system who withdraws their accumulated employee contributions, again becomes a member of the system, and earns credit in the system for an additional six months of service may repay to the system the amount withdrawn plus interest.” The price: “The amount required to repay withdrawn contributions is calculated as the withdrawn contributions plus interest at the actuarial valuation interest rate in effect at the time of the repayment, compounded annually and computed from the date of withdrawal of such contributions until repaid.” For military service, “A member may purchase credit for up to four years of either regular or non-regular military service, or a combination of both, not exceeding four years total.” See pension buyback calculator.
If a member dies before retiring
“A member who is eligible for normal retirement at the time of death and who leaves a surviving spouse will be deemed to have retired and selected Option 2 benefits on behalf of the surviving spouse on the date of death.” Otherwise, the handbook sets benefits for a spouse married at least twelve months, for a member with five or more years of service.
| Plan | Surviving spouse | Minor children |
|---|---|---|
| Plan A | Sixty percent of final compensation while the spouse cares for a minor child; otherwise forty percent from age 60 or disability, or an actuarial equivalent paid at once, not less than twenty percent | Thirty percent each, total not over sixty percent, with no surviving spouse |
| Plan B | Thirty percent of final compensation from age 60 or disability, or an actuarial equivalent paid at once, not less than fifteen percent | The pages read describe spouse benefits only |
“To select this form of benefit, a surviving spouse must notify the system of such selection within ninety days of the application for benefits and such selection is final and irrevocable.” “The survivor must notify the board in writing of the decision to request such a refund in lieu of the survivor benefits prior to receiving any survivor benefits and must execute a waiver of the survivor benefits.” See survivor benefit with a government pension.
Cost of living increases
The handbook says “unless a member chooses a retirement option with an automatic cost-of- living adjustment, those adjustments are not guaranteed”. The board’s policy lists conditions: “The funded ratio for the plan in which the COLA is granted must be at least 70%” and “Retirees to receive the COLA must have been retired for at least one year from the effective date of the COLA”.
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 MERS’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”. MERS’s handbook describes the same 20% withholding on direct payments and a rollover as the way to avoid it. 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
Two points differ between the handbook and the valuation, and the documents read do not resolve them. First, DROP interest: the handbook says “After a participant in the plan has terminated DROP participation, the individual DROP account balance will earn interest” and points to the office for the method, while the valuation says “After a member terminates his participation in DROP his account will earn interest at the actual rate of return earned on the funds left on deposit as certified by the custodian of the system’s assets”. The two descriptions differ, so confirm the method with MERS.
Second, final compensation: the handbook’s general rule is the highest sixty months, while noting that “For a member whose first employment making him eligible for membership in the system began on or before June 30, 2006, two legislative changes led to special rules related to minimum final compensation levels”. The valuation says “final average compensation was redefined to be thirty-six months plus the number of whole months since January 1, 2013 not to exceed sixty months”. A member first employed before July 2006 should ask MERS how the average is set.
What this page could not settle
- The pages read do not state the percentage reduction for Option 2, 3 or 4 or for early retirement.
- The pages read do not state the valuation interest rate used to price a repayment, or the rate credited on DROP balances.
- The handbook’s DROP tax passage refers to minimum distributions at age 70 1/2; confirm the current required age with a tax preparer.
- The Plan A and Plan B sections read are dated April 2021 while the refund sections carry June 2026; later changes are not shown.
- The pages read do not state a Plan B Tier 1 early retirement test, or whether the board has granted any cost-of-living increase.
- Disability, reemployment after retirement, community property court orders and special rules for elected officials and marshals were not examined.
Common mistakes
- Treating this system as the Municipal Police system; the Louisiana municipal police pension is a different system with its own rules.
- Expecting to change the option beneficiary after retirement; the handbook says a retiree may not, and the option selection cannot change after sixty days.
- Entering DROP without first settling the payment option and beneficiary, because the handbook says those DROP-entry selections are irrevocable.
- Expecting the full refund check; 20% of sheltered contributions that are eligible for rollover is withheld when paid directly to the member.
- Assuming money left on deposit grows; the handbook says it does not accrue interest.
Related on this site: Louisiana Municipal Police retirement decisions, pension refund versus leaving it, single-life versus joint-and-survivor pension, pension buyback calculator, 20% withholding on a pension lump sum, survivor benefit with a government pension and public pension retirement decisions by system.
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Answer againSources
- Municipal Employees’ Retirement System of Louisiana, MERS Plan Description and Handbook of Information, sections 1.01 to 1.60 (sections individually dated, April 2021 to June 2026): https://mersla.com/handbook/
- Municipal Employees’ Retirement System of Louisiana, Actuarial Valuation June 30, 2025 (report dated November 25, 2025, in the December 11, 2025 board meeting packet): https://mersla.com/wp-content/uploads/2025/12/board_meeting-2025_12_11-agenda_packet_22.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 30, 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.