Initial Lump-Sum Benefit (ILSB)

If you are retiring and have not participated in the Deferred Retirement Option Plan (DROP), you can choose the Initial Lump-Sum Benefit (ILSB), which provides a one-time, lump-sum payment of up to 36 months of the Maximum Option monthly benefit, along with a reduced regular monthly benefit for life. You may also choose an ILSB payment that is less than the maximum allowed.

The monthly, lifetime retirement benefit will be actuarially reduced based on the lump-sum amount withdrawn and your age at retirement.

If you choose ILSB, you must also choose a benefit option: Maximum Option, Option 2, 2A, 3, 3A, 4, or 4A. Option 1 may not be chosen.

The one-time, lump-sum distribution may:

• Be directly rolled over into an individual retirement account (IRA) or other qualified plan.
• Remain in an interest-bearing account at TRSL. The account will earn interest at 0.5% less than TRSL's actuarially realized rate of return. There are minimum withdrawal requirements. (For information on account withdrawals, see the TRSL brochure Withdrawing from Your DROP or ILSB Account.)
• Be paid directly to you, subject to any federal taxes and penalties due. Twenty percent will be withheld for federal income taxes, but this may not be sufficient to pay the taxes due.

Let's say, for example, a 60-year-old member with 18 years of service credit and 55% of a year of sick leave credit decides to retire and chooses ILSB. The member's average annual salary is $24,250.

The Maximum Option retirement allowance would be computed as follows:

• 18.55 years × 2% factor × $24,250 average salary = $8,997
• $8,997 = $750 maximum monthly benefit

By choosing an ILSB, this member could receive a maximum lump-sum payment of up to 36 times $750, or $27,000.

Using the above example, to find the monthly cost of the one-time payment, the member can find his or her age on the chart at the bottom of this page and the corresponding cost per $1,000 of $8.37.

The monthly cost to withdraw $27,000 would be $8.37 times 27, or $225.99. (The monthly cost to withdraw $10,000 would be $83.70.)

The $225.99 would be subtracted from the $750 monthly benefit to determine the actuarially reduced monthly benefit ($750 - $225.99 = $524.01). This member's new lifetime maximum monthly benefit would be $524.01 if he withdrew $27,000 as a lump sum.

The member would then have to choose one of the various retirement options (Maximum Option, 2, 2A, 3, 3A, 4, or 4A), which would be used to finalize the lifetime retirement benefit.

Payment of lump sum

If you choose an ILSB payment equal to 85% or more of your maximum lump-sum payment, you will not be able to withdraw the payment until the retirement benefit is finalized, which can often be a period of several months.

Even if you choose less than 85% of the maximum lump-sum, payment will not be immediate. Lump-sum payments cannot be processed until the benefit has been set up for estimated payment.

Retirement payments (including estimated payments)

TRSL issues retirement payments, including estimated payments, on the first of each month for that month. Service retirees must wait a minimum of 30 days after the retirement date to be added to the retirement payroll. For example, if your retirement date is June 6, your benefit can be added to the August 1 payroll as long as your completed Form 11E or 11E-5 (affidavit to choose a retirement option) is received by the first week of July.

The first retirement check will be mailed to your home address. As required by LSA-R.S. 11:815, members retiring on or after January 1, 2002, must have subsequent payments made by electronic funds transfer to a financial organization designated by the member. The member must complete and submit a Direct Deposit of Benefits (Form 15D) for deposit of the regular retirement benefit. If monthly withdrawals are made from the ILSB account, then a Direct Deposit of DROP or ILSB Account Withdrawals (Form 11R) must be completed and submitted.

Take special note

Members choosing ILSB should know that lump-sum distributions may be subject to special tax provisions. They should discuss the matter thoroughly with a tax advisor.

Members should carefully consider the fact that the monthly benefit reduction due to the ILSB is permanent. Members should look carefully at the reduced benefit they will receive after taking ILSB to be sure they are not reducing their benefit to the point where they will not be able to meet future financial obligations.

Get a benefit estimate!

The decision to take an initial lump-sum benefit at retirement, like all decisions concerning retirement, is a serious one and should be made with the greatest care.

The first thing anyone considering an initial lump-sum benefit should do is get an estimate as to how it will reduce their monthly retirement benefit.

To get an estimate, you must complete a Benefit Estimate Request (Form 10) and have your employer certify your employment history using our online certification processes.

You will also have to provide TRSL with the exact amount you want to receive as an ILSB (if you want an amount other than the maximum allowable) and the exact date you plan to retire. You will also need to supply your name, address, Social Security number, and the name and age of any beneficiary.

Member cost of ILSB per $1000

At the age shown, the chart below shows the amount a monthly benefit is reduced for each $1,000 of payment. For example, 50-year-old members who receive $10,000 would have their benefit reduced $74.40 a month for life ($7.44 × 10 = $74.40).

Ages 35-43	Ages 44-52	Ages 53-62	Ages 63-71	Ages 72-80
35 - $6.88	44 - $7.14	53 - $7.65	63 - $8.83	72 - $10.90
36 - $6.90	45 - $7.18	54 - $7.74	64 - $9.00	73- $11.23
37 - $6.92	46 - $7.22	55 - $7.83	65- $9.19	74- $11.58
38 - $6.94	47 - $7.27	56 - $7.92	66- $9.38	75- $11.96
39 - $6.97	48- $7.32	57- $8.03	67- $9.59	76 - $12.38
40 - $7.00	49- $7.38	58- $8.14	68- $9.81	77- $12.82
41 - $7.03	50- $7.44	59- $8.26	69- $10.06	78- $13.31
42 - $7.06	51 - $7.50	60 - $8.39	70 - $10.32	79- $13.84
43 - $7.10	52 - $7.58	61 - $8.53	71 - $10.60	80 - $14.42
-	-	62- $8.68	-	-