Borough of Sayre, PA Nonuniformed Employees' Deferred Retirement Option Plan (DROP)

Eligibility. Effective January 20, 2011, any full-time member who is eligible to participate in the Plan, and who has not retired prior to the implementation of the DROP program, may enter into the DROP on the first day of any month following the attainment of age 60. A member may not enter into the DROP based on eligibility for early retirement under Article 5.3 of Ordinance No. 642.[1]

[1]

Editor's Note: See Art. I, Nonuniformed Employees' Pension Fund, § 19-5C.

Written election.

(1)

An eligible member of the Plan electing to participate in the DROP program must complete and execute a DROP election form prepared by the Sayre Borough Secretary and/or the Plan Administrator, which shall evidence the member's election to participate and participation in the DROP program and document the member/participant's rights and obligations under the DROP. The form must be signed by the member and the Chief Administrative Officer of the Plan and submitted to Sayre Borough, Bradford County, Pennsylvania, within 30 days of the date on which the member wishes the DROP election to be effective. The DROP election form shall include an irrevocable notice to the Borough of Sayre by the member that the member shall terminate from employment with the Sayre Borough effective on a specific date not less than one year or more than five years from the effective date of the DROP election. In addition, all retirement documents required by the Sayre Borough Nonuniformed Pension Plan Administrator must be filed and presented to the Borough Council for approval of retirement and commencement of the monthly pension benefit. Once the retirement application has been approved by the Borough Council, it shall become permanent and irrevocable.

(2)

After a member enters the DROP program, contributions to the pension plan by the participant and the Borough Council will cease, and the amount of monthly benefits will be frozen except for any cost-of-living adjustment (COLA) increases, if and as applicable pursuant to the terms of the Plan, awarded to all pension recipients.

(3)

Members shall be advised to consult a tax advisor, of their choice, prior to considering the DROP program, as there may be serious tax implications and/or consequences to participating in the DROP program.

Limitation on pension accrual. After the effective date of the DROP election, the participant shall no longer earn or accrue additional years of continuous service for pension purposes.

Benefit calculation. For all Plan purposes, continuous service of a member participating in the DROP program shall remain as it existed on the effective date of commencement of participation in the DROP program. Service thereafter shall not be recognized or used for the calculation or determination of any benefits payable by the Plan. The average monthly pay of the member for pension calculation purposes shall remain as it existed on the effective date of commencement of participation in the DROP program. Earnings or increases in earnings thereafter shall not be recognized or used for the calculation or determination of any benefits payable by the Plan. The pension benefit payable to the participants shall increase only as a result of cost-of-living adjustments (COLAs), if any, and as applicable according to the terms of the Plan, effective on or after the date of the member's participation in the DROP program.

Payments to DROP account. The monthly retirement benefits that would have been payable had the member elected to cease employment and receive a normal retirement benefit shall, upon the member commencing participation in the DROP program, be credited on the first day of each month into a separate ledger account established by the Plan Administrator to track and accumulate the participant's monthly pension benefits. This account shall be designated the DROP account. Interest shall be compounded and credited monthly at an annual rate of 2.0%. All interest credited to the DROP account shall be included in the final cash settlement.

Early termination. A participant may withdraw from the DROP program (and terminate from employment) at any time, and no penalty shall be imposed for early termination of DROP participation. However, the participant must terminate employment at the time of early termination from the DROP and shall not be permitted to make any withdrawals from the DROP account until DROP participation has ended.

Payout. Upon the termination date set forth in the DROP election form or on such date as the participant withdraws or is terminated from the DROP program, if earlier, the normal retirement benefits payable to the participant or the participant's beneficiary, if applicable, shall be paid directly to the participant or beneficiary according to the Plan and shall no longer be credited to the DROP account. Within 30 days following the actual termination of a participant's employment with Sayre Borough, the accumulated balance in the DROP account shall be paid to the participant in a single lump-sum payment. Such payment shall be made either in cash, subject to any federal withholding as may be required, or as a direct rollover to an individual retirement account (IRA). If the participant selects the rollover option, he or she must also submit the appropriate paperwork from the IRA custodian within 20 days following termination.

Disability during DROP. If a participant becomes temporarily disabled during the DROP period, the participation freezes and the time period while on temporary disability does not count towards the five-year DROP participation limit. Upon return to duty, the DROP period shall resume, continuing with the remaining time left in the five-year DROP period. The participant shall be eligible to receive and shall receive disability pay (if any, as applicable) in the same manner as other full-time nonuniformed employees who are not participating in DROP. In no event shall a participant on temporary disability have the ability to draw from the DROP account. However, notwithstanding any other provision in this Subsection H, if a member is disabled and has not returned to work as of the date of the required resignation, then such resignation shall take precedence over all other provisions herein, and the member shall be required to resign. If a DROP participant becomes eligible for a disability pension benefit due to a permanent (service-related or non-service-related disability), if and as applicable according to the terms of the Plan, and terminates employment, the monthly normal retirement benefit shall cease.

Death. If a participant dies before the DROP account balance is paid, the participant's beneficiary(ies), as determined by the terms of the Plan or by operation of law, as applicable, shall have the same rights as the participant to withdraw the DROP account balance. The monthly benefit credited to the participant's DROP account during the month of the participant's death shall be the final monthly benefit for DROP participation.

Amendment. Any amendments to the DROP Ordinance shall be consistent with the provisions covering deferred retirement option plans set forth in any applicable collective bargaining agreement or state or federal law, and shall be binding upon all future participants and upon all participants who have balances in their DROP accounts.