[Adopted 10-3-2011 by Ord. No. 11-009]
A.
Overview.
(1)
Effective October 10, 2011, the City establishes a DROP within the retirement system in accordance with the terms set forth in this § 127-54.
(2)
The purpose of the DROP is to allow an eligible member (as defined
below) to: a) remain actively employed by the City for a minimum of
two additional years up to a maximum of five additional years of employment;
b) freeze his or her regular retirement allowance level on the effective
date of the DROP election (i.e., upon the DROP effective date, the
member's regular retirement allowance will be calculated as if that
was his/her date of retirement); and c) receive certain DROP contributions
to his/her DROP account. In other words, the DROP is created to add
flexibility to the retirement system and a DROP member by providing
him with access to a lump sum benefit at time of his/her actual retirement
in addition to his regular retirement allowance that is frozen upon
his/her DROP election. The DROP is intended to be cost neutral.
B.
Eligibility. A nonunion member with 25 years of credited service may voluntarily elect to participate in the DROP at any time during the DROP window period. (See Subsection C below.) Union members or members with less than 25 years of credited service as of the last day of the DROP window period generally shall not be eligible to become a DROP member, unless the City resolves to extend the DROP window period or the City opens it to a union benefit group through the terms of an applicable collective bargaining agreement.
C.
DROP window period, election procedure and effective date.
(1)
An eligible member who desires to voluntarily elect to participate
in the DROP must do so no later than 4:30 p.m. (EST) on December 16,
2011. Such a member must properly complete, execute and timely submit
the DROP election form(s). The Board of Trustees shall review the
application and make a determination as to the member's eligibility
for participation in the DROP within a reasonable time period.
(2)
A DROP member's election generally shall become effective as of the
date selected by such member following the Board of Trustees' approval
and acceptance of his DROP election, but in no event later than December
31, 2011. Members electing DROP participation shall not have an effective
DROP date earlier than the member's date of application and acceptance
by the Board of Trustees.
D.
Irrevocability of DROP election. Once a member's DROP election form
has been accepted by the Board of Trustees and becomes effective,
the member may not revoke his/her participation in the DROP or his/her
DROP participation period. A DROP member is solely responsible for
any federal, state or local tax due as a result of his or her participation
in the DROP.
E.
Impact of DROP election. Except as otherwise provided herein, a DROP
member generally will remain an active employee of the City eligible
to receive any applicable wages and benefits in accordance with the
City's normal policies for active employees, except as otherwise provided
below:
(1)
On the date that the member's DROP election becomes effective, he/she
shall become a DROP member and shall cease to be an active member
of the retirement system. The amount of credited service, multiplier
and average final compensation under the retirement system for purposes
of determining such member's regular retirement allowance shall be
fixed as of the effective date of becoming a DROP member. Increases
in compensation, final average earnings, multiplier and accrual of
additional service during the DROP participation will not be factored
into the regular retirement allowance of active or former DROP members.
(2)
A DROP member who is a nonunion member of the Division of Public
Safety or Police or Fire Department, was employed by the City prior
to July 1, 2008, and enters the DROP prior to January 1, 2012, shall
be entitled to the retiree health care benefits under the same terms
and conditions as those provided to members of the City of Monroe
Command Officers Association of Michigan in effect as of December
31, 2011. Coverage under the City's retiree health plan for such a
DROP member and his eligible family members shall begin as of the
date his DROP election first becomes effective, and as of that date,
they shall cease to be eligible for active coverage under the City's
group health care plans offered to active employees.
F.
DROP benefit and DROP account.
(1)
A DROP account shall be created in the accounting records of the
retirement system for each DROP member. The DROP member's account
shall be credited throughout the duration of his/her DROP participation
period (or if earlier, the date he/she ceases active employment with
the City or DROP participation) as follows:
(a)
An amount equal to each of his/her monthly regular retirement allowance (as calculated pursuant to § 127-14) to which such member would have been entitled if the member had actually retired and began receiving his regular retirement allowance as of the DROP effective date;
(b)
An interest payment at the rate of 3% per annum, prorated for
any fraction of a year; and
(c)
Scheduled COLA adjustments as otherwise granted under the terms of the retirement system, §§ 127-14, 127-15, 127-48A(8); but
(2)
The DROP account is a nominal account established within the retirement
system. A DROP member does not have a claim on the assets of the retirement
system with respect to his or her DROP account, nor will the system
set aside any assets for a DROP member that are separate from other
system assets.
G.
Duration and condition of participation in DROP.
(1)
A DROP member must indicate on his/her DROP election form the number
of years that he/she wants to participate in the DROP; provided, however,
that such period must be no less than two years and no more than five
years beginning as of the effective date of the DROP election for
such member.
(2)
As a condition for participation in the DROP, the member agrees to
sever his/her employment with the City at the conclusion of his/her
DROP participation period. Failure to sever employment after the expiration
of the elected DROP participation period will result in forfeiture
of the DROP member's monthly pension benefit otherwise payable to
his/her DROP account until he/she severs employment with the City.
H.
Termination of DROP participation.
(1)
The Board will terminate a DROP member's participation in the DROP,
and thus not credit any additional amounts to his/her DROP account,
on the earliest date on which:
(2)
Upon termination of DROP participation, the following shall apply:
(a)
A DROP member who voluntarily leaves City employment before
the expiration of his/her DROP participation period shall receive
a percentage of the amount credited to his/her DROP account in accordance
with the following schedule:
|
Years Actually Worked During DROP Period:
| ||||||
|---|---|---|---|---|---|---|
|
DROP Participation Period
|
Stay Less Than 1
|
Stay Less Than 2
|
Stay Less Than 3
|
Stay Less Than 4
|
Stay Less Than 5
|
Complete Full Term
|
|
2-year
|
70%
|
90%
|
n/a
|
n/a
|
n/a
|
100%
|
|
3-year
|
50%
|
70%
|
90%
|
n/a
|
n/a
|
100%
|
|
4-year
|
40%
|
50%
|
70%
|
90%
|
n/a
|
100%
|
|
5-year
|
30%
|
40%
|
50%
|
70%
|
90%
|
100%
|
(b)
A DROP member shall be entitled to receive 100% of the credits
to his/her DROP account upon termination of his/her DROP participation
under the following circumstances:
(c)
Notwithstanding anything to the contrary herein, the DROP, as
part of the retirement system, is subject to the Public Employee Retirement
Benefits Forfeiture Act (MCLA § 38.2701 et seq.), and, consequently,
any forfeitures required under such Act shall include credits to a
DROP account.
I.
Leaves of absence. Except as otherwise required by law, if a DROP
member takes a leave of absence under FMLA or military leave, he/she
may still participate in the DROP, but will receive credit to his/her
DROP account for each month of leave only to the extent he or she
has accumulated leave that continues him/her on the City's active
payroll.
J.
Member contributions to retirement system. A DROP member shall not
be required to make further member contributions to the retirement
system on or after his/her DROP election effective date.
K.
Distribution of regular retirement allowance and DROP account.
(1)
A DROP member shall be entitled to receive his/her monthly retirement allowance, as calculated pursuant to § 127-14 and limited by this § 127-54, and a distribution of the amounts credited to his/her DROP account (as determined under § 127-54F and H) only upon termination of his or her employment with the City and satisfaction of any other requirements set forth under the Retirement System Chapter or by law. A DROP member shall not have any claim to any funds in his/her DROP account until such time as he/she retires after his/her DROP participation ends.
(2)
Upon termination of DROP participation and commencement of his/her
regular retirement allowance, the former DROP member shall receive
the amount credited to his/her DROP account (as determined under § 127-52F
and H) in a single lump sum distribution [which may qualify as an
eligible rollover distribution in accordance with the rules under
Code Section 401(a)(31)]. Notwithstanding anything herein to the contrary,
a former DROP member must receive a distribution of the total balance
credited to his/her DROP account no later than April 1 following the
later of the calendar year in which the DROP member severs and retires
all employment with the City or attains age 70 1/2.
L.
Total and permanent disability during DROP participation. A DROP
member who becomes totally and permanently incapacitated for employment
by the City, by reason of personal or duty-related injury or disease,
shall:
(1)
Immediately cease participating in the DROP;
(2)
Be retired and entitled to commence receiving his regular retirement allowance computed according to § 127-14 based on the member's age, credited service and final average compensation in effect on the day he/she became of DROP member, but shall be subject to the workers' compensation offset provision in § 127-19C, and shall be determined without regard to § 127-20; and
M.
DROP member's death during DROP participation.
(1)
(2)
For purposes of paying a beneficiary the DROP account of a deceased DROP member under Subsection M(1)(a) above, the term "beneficiary" shall mean those individuals who have been duly designated on a DROP designation of beneficiary form accepted by the Board of Trustees. If the Board of Trustees does not have an accepted DROP designation of beneficiary form on file for a DROP member, then the DROP account shall be payable to the deceased DROP member's beneficiary with respect to his/her regular retirement allowance under the retirement system, and, if there is no such beneficiary, the balance credited to such DROP member's account shall be paid to his/her estate.
N.
Not an employment agreement. A member's participation in the DROP is completely voluntary and does not guarantee continued employment with the City. Except as otherwise provided herein (including Subsection F above), a DROP member will remain an active employee of the City eligible to receive any applicable wages and benefits, will be subject to the applicable civil service rules and regulations, and will be subject to policies and procedures of the City in the same manner as if he or she had not elected to participate in the DROP.
O.
Assignments. Except as required under state law regarding eligible domestic relation orders, the anti-alienation provisions of § 127-40 of the retirement system shall apply.
P.
Internal Revenue Code compliance.
(1)
Despite any other provision to the contrary, the provisions of this § 127-54 are subject to the requirements of the Internal Revenue Code ("Code") and related regulations issued thereunder for the retirement system to remain a tax qualified retirement plan, including, but not limited to, the following:
(a)
The limitations of Code Section 415(b) relating to the amount
of benefits that can be paid;
(b)
The limitations of Section 401(a)(9) relating to the time that
benefit payments must begin;
(c)
The rules of Section 401(a)(31) relating to the rollover of
benefits; and
(d)
The limitations of Section 401(a)(25) relating to definitely
determinable benefits.
(2)
If the City receives notification from the United States Internal Revenue Service that any portion of the DROP under this § 127-54 will cause the retirement system to be disqualified for tax purposes under the Internal Revenue Code, then the portion that will cause the disqualification or violation does not apply.
