[HISTORY: Adopted by the Board of Commissioners of the Township
of Penn as indicated in article histories. Amendments noted where
applicable.]
[Adopted 2-18-2013 by Ord. No. 886; amended in its entirety 8-18-2021 by Ord. No. 942]
Effective January 1, 2016, Deferred Retirement Option Plan (DROP)
provisions shall be added to the Township of Penn Police Pension Plan
as follows.
The following words and phrases, when used in this article,
shall have the meanings given to them in this section only, unless
the context clearly indicates otherwise:
A deferred retirement option plan established and being operated
by the Township of Penn.
A retired participant of the Township of Penn Police Pension
Plan who is eligible to participate in a DROP, and who has elected
to participate in a DROP program.
The pension trust fund ledger account.
The retirement benefit payable to a participant of a defined
benefit pension plan at the point in time when the participant satisfies
the age and service requirements for full, unreduced retirement benefits.
The separate, subsidiary DROP participant account established
for a DROP participant.
A.
The Township's actuary for the plan shall conduct an annual
review, or more frequently if determined necessary at the sole discretion
of the Township, to confirm the cost neutrality of the DROP. The cost
for such reviews shall be paid for from plan assets. In the event
the actuary determines that the DROP, as then currently structured,
cannot be offered while maintaining cost neutrality, the Township
may adopt amendments to the DROP, recommended by the actuary, to maintain
cost neutrality. Any such amendments are subject to approval by the
union and the prospective applicant and shall not affect current DROP
participants.
B.
The union reserves the right to grieve the actuary's determination
of cost neutrality in accordance with the grievance procedure of the
collective bargaining agreement. Any arbitration award shall comply
with applicable law, including, but not limited to, Act 205 of 1984,
and shall be subject to the plan actuary's fiduciary responsibility
to determine actuarial assumptions for the pension plan.
C.
In the event future legislation is enacted that sets forth any mandatory,
minimum or maximum provisions with respect to DROP Plans sponsored
by the Township of Penn or the Township receives an audit finding
from the Department of the Auditor General, the plan shall be amended
to bring the existing DROP Plan into compliance, so long as the legislation
of audit findings recommendations provides for a structure that is
cost neutral.
D.
A DROP participant's monthly retirement benefits shall be paid
into the participant's subsidiary DROP participant account. The
account shall accrue 0% interest for the period of the DROP participation.
Upon termination of employment, the participant shall receive the
balance in the participant's subsidiary DROP account and begin
to receive the previously determined monthly retirement benefit. The
employment of a DROP participant by the Township of Penn does not
guarantee the DROP participant's continued employment by the
Township of Penn through the end of the specified period of the DROP.
An employee who has attained the date of eligibility for a normal
retirement benefit under the plan is eligible (but not required) to
elect to participate in the DROP by filing a written application with
the retirement Plan Administrator at least 30 days prior to the date
that the employee desires to enter the DROP.
An eligible participant may elect to participate in this DROP
for a period not to exceed three years. Upon deciding to participate
in a DROP, a participant must submit, on forms provided by the Township,
all of the following:
A.
A binding and irrevocable letter of resignation from regular employment
with the Township of Penn which discloses the participant's intent
to retire and specifies the participant's retirement date.
B.
An irrevocable written election to participate in the DROP which
must specify the effective date of DROP participation that shall be
one-day after the participant's specified retirement date, specify
the DROP termination date which satisfy the agreed terms, detail a
DROP participant's rights and obligations under the DROP and
include an agreement to forgo:
(1)
Active membership in the plan;
(2)
Any growth in the salary base used for calculating the retirement
benefits;
(3)
Any additional benefit accrual for retirement purposes, including
service increments;
(4)
Agree to be placed at the bottom of the seniority list for purposes
of overtime distribution.
C.
The DROP participant shall be required to provide any other information
required by the Township.
A retired participant's effective date of participation
in a DROP shall begin on the day following the effective date of the
participant's retirement. A retired participant's participation
in a DROP shall end on the last day of the participation period specified
in the ordinance establishing the DROP based on the effective date
of the retired participant's participation in the DROP.
A DROP participant may change the DROP termination date to an
earlier date, but may not change it to a later date than elected at
the time of initial DROP participation. No penalty shall be imposed
for early termination of DROP participation. Upon either early or
regular termination of DROP participation, the DROP participant shall
be separated from employment by the Township of Penn and the plan
shall pay the balance in the DROP participant's subsidiary DROP
participant account to the terminating participant. The DROP participant
shall be ineligible to reenroll in the DROP thereafter even if the
former DROP participant is reemployed by the Township of Penn with
renewed active membership in the Township of Penn Police Pension Plan.
DROP participants shall neither be required nor permitted to
pay contributions into the plan during the DROP participation period.
Effective with the date of retirement, which must be the day
before the effective date of DROP participation, the participant's
monthly late retirement benefit as calculated under the plan, the
participant's effective date of retirement and the participant's
effective dates of beginning and terminating participation in the
DROP shall be fixed. There shall be no further retirement benefit
accruals after the participant's effective date of retirement.
On the effective date of a DROP participant's termination
of employment with the Township as a DROP participant, participation
in the DROP shall cease; and the plan shall calculate and pay to the
participant the participant's total accumulated DROP benefits
in the DROP participant's subsidiary DROP participant account
subject to the following provisions:
A.
The termination DROP participant or, if the participant is deceased,
the participant's named beneficiary shall elect on a form provided
by the Plan Administrator to receive payment of the DROP benefits
in accordance with one of the following options:
(1)
The balance in the DROP participant's subsidiary DROP participant
account, less withholding taxes, if any, remitted to the Internal
Revenue Service, and shall be paid within 45 days of the receipt of
the election form, by the plan from the account to the DROP participant
or surviving beneficiary.
(2)
The balance in the DROP participant's subsidiary DROP participant
account shall be paid within 45 days of the receipt of the election
form, by the plan from the account directly to the custodian of an
eligible retirement plan as defined in Section 402(c)(8)(B) of the
Internal Revenue Code of 1986 or, in the case of an eligible rollover
distribution, to the surviving spouse of a deceased participant to
an eligible retirement plan which is an individual retirement account
or an individual retirement annuity as described in Section 402(c)(9)
of the Internal Revenue Code of 1986.
(3)
If the DROP participant or beneficiary fails to elect a method of
payment within 60 days after the participant's termination date,
the plan shall pay the balance directly to the custodian of an eligible
retirement plan as provided.
B.
The form of payment selected by the DROP participant or surviving
beneficiary shall comply with the minimum distribution requirements
on the Internal Revenue Code of 1986.
C.
DROP benefits are not subject to assignment, attachment, or levy
and DROP benefits are subject to the Pennsylvania Pension Forfeiture
Act.
D.
The terminating DROP participant shall commence receipt of the monthly
retirement benefit directly starting with the first day of the month
coincident with or next following termination of employment with the
Township.
If a DROP participant dies, the participant's designated
beneficiary shall be entitled to apply for and receive the benefits
accrued in the DROP participant's subsidiary DROP participant
account.
The monthly retirement benefit accrued in the DROP participant's
DROP participant account during the month of a DROP participant's
death shall be the final monthly retirement benefit credited for DROP
participation.
A DROP participant's eligibility to participate in the
DROP terminates upon the death of the DROP participant. If a DROP
participant dies on or after the effective date of participation in
the DROP but before the initial monthly retirement benefit of the
participant accruable for the month has accrued in the DROP participant's
subsidiary DROP participant account, the Township of Penn shall pay
the monthly retirement benefits as though the participant has not
elected DROP participation and had died after the employee's
effective date of retirement but before receipt of the retired participant's
first normal retirement benefit.
If a DROP participant becomes eligible for a disability pension
benefit and terminates employment, the monthly normal retirement benefit
of the DROP participant shall terminate.
A DROP participant shall be eligible for all preretirement benefits
for employees otherwise provided by law, including, but not limited
to, the following:
Attached hereto, made a part hereof, and incorporated herein
by reference as if more fully set forth herein is Appendix A. In addition,
attached hereto, made a part hereof, and as a part of Appendix A is
the application for DROP retirement benefits. The benefits and application
for DROP retirement benefits shall be effective January 1, 2016, and
shall remain in full force and effect until such time as they may
be modified by negotiations between the Township of Penn and the Penn
Township Police Department bargaining unit.
A.
At the time the Township of Penn establishes a DROP it shall also
establish a DROP participant account as a separate ledger account
in its pension trust fund for each DROP participant. The account balance
shall be accounted for separately but need not be physically segregated
from other pension trust fund assets. A separate subsidiary DROP participant
account shall be established for each DROP participant.
B.
While a retired participant is employed as a DROP participant, the
participant's monthly retirement benefit shall be credited to
the DROP participant account. When a DROP participant terminates employment
with the Township of Penn as a DROP participant, the participant's
total accumulated benefits shall be calculated, charged to the DROP
participant account and paid out of the pension trust fund.
C.
The balance in the DROP participant's account shall be excluded
from actuarial valuation reports of the plan prepared and filed under
this legislation. The DROP participant's account shall be held
in trust for the exclusive benefit of DROP retired participants who
are or were DROP participants and for the beneficiaries of these participants
or an alternate payee.
