Borough of West Reading, PA Police Pension Plan

Members shall pay into the fund at a rate of 5% of compensation. Compensation for this purpose shall be as defined in § 72-1 of this article. The Council may, on an annual basis, by ordinance or resolution, reduce or eliminate payments into the fund by members. Individual records of contributions by members shall be maintained, including all interest credited to his or her individual account. Interest to be credited shall be 5% compounded annually.

Interest shall be credited from the end of the plan year in which paid to the last day of the month after which a refund becomes payable.

Refund of member's contributions. Any member who for any reason shall be ineligible to receive a pension after having made contributions shall be entitled to a refund of all contributions made by him or her and then on deposit in the fund, plus interest thereon; such refund is payable immediately upon discontinuance of his or her employment with the police force or within a reasonable time. If such discontinuance is due to death, then such refund shall be paid to his or her designated beneficiary or, in the absence thereof, to his or her estate. If the disabled or retired member is receiving a benefit by reason of disability or retirement, then the refund payable to the beneficiary is equal to the individual account balance at the date of disability or retirement, less any pension payments made to the member.

Deposits. Contributions by members shall be remitted to the Trustee monthly.

State aid. The portion of the payments made by the State Treasurer to the Borough and designated by the Council to be allocated to the Police Pension Fund from money received from taxes paid upon premiums by foreign casualty insurance companies for purposes of pension retirement or disability benefits for policemen shall be used as follows:

To reduce the unfunded liability, or, after such liability has been fully funded;

To apply against the annual obligation of the Borough for future service costs, or to the extent that the payment may be in excess of such obligations;

To reduce member contributions pursuant to Subsection A of this section.

Borough contributions. Subject to the provisions and limitations set forth in other sections of this plan, the Borough shall contribute the amounts certified to be necessary by the fund's actuary to provide the benefits provided by this plan.

Nonintervening military buyback.

The plan provides full service credit for each year of military service or fraction thereof, not to exceed five years, to a member who was not employed by the Borough prior to such military service, payable by the member.

The member shall pay the amount for the purchase of credit for military service, other than intervening military service, which shall be computed by applying the average normal cost rate for the plan as certified by the Public Employee Retirement Study Commission, but not to exceed 10%, to the member's average annual rate of compensation over the first three years of service and multiplying the result by the number of years and fractional part of a year of creditable nonintervening military service being purchased, together with interest at the rate of 4.75% compounded annually from the date of initial entry into service to the date of payment.

A member of the plan shall be eligible to receive service credit for intervening or nonintervening military service, provided that he is not entitled to receive, eligible to receive then or in the future, or is receiving retirement benefits for such service under a retirement system administered and wholly or partially paid for by any other governmental agency, with the exception of a member eligible to receive or who is receiving military retirement pay earned by a combination of active duty and nonactive duty with a Reserve or National Guard component of the armed forces which retirement pay is payable only upon the attainment of a specified age and period of service under 10 U.S.C. Ch. 67 (relating to retired pay for "non-regular" service).[1]

Editor's Note: See now 10 U.S.C. § 12731 et seq.

Other contributions. The fund shall be authorized to receive by gift, grant, devise or bequest, any money or property, real, personal or mixed, in trust for the benefit of the fund. The Trustee of the fund shall be subject to such directions not inconsistent with this plan as the donors of such funds and property may prescribe.

§ 72-4 Retirement benefits.

Normal retirement.

Each member may retire on or at any time after his or her normal retirement date. Any member so retiring shall be entitled to receive a monthly pension commencing as of the first day following his or her date of actual retirement and ending with the payment made as of the first day of the month in which his or her death occurs. The monthly pension to which such retired member shall be entitled to under this plan shall be equal to 50% of such member's average applicable compensation.

In addition to the monthly retirement benefit described above, each member who has completed in excess of 25 years of service shall receive an additional monthly pension benefit equal to $20 per month for each completed year of service in excess of 25 years up to a maximum of $100 per month, nor shall the yearly benefit exceed $1,200.

Early retirement benefit. Each member may retire on or at any time after his or her early retirement date. Upon termination, the member must file with the Secretary of the Borough a written notice of his or her intention to elect an early retirement benefit. This benefit shall become effective as of the date of the notice or the date designated in the notice, whichever is later. The amount of the early retirement benefit shall be the actuarial equivalent of a vested retirement benefit as computed in § 72-6A of this article. The actuarial equivalent of the vested retirement benefit shall be determined by actuarially reducing the vested retirement benefit to reflect that it will commence on the effective date of the early retirement rather than on the member's normal retirement date. The actuarial reduction shall be calculated using the actuarial assumptions reported in the last actuarial valuation report filed with the Public Employee Retirement Commission.

Postponed retirement. An employee shall be allowed to continue as an employee beyond his normal retirement date. In such case, the employee shall remain a member of the plan until he or she actually retires or ceases to be an employee. Any contributions required pursuant to § 72-3A hereof shall continue.

Disability benefit. If a member retires because of a total and permanent disability, he or she shall be entitled to receive a pension benefit equal to 50% of his or her salary at the time the disability was incurred, offset by any social security disability benefits received by the member for the same injury. The benefit will commence on the first day of the month following the month in which he or she is placed on disability and will continue until his or her death. Council reserves the right to require a disabled member to present evidence of total and permanent disability and of the continuance of such condition from time to time and reserves the right to require members to submit to medical examinations by a practitioner(s) selected by the Council as a precondition to the continued payment of benefits.

§ 72-5 Death benefits.

Death benefit if no surviving spouse nor dependent children. If a member dies prior to the commencement of pension benefits, then his or her designated beneficiary shall be entitled to a refund of his or her accumulated member's contributions with credited interest. If no beneficiary survives, then the refund is payable to the member's estate.

Pension benefit to surviving spouse and dependent children.

If a member dies survived by a spouse or dependent children, after having become eligible to receive a pension benefit (i.e., he or she was eligible because he or she was already receiving a pension; he or she met the age and service requirements but he or she had not yet retired), then a monthly pension benefit shall be provided.

The amount of the monthly pension benefit shall be 50% of the pension the member was receiving or would have been entitled to receive if he or she had been retired at the time of his or her death.

In the event a member dies after completing 12 or more years of service but was not yet eligible for normal retirement or preretirement survivor benefits, the surviving spouse shall act on behalf of the member in selecting the alternative addressed in § 72-6B(1). If a vested benefit is selected, the surviving spouse shall receive 50% of the member's vested monthly benefit commencing on the first day of the month following the member's normal retirement date.

(4)

In the event a member dies after completing 20 or more years of service but was not yet eligible for normal retirement or preretirement survivor benefits, the surviving spouse shall act on behalf of the member in selecting the alternative addressed in § 72-4B. If an early retirement benefit is selected, the surviving spouse shall receive 50% of the member's monthly early retirement benefit commencing on the first day of the month following the election of this benefit.

(5)

The monthly pension benefit is payable to the surviving spouse until death, then to surviving dependent children under the age of 18 years, or, if attending college, under or attaining the age of 23 years. Attending college shall mean the eligible children are registered at an accredited institution of higher learning and are carrying a minimum course load of seven credit hours per semester. Dependent children shall include step-children, adopted children, and any child conceived before the time of the member's death and thereafter born to the member's spouse.

Pre-retirement survivor benefit. In the event a member is killed in service, the member's family shall receive the benefits provided for and subject to the terms of Act 51 of 2009,[1] which benefits are paid exclusively by the Commonwealth of Pennsylvania, with the exception of any pension benefit to which the member was entitled prior to the member's death, solely by virtue of the member's service as a Borough police officer (i.e., either a normal, early or vested pension benefit). For purposes of this Subsection, "family" shall mean the member's surviving spouse and dependent children. The benefit shall be payable to the member's surviving spouse until death, and then to the member's surviving dependent children under the age of 18 years, or if attending college, under or attaining the age of 23 years. For purposes of this Subsection dependent children shall include step-children, adopted children and any child conceived before the time of the member's death and thereafter born to the member's spouse.

[Amended 10-18-2011 by Ord. No. 1003]

Editor's Note: See 53 P.S. § 891 et seq.

§ 72-6 Severance of employment.

If a member leaves the employ of the Borough or ceases to be a member whether by reason of his or her transfer, resignation or discharge, or by reason of disability or retirement other than after becoming eligible for benefits pursuant to § 72-4 or 72-5 of this plan, he or she shall be entitled to a refund of all contributions made by him or her and then on deposit in the fund, plus interest thereon, computed at the rate described in § 72-3A.

However, a member who has completed 12 or more years of service may elect either Subsection B(1) or (2) as described below:

He or she may elect to leave his or her contributions plus interest in the fund so as to receive a vested pension benefit to start at his or her normal retirement date. He or she must file with the Secretary of the Borough within 90 days of the date he or she ceases to be a full-time police officer a written notice of his or her intention to vest. The amount of the vested pension benefit shall be (x) divided by (y) where (x) is the number of years of service at the date of termination and (y) is the number of years of service which the member would have had if he or she worked until his or her normal retirement date, multiplied by the benefits described in § 72-4A. Years of service shall be measured in years and completed months.

He or she may elect to receive a refund of all contributions made by him or her and then on deposit in the trust fund, plus interest thereon, computed at the rate described in § 72-3A. If he or she elects to receive the refund of his or her contributions plus interest, he or she would forfeit the pension benefit outlined in Subsection B(1) above.

§ 72-7 Method of distribution of benefits.

Refund benefits becoming distributable pursuant to § 72-6A and death benefits becoming distributable pursuant to the provision of § 72-5A shall be paid in the form of a lump-sum distribution.

The normal form of all benefits payable hereunder shall be a pension for the life of the member commencing on the date specified and ending with a payment made on the first day of the month in which the member dies, subject, however, to the payment of a death benefit calculated pursuant to § 72-5B.

§ 72-8 Management of fund.

It is the duty of the Trustee to pay the benefits to members and their beneficiaries, as provided in §§ 72-4, 72-5 and 72-6, in accordance with the instructions received from the Council, provided, however, that the duty of the Trustee to make such payments is wholly contingent upon the sufficiency of the fund for such purposes.

The Council may employ an actuary, investment advisors, counsel, or other professional consultants from time to time in connection with the operation of the fund or of this plan.

Investment manager.

The Council may, by an instrument in writing, appoint one or more persons as an investment manager and may delegate to an investment manager, from time to time, the power to manage and control the investment of any plan asset. Each person appointed shall be:

(a)

An investment advisor registered under the Investment Advisors Act of 1940,[1] or

Editor's Note: See 15 U.S.C. § 80b-1 et seq.

(b)

A bank as defined in that Act, or

(c)

An insurance company qualified to manage, acquire or dispose of any asset of the plan under the laws of more than one state.

Each investment manager shall acknowledge, in writing, that it is a fiduciary with respect to the plan. The Council shall enter into an agreement with each investment manager specifying the duties and compensation of such investment manager and other terms and conditions under which such investment manager shall be retained. The Council shall not be liable for any act or omission of any investment manager, and shall not be liable for following the advice of any investment manager, with respect to any duties delegated to the investment manager.

The Council shall have the power to determine the amount of fund assets to be invested pursuant to the direction of a designated investment manager and to set investment objectives and guidelines for the investment manager.

Fair market value of the fund.

The Trustee shall make an annual determination of the fair market value of the fund as of the anniversary date and as of such additional dates as the Council may direct.

The fair market value of the fund shall be reported to the actuary who shall calculate the amount to be contributed to the fund by the Borough with respect to each plan year in accordance with the assumptions most recently adopted by the Council for the purpose of such computations; provided, however, that the liability of the Borough to make such contributions is subject to all of the conditions and limitations set forth elsewhere in this plan.

§ 72-9 Administration of plan by Council.

The plan shall be administered by the Council of the Borough. The Council shall make and adopt rules and regulations for the efficient administration of the plan.

The Council shall keep all data, records and documents pertaining to the administration of the plan and shall execute all documents necessary to carry out the provisions of the plan, and shall provide all such data, records and documents to the professionals whose services are employed pursuant to § 72-8B of this plan.

The Council shall construe the plan, shall determine any questions of fact arising under the plan and shall make all decisions required of it under the plan. Decisions and actions taken thereon in good faith shall be final and conclusive. It may correct any defect or supply any omission or reconcile any inconsistency in such manner and to such extent as it shall be the sole judge of such expediency.

The members of the Council, and each of them shall be free of all liability for any act or omission except by willful misconduct or gross negligence, and each of them shall be fully indemnified by the Borough against all judgments not involving findings of their respective personal or collective willful misconduct or gross negligence and against all cost, including counsel fees, incurred in defense of actions brought against them.

The Council shall make available to members, retired members and terminated members and to their beneficiaries, for examination during business hours, such records as pertain to the person examining.

To enable the Council to perform its function, the Borough Administration shall supply full and timely information to it on all matters relating to the pay of all members, their retirement, death, termination of employment and such other pertinent facts as the Council may require.

The Council shall enact such rules and regulations for the conduct of its business and for the administration of the plan as it may consider desirable, provided the same shall not be in conflict with any of the provisions of the plan. Written minutes shall be kept of the meetings and action of the Council.

§ 72-10 Provisions relating to Borough.

It is the expectation of the Borough that it will continue this pension plan indefinitely, and will, from time to time, contribute to the fund such amounts as may be needed to provide the benefits set forth in the plan.

The provisions of any ordinance establishing, amending, or maintaining the plan shall not be a charge on any other fund in the Treasury of the Borough or under its control, save the Uniformed Employee's Pension Fund herein provided for.

Nothing contained in the plan shall be held or construed as a contract or guarantee of employment, nor to create any liability upon the Borough to retain any person in its service. The Borough reserves the full right to discontinue the service of any person without any liability, except for salary or wages that may be due and paid, whenever, in its judgment, its best interests so require, and such discontinuance shall be without regard to this plan.

§ 72-11 Termination or amendment of plan.

The Borough may amend this plan from time to time as is necessary to maintain its actuarial soundness and to incorporate changes in plan benefits or entitlements. However, no amendment shall be made which will, in any manner, divert any part of the fund to any purpose other than the exclusive benefit of members or their beneficiaries, except that upon termination such diversion may be made after all of the fixed and contingent liabilities to members and their beneficiaries have been met.

In the event of termination of this plan, the Council shall allocate the assets then remaining in the fund as follows:

Sufficient funds shall be maintained to provide the pension benefits prescribed in § 72-3 for all members who have retired prior to termination or who are eligible for retirement at the time of the termination of this fund.

Contributions with interest at a rate established by the Council as provided in § 72-5 shall be refunded to any and all members who terminate service at the time of the termination of the fund.

Of the remaining funds, those which can be identified as municipality contributions or contributions other than from members or from the Commonwealth allocation shall be distributed as the Council sees fit, provided that such distribution is in compliance with § 72-8.

(4)

All funds in excess of the funds described in Subsections B(1), (2) and (3) above shall be returned to the Commonwealth as unused funds pursuant to the Act of May 12, 1943, P.L. 259, as amended, 72 P.S. § 2263.1 et seq.

§ 72-12 Miscellaneous provisions.

No benefit under this plan shall be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, or encumbrance, nor to seizure, attachment or other legal process for the debts of any member or member's beneficiary. This provision shall not apply to a qualified domestic relations order defined in Code Section 414(p),[1] and those other domestic relations orders permitted to be so treated by the Council under the provisions of the Retirement Equity Act of 1984.[2] The Borough shall establish a written procedure to determine the qualified status of domestic relations orders to administer distributions under such qualified orders.

Editor's Note: See 26 U.S.C. § 414(p).

[2]

Editor's Note: See 29 U.S.C. 1001 et seq.

Any person dealing with the Borough may rely upon a copy of this plan and any amendments thereto certified to be true and correct by the Trustee.

In no circumstances, whether upon amendment or termination of this plan or otherwise, shall any part of the fund be used or diverted to any purpose other than the exclusive benefit of members or their beneficiaries until all of the actuarial obligations to such member or member's beneficiaries have been met.

If the Council deems any person incapable of receiving benefits to which or she he is entitled by reason of minority, illness, infirmity, or other incapacity, it may make payment directly for the benefit of such person to the guardian or trustee for said person, whose receipt shall be complete acquittance therefor. Such payment shall, to the extent therefor, discharge all liability of the Borough or the fund.

Should any provision of this plan be determined to be void by any court, the plan will continue to operate and, to the extent necessary, will be deemed not to include the provision determined to be void.

Headings and captions provided herein are for convenience only and shall not be deemed part of the plan.

This plan shall be construed and applied under the laws of the Commonwealth of Pennsylvania where not in conflict with federal laws which shall prevail.

This article repeals all other ordinances pertaining to the subject matter hereof prior to the date of its enactment.

§ 72-13 Deferred retirement option plan.

[Added 4-21-2015 by Ord. No. 1045[1]]

Definitions. The following definitions apply when used in this section:

BOROUGH

West Reading Borough, Berks County, Pennsylvania.

DROP

Deferred Retirement Option Plan.

DROP NOTICE

The form prescribed by the Borough and the Union upon which a member or officer informs the Borough of his or her intent to participate in the DROP Program.

DROP PROGRAM

The program implemented by the Borough and the Union as required by an April 5, 2011, interest arbitration award entered in accordance with Act 111,[2] pursuant to which certain members of the Borough's Police Department may establish DROP accounts as described herein.

DROP ACCOUNTS

Separate accounts created for the exclusive purpose of accepting monthly pension checks of DROP participants while they are participating in the DROP Program. Account balance shall be accounted for separately, but need not be physically segregated from other pension trust fund accounts.

MEMBER or OFFICER

A duly-sworn full-time police officer employed by the Borough.

PARTICIPANT

A member or officer who has properly submitted a request to participate in the DROP Program which has been approved by the Borough Council of West Reading Borough.

UNION

The officers of the West Reading Borough Police Department, which is the duly recognized collective bargaining representative for all nonmanagerial full-time and regular part-time employees of the West Reading Borough Police Department.

[2]

Editor's Note: See 43 P.S. § 217.1 et seq.

Eligibility. Upon enactment of this section, members of the West Reading Borough Police Department who have not retired prior to the implementation of the DROP Program may enter into the DROP Program on the first day of any month following his or her satisfying the requirements for receipt of a normal pension benefit, which is rendering a minimum of 25 years of service and attaining at least the age of 50. A DROP participant shall be ineligible to re-enroll in the DROP upon termination.

Written election. An officer electing to participate in the DROP Program must submit a notarized statement to the Borough Council of West Reading Borough at least 30 days prior to the date on which the member wishes the DROP notice to be effective (the effective date of retirement). The DROP notice shall constitute an irrevocable notice to the Borough that the member shall resign from employment with the West Reading Borough Police Department effective on a specific date (the resignation date). In no event shall the resignation date be more than 48 months from the execution of the DROP notice. An officer shall cease to work for the Borough in any capacity as of the resignation date, unless the Borough terminates or honorably discharges the officer prior to reaching the resignation date. Additionally, all necessary documents required by the Borough in order to process the officer's pension must be submitted to the Borough in a timely manner.

[Amended 2-15-2022 by Ord. No. 1148]

Effect of DROP election. The effective date of the DROP notice shall be the date on which the officer indicates his enrolment in DROP (the effective date), but under no circumstances may an officer back date his/her enrollment form (unless the officer elects to participate in DROP in accordance with the retroactivity provision of this section).[3] After the effective date, the officer shall no longer earn or accrue additional years of continuous service for pension purposes. A separate non-interest-bearing account shall be created to accept the DROP participant's monthly pension check during the time period that the officer continues to be employed by the Police Department (DROP account).

[3]

Editor's Note: See note to this section that provides Section 2 of the original ordinance.

Benefit calculation. For all retirement purposes, continuous service of a participant in the DROP Program shall remain as it existed on the effective date of the DROP notice. Service thereafter shall not be recognized or used for the calculation or determination of any post-retirement benefits payable by West Reading Borough, including but not limited to service increments. The final average salary used for all pension calculation purposes shall remain as it existed on the effective date of the DROP notice, subject to the retroactivity provision of this section.[4] Any and all earnings or increases in compensation thereafter shall not be recognized or used for the calculation or determination of any post-retirement or pension benefits payable by the Borough or its Police Pension Plan. The pension benefit payable to an officer shall increase only as a result of cost of living adjustments in effect on the effective date of the member's participation in the DROP Program. The foregoing shall not be construed to require the Borough to provide cost of living increases.

[4]

Editor's Note: See note to this section that provides Section 2 of the original ordinance.

Pension contributions. While participating in the DROP Program, an officer shall not contribute to the Police Pension, regardless of the level of contribution required to be made by officers who are not participating in DROP.

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, as of the first monthly pension benefit payable after the effective date of the DROP notice, be paid into a separate account established to receive the participant's monthly pension benefits. The DROP account established for each participating officer will be considered a tax-deferred account, and, as a result, will be subject to the withdrawal restrictions established under Section 401(a) of the Internal Revenue Code.[5] As a condition of participation in the DROP Program, both the Union and the individual participating officers collectively and individually acknowledge that the Borough shall have no responsibility for the financial impact and/or consequences of an officer's participation in DROP, including, but not limited to, the investment of the contents of an officer's DROP account, the performance of any such investments, or any tax consequences flowing from DROP participation.

[5]

Editor's Note: See 26 U.S.C. § 401(a).

Payout. Subject to the provisions of § 72-13G above, upon the resignation date set forth in the member's DROP notice or such date as the member withdraws or is terminated from the DROP Program, retirement benefits payable to the member or the member's beneficiary, if applicable, shall be paid to the member or beneficiary and shall no longer be paid to the member's DROP account. Within 30 days following an officer's resignation date, the balance in the member's DROP account shall be paid to the officer in a single lump-sum payment, or at the officer's option, in any manner permitted by law.

Disability during DROP. If a member becomes temporarily disabled during his participation in DROP, the time period while on disability counts toward the thirty-six month participation limit. A member shall receive disability pay in the same amount as disabled police officers that are not participating in DROP. In no event shall a member on temporary disability have the ability to draw from this DROP account. However, notwithstanding any other provision in this section, if an officer is disabled and has not returned to work as of the date of his required resignation, then such resignation shall take precedence over all other provisions herein and said officer shall immediately resign. In addition, if an officer's disability becomes permanent during the DROP period, he or she shall be honorably discharged from employment immediately, regardless of where in the DROP period his or her service stands. An officer participating in the DROP Program who becomes permanently disabled as the result of a work-related condition shall be eligible to receive the 50% disability pension benefit in lieu of future normal pension benefit payments. Nothing hereunder shall be construed as conferring any legal rights upon any police employee or other person to a continuation of employment nor shall participation in the DROP Program in any way supersede or limit the right of the Borough to honorably discharge a police employee based upon an inability to perform his or her full duties as a police officer.

Death. If a DROP participant dies, the DROP participant's named beneficiary shall be entitled to apply for and receive the benefits accrued in the DROP participant's account in accordance with the provisions set forth in 53 P.S. §§ 895.1114(d) and 895.1115. The DROP participant's survivor shall be eligible to receive retirement system death benefits normally payable in the event of the death of a retired employee.

Other benefits/term. For all nonpension post-retirement benefits, all DROP participants are treated the same as a nonretired police officer. Participation in DROP shall not exceed a maximum of 36 months and DROP participants may withdraw from the program at any time and terminate their employment without penalty. DROP participants may also be terminated from employment as a police officer for any reason that an active police officer could be terminated, and participation in the DROP Program establishes no new benefits beyond what is specifically permitted by this agreement.

Forfeiture of benefits. Notwithstanding an officer's participation in the DROP Program, an officer who is convicted or pleads guilty to engaging in criminal misconduct which constitutes a "crime related to public office or public employment," as that phrase is defined in Pennsylvania's Pension Forfeiture Act, 43 P.S. §§ 1311 to 1314, shall forfeit his or her right to receive a pension, including any amounts currently deposited in the DROP account. In such a case, the officer shall only be entitled to receive the contributions, if any, made by the officer to the Borough's Police Pension Fund, without interest.

Amendment. Any amendments to DROP shall be consistent with the provisions covering deferred retirement option plans set forth in any applicable collective bargaining agreement and shall be binding upon all future DROP participants and upon all DROP participants who have balances in their deferred retirement option accounts. DROP may only be amended by a written instrument, not by any oral agreement or past practice.

Interpretation of provisions. This document shall be interpreted under the laws of the Commonwealth of Pennsylvania. An officer's election to participate in the DROP Program shall in no way be construed as a limitation on the Borough's right to suspend or terminate an officer for just cause or to grant the officer an honorable discharge based upon a physical or mental inability to perform his or her duties. In addition, nothing provided hereunder shall be construed as a change to the parties' practice of calculating pensionable compensation, and, except for the ability to establish a DROP account and participate in the DROP Program, nothing herein is intended to create new pension benefits of any kind which did not exist as of December 31, 2014.

Severability. In the event that the DROP provision is declared invalid or illegal by a court of competent jurisdiction or through an administrative determination of the Department of the Auditor General, the Union shall have the right to bargain in accordance with Act 111[6] over deletion of this benefit. It is expressly understood that this shall not involve bargaining over a replacement provision.

[6]

Editor's Note: See 43 P.S. § 217.1 et seq.

Indemnification; tax consequences. The Union agrees that it will indemnify and hold harmless the Borough for any penalties, fines or costs imposed or assessed by the United States Internal Revenue Service, the Pennsylvania Department of Revenue, or any municipality or other governmental agency or entity, which relate to the manner in which the parties have agreed to treat DROP accounts as described herein. In the event that the Auditor General determines that the Borough's DROP Program is invalid or not compatible with state law, the Union shall indemnify and hold harmless the Borough from any costs, liabilities, lawsuits, etc., as a result of any such Auditor General determination. The Union also agrees to pay the cost of reasonable attorneys' fees that the Borough may incur in defending against any action instituted by a taxing authority in connection with the payments made under the DROP Program, including the attorneys' fees that the Borough may incur in enforcing its right to indemnification under this section. The Union acknowledges on behalf of all officers and DROP-eligible participants that the Borough has made no representations regarding the manner in which DROP accounts must be treated for federal, state or local tax purposes and that the Borough shall bear no responsibility, financial or otherwise, for any tax consequences to the DROP participants. It is understood by the Union that any such consequences, including any fines or penalties as well as any professional tax advice which may be appropriate, shall be the sole and exclusive responsibility of each DROP participant, and the Union further agrees to inform its membership of the terms set forth in this section.

Revenue Code Section 415.[7] Notwithstanding anything contained in this section to the contrary, the limitations, adjustments, and other requirements prescribed in this section shall at all times comply with the applicable provisions of Revenue Code Section 415 and the regulations thereunder, the terms of which are specifically incorporated herein by reference.

[7]

Editor's Note: See 26 U.S.C. § 415.