Borough of Economy, PA Police Pension Fund

Editor's Note: This ordinance repealed former Ch. 31, Police Pension Fund, adopted 3-8-1977 by Ord. No. 192, as amended.

§ 31-1 Fund established.

Pursuant to provisions of Act 600 of 1956 of the Commonwealth of Pennsylvania, as amended, the Borough of Economy hereby repeals all previously enacted ordinances related to the Police Pension Fund and hereby establishes a new Police Pension Fund, to be funded by investments allowed by the commonwealth. For those officers hired prior to 1983, the fund purchased life insurance policies in the amount of $30,000 and upon retirement the proceeds will go back to the fund.

§ 31-2 Maintenance of fund.

The fund is to be maintained by payments made by the State Treasurer to the Borough from monies received from taxes paid on premiums for foreign-casualty insurance companies, by a charge against each member of the police force, if required, by annual appropriations made by the Borough of Economy, if required, and by gifts, grants, devises or bequests granted to such fund pursuant to the provisions of the Act.

§ 31-3 Administration. [1]

Such Police Pension Fund shall be administered by the Economy Borough Council and shall be applied under such regulations as the Borough Council may, by ordinance or resolution, prescribe for the benefit of such members of the Economy Borough Police Department.

Editor’s Note: Resolution No. 445 established procedures and requirements for entering into professional service contracts designed to guide the Borough in the maintenance and performance of the Uniform and Nonuniform Employee Pension Plans in accordance with Act 44 of 2009. This resolution, along with any other related procedures, is on file in the Borough offices.

§ 31-4 Acceptance of gifts or grants.

The Borough of Economy is hereby authorized to take, by gift, grant, devise or bequest, any money or property, real, personal or mixed, in trust, for the benefit of such fund; and the care, management, investment and disposal of such trust funds or property shall be vested in the Borough of Economy Council, the person, agent and the company having the management of such Police Pension Fund and the right to appoint a trustee for the fund; and said trust funds shall be governed thereby subject to such directions not inconsistent therewith as the donors of such funds and property may prescribe.

§ 31-5 Participants.

Each police officer who, on the effective date of this chapter or thereafter, is employed by the Borough on a full-time basis for six months, shall be eligible to be and shall be a participant in the police pension program herein established.

§ 31-6 Credit for military service.

Any member of the police force who has been on duty for at least six months and who thereafter enters into the military service of the United States shall have credited to his employment record for pension or retirement benefits all of the time spent by him in such military service, if such person returns or has heretofore returned to his employment within six months after his separation from the service.

Any member of the police force shall be eligible to receive service credit for intervening or nonintervening military service as provided in Section 4 (a) and (b) of the Act, provided that he is not entitled to receive, eligible to receive now 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 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 nonregular service).

§ 31-7 Determination of eligibility; benefits.

Eligibility for receiving retirement benefits shall be determined by the following:

An officer reaches age 50.

An officer has completed 25 years aggregate total service with the Borough.

An officer has completed 20 years aggregate total service with the Borough, but at a reduced benefit.

(4)

There is no social security offset.

Average monthly earnings are those received during the last 36 months immediately preceding retirement.

Cost-of-living adjustments will be made in accordance with the Act.

As a result of the above provisions, each retired participant shall be entitled to receive a pension, payable in equal monthly installments during his lifetime, in an amount equal to 1/2 of the average monthly earnings of the participant paid by the employer during the last 36 months immediately preceding retirement. Participants shall receive service increments of $100 per month after completion of 26 years of service. In addition, each retired participant shall be entitled to receive a life insurance policy of $5,000, which shall be paid for from the Borough of Economy general funds and not by the Police Pension Fund.

Cost-of-living adjustments (COLAs). Effective January 1, 1999, cost-of living adjustment (COLAs), as defined and permitted by Act 600, are provided. Such COLAs are defined and limited to the percentage increase in the Consumer Price Index from the year in which the officer last worked; in no case shall the total pension benefit exceed 75% of the salary used to compute retirement benefits; the total cost-of-living increase shall not exceed 30%; and no COLA will be granted that would impair the actuarial soundness of the pension fund.

Service increment. Notwithstanding anything contained herein to the contrary, each participant who shall retire upon completion of the 26th anniversary of aggregate service or thereafter may be entitled to receive a monthly service increment benefit. Such service increment shall only be available to a participant who shall retire on a retirement date on or after the attainment of normal retirement age and whose aggregate service for purposes of this subsection shall only include any period of time when the participant actively renders service in employment and shall not include any period of time during which the participant received a disability benefit under the terms of this plan. Such service increment shall be an amount equal to $100 for each year of completed aggregate service in excess of 25 years, up to maximum of $500 after five completed years of aggregate service in excess of 25 years, and shall be paid monthly in addition to the amount of normal retirement benefit calculated pursuant to § 31-7D.

[Added 11-14-2006 by Ord. No. 410]

§ 31-8 Revisions of some benefits.

In addition to the benefits listed above, the following benefits are revised as a result of Act 30 of 2002.

Killed in service. Pensions for the families of members killed in service shall be calculated at 100% of the member's salary at the time of death.

Survivor benefit. A lifetime survivor's benefit shall be provided to the surviving spouse (or if no spouse survives or if he or she subsequently dies, the child or children under 18 years of age or, if attending college, under or until attaining the age of 23) of 50% of the pension the member was receiving or would have been entitled to receive had he been retired at the time of death. "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.

Service-related disability benefit. When an officer becomes disabled due to a service-related injury he shall receive a benefit of 50% of his salary at the time the disability was incurred, reduced by the amount of social security disability benefits received for the same injury.

Member contributions. If covered by social security, members shall pay into the fund, monthly, an amount determined as follows: 1) if the pension plan provides for no social security offset, 5% of total compensation; or 2) if the pension plan provides for a social security offset: a) on compensation on which social security taxes are payable, at a rate calculated by subtracting from 5% the product obtained by multiplying 3% by such offset percentage; and b) on compensation in excess of that on which social security taxes are payable, if any, 5%. The governing body of the municipality may, on an annual basis, by ordinance or resolution, reduce or eliminate payments into the fund by members.

Pre-vesting death benefit. The surviving spouse of a member of the police force who dies before his pension has vested or if no spouse survives or if he or she survives and subsequently dies, the child or children under the age of 18 years, or, if attending college, under or attaining the age of 23 years, shall be entitled to receive repayment of all money which the member invested in the pension fund plus three-percent interest or other increases in value of the member's investment in the pension fund, unless the member has designated another beneficiary for this purpose.

§ 31-9 Service as police reserve.

Retired participants shall be subject to service, from time to time, as a police reserve, in cases of riot, tumult or preservation of the public peace until determined by the Council to be unfit for such service, when they may be finally discharged by reason of age or disability.

§ 31-10 Life insurance.

For those members who were hired prior to 1983 and are insurable, the Borough shall direct the trustee to purchase pension life insurance and annuity contracts as an incidental death benefit for such participant, the purpose of said purchase being primarily to fund the pension program.

Said participant shall be insured for $30,000, which is payable to participant's beneficiary by a pension annuity life insurance contract. The participant shall have the right to name and change his beneficiary. Said policy shall be owned by the Police Pension Fund and, upon retirement of the participant, the cash value of the policy shall become an asset of the fund.

§ 31-11 Powers of Council.

The Council shall have full power and authority by majority action, either directly or through its designated representatives, to do all acts, execute, acknowledge and deliver all instruments and to exercise for the sole benefit of the participant's hereunder any and all powers and discretion necessary to implement and effectuate the purpose of this chapter. Administrative expenses to carry out this authority shall be paid by the fund.

§ 31-12 Responsibility for fund; entitlement on termination of employment.

The trustee shall be the owner of all moneys or property paid into or acquired by the fund or deposited with insurance companies under the trust or invested in mutual fund companies hereunder and the owner of all insurance, annuity, retirement income or similar contracts acquired hereunder; and no participant, prior to retirement, permanent injury or disability or death, shall have any right or interest in any portion of said moneys, property, deposits or contracts except as and to the extent required by any applicable law; provided, however, that each participant shall be entitled, in the event of termination of his employment with the Borough for reasons other than retirement, permanent injury or disability or death, to have returned to him the total amount of his contributions to the fund herein created, plus interest at the rate of 3% per annum.

§ 31-13 Assignment of funds.

No participant or beneficiary of a participant shall have any right to alienate, encumber or assign any assets of the fund held by the trustee on his behalf or any of the benefits or payments or proceeds or avails of any contract or agreement purchased or acquired by the trustee. Any contract or agreement purchased or acquired by the trustee pursuant to this chapter shall contain provision, in substance, that, to the extent provided by law, none of the benefits or payments or proceeds of such contract or agreement shall be subject to any legal process by any creditor of such participant or any beneficiary of such participant.

§ 31-14 Prior retirement contracts.

All contracts, agreements or funds held by the Borough of Economy for the purpose of providing police pension benefits on any police officer who shall be a participant in the program herein established shall be and hereby are transferred and assigned to the fund herein created. Any and all rights and benefits conferred by prior contracts on any police officer who shall be a participant in the program herein established shall be and the same are hereby terminated subject to the condition that any changes in said prior contracts as set forth herein constitute a reasonable enhancement of the actuarial soundness of the retirement fund and do not affect adversely any participant's rights which existed under prior retirement contracts.

§ 31-15 Limitations.

The Borough reserves to itself the right to transfer or assign to any pension or other employee benefit plan or program which the Borough may be required by the laws of the Commonwealth of Pennsylvania to establish for participants in the program herein established all funds, contracts, agreements or other property held by the Borough for the purpose of providing the benefits of said program for such participant who may be included in such mandatory pension or retirement income plan or program; and all rights and benefits conferred upon police officers of the Borough by this chapter shall be subject to the limitations of this section.

The Council reserves the right at any time and from time to time to alter and amend any or all of the provisions of this chapter.

§ 31-16 Termination of employment.

[Amended 7-9-2013 by Ord. No. 443]

Should a police officer, before completing superannuation retirement age and service requirements but after having completed 12 years of total service, for any reason cease to be employed as a full-time police officer by the municipality in whose pension fund he has been a member, he shall be entitled to vest his retirement benefits by filing with the governing body within 90 days of the date he ceases to be a full-time police officer a written notice of his intention to vest. Upon reaching the date which would have been his superannuation retirement date if he had continued to be employed as a full-time police officer the participant shall be paid a partial superannuation retirement allowance determined by applying the percentage his years of service bears to the years of service which he would have rendered had he continued to work until his superannuation retirement date to the gross pension, using however the monthly average salary during the appropriate period prior to his termination of employment.

§ 31-17 Compliance with other provisions.

[Added 12-13-2011 by Ord. No. 433]

The purpose of these plan amendments is to comply with the Pension Protection Act of 2006 (PPA)[1] and the Heroes Earnings Assistance Relief Tax Act (HEART Act).[2] Notwithstanding anything in this plan to the contrary, this plan shall be interpreted so as to comply with the applicable required provisions of the PPA and the HEART Act.

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

[2]

Editor’s Note: See 26 U.S.C. § 1 et seq.

For the purposes of Code Section 415(b)(1)(A), effective as of January 1, 2008, the applicable mortality table and applicable interest rate are found in Rev. Rul. 2007-67. The applicable mortality table in Rev. Rul. 2001-62 was effective from December 31, 2002, through December 31, 2007. From January 1, 2009, through December 31, 2013, the applicable mortality table is found in IRS Notice 2008-85.

415(c) compensation. For the purposes of this section, compensation includes only those items specified in Treas. Reg. § 1.415(c)-2(b)1 or (2) and excludes all items listed in Treas. Reg. § 1.415(c)-2(c), the terms of which are specifically incorporated herein by reference. Effective as of January 1, 2009, to the extent required by the Heroes Earnings Assistance Relief Tax Act of 2008 (HEART Act), differential wage payments shall be included in compensation.

Effective as of January 1, 2007, an eligible rollover distribution shall include an eligible rollover distribution containing after-tax contributions that is transferred in a direct trustee-to-trustee transfer to a 403(b) annuity contract or a qualified trust under Code Section 401(a) that agrees to separately account for amounts so transferred, including separately accounting for the portion of such distribution which is includible in gross income and the portion of such distribution which is not so includible.

Effective as of January 1, 2008, a Roth IRA is an eligible retirement plan.

Nonspousal rollover. Effective January 1, 2007, if a beneficiary who is not a surviving spouse is entitled to receive what would otherwise be an 'eligible rollover distribution, the beneficiary may, in accordance with Code Section 402(c)(11), make a trustee-to-trustee transfer of that amount to an IRA or individual retirement annuity (other than an endowment contract); provided that:

The transfer is made not later than the end of the fourth year after the year of the participant's death; and

The account or annuity to which the amount is transferred is treated as an inherited IRA or individual retirement annuity in accordance with Code Section 408(d)(3)(C).

HEART Act. Effective for participant deaths occurring while performing qualified military service [as defined in Code Section 414(u)] on or after January 1, 2007, the plan will provide retirement benefits and service credit to the extent required by the HEART Act.

§ 31-18 2013 Deferred Retirement Option Plan (DROP).

[Added 4-23-2013 by Ord. No. 441]

Definitions. Unless otherwise specifically set forth in this § 31-18 the defined terms used herein shall have the meaning assigned to them in the remainder of Chapter 31.

DROP

The DROP is created as an optional form of benefit under the existing Borough of Economy Police Pension Fund ("fund"). The DROP shall be for a maximum one-year term.

DROP ACCOUNT

A separate ledger account created to accumulate the DROP pension benefit for a DROP participant.

DROP PARTICIPANT

An employee and participant in the fund who attains the later of age 50 and 25 years of service, and who has elected to participate in the DROP program.

QUALIFYING OFFICER

Any full time active police officer of Economy Borough who has attained age 50 with 25 years of service and thus is eligible for normal retirement under the fund prior to September 1, 2013.

Eligibility. Qualifying officers who so elect between May 1, 2013, and August 31, 2013, may enter into the DROP on the first day of any month following the attainment of the later of age 50 and 25 years of service.

Written election.

A qualifying officer in the fund electing to participate in the DROP program must complete and execute a DROP election form, which shall evidence the DROP participant's participation in the DROP program, the DROP participant's election to forego active membership in the fund and document the DROP participant's rights and obligations under the DROP. The form must be signed by the DROP participant and the Chief Administrative Officer of the fund and submitted to the employer prior to the date on which the DROP participant elects to enter the DROP ("election date"). The election date must be prior to September 1, 2013. The DROP election form shall include an irrevocable notice to the employer by the DROP participant that the DROP participant shall terminate from employment with the employer effective on a specific date not more than one year from the effective date of the DROP participant's entry into the DROP. In addition, all retirement documents required by the Borough must be filed and presented to Council for approval of retirement and commencement of the monthly pension benefit. Once the retirement application has been approved by Council, it shall become irrevocable. A DROP participant's participation shall become effective the day following his election date.

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

Participants should 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.

Limitation on pension accrual. After the effective date of the DROP election, the participant shall no longer earn or accrue additional years of service for pension purposes, including the calculation of any service increment should such a service increment become available to active participants in the fund. The DROP participant shall also forego any growth in salary after the election date for the purpose of calculating retirement benefits under the fund.

Ineligibility for Reenrollment in DROP. Once a DROP participant's DROP participation terminates he shall be ineligible to reenroll in the DROP even if the former DROP participant is reemployed by the local government with renewed active membership in the fund.

Benefit calculation. For all fund purposes, service of a DROP participant 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 fund, including any service increments that may be available. The average monthly earnings of the DROP participant 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 fund. The pension benefit payable to the participant shall increase only as a result of cost-of-living adjustments (COLAs), if any, effective on or after the date of the DROP participant's participation in the DROP.

Payments to DROP account.

The monthly retirement benefits that would have been payable had the DROP participant elected to cease employment and receive a retirement benefit shall, upon the DROP participant commencing participation in the DROP program, be credited on the first day of each month into a separate ledger account established by the fund administrator to track and accumulate the participant's monthly pension benefits. This account shall be designated the DROP account. The DROP account shall not contain a guaranteed interest rate but shall be credited with interest at the actual rate earned by the DROP account but shall not be less than 0% nor greater than 4.5%, and shall be compounded monthly. The DROP account shall be a segregated account into which each DROP participant's monthly retirement benefit shall be deposited. All earnings or losses credited to the DROP account will be included in the final cash settlement. The DROP account shall be invested in an insured savings account, money market account or a mutual fund invested in ultra short-term treasuries as may be selected by the Fund Administrator. All earnings or losses credited to the DROP account will be included in the final cash settlement.

The DROP shall at all times comply with the annual benefit limitations of IRC § 415 and the regulations thereto.

Early termination. A DROP participant may withdraw from the DROP program at any time and effectuate a complete retirement from service. No penalty shall be imposed for early termination of DROP participation. However, the DROP participant 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 DROP participant withdraws or is terminated from the DROP program, if earlier, the retirement benefits payable to the participant shall be paid directly to the participant and shall no longer be credited to the DROP account. Within a period not to exceed 45 days following the actual termination of a participant's employment with the Borough of Economy, the DROP participant or the DROP participant's designated beneficiary, where applicable, shall elect one of the following options: 1) the accumulated balance in the DROP account, less any withholding taxes required to be remitted to the Internal Revenue Service, shall be paid to the DROP participant or his designated surviving beneficiary in a single lump-sum payment; or 2) the balance of the DROP participant's DROP account shall be paid within 45 days directly to the custodian of an eligible retirement fund as defined in § 402(c)(8)(b) of the Internal Revenue Code of 1986 (IRC) or in the case of an eligible rollover distribution to the surviving spouse of a deceased DROP participant, an eligible retirement fund that is an individual retirement account or an individual retirement annuity as described in IRC § 402(c)(9). If the DROP participant or designated beneficiary fails to elect a method of payment within 60 days after the DROP participant's termination date, the DROP participant's DROP account shall be paid in a lump-sum as provided above. All distributions of the DROP account shall comply with IRC § 401(a)(9).

Under this Subsection I, a distributee may elect to have an eligible rollover distribution paid directly to an eligible rollover retirement fund by way of a direct rollover. For purposes of this section a "distributee" includes a DROP participant, a DROP participant's survivor as provided by Act 600 of 1956, 53 P.S. § 767 et seq., or in lieu thereof, the DROP participant's designated beneficiary and a DROP participant's former spouse who is an alternate payee under a qualified domestic relations order. For purposes of this section, "eligible rollover distribution" has the meaning given the term by IRC § 402(f)(2)(A) except that a qualified trust shall be considered an eligible fund only if it accepts the distributee's eligible rollover distribution and, in the case of an eligible rollover distribution to a surviving spouse, an eligible retirement fund is an "individual retirement account" or an "individual retirement annuity" as those terms are defined in IRC § 408(a) and (b).

Death.

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 first monthly retirement benefit due the DROP participant for that month has been credited to his DROP account, the fund shall pay the monthly retirement benefit as though the DROP participant had not elected DROP participation and had died after the DROP participant's effective date of retirement but before receipt of the DROP participant's first regular retirement benefit. If a DROP participant dies while participating in the DROP and after his monthly retirement benefits have begun to have been credited to his DROP account, the monthly retirement benefit credited to the DROP participant's DROP account during the month of the DROP participant's death shall be the final monthly retirement benefit from the fund credited to his DROP account.

Except for those benefits specifically payable as a result of death incurred in the course of performing a hazardous public duty, the survivors of the DROP participant who dies shall not be eligible to receive retirement system death benefits payable in the event of the death of an active member. The DROP participant's survivor(s) shall be eligible to receive survivor benefits normally payable in the event of the death of a retired participant.

Disability. If a DROP participant becomes eligible for a disability benefit from the fund and terminates employment, the monthly nondisability retirement benefit of the DROP participant shall terminate.

Eligibility for other benefits. Except for benefits specifically foregone by the DROP participant pursuant to Subsection D, a DROP participant shall be eligible for the employee benefits provided to active employees that is appended to this section as Appendix A.[1]

Editor's Note: Appendix A is included as an attachment to this chapter.

Eligibility for statutory benefits. A DROP participant shall be eligible for all preretirement benefits for employees otherwise provided by law including, but not limited to the following:

The Workers' Compensation Act [the Act of June 2, 1915 (P.L. 736, No. 338)].

The Enforcement Officer Disability Benefits Law [the Act of June 28, 1935 (P.L. 477, No. 193)].

The Unemployment Compensation Law [the Act of December 5, 1936 (2nd Sp. Sess., 1937 P.L. 2897, No. 11)].

(4)

The Emergency and Law Enforcement Personnel Death Benefits Act [the Act of June 24, 1976 (P.L. 424, No. 101)].

(5)

The Public Safety Officers' Benefit Act of 1976 (Public Law 94-430, 42 U.S.C. § 90 Stat. 1347).

Designation of beneficiary. A DROP participant may designate a DROP beneficiary who shall be entitled to apply for and receive the DROP participant's DROP account in the event of the DROP participant's death while participating in the DROP. In the event that a DROP participant does not designate a beneficiary and dies while participating in the DROP, his DROP account will be paid to his survivor(s) as determined under Act 600 of 1956 and if no such survivors exist, then to his estate.

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 DROP participants who have balances in their DROP accounts.

Taxation, attachment and assignment. Except as provided in this section, the right of a DROP participant to any benefit or right accrued or accruing under the provisions of this § 31-18 and moneys in the DROP participant's DROP account are exempt from any state or municipal tax, levy and sale, garnishment, attachment, spouse's election or any other process whatsoever. Rights and benefits under this § 31-18 shall be subject to forfeiture as provided by the Public Employees Forfeiture Act [the Act of July 8, 1978 (P.L. 752, No. 140)]. Forfeitures under this section or under any other provision of law may not be applied to increase the benefits that any DROP participant otherwise would receive under this § 31-18. Rights under this § 31-18 shall be subject to attachment in favor of an alternate payee as set forth in a qualified domestic relations order.

Trust requirement. A DROP participant's DROP account shall be held in trust for the exclusive benefit of fund participants who are or were DROP participants and for their beneficiaries.

Severability. The provisions of this § 31-18 shall be severable, and if any of its provisions shall be held to be unconstitutional or illegal, the validity of any of the remaining provisions of this § 31-18 shall not be affected thereby. It is hereby expressly declared as the intent of the Borough that this § 31-18 has been adopted as if such unconstitutional or illegal provision or provisions have not been included herein.

Auditor General findings. If the Auditor General issues a finding of noncompliance with the provisions of Act 44 of 2009 that govern this DROP, the Borough shall be authorized to reform this § 31-18 to bring it into compliance with the DROP within 90 days of the date the Auditor General's finding becomes final.

Termination. The ability of a qualifying officer to elect into this one-year window DROP benefit shall as of September 1, 2013, be terminated and shall no longer be a plan feature.

§ 31-19 (Reserved)

§ 31-20 2016 Deferred Retirement Option Plan (DROP).

[Added 2-23-2016 by Ord. No. 453]

Definitions. Unless otherwise specifically set forth in this § 31-20, the defined terms used herein shall have the meanings assigned to them in the remainder of Chapter 31.

DROP

The DROP is created as an optional form of benefit under the existing Borough of Economy Police Pension Fund ("fund)". The DROP shall be for a maximum two-year term.

DROP ACCOUNT

A separate ledger account created to accumulate the DROP pension benefit for a DROP participant.

DROP PARTICIPANT

An employee and participant in the fund who attains the later of age 54 and 25 years of service, and who has elected to participate in the DROP program.

QUALIFYING OFFICER

Any full-time active police officer of Economy Borough who has attained age 54 with 25 years of service and thus is eligible for normal retirement under the fund prior to entry into the DROP program.

Eligibility. Qualifying officers who so elect between July 1 and December 31 of the year in which they become a qualifying officer may enter into the DROP during this period but no earlier than the first day of any month following the attainment of the later of age 54 and 25 years of service.

Written election. A qualifying officer in the fund electing to participate in the DROP program must complete and execute a "DROP election form" which shall evidence the DROP participant's participation in the DROP program and the DROP participant's election to forego active membership in the fund and document the DROP participant's rights and obligations under the DROP. The form must be signed by the DROP participant and the chief administrative officer of the fund and submitted to the employer prior to the date on which the DROP participant elects to enter the DROP ("election date"). The DROP election form shall include an irrevocable notice to the employer by the DROP participant that the DROP participant shall terminate from employment with the employer effective on a specific date not more than two years from the effective date of the DROP participant's entry into the DROP. In addition, all retirement documents required by the Borough must be filed and presented to Council for approval of retirement and commencement of the monthly pension benefit. Once the retirement application has been approved by Council, it shall become irrevocable. A DROP participant's participation shall become effective the day following his election date.

Participants should 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.

Ineligibility for reenrollment in DROP. Once a DROP participant's DROP participation terminates, he shall be ineligible to reenroll in the DROP even if the former DROP participant is reemployed by the local government with renewed active membership in the fund.

Payments to DROP account.

The monthly retirement benefits that would have been payable had the DROP participant elected to cease employment and receive a retirement benefit shall, upon the DROP participant commencing participation in the DROP program, be credited on the first day of each month into a separate ledger account established by the fund administrator to track and accumulate the participant's monthly pension benefits. This account shall be designated the "DROP account." The DROP account shall not contain a guaranteed interest rate but shall be credited with interest at the actual rate earned by the DROP account, but shall not be less than 0% nor greater than 4.5%, and shall be compounded monthly. The DROP account shall be a segregated account into which each DROP participant's monthly retirement benefit shall be deposited. All earnings or losses credited to the DROP account will be included in the final cash settlement. The DROP account shall be invested in an insured savings account, money market account or a mutual fund invested in ultra-short-term treasuries as may be selected by the fund administrator. All earnings or losses credited to the DROP account will be included in the final cash settlement.

The DROP shall at all times comply with the annual benefit limitations of IRC § 415 and the regulations thereto.

Payout.

Upon the termination date set forth on the DROP election form or on such date as the DROP participant withdraws or is terminated from the DROP program, if earlier, the retirement benefits payable to the participant shall be paid directly to the participant and shall no longer be credited to the DROP account. Within a period not to exceed 45 days following the actual termination of a participant's employment with the Borough of Economy, the DROP participant or the DROP participant's designated beneficiary, where applicable, shall elect one of the following options: the accumulated balance in the DROP account, less any withholding taxes required to be remitted to the Internal Revenue Service, shall be paid to the DROP participant or his designated surviving beneficiary in a single lump-sum payment; or the balance of the DROP participant's DROP account shall be paid within 45 days directly to the custodian of an eligible retirement fund as defined in Section 402(c)(8)(b) of the Internal Revenue Code of 1986 (IRC) or, in the case of an eligible rollover distribution to the surviving spouse of a deceased DROP participant, an eligible retirement fund that is an individual retirement account or an individual retirement annuity as described in IRC § 402(c)(9). If the DROP participant or designated beneficiary fails to elect a method of payment within 60 days after the DROP participant's termination date, the DROP participant's DROP account shall be paid in a lump sum as provided above. All distributions of the DROP account shall comply with IRC § 401(a)(9).

Under this Subsection I, a distributee may elect to have an eligible rollover distribution paid directly to an eligible retirement fund by way of a direct rollover. For purposes of this section, a "distributee" includes a DROP participant, a DROP participant's survivor as provided by Act 600 of 1956, 53 P.S. § 767 et. seq., or, in lieu thereof, the DROP participant's designated beneficiary, and a DROP participant's former spouse who is an alternate payee under the qualified domestic relations order. For purposes of this section, "eligible rollover distribution" has the meaning given the term by IRC § 402(f)(2)(A), except that a qualified trust shall be considered an eligible fund only if it accepts the distributee's eligible rollover distribution; and, in the case of an eligible rollover distribution to a surviving spouse, an eligible retirement fund is an "individual retirement account" or an "individual retirement annuity," as those terms are defined in IRC § 408(a) and (b).

Death.

Eligibility for statutory benefits. A DROP participant shall be eligible for all preretirement benefits for employees otherwise provided by law, including, but not limited to, the following:

The Workers' Compensation Act [the Act of June 2, 1915 (P.L. 736, No. 338)].

The Enforcement Officer Disability Benefits Law [the Act of June 28, 1935 (P.L. 447, No. 193)].