[HISTORY: Adopted by the Borough Council
of the Borough of Economy 10-11-2005 by Ord. No. 402. Amendments noted where applicable.]
GENERAL REFERENCES
Police Department — See Ch.
29.
Pension Plan for Employees – See Ch.
23.
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.
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.
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.
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.
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.
A. 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.
B. 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).
A. Eligibility for receiving retirement benefits shall
be determined by the following:
(1) An officer reaches age 50.
(2) An officer has completed 25 years aggregate total
service with the Borough.
(3) An officer has completed 20 years aggregate total
service with the Borough, but at a reduced benefit.
(4) There is no social security offset.
B. Average monthly earnings are those received during
the last 36 months immediately preceding retirement.
C. Cost-of-living adjustments will be made in accordance
with the Act.
D. 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.
E. 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.
F. 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]
In addition to the benefits listed above, the
following benefits are revised as a result of Act 30 of 2002.
A. 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.
B. 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.
C. 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.
D. 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.
E. 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.
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.
A. 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.
B. 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.
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.
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.
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.
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.
A. 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.
B. 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.
[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.
[Added 12-13-2011 by Ord. No. 433]
A. The purpose
of these plan amendments is to comply with the Pension Protection
Act of 2006 (PPA) and the Heroes Earnings Assistance Relief Tax Act (HEART
Act). 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.
B. 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.
C. 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.
D. 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.
E. Effective
as of January 1, 2008, a Roth IRA is an eligible retirement plan.
F. 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:
(1) The
transfer is made not later than the end of the fourth year after the
year of the participant's death; and
(2) 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).
G. 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.
[Added 4-23-2013 by Ord. No. 441]
A. 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.
B. 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.
C. Written election.
(1) 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.
(2) 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.
(3) 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.
D. 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.
E. 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.
F. 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.
G. Payments to DROP account.
(1) 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.
(2) The DROP shall at all times comply with the annual benefit limitations
of IRC § 415 and the regulations thereto.
H. 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.
I. Payout.
(1) 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).
(2) 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).
J. Death.
(1) 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.
(2) 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.
K. 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.
L. 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.
M. 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:
(1) The Workers' Compensation Act [the Act of June 2, 1915 (P.L.
736, No. 338)].
(2) The Enforcement Officer Disability Benefits Law [the Act of June
28, 1935 (P.L. 477, No. 193)].
(3) 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).
N. 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.
O. 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.
P. 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.
Q. 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.
R. 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.
S. 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.
T. 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.
[Added 2-23-2016 by Ord.
No. 453]
A. 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.
B. 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.
C. 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.
(1) 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.
(2) 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.
D. 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.
E. 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.
F. 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.
G. Payments to DROP account.
(1) 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.
(2) The DROP shall at all times comply with the annual benefit limitations
of IRC § 415 and the regulations thereto.
H. 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.
I. Payout.
(1) 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).
(2) 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).
J. Death.
(1) 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.
(2) 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.
K. 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.
L. 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 officers.
M. 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:
(1) The Workers' Compensation Act [the Act of June 2, 1915 (P.L.
736, No. 338)].
(2) The Enforcement Officer Disability Benefits Law [the Act of June
28, 1935 (P.L. 447, No. 193)].
(3) 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).
N. 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.
O. 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; provided, however, that the provisions of this §
31-20 shall apply exclusively to those DROP participants electing to participate in the DROP program on or after January 1, 2014.
P. 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 §
31-20 and moneys in the DROP participant's DROP account are exempt from a state or municipal tax, levy and sale, garnishment, attachment, spouse's election or any other process whatsoever. Rights and benefits under this §
31-20 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 §
31-20. Rights under this §
31-20 shall be subject to attachment in favor of an alternate payee as set forth in a qualified domestic relations order.
Q. Trust requirement. A DROP participant's DROP account shall be
held in trust for the exclusive benefit of the fund participants who
are or were DROP participants and for their beneficiaries.
R. Severability. The provisions of this §
31-20 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 §
31-20 shall not be affected thereby. It is hereby expressly declared as the intent of the Borough that this §
31-20 has been adopted as if such unconstitutional or illegal provision or provisions had not been included herein.
S. 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 §
31-20 to bring it into compliance with the DROP within 90 days of the date the Auditor General's finding becomes final.