[HISTORY: Adopted by the Board of Commissioners of the Township of Penn as indicated in article histories. Amendments noted where applicable.]035a Appendix A 035b App for DROP Retirement Ben
[Adopted 2-18-2013 by Ord. No. 886]
Effective January 1, 2016, Deferred Retirement Option Plan (DROP) provisions shall be added to the Township of Penn Police Pension Plan as follows.
The following words and phrases when used in this article shall have the meanings given to them in this section only, unless the context clearly indicates otherwise:
- A deferred retirement option plan established and being operated by the Township of Penn.
- DROP PARTICIPANT
- A retired participant of the Township of Penn Police Pension Plan who is eligible to participate in a DROP, and who has elected to participate in a DROP program.
- DROP PARTICIPANT ACCOUNT
- The pension trust fund ledger account.
- NORMAL RETIREMENT BENEFIT
- The retirement benefit payable to a participant of a defined benefit pension plan at the point in time when the participant satisfies the age and service requirements for full, unreduced retirement benefits.
- SUBSIDIARY DROP PARTICIPANT ACCOUNT
- The separate, subsidiary DROP participant account established for a DROP participant.
The Township's actuary for the plan shall conduct an annual review, or more frequently if determined necessary at the sole discretion of the Township, to confirm the cost neutrality of the DROP. The cost for such reviews shall be paid for from plan assets. In the event the actuary determines that the DROP, as then currently structured, cannot be offered while maintaining cost neutrality, the Township may adopt amendments to the DROP, recommended by the actuary, to maintain cost neutrality. Any such amendments are subject to approval by the union and shall have only prospective application and shall not affect current DROP participants.
The union reserves the right to grieve the actuary's determination of cost neutrality in accordance with the grievance procedure of the collective bargaining agreement. Any arbitration award shall comply with applicable law, including, but not limited to, Act 205 of 1984 and shall be subject to the plan actuary's fiduciary responsibility to determine actuarial assumptions for the pension plan.
In the event future legislation is enacted that sets forth any mandatory, minimum or maximum provisions with respect to DROP plans sponsored by the Township of Penn or the Township receives an audit finding from the Department of the Auditor General, the plan shall be amended to bring the existing DROP plan into compliance, so long as the legislation of audit findings recommendations provides for a structure that is cost neutral.
A DROP participant's monthly retirement benefits shall be paid into the participant's subsidiary DROP participant account. The account shall accrue zero-percent interest for the period of the DROP participation. Upon termination of employment, the participant shall receive the balance in the participant's subsidiary DROP account and begin to receive the previously determined monthly retirement benefit. The employment of a DROP participant by the Township of Penn does not guarantee the DROP participant's continued employment by the Township of Penn through the end of the specified period of the DROP.
An employee who has attained the date of eligibility for a normal retirement benefit under the plan is eligible (but not required) to elect to participate in the DROP by filing a written application with the retirement Plan Administrator at least 30 days prior to the date that the employee desires to enter the DROP.
An eligible participant may elect to participate in this DROP for a period not to exceed three years. Upon deciding to participate in a DROP, a participant must submit, on forms provided by the Township, all of the following:
A binding and irrevocable letter of resignation from regular employment with the Township of Penn which discloses the participant's intent to retire and specifies the participant's retirement date.
An irrevocable written election to participate in the DROP which must specify the effective date of DROP participation that shall be one day after the participant's specified retirement date, specify the DROP termination date which satisfy the agreed terms, detail a DROP participant's rights and obligations under the DROP and include an agreement to forgo:
Active membership in the plan;
Any growth in the salary base used for calculating the retirement benefits;
Any additional benefit accrual for retirement purposes, including service increments;
Agree to be placed at the bottom of the seniority list for purposes of overtime distribution.
The DROP participant shall be required to provide any other information required by the Township.
A retired participant's effective date of participation in a DROP shall begin on the day following the effective date of the participant's retirement. A retired participant's participation in a DROP shall end on the last day of the participation period specified in the ordinance establishing the DROP based on the effective date of the retired participant's participation in the DROP.
A DROP participant may change the DROP termination date to an earlier date, but may not change it to a later date than elected at the time of initial DROP participation. No penalty shall be imposed for early termination of DROP participation. Upon either early or regular termination of DROP participation, the DROP participant shall be separated from employment by the Township of Penn and the plan shall pay the balance in the DROP participant's subsidiary DROP participant account to the terminating participant. The DROP participant shall be ineligible to reenroll in the DROP thereafter even if the former DROP participant is reemployed by the Township of Penn with renewed active membership in the Township of Penn Police Pension Plan.
DROP participants shall neither be required nor permitted to pay contributions into the plan during the DROP participation period.
Effective with the date of retirement, which must be the day before the effective date of DROP participation, the participant's monthly late retirement benefit as calculated under the plan, the participant's effective date of retirement and the participant's effective dates of beginning and terminating participation in the DROP shall be fixed. There shall be no further retirement benefit accruals after the participant's effective date of retirement.
On the effective date of a DROP participant's termination of employment with the Township as a DROP participant, participation in the DROP shall cease; and the plan shall calculate and pay to the participant the participant's total accumulated DROP benefits in the DROP participant's subsidiary DROP participant account subject to the following provisions:
The termination DROP participant or, if the participant is deceased, the participant's named beneficiary shall elect on a form provided by the Plan Administrator to receive payment of the DROP benefits in accordance with one of the following options:
The balance in the DROP participant's subsidiary DROP participant account, less withholding taxes, if any, remitted to the Internal Revenue Service, and shall be paid within 45 days of the receipt of the election form, by the plan from the account to the DROP participant or surviving beneficiary.
The balance in the DROP participant's subsidiary DROP participant account shall be paid within 45 days of the receipt of the election form, by the plan from the account directly to the custodian of an eligible retirement plan as defined in § 402(c)(8)(B) of the Internal Revenue Code of 1986 or, in the case of an eligible rollover distribution, to the surviving spouse of a deceased participant to an eligible retirement plan which is an individual retirement account or an individual retirement annuity as described in § 402 (c) (9) of the Internal Revenue Code of 1986.
If the DROP participant or beneficiary fails to elect a method of payment within 60 days after the participant's termination date, the plan shall pay the balance directly to the custodian of an eligible retirement plan as provided.
The form of payment selected by the DROP participant or surviving beneficiary shall comply with the minimum distribution requirements of the Internal Revenue Code of 1986.
DROP benefits are not subject to assignment, attachment, or levy, and DROP benefits are subject to the Pennsylvania Pension Forfeiture Act.
The terminating DROP participant shall commence receipt of the monthly retirement benefit directly starting with the first day of the month coincident with or next following termination of employment with the Township.
If a DROP participant dies, the participant's designated beneficiary shall be entitled to apply for and receive the benefits accrued in the DROP participant's subsidiary DROP participant account.
The monthly retirement benefit accrued in the DROP participant's DROP participant account during the month of a DROP participant's death shall be the final monthly retirement benefit credited for DROP participation.
A DROP participant's eligibility to participate in the DROP terminates upon the death of the DROP participant. If a DROP participant dies on or after the effective date of participation in the DROP but before the initial monthly retirement benefit of the participant accruable for the month has accrued in the DROP participant's subsidiary DROP participant account, the Township of Penn shall pay the monthly retirement benefits as though the participant has not elected DROP participation and had died after the employee's effective date of retirement but before receipt of the retired participant's first normal retirement benefit.
If a DROP participant becomes eligible for a disability pension benefit and terminates employment, the monthly normal retirement benefit of the DROP participant shall terminate.
A DROP participant shall be eligible for all preretirement benefits for employees otherwise provided by law, including, but not limited to, the following:
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. 28979 No. 11);
The Public Safety Officers' Benefit Act of 1976 (Public Law 94-430, 42 U.S.C. § 3796);
The Emergency and Law Enforcement Personnel Death Benefits Act (53 P.S. § 891).
Attached hereto, made a part hereof, and incorporated herein by reference as if more fully set forth herein is Appendix A. In addition attached hereto, made a part hereof, and as a part of Appendix A is the application for DROP retirement benefits. The benefits and application for DROP retirement benefits shall be effective January 1, 2016 and shall remain in full force and effect until such time as they may be modified by negotiations between the Township of Penn and the Penn Township Police Department bargaining unit.
At the time the Township of Penn establishes a DROP it shall also establish a DROP participant account as a separate ledger account in its pension trust fund for each DROP participant. The account balance shall be accounted for separately but need not be physically segregated from other pension trust fund assets. A separate subsidiary DROP participant account shall be established for each DROP participant.
While a retired participant is employed as a DROP participant, the participant's monthly retirement benefit shall be credited to the DROP participant account. When a DROP participant terminates employment with the Township of Penn as a DROP participant, the participant's total accumulated benefits shall be calculated, charged to the DROP participant account and paid out of the pension trust fund.
The balance in the DROP participant's account shall be excluded from actuarial valuation reports of the plan prepared and filed under this legislation. The DROP participant's account shall be held in trust for the exclusive benefit of DROP retired participants who are or were DROP participants and for the beneficiaries of these participants or an alternate payee.