(a) General. In lieu of the standard pension benefit or the alternative pension benefit, a member who has attained his or her normal retirement date may elect to remain in active service with the city and to participate in the DROP. By making an election to participate in DROP, the member’s commencement of retirement pension benefits will be deferred until the member’s actual retirement and the member will receive a lump sum payment (unless such person elects installment payments pursuant to subsection (j) below) of his or her DROP account at the time the member’s actual retirement pension benefits commence. No interest on earnings shall be paid on the lump sum payment. Once a member makes a DROP election and the DROP election is approved by the board, the DROP election is irrevocable and is effective as long as the member remains in active service with the city. Distribution of a member’s DROP account will not be made, and commencement of the member’s retirement pension benefits will not begin, until the member retires from the city. DROP shall be administered in accordance with the rules, procedures and forms as may be adopted and amended by the board in its complete discretion, which shall be uniform and nondiscriminatory and which shall be interpreted in a manner that is consistent with the provisions of this Article and applicable law.
(b) Procedure for DROP election. A DROP election shall be made in accordance with the rules, procedures and forms (including spousal consent, where applicable) as may be adopted by the board. The election form adopted by the board may be amended by the board, and, except as otherwise provided by the board, the election form in effect at the time of the member’s DROP election is effective shall control all DROP benefits the member may become entitled to receive upon retirement. A member shall not be subject to any fees, charges or any other similar expenses in connection with a DROP election.
(c) Timing and irrevocability of a DROP election. A member may make a DROP election at any time on or after the date that is 60 days prior to the date that the member will attain his or her normal retirement date or special retirement date. Once effective, a DROP election is irrevocable, provided, however, that a member’s DROP election shall not be effective until the member attains his or her normal retirement date.
(d) The DROP account. A member’s DROP account is an individual account established on behalf of the member into which a monthly amount will be credited once the DROP election is effective. The monthly amount credited to the member’s DROP account will be equal to the monthly pension benefit that the member would have initially received if the member had retired from the city and commenced his or her pension. Credits to a member’s DROP account will continue to be made until the member’s actual retirement, provided, however, that amounts will be credited to a member’s DROP account for a maximum of six years. No withdrawals may be made from the DROP account. A member will receive his or her DROP account in a lump sum distribution at the time the member’s pension benefits commences upon retirement, or, if elected by the member, the DROP account will be distributed in installments, as provided in subsection (j) below.
(e) Continued contributions to the fund. Once a DROP election is effective, both the member and the city shall continue to make the same contributions to the fund that would have been made if the member had not made a DROP election. Neither the member’s nor the city’s contributions to the fund will be credited to the member’s DROP account and the additional contributions will not affect the member’s monthly pension upon actual retirement.
(f) Monthly pension and ad hoc cost of living adjustment. Upon retirement following an effective DROP election, the member’s base pension will be the monthly pension benefits that the member had earned at the time the DROP election became effective. The member’s earnings and credited service following the DROP election will not be included in calculating the member’s base pension and monthly pension benefits. If (and only if) a member completes at least two years of service with the city after his or her DROP election is effective, then the monthly pension benefits that the member initially receives upon retirement will be adjusted for intervening cost of living adjustments, if applicable, as if the member’s monthly pension had commenced at the time the DROP election became effective. Further, such a member shall receive a cost of living adjustment on the following January 1, regardless of whether the member’s pension benefits had commenced by September 30. Notwithstanding the preceding provisions of this subsection (f), when a member’s monthly pension is initially scheduled to commence at retirement or death, the member’s base pension shall be recalculated by adjusting the member’s credited service for the member’s then accumulated sick leave and major medical leave (if any) pursuant to § 2.5-4(b).
(g) DROP election and death pension. If a member dies while his or her DROP election is in effect, the member’s DROP account shall be paid to the member’s spouse, or if there is no spouse, to the member’s estate. The spouse or estate eligible to receive the DROP account shall receive the DROP account in a lump sum distribution, unless an election is made to receive installment payments pursuant to this section. The remaining portion of the member’s pension shall be paid pursuant to the death pension provisions of this article, with the amount determined as if the member had died at the time of the DROP election.
(h) DROP election and disability pension. If a member makes a DROP election, the member will not be eligible to receive a disability pension under this article. If a member does become disabled following an effective DROP election, the member may retire from the city and receive the amount that has been credited to the member’s DROP account in a lump sum or in installment payments pursuant to subsection (j) below, and commence receipt of a monthly pension, with the amount of the pension calculated as if the member had retired at the time the DROP election became effective.
(i) Alternative pension benefit. A member who has made a DROP election shall not be eligible to elect an alternative pension benefit.
(j) Installment payments. Notwithstanding the preceding provisions of this section, a member who is entitled to receive a lump sum payment of his or her DROP account may elect (on a form adopted by the board) to receive the DROP account in five substantially equal annual installment payments, rather than a lump sum. The first installment payment shall be made at the time the member’s monthly pension commences, and the other installments shall be made on or about the anniversary of the initial installment. No interest on earnings shall be paid on the installment payments.
(Ord. 20471-10-2012, § 2, passed 10-23-2012; Ord. 23516-12-2018, § 4, passed 12-11-2018)