(a) If a member with ten or more years of credited service ceases to be a police officer or firefighter in the employ of the City before attaining his or her voluntary retirement age for any reason except his or her retirement or death, he or she shall become entitled to an annuity provided for in Section 296.13. Such annuity shall begin as of the first day of the calendar month next following the month in which his or her application for the same is filed with the Retirement Board on or after the date he or she would have attained his or her voluntary retirement age had he or she remained in City service. Such member may elect to withdraw all or part of his or her accumulated contributions from the Annuity Savings Fund. In such event, he or she shall thereupon forfeit all his or her rights in and to a deferred annuity provided for in this section.
(1979 Code Sec. 2.80.140)
(b) Deferred Retirement Option Plan (DROP) for Fire Chief. The Retirement System is hereby amended to provide increased retirement benefits to a member who is actively employed in the position of Fire Chief in accordance with the following:
(1) Overview.
A. Effective September 18, 2007, the Fire Chief, who is a member of the City of Lincoln Park Police and Fire Retirement System, may voluntarily elect to participate in the City of Lincoln Park Police and Fire Retirement System Public Safety Employee Deferred Retirement Option Plan (hereinafter "DROP") after attaining the minimum requirements for a service retirement. Upon commencement of DROP Participation, the Participant's DROP Benefit shall be the dollar amount of the employee's monthly pension benefit computed by using the contractual guidelines and formula(s) that are in effect on the DROP Date.
B. After filing an election to participate in the DROP, the employee continues with full employment status, receives all future promotions and benefit/wage increases, and is considered an employee of the City, not a retiree. The Participant's DROP Benefit shall be credited monthly to the Participant's DROP Account which shall be established within the City of Lincoln Park Police and Fire Retirement System (the "Police and Fire Retirement System"). The Participant's DROP Account shall be maintained and managed by the Board of Trustees of the City of Lincoln Park Police and Fire Retirement System (the "Retirement Board"). The Participant is solely responsible for analyzing the tax consequences of DROP Participation.
(2) Eligibility. Effective September 18, 2007, the Fire Chief may voluntarily elect to participate in the DROP at any time after attaining the minimum requirements for a service retirement.
(3) Election to Participate. Once elected, participation in the DROP program is IRREVOCABLE (except as specifically provided in Subsection (12) herein). An eligible employee who wishes to participate in the DROP shall complete and sign such application form or such other forms as shall be required by the Retirement Board. The Retirement Board shall review the application within a reasonable time period and make a determination as to the employee's eligibility for participation in the DROP. An employee electing to participate in the DROP must file their election prior to their DROP date. As of the Participant's effective DROP Date, the Participant shall cease to accrue additional retirement benefits otherwise credited to active members of the Police and Fire Retirement System. The amount of credited service, multiplier and average final compensation shall be fixed as of the Participant's DROP Date. Increases in compensation and accrual of additional service after the Participant's effective DROP Date will NOT be factored into the pension benefits of active or former DROP Participants (except as specifically provided in Subsection 12). Except with regard to the retirement benefits expressly provided herein, employees electing DROP Participation will continue with full employment status with all rights and privileges afforded to respective employees of the Fire Department, including, but not limited to, future promotions, benefit and wage increases, as well as Retirement System membership and Board representation.
(4) Participation Period.
A. The maximum period for participation in the DROP is three years (the "Participation Period"). There is no minimum time period for participation. DROP Participation shall cease within three years from their DROP date.
B. The City in its sole discretion may extend participation in the DROP or in an alternative retirement plan (e.g. Defined Contribution Plan) to those employees who continue in their employment after expiration of their DROP Participation Period.
C. The Participant's monthly pension benefit otherwise credited to their DROP Account shall cease as of the earlier of the Participant's termination of employment or expiration of the DROP Participation Period. Interest on the DROP Account will continue to be credited until distributed in accordance with Section 8 herein. Upon retirement, the Participant's monthly retirement benefit shall be the monthly amount credited to their DROP Account and the Participant shall be eligible for distribution of their DROP Account Balance in accordance with Subsection 9 herein.
D. The City may extend participation in an alternative retirement plan (e.g. Defined Contribution Plan) to those applicable Public Safety Employees who continue in their employment after expiration of their DROP Participation Period.
(5) DROP Benefit.
A. The Participant's DROP Benefit shall be the regular monthly retirement benefit to which the Participant would have been entitled if the Participant had actually terminated employment and retired on their DROP Date (less the actuarial reductions as a result of the retiree electing an Optional form of benefit under the Plan, if applicable). The Participant's DROP Benefit shall be credited monthly to an individual DROP Account. The Participant may at the time of DROP Election elect to receive their benefit in the form of the Plan's Option A or Option B Benefit and nominate a named beneficiary in accordance with the Police and Fire Retirement System provisions.
B. The term "beneficiary" for purposes of benefit qualification of DROP Participants shall mean such person having an insurable interest in the life of the Participant.
(6) Annuity Withdrawal.
A. A Participant who elects to participate in the DROP (and correspondingly, ceases to accrue additional retirement benefits otherwise credited to active members of the Police and Fire Retirement System) may elect the Annuity Withdrawal Option provided by the Police and Fire Retirement System at the time of electing DROP participation. The Annuity Withdrawal Option and all other retirement options under the Police and Fire Retirement System which are available to Retirement System Members shall only be available to the DROP Participant at such time as the Participant elects DROP Participation.
B. The Annuity Withdrawal Option election shall be made commensurate with the Participant's DROP election, but not thereafter, and the Annuity Withdrawal amount at time of DROP will be utilized to compute the actuarial reduction of the Participant's DROP Benefit, as well as the Participant's monthly retirement benefit from the Police and Fire Retirement System after termination of employment. The Annuity Withdrawal amount (accumulated contributions) shall be withdrawn from the Police and Fire Retirement System at the time of termination of employment and shall not be subject to withdrawal by a DROP Participant at the time of DROP election.
C. DROP Participants who do not elect the Annuity Withdrawal Option shall have their full unreduced benefit credited to their DROP account.
(7) DROP accounts.
A. An individual DROP account shall be created for each Participant electing DROP Participation. All individual DROP Accounts shall be maintained for the benefit of each Participant and will be managed by the Retirement Board in the same manner as the primary pension fund. DROP Interest for each DROP Account shall be based upon 4.0% per annum compounded monthly. DROP Interest will be credited to each individual DROP Account on the first day of each month on the prior month's principal and interest balance. [By way of example, the following illustration is provided: The DROP Interest rate is 4.0% per annum compounded monthly (e.g. .3333% monthly). A Participant's DROP Account balance on June 1, 2007 is $12,500 (including principal and interest). On July 1, 2007, the Participant's DROP Account will be credited with $41.66 in interest.]
B. The Retirement Board shall provide each individual with a statement of their DROP account. The reference to individual DROP Accounts shall be interpreted to refer to the accounting records of the Police and Fire Retirement System and not to the actual segregation of moneys in the funds of the Police and Fire Retirement System.
(8) Contributions. The payroll of those employees electing DROP Participation shall be included in the covered compensation upon which regular City employer contributions to the Police and Fire Retirement System are based. Employer contributions shall be credited to the Retirement System and not to any individual DROP Account.
(9) Distribution of DROP Funds.
A. Upon termination of employment, the retiree must choose one, or a consistent combination of, the following distribution methods to receive payment(s) from his or her individual DROP Account:
1. A total lump sum distribution to the retiree.
2. A partial lump sum distribution to the retiree (no more than one per calendar year is allowed).
3. A lump sum direct rollover to another qualified plan to the extent allowed by federal law and in accordance with the Retirement Board's rollover procedures.
4. An annuity payable for the life of the retiree.
5. An optional form of annuity as established by the Retirement System Ordinance.
B. A retiree may change his or her distribution method as may be applicable no more than once per calendar year, prior to June 30 of each year in accordance with such procedures and time guidelines as adopted by the Retirement Board. A retiree may elect a total lump sum distribution of any remaining balance in his DROP Account at any time after termination of employment. The distribution will be paid within 90 days after receiving the written request. All benefit payments under the Retirement System shall be made (or commence in the case of an annuity) as soon as practical after entitlement thereto, but in no event later than the April 1 following the later of:
1. The calendar year in which the Participant attains age 70 ½; or,
2. The calendar year in which the Participant's employment terminated.
C. If the accumulated balance in any retiree's DROP account becomes less than five thousand dollars ($5,000) [or such other amount as provided in Internal Revenue Code Section 411(a)(11)(A)], then the Retirement Board, in its sole discretion, may distribute the retiree's entire DROP account, in the form of a lump sum, to the retiree.
D. Any and all distributions from a retiree's DROP account shall not be subject to offset by any workers' compensation wage loss payments received by the participant, including any redemption amounts.
(10) Death during DROP participation. Except as otherwise provided in Subsection 12, if an employee who has made a DROP election dies either before termination of service, or after retirement but before his or her DROP account balance has been fully paid out, the designated beneficiary or beneficiaries shall receive the participant's DROP account balance in the manner in which they elect from the previously mentioned distribution methods (Subsection 9). In the event the employee or retiree has failed to name a beneficiary, the DROP account balance shall be payable to the employee's or retiree's beneficiary of benefits from the Police and Fire Retirement System. If there is no such beneficiary, the account balance shall be paid in a lump sum to the employee's or retiree's estate. In the event such death occurs prior to termination of service, benefits payable from the Police and Fire Retirement System shall be determined as if the employee had terminated service on the day prior to the employee's date of death.
(11) Disability during DROP participation. Except as otherwise provided in Subsection 12, in the event an employee who has elected DROP participation becomes totally and permanently disabled from further performance of duty as a fire fighter, the employee shall not be eligible for disability benefits from the Police and Fire Retirement System, except as specifically provided in Subsection 12. The employee shall terminate employment and be eligible for those benefits provided to a retiree in accordance with the DROP provisions.
(12) Special provision for duty disability and duty death.
A. An employee who has elected DROP participation who the Retirement Board, in accordance with retirement system provisions, finds to be totally and permanently incapacitated for duty in the service of the City by reason of a personal injury or disease which the Retirement Board finds to have occurred solely and exclusively as the natural and proximate result of causes arising out of and in the course of the employee's employment with the City, may retroactively revoke his DROP election.
B. If an employee who has elected DROP participation dies solely and exclusively as a result of a personal injury or disease arising out of and in the course of his or her employment by the City, the employee's eligible survivors (i.e., survivors qualified under retirement Ordinance Section 296.18) and the employee's eligible DROP beneficiary or beneficiaries may, by unanimous agreement, retroactively revoke the employee's DROP election if the revocation occurs before payment of a distribution from the employee's DROP Account or payment of benefits from the Police and Fire Retirement System. If a DROP election revocation is made as prescribed by this Subsection, the employee's DROP account is not distributed, and the beneficiary or beneficiaries, as applicable, are entitled to all benefits provided by the Police and Fire Retirement System as if a DROP election had not been made.
(13) Re-employment. In the event a former DROP participant is re-employed by the City in the capacity of a sworn firefighter, they shall not be eligible for membership in the Police and Fire Retirement System or DROP participation. Retirement benefits payable from the Police and Fire Retirement System shall continue during such period of re-employment. The City may extend participation in an alternative retirement plan (e.g., Defined Contribution Plan) during such period of reemployment.
(14) DROP cost. It is intended for the DROP to be essentially cost neutral. The parties recognize the complexity in estimating the actuarial cost impact of this DROP on the Police and Fire Retirement System. Accordingly, ten years after this DROP is established, the Retirement Board will direct that the Retirement System's actuary conduct an evaluation as to the cost impact of this DROP on the Retirement System. In the event that the actuary determines that this DROP has had a positive cost to the Retirement System, the DROP shall be amended in such manner, as recommended by the actuary and approved by the parties, to result in an essentially cost neutral program.
(15) Internal Revenue Code compliance.
A. The DROP is intended to operate in accordance with Section 415 and other applicable laws and regulations contained within the Internal Revenue Code of the United States. Any provision of the DROP, or portion thereof, that is found by the Retirement Board to be in conflict with an applicable provision of the Internal Revenue Code of the United States is hereby declared null and void.
B. The City of Lincoln Park Police and Fire Retirement System consists of a defined benefit plan.
C. The DROP account shall be established as part of the defined benefit plan of such Retirement System or such other plan as the Retirement Board shall determine (i.e., IRC section 415(m) benefit plan) after consultation with appropriate legal counsel.
(Res. 07-310A. Passed 9-17-07.)