Section
4.2100 Purpose and Duration.
4.2101 Eligibility, Duration of DROP Participation, and Waiver.
4.2102 DROP Benefits and Accounts.
4.2103 Additional DROP Provisions.
4.2104 Designation of Beneficiary.
4.2105 Termination of DROP Participation.
4.2106 Payment of Benefits.
4.2107 Compliance with Applicable Provisions of the Internal Revenue Code.
4.2108 Employment Status During DROP Participation.
4.2109 Authority of the Board.
4.2110 Suspension of Participation.
(a) Pursuant to Charter Section 1218, a deferred retirement option plan (DROP) is created and offered to members of the Fire and Police Pension Plan on a voluntary basis. DROP is an alternative method of benefit accrual in the Retirement System as set forth in this chapter.
(b) DROP is created to add flexibility to the Fire and Police Pension Plan. It provides members who elect to participate in the program access to a lump sum benefit in addition to their normal monthly retirement allowance at their actual retirement, which occurs when employment as a sworn member with the City is terminated. DROP is intended to be cost neutral regarding plan funding.
(c) The City reserves the right to suspend the right of members to enter the DROP program and to modify the program for future entrants as necessary to maintain cost neutrality and/or to meet the City’s DROP goals of retaining and lengthening the careers of sworn personnel with the Police Department, Fire Department, Harbor Department, and Department of Airports. Any amendments to DROP enacted in accordance with this subsection will only affect those persons who enter DROP after the date the changes become effective.
The City has the right to complete an actuarial study of DROP in order to evaluate whether DROP continues to be cost neutral and to review DROP to determine whether DROP is meeting the City’s DROP goals. An actuarial study and review of the City’s DROP goals shall be completed by the City at least every five (5) years or more often. If the City determines changes to DROP are needed based on this review, the appropriate labor organizations shall meet and confer with the City immediately upon demand. Once the City and the labor organizations reach agreement, DROP shall forthwith be amended in accord with that agreement unless no changes to DROP are required.
If the City and the labor organizations do not agree upon changes to DROP within one hundred eighty (180) days of the date of the City’s demand, then the City Administrative Officer shall so notify the Fire and Police Pension Plan in writing. However, if the City and the involved labor organizations mutually agree to extend negotiations for an additional period of time, not to exceed one hundred eighty (180) days, then the City Administrative Officer shall not provide this notice to the Fire and Police Pension Plan until the additional time has expired without the parties reaching agreement. Upon receipt of this written notice from the City Administrative Officer, the Fire and Police Pension Plan shall no longer allow members to enter DROP until the effective date of an ordinance enacted by the City Council amending DROP to allow new members to enter DROP while maintaining cost neutrality and otherwise meeting the City’s DROP goals or until the City Administrative Officer notifies the Fire and Police Pension Plan in writing that the City has determined that no modifications to DROP are necessary at that time.
SECTION HISTORY
Chapter and Section Added by Ord. No. 174,540, Eff. 5-8-02.
Amended by: Subsec. (d) added, Ord. No. 177,900, Eff. 9-28-06; Subsec. (d), Ord. No. 179,750, Eff. 3-25-08; Subsec. (c) amended and Subsec. (d) deleted, Ord. No. 180,322, Eff. 11-7-08; Subsec. (c), Ord. No. 184,853, Eff. 4-6-17; Subsec. (c), Ord. No. 185,935, Eff. 1-23-19.
(a) All members of the Fire and Police Pension Plan, including the Chief of Police, Chief Engineer of the Fire Department and Port Warden if they are members of the Plan, are eligible to enter DROP no later than April 30, 2007, if they meet all other requirements. As of May 1, 2007, all members of the Fire and Police Pension Plan, except for the Chief of Police and the Chief Engineer of the Fire Department, are eligible to enter DROP if they meet all other requirements.
(b) In order to enter DROP, members must be eligible for an unreduced retirement in one of the pension tiers and meet the following minimum criteria:
Tier 2: 25 years of service
Tier 3: 25 years of service and age 50
Tier 4: 25 years of service
Tier 5: 25 years of service and age 50
Tier 6: 25 years of service and age 50
(c) Effective November 1, 2008, a member must also be on active duty status on the DROP entry date. For purposes of this provision active duty status shall include members working on light-duty status, but exclude members on sick, vacation, injured-on-duty, administrative leave, and all other types of non-working status. The City Administrative Officer shall have the authority to determine which payroll codes constitute active duty status for purposes of this provision and shall notify the Board accordingly.
(d) Any member who enters DROP on or after February 1, 2019, is subject to the suspension of participation provisions of Section 4.2110 of this Chapter.
(e) Any member who elects to participate in DROP shall voluntarily and irrevocably:
(1) Determine a beginning date upon which to enter DROP, consistent with the rules set forth by the Board of Fire and Police Pension Commissioners (“Board”) and agree to terminate employment as a sworn member with the City of Los Angeles on the last day of their participation in DROP. The beginning date for DROP participation may not be backdated. Members may participate in DROP for a maximum of five (5) years, or sixty (60) months, regardless of when they enter DROP. In no event shall a member be permitted to participate in DROP more than sixty (60) consecutive months after the DROP entry date, unless the member is eligible to extend the participation period as provided in Section 4.2110(d).
(2) Cease, from and after the date the member begins participating in DROP, to accrue additional retirement benefits, either through service accruals, future pay increases, active cost of living adjustments or promotions.
(3) Agree the member’s service retirement formula, including years of service and pension base, and all other eligibility conditions, including eligibility for survivor benefits, will be frozen at the time the member enters DROP.
(a) Tier 2 Members shall purchase Lost Service Time prior to entering DROP in order for that time to be counted toward the service pension.
(4) Have an amount equal to one hundred percent (100%) of the service retirement benefit the member would have received if the member had retired at the time of entering DROP placed in a nominal account (“DROP account”). This amount shall not include credit for any calendar month for which participation has been suspended.
(5) Receive benefits from the Fire and Police Pension Plan upon termination of City employment as a sworn member of the Fire, Police, Harbor, or Airport Department at the time and in the manner provided in this Chapter.
(6) Execute such waivers with respect to age and other discrimination in employment laws as are required by the City and the Fire and Police Pension Plan.
(f) Notwithstanding any other provision of this chapter, a member who has elected to participate in DROP and subsequently, while still participating in DROP, is appointed to the position of Chief Engineer of the Fire Department or Chief of Police shall be allowed to rescind that election in writing subject to the following:
(1) The member shall forfeit the member’s entire DROP account.
(2) The member shall not be eligible to participate in DROP in the future.
(3) The member’s service and benefits under the Plan shall be determined the same as if the member had never elected to participate in DROP.
(4) The member shall not have the right to elect to become a member of the Los Angeles City Employees’ Retirement System pursuant to Section 4.2000 (j), or otherwise, but shall remain a member of the Plan for so long as the member is employed as Chief Engineer of the Fire Department or Chief of Police.
SECTION HISTORY
Added by Ord. No. 174,540, Eff. 5-8-02.
Amended by: Subsec. (a), Ord. No. 177,900, Eff. 9-28-06; Subsec. (a), Ord. No. 178,656, Eff. 5-4-07; Subsec. (d) added, Ord. No. 179,987, Eff. 7-3-08; Last Para. of Subsec. (b) added, Ord. No. 180,322, Eff. 11-7-08; Subsecs. (b) and (c), Ord. No. 183,163, Eff. 8-8-14; Subsecs. (b) - (f), Ord. No. 185,935, Eff. 1-23-19.
(a) A DROP account is a “nominal” account established within the Fire and Police Pension Plan on behalf of each DROP participant. All benefits accrued pursuant to this Chapter shall be accounted for in the DROP account. A DROP participant shall not have a claim on the assets of the Fire and Police Pension Plan with respect to such participant’s DROP account, nor shall there be any assets set aside for any DROP participant, which are separate from all other Pension Plan assets.
(b) All amounts credited to the member’s DROP account shall be fully vested.
(c) A member’s DROP account shall be credited with:
(1) an amount, credited monthly, which is equal to the monthly service pension to which the member would be entitled using the formula in the Tier in which the member is enrolled on the effective date of the member’s entry into DROP. Credit shall not be awarded for any calendar month when participation in DROP has been suspended pursuant to Section 4.2110.
(3) interest in the amount of five percent (5%) annually. Interest will be credited to member DROP accounts semi-annually on the dates specified by the Board. No interest shall accrue after a member terminates DROP participation. Notwithstanding whether or not participation has ever been suspended or a member is eligible to extend the original participation period, no interest shall accrue nor be credited after completion of the sixtieth (60th) month following the member’s DROP entry date. This 60-month limit on interest shall apply to all DROP participants.
(d) Until a member actually terminates employment as a sworn member of the City of Los Angeles Fire Department, Police Department, Harbor Department, or Department of Airports, no money shall be paid to any persons from the DROP account. After the member terminates employment, the DROP account shall be subject to court orders in the same manner as the monthly service pension entitlement and according to the terms of the court order.
SECTION HISTORY
Added by Ord. No. 174,540, Eff. 5-8-02.
Amended by: Subsec. (d), Ord. No. 177,214, Eff. 1-4-06; Subsec. (c)(2), Ord. No. 183,163, Eff. 8-8-14; Subsec. (d), Ord. No. 184,853, Eff. 4-6-17; Subsecs. (c)(1) and (c)(3), Ord. No. 185,935, Eff. 1-23-19.
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