(a) Establishment of DROP. Notwithstanding anything contained in this Chapter 282 to the contrary, the Borough hereby establishes a deferred retirement option plan that shall be governed by this subsection.
(b) Definitions. As used in this section, the following terms shall have the meanings indicated:
(1) “Association.” The Swarthmore Borough Police Association, the duly recognized collective bargaining unit representing all eligible full-time police officers in the Swarthmore Borough Police Department.
(2) “Drop.” A Deferred Retirement Option Plan established as an optional form of benefit under the Plan and being operated by the Borough of Swarthmore.
(3) “Drop notice.” The form prescribed by the Borough and Association upon which a member or officer informs the Borough of his or her irrevocable intent to participate in the DROP.
(4) "Drop participation period." The period of time from the commencement of the member's participation in the DROP as stated in the DROP notice until the member's separation from employment as a Police Officer in Swarthmore Borough, which shall in no event exceed five years/sixty months.
(5) “Individual drop participation account.” A separate trust account created for the exclusive purpose of accepting monthly pension checks of DROP participants while they are participating in the DROP.
(6) “Member or officer.” A duly sworn police officer employed by the Borough and a member of the Police Pension Plan.
(7) “Normal retirement date.” The earliest date at which the officer meets both the age and service requirements for retirement.
(8) “Plan.” The Swarthmore Borough Police Pension Plan, as the same may be amended from time to time.
(9) “Termination date.” The date specified in the participant's irrevocable DROP notice approved by the Borough on which the member or participant's employment with the Swarthmore Police Department shall terminate.
(c) Deferred Retirement Option Plan (DROP) Terms and Conditions.
(1) Eligibility. Any member who has reached his or her normal retirement date, as defined in this section, may elect to become a participant in the DROP. Once a police officer commences participation in the DROP, he or she may not choose to end participation in the DROP and resume participation in the Plan.
(2) Election to participate. A member electing to participate in the DROP must complete and execute a DROP notice. Election to participate in the DROP is irrevocable. The DROP notice must be signed by the member and notarized and submitted to the Borough at least forty-five days prior to the date on which the members wishes his or her DROP participation to commence, which shall be specified in the DROP notice as the effective date of retirement. The DROP notice must also include a termination date. Such termination date shall be no later than five years after the member's normal retirement date, as defined in this section, regardless of the date the participant entered the DROP.
(3) Duration. The DROP participation period shall be no more than thirty-six months. The effective date of the DROP participation shall be the day after the member's effective date of retirement. Except in the event of the death of the DROP participant, the DROP termination date shall be the last calendar day of the fifth year/sixtieth month unless a shorter participation period is selected.
(4) Early termination. A DROP participant may choose to participate in the DROP for a period of less than five years/sixty months or may change the DROP termination date during DROP participation to an earlier date without penalty. In all cases, the earlier termination date shall be the last calendar day of a month.
(5) DROP pension payments. Upon entry into the DROP, a member's monthly retirement benefit, as calculated under the Plan, shall be frozen and his or her DROP pension payment shall be calculated as if he or she actually retired on the date he or she entered the DROP. After the effective date of the DROP notice, the officer shall no longer earn or accrue additional years of service for pension calculation purposes under the Plan. The average monthly pay of the member for pension calculation purposes shall remain as it existed on the effective date of commencement of participation in the DROP. No benefit increases that may occur after a DROP participant's commencement of participation in the DROP, including bargained pension enhancements, mandated pension enhancements through arbitration or pension enhancements mandated by law, will apply to the DROP participant and shall not increase the DROP participant's frozen pension under the Plan, as calculated on the effective date of the DROP participation period. The pension benefit payable to the members shall increase only as a result of cost-of-living adjustments in effect under the Plan on the effective date of the member's participation in the DROP or by applicable cost-of-living adjustments specifically granted to DROP participants.
(6) DROP participant contributions. DROP participants shall neither be required nor permitted to make contribution into the Plan during the DROP participation period.
(7) Disability during DROP period. If an officer in the DROP is unable to return to full police duties for a period of ninety days after a work-related or non-work-related disability, the employee may be presumed permanently disabled and may be honorably discharged from service and receive a pension in the amount of the regular age and service retirement pension as calculated when the officer entered the DROP program. If the discharge is due to a work-related disability the pension shall be at the amount of the normal retirement pension calculated when the officer entered the DROP but the pension shall be classified as a disability pension payable at the normal retirement pension amount. The officer shall have the right to contest the presumption and the right to appeal the discharge and be reinstated if the disability is proved to be temporary.
(8) Individual DROP participant account. Beginning on the effective date of DROP participation and ending the last day of the month of termination, all monthly pension payments payable to the DROP participant shall be deposited into an individual DROP participant account established by the Borough and managed by a third-party administrator. Each member shall select the investments in his or her individual investment account from the options selected by the third-party administrator. There is no guaranteed rate of return on the DROP participant account; in no case shall the rate of interest be less than zero percent or more than four and one-half percent annually. All investment and administrative costs shall be charged against the participant's DROP account. The participant shall bear the full responsibility for obtaining appropriate investment advice, as well as for the consequences of any investment of all or part of the contents of the DROP account. The DROP account established for each participant will be considered a tax-deferred account maintained as part of the plan, and, as a result, will be subject to the restrictions established under Section 401(a) of the Internal Revenue Code.
The Borough shall have no responsibility for the financial impact and/or consequences of a member's participation in the DROP, including, but not limited to, the investment of the balance of an officer's DROP account, the performance of any such investments, or any tax consequences flowing from participation in the DROP.
(9) DROP Payout upon Termination. No withdrawals from the DROP account are permitted until DROP participation has ended. Within forty-five days of the DROP termination date, the Borough shall pay to the member in a lump-sum the amount credited to the member's individual DROP participation account as of the member's DROP termination date less any required withholding taxes. The DROP participant may elect to have such lump-sum payment paid directly into an eligible retirement plan (tax-sheltered rollover distribution) or in a check made payable to the DROP participant. If the DROP participant fails to elect a method of payment of the lump-sum within sixty days of the DROP termination date, the lump-sum shall be paid directly to the DROP participant.
(10) Death. Upon the death of a DROP participant, participation in the DROP shall terminate effective as of the date of the member's death. The balance of the member's individual DROP participation account as of the member's date of death shall be paid the beneficiary who shall choose from one of the payment methods described under "DROP Payout upon Termination."
(11) Provisions of employment while in the DROP.
A. All DROP participants shall be subject to the same terms and conditions of employment, rules and regulations and disciplinary procedures as other officers and members who are not DROP participants that are contained in all Borough policies, directives, and orders as well as in the collective bargaining agreement between the Borough and the police.
B. An officer's election to participate in the DROP shall in no way be construed as a limitation on the Borough's right to suspend or terminate an officer for just cause or to grant the officer an honorable discharge based upon a physical or mental inability to perform his or her duties.
C. Except as specifically listed in this section, a DROP participant is eligible for any employee benefits provided to the active employees before retirement.
D. While in the DROP, longevity and shift differential pay shall be frozen at the amount received during the twelve months prior to entering the DROP.
E. Participants in the DROP will not receive any college tuition reimbursement.
(12) Revocation of DROP participation. A DROP participant who voluntarily terminates his or her employment for any reason prior to the termination date stated in his or her DROP notice (which has been accepted by the Borough) shall automatically revoke his or her DROP participation election and cease employment with the Borough. All monies in the individual DROP participation account shall be returned in a lump sum with the options presented in this section under "DROP Payout upon Termination." No penalty shall be imposed for early termination of DROP participation.
(13) Re-enrollment in the DROP program. A DROP participant is ineligible to re-enroll in the DROP program after they have terminated employment as prescribed in the approved DROP notice, even if they are re-employed by the Borough with renewed active membership rights in the Plan.
(14) Compliance with a future law. The Borough and the FOP and all current and future DROP participants (as a condition of participating in the DROP) recognize that laws may be enacted that impact the provisions of this DROP. The Borough, the FOP and any current and future DROP participants (as a condition of participating in the DROP) agree and acknowledge that if any such law requires that this DROP program be altered, changed, modified or amended in any way, such changes shall be made as required by such law within the required time period. The FOP and the Borough shall meet to discuss how to most efficiently implement those changes, and any agreement reached in those discussions shall be binding on the Borough, the FOP and any current and future DROP participants. Such discussions, however, shall not in any way delay the implementation of any such required change as required by law.
(Ord. 1059. Passed 2-10-14; Ord. 1094. Passed 11-8-21.)