86.251. Deferred retirement option plan--election--deposit of retirement allowance in DROP account--termination of participation, when--forms of payment--effect of participation--death of member, paym
Deferred retirement option plan--election--deposit of retirementallowance in DROP account--termination of participation, when--formsof payment--effect of participation--death of member, payment offunds--accidental disability retirement allowance, effect--interest,amount--approval by IRS--election for monthly survivor annuity, when.
86.251. 1. The board of trustees may develop and establish adeferred retirement option plan (DROP) in which members who are eligiblefor retirement but who have not terminated employment as police officersand who have not actually retired may participate. The DROP shall bedesigned to allow members with at least twenty years of creditable serviceor who have attained the age of fifty-five who have achieved eligibilityfor retirement and are entitled to a service retirement allowance and otherbenefits to postpone actual retirement, continue active employment andaccumulate a deferred receipt of the service retirement allowance. No oneshall participate in the DROP for a period exceeding five years.
2. Any member who has at least twenty years of creditable service orhas attained the age of fifty-five may elect in writing before retirementto participate in the DROP. A member electing to participate in the DROPshall postpone actual retirement, shall continue in active employment andshall not receive any direct retirement allowance payments or benefitsduring the period of participation.
3. Upon the start of the participation in the DROP, the member shallcease to make any mandatory contributions to the system. No contributionshall be required by the city into the DROP account. During the period ofparticipation in the DROP, the amount that the member would have receivedas a service retirement allowance if the member had actually retiredinstead of entering DROP shall be deposited monthly in the member's DROPaccount which shall be established in the member's name by the board oftrustees. The member's service retirement allowance shall not be adjustedfor any cost-of-living increases for any period prior to the member'stermination of employment as a police officer and actual retirement.Cost-of-living increases, if any, for any period following the member'stermination of employment as a police officer and actual retirement shallbe applied only to monthly service retirement payments made followingtermination of employment as a police officer and actual retirement.Service earned during the period of participation in the DROP shall not becreditable service and shall not be counted in determination of any serviceretirement allowance or surviving spouse's or dependents' benefits.Compensation paid during the period of participation in the DROP shall notbe earnable compensation and shall not be counted in the determination ofany service retirement allowance or surviving spouse's or dependent'sbenefits. The member's service retirement allowance shall be frozen as ofthe date the member enters DROP. Except as specifically provided insections 86.200 to 86.366, the member's frozen service retirement allowanceshall not increase while the member is participating in DROP or after themember's participation in DROP ends, and the member shall not share in anybenefit improvement that is enacted or that becomes effective while suchmember is participating in the DROP.
4. A member shall cease participation in the DROP upon thetermination of the member's employment as a police officer and actualretirement, or at the end of the five-year period commencing on the firstday of the member's participation in the DROP, or as of the effective date,but in no event prior to October 1, 2001, of the member's election toreturn to active participation in the system, whichever occurs first. Amember's election to return to active participation in the system beforethe end of the five-year period commencing on the first day ofparticipation in the DROP shall be made and shall become effective inaccordance with procedures established by the board of trustees, but in noevent prior to October 1, 2001. Upon the member's termination ofemployment as a police officer and actual retirement, the member shallelect to receive the value of the member's DROP account, in one of thefollowing forms of payment:
(a) A lump sum payment; or
(b) Equal monthly installments over a ten-year period.
Either form of payment should begin within thirty days after the member'snotice to the board of trustees that the member has selected a particularoption.
5. If a member who is participating in the DROP elects to return toactive participation in the system or if a member who is participating inthe DROP does not terminate employment and actually retires as a policeofficer in the city for which the retirement system was establishedpursuant to sections 86.200 to 86.366 at the end of the five-year periodcommencing on the first day of the member's participation in the DROP, themember shall return to active participation in the system and shall resumemaking mandatory contributions to the system effective as of the day afterparticipation in the DROP ends or, if later, October 1, 2001. The board oftrustees shall notify the police commissioners to begin deducting mandatorycontributions from the member's salary and the member's employment periodshall count as creditable service beginning as of the day the memberreturns to active participation.
6. In no event shall a member whose participation in DROP has endedfor any reason be eligible to participate in DROP again.
7. Upon the member's termination of employment as a police officerand actual retirement, the member's mandatory contributions to theretirement system shall be paid to the member pursuant to subsection 4 ofsection 86.253.
8. If a member dies prior to termination of employment as a policeofficer and actual retirement while participating in the DROP or before themember has received full withdrawal of the amount in the member's DROPaccount under the installment optional payment form, the remaining balanceof the member's DROP account shall be payable to the member's survivingspouse; or, if the member is then unmarried, to the member's dependentchildren in equal shares; or, if none, to the member's dependent mother orfather; or, if none, to the member's designated beneficiary or, if no suchbeneficiary is then living, to the member's estate. Payment shall be madein a lump sum within sixty days after receipt by the board of trustees ofevidence and proof of the death of a member. In addition, the member'smandatory contributions, if any, that were not already paid to the memberpursuant to subsection 4 of section 86.253 shall be paid to the member'ssurviving spouse pursuant to section 86.288.
9. If a member applies for and receives benefits for an accidentaldisability retirement allowance pursuant to the provisions of section86.263, the member shall forfeit all rights, claims or interest in themember's DROP account and the member's benefits shall be calculated as ifthe member has continued in employment and had not elected to participatein the DROP. Any portion of a DROP account that has been forfeited asprovided in this subsection shall be a general asset of the system.
10. A member's DROP account shall earn interest equal to the rate ofreturn earned by the system's investment portfolio on a market value basis,including realized and unrealized gains and losses, net of investmentexpense, as certified by the system's actuary. As of the last day of eachplan year beginning after DROP participation begins, the member's DROPaccount balance, determined as of the last day of the prior plan year,shall be credited with interest at the investment rate earned by the assetsof the retirement system for such prior plan year. If distribution of themember's DROP account balance is made in a lump sum under subsection 4 or 8of this section, interest for the plan year of distribution shall becredited on the ending balance for the prior plan year at the investmentrate earned on the assets of the retirement system for the prior plan year,in proportion to the part of the plan year preceding the date of themember's termination of employment or death, whichever is earlier. If themember's DROP account is paid in equal monthly installments pursuant tosubsection 4 of this section, interest during the installment period shallbe credited as of the last day of each plan year ending after installmentpayment begins on the account balance as of the first or last day of theplan year, whichever is lower, at the investment rate earned by the assetsof the system for the prior plan year. Interest for the year in which thefinal installment is paid shall be credited on the balance remaining afterthe final installment is paid, at the investment rate earned on the assetsof the system for the prior plan year, in proportion to the part of theplan year preceding payment of the final installment. Any interestcredited to the DROP account during the installment period shall be paid assoon as reasonably possible after the final monthly installment. Nointerest shall be credited on amounts, if any, added to the member's DROPaccount during the year in which the distribution of the account iscompleted.
11. The board of trustees shall not incur any liability individuallyor on behalf of other individuals for any act or omission made in goodfaith in relation to the DROP or assets credited to DROP accountsestablished by this section. The provisions of the Internal Revenue Codeand regulations promulgated thereunder shall supersede any provision ofthis section if there is any inconsistency with the Internal Revenue Codeor regulation.
12. Upon the receipt by the board of trustees of evidence and proofthat the death of a member resulted from an event occurring while themember was in the actual performance of duty, and if the member isparticipating in the DROP, the member's surviving spouse or, if the memberis then unmarried, the member's unmarried dependent children, may electwithin thirty days after the member's death to have the amount in themember's DROP account paid in the form of a monthly survivor annuity.Payment of the survivor annuity shall begin within sixty days after theelection is received. Payment to the member's surviving spouse shallcontinue until the surviving spouse's death; payment to the member'sunmarried dependent children shall be made while any child qualifies as anunmarried dependent child pursuant to section 86.280. The survivor annuityshall be the actuarial equivalent of the member's DROP account as of thedate of the member's death. In no event shall the total amount paidpursuant to this subsection be less than the member's DROP account balanceas of the date of the member's death.
(L. 1995 H.B. 260, et al. § 1, A.L. 1999 S.B. 308 & 314, A.L. 2000 H.B. 1808, A.L. 2001 S.B. 290, A.L. 2002 H.B. 1455, A.L. 2003 H.B. 152 & 180 merged with S.B. 248, et al.)