§ 35.110. DEFERRED RETIREMENT OPTION PLAN.

(A)

Beginning with the first pay period after September 1, 1999, any employee who is eligible for normal retirement, as defined in Section 35.089(G), may elect to participate in the Deferred Retirement Option Plan ("DROP"), except as provided in Section 35.110(L), in accordance with this Section. An employee is considered retired for pension plan purposes upon entering into the DROP plan.

(B)

An election to participate in the DROP plan must be made in writing and shall become effective thirty (30) days following the date it is received by the Retirement Committee or pension plan administrator, or on a later date if specified by the employee.

(C)

An employee who elects to participate in the DROP plan may participate in such plan for a maximum of sixty (60) months.

(D)

An employee's credited service and accrued benefit under the system shall be determined on the effective date of the employee's election to participate in the DROP plan. An employee shall not accrue any additional benefit under the plan after entering the DROP plan, except as afforded other eligible retirees under the plan. After entering the DROP plan, a participant shall not be eligible for disability or pre-retirement death benefits under the retirement plan.

(E)

A DROP plan account shall be established for each employee who elects to participate in the DROP plan in accordance with this Section. During the period of the employee's participation in the DROP plan, the employee's normal retirement benefit shall be paid into the employee's DROP plan account. The employee's DROP plan account shall be invested by the Retirement Committee and credited with interest equal to the overall net (earning less costs) investment rate of return on the retirement plan assets during the period of the employee's participation in the DROP plan. Provided, however, the Committee, in its sole discretion, may establish a separate plan for DROP accounts that would be invested by the retiree and for which special rules may be applied consistent with Internal Revenue Service regulations.

(F)

At the conclusion of the retiree's participation in the DROP plan, and as a condition of participating in such plan, the retiree will continue his retirement and terminate City employment. The retiree will thereafter receive a normal retirement benefit at the same rate as previously calculated but the monthly amount will be paid to the retiree and not deposited in the DROP plan account. The retiree's DROP plan account will thereafter be distributed to the retiree in a cash lump sum, unless the retiree elects an alternative distribution as described below:

(1)

Payments in approximately equal quarterly or annual installments over a period designated by the retiree not to exceed the life expectancy of the retiree or the joint life expectancy of the retiree and the retiree's designated beneficiary. In the event that the retiree dies before all installments have been paid, the remaining balance in the DROP plan account shall be paid in an immediate cash lump sum to the retiree's designated beneficiary; or

(2)

The purchase of a nonforfeitable fixed annuity payable in such form as the employee may elect. Elections shall be in writing and shall be made at such time or in such manner as the Retirement Committee shall determine. If the annuity form selected is not a qualified joint and fifty (50) percent survivor annuity with the retiree's spouse as the beneficiary, the annuity payable to the retiree and thereafter to the retiree's beneficiary shall be subject to the incidental death benefit rule as described in Section 401(a)(9)(G) of the Internal Revenue Code and applicable regulations.

(G)

Notwithstanding the provisions of paragraph (F), if a retiree dies before distribution of the retiree's DROP plan account commences, the account balance shall be paid to the retiree's designated beneficiary in such optional form as the beneficiary may select. Notwithstanding the provisions of paragraph (F), if the Retirement Committee adopts a separate plan in accordance with Section 35.110(E), distribution in accordance with rules established by the Retirement Committee under such separate plan will apply.

(H)

Except as otherwise provided in this Section, distribution of an employee's DROP plan account shall begin as soon as administratively practicable following the employee's termination of employment. A retiree may, in accordance with such procedures as the Retirement Committee may prescribe, elect to defer distribution of the DROP plan account until the first day of any month coincident with or following the termination of the retiree's City employment; provided, however, distribution shall be made before the distribution date elected by the employee to the extent necessary to comply with the Internal Revenue Code and regulations thereunder. Any amounts in a retiree's DROP plan account shall continue to be invested by the Retirement Committee and shall be credited with the net investment return on the Retirement Fund until the balance of the DROP plan account is fully distributed to the retiree or the retiree's beneficiary. Provided, however, if the Committee establishes a separate plan as set forth in Section 35.110(E), the earnings will be invested and distributed pursuant to the rules of the separate plan.

(I)

In no event shall the provisions of this Section operate so as to allow the distribution of a retiree's DROP plan account to begin later than April 1 following the later of the calendar year in which the retiree terminates city employment or attains age seventy and one-half (70½).

(J)

Notwithstanding any other provisions of this Section, all distributions from retiree DROP plan accounts shall conform to applicable provisions of the Internal Revenue Code and regulations issued thereunder and as provided under a separate plan if adopted by the Retirement Committee.

(K)

Notwithstanding any provision of this Section to the contrary, a retiree or beneficiary receiving distributions from a DROP plan account may elect, at the time and in a manner prescribed by the Retirement Committee, to have any portion of an eligible rollover distribution paid directly from the DROP plan account to an eligible retirement plan specified by the retiree or beneficiary in a direct rollover; provided, however, if the Committee establishes a separate plan as set forth in Section 35.110(E), the eligible rollover distribution of the DROP plan allotment will be distributed pursuant to the rules of the separate plan. The following definitions apply to the terms used in this paragraph:

(1)

Eligible Rollover Distribution. Any distribution of all or any portion of the balance to the credit of the distributee under the DROP plan, except that an eligible rollover distribution does not include any distribution that is one of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the distributee or the joint lives (or joint life expectancies) of the distributee and the distributee's designated beneficiary, or for a specified period of ten (10) years or more, any distribution to the extent such distribution is required under Section 401(a)(9) of the Internal Revenue Code, and the portion of any distribution that is not includable in gross income.

(2)

Eligible Retirement Plan. An individual retirement account described in Section 408(a) of the Internal Revenue Code, an individual retirement annuity described in Section 408(b) of the Internal Revenue Code, an annuity plan described in Section 403(a) of the Internal Revenue Code, or a qualified trust described in Section 401(a) of the Internal Revenue Code, that accepts the distributee's eligible rollover distribution. However, in the case of an eligible rollover distribution to the surviving spouse, an eligible retirement plan is an individual retirement account or individual retirement annuity.

(3)

Distributee. An employee or former employee. In addition, the employee's or former employee's surviving spouse is a distributee with regard to the interest of the spouse.

(4)

Direct Rollover. A payment by the DROP plan to the eligible retirement plan specified by the distributee. The direct rollover may be accomplished by any reasonable means determined by the Retirement Committee.

(L)

The DROP is not a separate retirement plan; it is part of the plan. Upon termination of employment, a participant is entitled to a lump sum distribution of his or her DROP account balance or may elect a rollover. The DROP account distribution is in addition to the participant's monthly benefit.

(M)

Notional account. The DROP account established for such a participant is a notional account, used only for the purpose of calculation of the DROP distribution amount. It is not a separate account in the plan.

(N)

No employer discretion. The DROP benefit is determined pursuant to the provisions of this section which do not involve employer discretion.

(O)

IRC limit. The DROP account distribution, along with other benefits payable from the system, is subject to limitation under Internal Revenue Code Section.

(Ord. No. 30-99, passed 8/17/99; Ord. No. 45-17 , § 15, passed 12/5/17)