(a) A deferred retirement option plan (“DROP”) is hereby created.
(1) Members hired on and before September 30, 2019 who elect to participate in the DROP are subject to the DROP terms as provided for in this Section
18-175.
(2) Members hired on and after October 1, 2019 who elect to participate in the DROP are subject to the DROP terms as provided for in Section
18-300 of the City of Boynton Beach Code.
(b) Eligibility to participate in the DROP is based upon eligibility for normal service retirement in the plan. Members shall elect to participate by applying to the Board of Trustees on a form provided for that purpose.
(c) Participation in the DROP must be exercised within the first 25 years of combined credited service.
(d) A member shall not participate in the DROP beyond the time of attaining 30 years of service and the total years of participation in the DROP shall not exceed five years. For example:
(1) Members with 20 years of credited service at time of entry shall only participate for five years.
(2) Members with 25 years of credited service at time of entry shall participate for five years.
(3) Members with 26 years of credited service at time of entry shall only participate for four years.
(e) Upon a members election to participate in the DROP, he or she shall cease to be a member and is precluded from accruing any additional benefit under the Pension Fund. For all fund purposes, the member becomes a retirant. The amount of credited service and final average salary freeze as of the date of entry into the DROP. Accumulated, unused sick and vacation leave shall be included in the compensation calculation; provided however, that a minimum balance of 120 hours of sick leave and 120 hours of vacation leave shall be maintained by the employee and excluded from this calculation. The retained leave balance, including any additions, shall be distributed at the conclusion of DROP participation and separation from service.
(f) Payment shall be made into the employee’s DROP account as if the employee had retired from the employ of the city. The amounts paid will be determined in accordance with this Plan and the employee’s selection of the payment option. Payments into the DROP will be made monthly over the period the employee participates in the DROP, up to a maximum of 60 months.
(g) Effective January 1, 2003, DROP participants have the option to select optional methods to credit investment earnings to their account less any outstanding loan balances. The method may be changed each year effective January 1, however, the method must be selected prior to January 1 on a form provided by the Board of Trustees. The methods are:
(1) Gains or losses at the same interest rate earned by the Pension Plan; or
(2) A guaranteed rate of 7%; or
(3) A percentage of the DROP account will be credited with interest gains or losses at the same rate earned by the pension plan and the remaining percentage will be credited with earnings at a guaranteed rate of 7%. The actual percentage shall be selected by the member on a form provided by the Board of Trustees. The total of the two percentages must equal 100%. Employee’s DROP accounts will be assessed an administrative fee that is based upon the ratio that the Employee’s DROP account bears to the fund as a whole.
(4) Participants in the DROP, as of December 31, 2002, may change their method for the crediting of earnings. This change in the crediting of earnings is a one time opportunity. The election to change the method for crediting must be made during the month of January 2003. The method, if changed, will be effective February 1, 2003.
(h) An employee’s participation in the DROP shall terminate at the end of five years or 30 years of service, whichever comes first. Failure to end DROP participation may result in penalties at the discretion of the Trustees, up to and including forfeiture of the DROP account. Upon entering into the DROP, an employee shall file with the Board a binding letter of resignation from city employment. The binding letter of resignation shall establish a deferred termination date in accordance with the limitations of this DROP, which may be amended.
(i) All interest shall be credited to the employee’s DROP account less any outstanding loan balances on a quarterly basis with quarterly statements provided. In the event that a member dies while in the DROP, interest shall be pro-rated to the last business day of the month preceding the death of the member.
(j) Upon termination of employment, participants in the DROP will receive the balance of the DROP account in accordance with the following rules:
(1) Members may elect to begin to receive payment upon termination of employment or defer payment of DROP until the latest day as provided under sub-subparagraph (3).
(2) Payments may be made in the following ways:
a. Lump sum. The entire account balance will be paid to or on behalf of the retirant upon approval of the Board of Trustees.
b. Installments. The account balance will be paid out to the retirant in five equal annual payments paid over five years, the first payment to be made upon approval of the Board of Trustees.
c. Monthly installments. The account balance will be paid out to the retirant on a monthly basis until the account balance is paid out based on actuarial tables provided by the actuary.
d. Partial lump sum withdrawals. Part of the account balance will be paid to or on behalf of the retirant upon approval of the Trustees.
(3) Any form of payment selected by a police officer must comply with the minimum distribution requirements of section 401(A)(9) of the Internal Revenue Code, and is subject to the requirements of Section
18-174(f), e.g., payments must commence by age 70.5.
(4) The beneficiary of the DROP participant who dies before payments from DROP begin shall have the same right to select payment options as the participant in accordance with this subsection. A DROP participant may designate a beneficiary to receive the DROP balance in the event of the participant’s death prior to pay out of the full DROP balance.
(k) No payments will be made from DROP until the employee actually separates from service with the city.
(l) Death benefits. If an employee shall die during participation in the DROP, a survivor benefit shall be payable in accordance with the form of benefit chosen at the time of entry into the DROP.
(1) If a DROP Participant dies with a DROP balance in the Pension Fund, then the entire balance of the DROP account shall be converted to the name of the beneficiary, designated on a form provided by the board of trustees.
a. If the designated beneficiary is the surviving spouse, the account may remain with the fund until the latest period specified under Internal Revenue Code Section 401(a)(9) and the regulations thereunder.
b. If the designated beneficiary is a non-spouse beneficiary then the distribution must be made within 5 years of the DROP participant's death.
c. If the beneficiary is a trust or the DROP participant's estate, the balance must be paid out of the Fund in a lump sum.
(2) If a DROP participant fails to designate a beneficiary, or if the beneficiary predeceases the DROP participant, the entire balance shall be converted, in the following order, to the name or names of:
a. The DROP participant's surviving children on a pro rata basis;
b. If no children are alive, the DROP participant's spouse:
c. If no spouse is alive, the DROP participant's surviving parents on a pro rata basis; or
d. If none are alive, the estate of the DROP participant. The accounts which are converted to the names of the beneficiaries shall have the right to name a successor beneficiary. This option is not available to a trust.
(m) Upon commencement of participation in the DROP, the member shall no longer be eligible for disability retirement from the pension plan.
(1) Availability of loans.
a. Loans are available to members only after termination of employment, provided the member had participated in the DROP for a period of 12 months.
b. Loans may only be made from a member's own account.
c. There may be no more than one loan at a time.
a. Loans may be made up to a maximum of 50% of account balance.
b. The maximum dollar amount of a loan is $50,000, reduced by the highest outstanding loan balance during the last 12 months.
c. The minimum loan is $5,000.
(3) Limitations on loans shall be made from the amounts paid into the DROP and the earnings thereon.
a. The loan must be for at least one year.
b. The loan shall be no longer than five years.
a. The interest rate shall be fixed at time the loan is originated for the entire term of loan.
b. The interest rate shall be equal to the prime rate published by an established local bank on the last day of each calendar quarter preceding the date of loan application.
a. Loans shall be in default if two consecutive months’ repayments are missed or if a total of four months’ repayments are missed.
b. Upon default, the entire balance becomes due and payable immediately.
c. If a loan in default is not repaid in full immediately, the loan may be canceled and the outstanding balance treated as a distribution, which may be taxable.
d. Upon default of a loan, a member will not be eligible for additional loans.
(7) Miscellaneous provisions.
a. All loans must be evidenced by a written loan agreement signed by the member and the Board of Trustees. The agreement shall contain a promissory note.
b. A member’s spouse must consent in writing to the loan. The consent shall acknowledge the effect of the loan on the member’s account balance.
c. Loans shall be considered a general asset of the fund.
d. Loans shall be subject to administrative fees to be set by the Board of Trustees.
e. Outstanding loan balances shall not be credited with earnings or losses. As the outstanding balance is repaid with interest, earnings and losses shall be applied to the payments and interest as provided for in Section
18-175(i).
(Ord. No. 10-005, § 2, 2-2-10; Ord. No. 11-011, § 3, 3-15-11; Ord. No. 20-010, § 7, 5-19-20)
