CORP; deferred retirement
option plan
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Committee on Retirement & Government Operations |
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Committee on Appropriations |
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Caucus and COW |
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As Passed the House |
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HB 2331 establishes a deferred retirement option plan (DROP) for the Correctional Officers Retirement Plan (CORP) members. This bill also establishes the guidelines for the plan.
DROPs are designed to give members an additional option at normal retirement. A member is required to designate a period, a beneficiary, agree to cease to accrue benefits during the period and terminate employment at the end of the period. The benefits credited to the DROP account are paid-out upon termination as a lump sum. Laws 2000, Chapter 340 established a DROP program for the Public Safety Personnel Retirement System (PSPRS).
Currently, in order to qualify for normal retirement, a CORP member must have 25 years of service, or reach age 62 with 10 years of service or have any combination of age and credited service equaling 80. A CORP member’s normal retirement pension is calculated by multiplying 2.5 per cent of the average compensation by the number of years of service up to 30 years, not to exceed 75% of the member’s average compensation.
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Establishes DROP to provide members
who elect to participate access to a lump sum benefit upon termination, in
addition to their normal monthly retirement benefit.
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Requires the board or fund manager to offer DROP to eligible CORP members
on a voluntary basis as an alternative method of benefit accrual under the
system from July 1, 2002 to June 30, 2007.
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States that any member of CORP who is eligible for a
normal pension is eligible to participate in DROP.
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Requires that a member who elects to participate in DROP
must voluntarily and irrevocably:
1.
Designate a period of participation that is not more than
sixty consecutive months.
2.
Cease to accrue membership benefits beginning on the first
day of the member's participation in DROP.
3.
Have DROP plan benefits credited to a DROP participation
account.
4.
Receive benefits from the system on termination of
employment at the same time and in the same manner as a normal retirement
pension.
5.
Agree to terminate employment on completion of the DROP
participation period.
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If a member fails to terminate employment on completion of
the designated DROP participation period, the member is not entitled to the
interest accumulation on the DROP participation account.
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A member may terminate participation in DROP by
voluntarily terminating employment at any time before completing the DROP
participation period.
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States that participation in DROP terminates upon one of
the following:
1.
Completion of the DROP participation period.
2.
Termination of employment. If termination of employment is reversed, a member's
participation in DROP, minus any benefits previously distributed, shall be
reinstated for the duration of the original DROP participation period.
3.
Death of a member.
4.
Approval of disability retirement benefits.
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Establishes a DROP participation account within the system
on behalf of each DROP participant.
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Requires that all accrued benefits be accounted for in the
DROP participation account.
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States that a member does not have a claim on the member’s
DROP assets during the DROP period, and that assets cannot be held separately
from the fund assets for a DROP participant.
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States that all amounts credited to a member's DROP
participation account are fully vested.
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Requires a member's DROP participation account to be
credited with the following:
1.
An amount that is computed in the same manner as a normal
retirement. This amount shall be increased
annually if applicable.
2.
Interest in an amount equal to the assumed rate of return
of the fund.
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Prohibits members from receiving retirement benefits,
including COLA increases and health insurance premium subsidies, during the
DROP participation period.
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States that beginning on the date the member elects to
participate in DROP, employee and employer contributions for that member stop.
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Allows a DROP member who becomes disabled during the
period of DROP participation to apply for disability retirement benefits. If
the member becomes disabled during DROP participation, the member is eligible
for disability benefits.
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Requires a member who elects to participate in the DROP to
designate a beneficiary.
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States that if a member dies during the member's DROP
participation, the designated beneficiary of the member is entitled to receive
all amounts in the member's DROP participation account.
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States that if a beneficiary predeceases a DROP
participant who dies before designating a new beneficiary, all distributions
are made to the estate of the DROP participant.
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Prohibits
a member from making a beneficiary designation that results in a repeal of a
member's community property obligations.
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States that upon termination of DROP participation and
employment, a member is entitled to receive both of the following:
1.
The monthly retirement allowance.
2.
All amounts credited to the member's DROP participation
account on the effective date of termination.
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Prescribes a lump sum distribution payment form.
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Allows the member to choose to transfer a lump sum
distribution to an IRA or other eligible retirement plan if allowed by the IRS.
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Prohibits the DROP program from jeopardizing the
tax-qualified status of PSPRS.
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Allows the fund manager to adopt additional rules for the
DROP to comply with federal law.
· Repeals the DROP program July 1, 2007.
· Allows a member who is participating in DROP before July 1, 2007 to continue to participate until the member's effective date of termination, even after the repeal of DROP.
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45th Legislature
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First Regular Session 3 January
22, 2001
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