House of Representatives

HB 2354

deferred retirement option plans

Sponsors: Representatives Voss, Brotherton,

Senator Richardson

 

DPA

Committee on Retirement and Government Operations

X

Committee on Appropriations

 

Caucus and COW

 

Third Read

 

 

As Passed the House

 

HB 2354 adds a deferred retirement option plan (DROP) for ASRS, EORP, and CORP members.

 

Current Status

HB 2354 was amended in the Retirement and Government Operations Committee to make technical, clarifying and conforming changes.  It was also amended by removing the termination of employment for cause section regarding EORP members.

 

History

Normal Retirement Eligibility:

ASRS

Normal retirement is achieved when a member reaches the age of 65 or age 62 with 10 years of credited service or any combination of age and credited service totaling 80 points.

EORP

Normal retirement is achieved when a member reaches the age of 65 with 5 years of credited service or age 62 with 10 years of credited service or 20 or more years of credited service regardless of age. 

CORP

Normal retirement is achieved after the completion of 20 years of credited service, except for a full-time dispatcher, who must complete 25 years of credited service or reaches the age of 62 with 10 years of credited service or any combination of age and credited service totaling 80 points.

 

DROP:

DROP is a voluntary program that allows a member to work up to 5 years following normal retirement eligibility, and receive a lump sum benefit following the designated period.  At the time of normal retirement eligibility, the employer and member’s contributions cease and the member stops accruing benefits.  All monthly pension payments are then deferred into a separate account within the system to be paid out upon termination of employment as a lump sum benefit. At that time the member will also begin receiving the remainder of their earned retirement benefits as a monthly pension payment.  The member is required to leave employment after the designated period, but may leave employment during the designated period. 

Laws 2000, Chapter 340, established a DROP program within the Public Safety Personnel Retirement System.

 

Provisions

Establishes the DROP program for ASRS, EORP and CORP members starting July 1, 2003 through July 1, 2008, which gives participants a lump sum benefit in addition to their normal retirement benefit.

 

·          Allows a member who has achieved normal retirement eligibility to participate in DROP and states that the member shall do the following:

1.      Designate a period of participation that is not more than sixty consecutive months.

2.      Cease to accrue benefits.

3.      Have the DROP benefits credited to the DROP participation account.

4.      Receive benefits from ASRS, EORP and CORP on termination of employment at the same time and manner as otherwise prescribed in this article.

5.      Agree to terminate employment on completion of the DROP participation period designated by the member.

 

·          Specifies that if a member does not terminate employment on completion of the DROP period, the following takes place:

1.      The member is not entitled to the interest accumulated on the DROP account.

2.      The DROP participation account shall not be credited with the monthly amount nor will the amount be given to the member.

3.      The member is not allowed to receive the monthly retirement allowance given to members upon retirement until the member terminates employment.

4.      The member does not acquire any other credited service. 

 

·          Stipulates that a member may terminate participating in DROP by voluntarily terminating employment at any time before the participation period is over or by doing one of the following:

1.      Completion of the DROP participation period.

2.      Termination of employment.  However, if termination of employment for cause is reversed, the member’s participation in the DROP program minus any benefits previously distributed shall be reinstated for the duration of the designated DROP period.

3.      Death of a member.

4.      Approval of a disability retirement benefit for a member of EORP or CORP.

 

·          Stipulates that the DROP participation account is an account established within each system and on behalf of each DROP participant.  The member does not have a claim to the plans’ assets in respect to the member’s DROP account and assets will not be set aside for any DROP participant.

 

·          Maintains that all amounts credited to a member’s DROP account are fully vested and credited with the following:

1.      An amount that is computed in the same manner as the normal retirement benefit.

2.      Monthly interest equal to the assumed rate of return determined by the ASRS board or fund manager.

 

·          Exempts DROP participants from receiving any benefit increases or the group health and accident subsidy during the DROP participation period.

 

·          Prohibits the employer from paying benefits on behalf of the member.

 

·          States that any member of EORP or CORP that participates in DROP and becomes disabled during participation is eligible to apply for disability retirement benefits.  If the disability occurred during the DROP participation period and is approved, the fund manager shall:

1.      Compute disability benefits by using the factors of credited service and average yearly salary in effect the day before the effective date of the member’s DROP participation.

2.      Distribute all amounts to the member.

 

·          States that a member who participates in DROP shall elect a beneficiary.

 

·          Provides that the designated beneficiary shall receive amounts in the member’s DROP account if the member dies.

 

·          Ensures that if a designated beneficiary dies and the member dies before designating a new beneficiary, the amount in the member’s account shall be distributed to the member’s estate.

 

·          Prohibits a member from making a beneficiary designation that annuls a member’s community property obligations. 

 

·          Stipulates that upon termination of DROP participation and employment, a member shall receive the following:

1.      A monthly retirement allowance determined by statute.

2.      All amounts credited to the member’s DROP participation account in a lump sum distribution.

 

·          Allows the participant to transfer the lump sum distribution to an eligible retirement plan or individual retirement account.

 

·          Stipulates that the DROP shall not jeopardize in any way the tax qualified status of ASRS, EORP and CORP under the rules of the internal revenue code and gives ASRS, EORP, and CORP leeway to adopt any provision necessary or appropriate for the DROP to comply with federal laws or rules.

 

·          Sunsets July 1, 2008.

 

·          Stipulates that members participating in the DROP program before July 1, 2008 may continue to participate until the member’s elected DROP termination date.

 

Amendments

HB 2354 was amended in the Retirement and Government Operations Committee as follows:

·          Makes technical, clarifying and conforming changes.

 

·          Removes the termination of employment for cause section for EORP members. 

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·          45th Legislature                 

·          Second Regular Session      3          February 5, 2002

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