Skip to main content
Loading…
This section is included in your selections.

(a) Establishment; applicability; purpose; citation.

(1) This section adds, as a part of this retirement system, an optional account known as the deferred retirement option plan.

(2) The provisions of the section are applicable with respect to those otherwise eligible members of the retirement system whose election to participate in the deferred retirement option plan occurs on or after the receipt of all IRS approvals that the board deems appropriate for this plan provision.

(3) The provisions of this section may be cited as the "DROP."

(4) The purpose of the DROP is to allow an eligible member to elect, in lieu of immediate termination of employment and receipt of a service retirement benefit, to continue employment for a specified period of time and to have the member's otherwise deductible employee contribution and retirement benefits paid into the DROP account until the end of such specified period of participation, at which time employment is to cease.

(b) Eligibility for participation; limitations.

(1) Participation in the DROP is an option available to any member of this retirement system who is eligible to retire in accordance with sections 102-193, 194, or 195.

(2) A member may participate in DROP only once.

(3) The duration of a member's participation in the DROP shall not exceed a total of five years. As a condition precedent to participation in DROP, the member shall execute an irrevocable agreement with the board of trustees of the fire "old hire" retirement plan which agreement shall, among other items, clearly and unequivocally state that the member must retire no later than the fifth anniversary of the participation in DROP. The member shall also acknowledge that no disbursement of DROP funds can occur absent the retirement or death of the member.

(4) If the member's participation in the DROP is interrupted by (i) military service, (ii) reduction in work force, or (iii) job related disability, upon reestablishment of membership, provided the member has not received any distribution from his DROP account, the member shall be immediately eligible for resumption of participation for the balance of the five-year maximum. Other than the above described types of interruptions, the five-year period shall continue to run in all other cases.

(c) Conditions of participation; effects.

(1) Upon commencement of participation in the DROP, the member shall remain an active member of this retirement system. Nevertheless, the member shall earn no additional service credit or additional benefits, and the rank escalator benefit described in sections 102-94, 102-95, and 102-205 shall be established and calculated by utilizing the rank and grade held by the member at the time of the member's commencement of participation in DROP.

(2) Upon commencement of participation, i) the service retirement benefit, ii) the rank escalator benefit, and iii) the employee contribution shall be paid into the deferred retirement option plan account. In no case shall the employer contribution be used to fund the DROP.

(3) The DROP assets shall be held in trust for investment purposes as part of the fire and police members' self-directed investments fund, subject to such rules as may be adopted for the administration of the trust. The FPPA board shall be authorized to charge each account a reasonable fee for the administration of the DROP.

(4) The deferred retirement option plan account shall not be subject to any fees or charges of any kind for any purposes, except as otherwise provided herein.

(d) Termination of participation.

(1) A participant in the DROP who terminates employment or reaches the five-year limit for participation, shall become a retiree and shall be entitled to select one of the following distribution methods:

a. Deferral of any payment(s) from the account until a specified date. If a deferral of payment(s) is selected, the participant shall select one of the following distribution methods. However, all distributions must start no later than April 1 of the calendar year following the calendar year in which the participant attains the age of 70½.

b. A lump sum distribution of the entire account balance.

c. Periodic monthly payments with a designated amount until the balance of the DROP account has been entirely distributed.

d. Periodic payments for a designated period of years. FPPA will calculate the dollar amount of the participant's periodic payment, so that the entire balance in the participant's DROP account will have been distributed to the participant by the end of the period selected by the participant. This amount will be recalculated annually during April.

e. Initial minimum required distribution. The FPPA will calculate the dollar amount of the participant's periodic payment based on the participant's current DROP account balance. The minimum distribution is based on the participant's life expectancy (and the life expectancy of his/her designated beneficiary, if applicable).

f. 

i. Combination of lump sum and periodic payments by designating an initial lump sum payment of a specified amount and a balance to be paid in a specified number of monthly payments of a specified dollar amount until the balance of the DROP account has been entirely distributed to the participant.

Regardless of the form of payment the participant chooses, the minimum distribution amount will be determined and made in accordance with code section 401(a)(9) and the regulations there under, including minimum distribution incidental death benefit requirement of income tax regulation section 1.401(a)(9)-2. The minimum distribution is recalculated by the FPPA annually on the basis of the life expectancy of the participant and the participant's designated beneficiary, if applicable. If elected in writing before the required beginning date under code section 401(a)(9) by the participant, and/or the participant's spouse, if applicable, the life expectancy of the participant and/or the participant's spouse shall be recalculated annually.

ii. Notwithstanding any provision to the contrary, any distribution under the DROP shall be made in accordance with code section 401(a)(9)and the regulations established thereunder as they are amended and shall comply with the following rules:

A. To the extent required by code section 401(a)(9) and the regulations promulgated thereunder, payment of the benefits of a member shall begin not later than the "required beginning date." For purposes of this section, "required beginning date" means April 1 of the calendar year following the later of the calendar year in which the member reaches age 70½, or the calendar year in which the member retires.

B. No payment option may be selected by a member unless the amounts payable to the member are expected to be at least equal to the minimum distribution required under code section 401(a)(9).

C. The amounts payable must satisfy the minimum distribution incidental benefit requirements of the code section 401(a)(9)(g).

(2) 

a. Payment of DROP account proceeds shall be in addition to normal survivor benefits payable to survivors of retirees as provided for in this article.

b. In the event of the member's death, any remaining benefit shall be distributed according to the following subject to compliance with code section 401(A)(9) and regulations thereunder.

c. If the member had begun receiving periodic payments from the plan that were not annuitized, the balance of the accounts shall be paid to the designated beneficiary at least as rapidly as under the payment option selected by the member.

d. If the member had begun receiving payments in the form of a pension or an annuity, the designated beneficiary shall be bound by all restrictions applicable to the pension or annuity, and the form of payment selected thereunder, and remaining payments, if any, shall be paid to the designated beneficiary in the same manner.

e. If the member dies before distributions have commenced, a spouse designated beneficiary may take a lump sum distribution or may delay the commencement of benefits until not later than December 31 of the year the member would have attained age 70½ and may elect to receive periodic payments over the spouse's life expectancy.

f. If the member dies before distributions have commenced, a designated beneficiary other than a surviving spouse may take a lump sum or a periodic payment. In the case of a lump sum, payment must be made no later than December 31 of the year following the year of the member's death, and in no event be payable over a period longer than the designated beneficiary's life expectancy at the time the distribution commences.

g. If the member has not designated a beneficiary or the plan is unable to locate the designated beneficiary upon the death of the member, the member's remaining interest will be paid in a lump sum to the member's estate.

h. Notwithstanding the foregoing, any payment to an estate shall be made in a lump sum.

(3) Except for assignments for child support purposes and writs of garnishment that are the result of a judgment taken for arrearages for child support or for child support debt, no portion of the account, before or after its order shall be held, seized, taken, subjected to, detained, or levied on by virtue of any attachment, execution, injunction, writ, interlocutory or other order or decree, or process or proceeding whatsoever issued out of or by any court of this state for the payment or satisfaction, in whole or in part, of any debt, damage, claim, demand, or judgment against the employer or the beneficiary of the fund. The DROP shall be subject to the marital agreement provisions described in state law, C.R.S. 14-10-113.

(e) Compliance with IRS requirements. The board shall take all necessary steps to ensure that the DROP is administered in full compliance with all applicable IRS rules, regulations, and determinations. (Ord. No. 2005-26, §§ 1, 2, 5-16-2005; Ord. No. 2002-80, § 1, 1-6-2003; Ord. No. 2001-68, § 5, 11-19-2001; Ord. No. 98-72, § 1, 10-12-1998; Ord. No. 98-63, §§ 1, 2, 9-21-1998; Ord. No. 96-37, § 1, 10-7-1996)