DEFERRED RETIREMENT OPTION PROGRAM

In general the Deferred Retirement Option Program (DROP) is a program under which an eligible member of the plan may elect to participate, deferring receipt of normal retirement benefits while continuing employment with the city without loss of any other employee benefits. Upon an eligible member's election to participate in the DROP, the amount of credited service and final average salary becomes frozen for purposes of determining pension benefits. Additional service beyond the date of entry into the DROP shall no longer accrue any additional benefits under the Pension Fund. The deferred monthly retirement benefits under the DROP shall accrue in the fund on behalf of the participant, plus interest compounded monthly. Upon termination of employment, the participant shall receive the total DROP benefits and begin to receive the previously determined normal retirement benefits.

(a) Eligibility of Member to Participate in the DROP. All members who are eligible may elect participation in the DROP, provided members comply administratively with the rules and regulations established by the Board for the administration of the DROP.

(1) A Member who is eligible to receive normal retirement benefits after 20 years under Section 120.306 may participate in the DROP providing the member elects to participate within the appropriate time limits.

(2) Election to participate is made on a date following the date on which the Member first attains 20 years of credited service.

(3) An eligible Member may elect to participate in the DROP by complying with the election process established by the Board.

(b) Participation in the DROP.

(1) An eligible member may elect to participate in the DROP for a period not to exceed a maximum of 130 full bi-weekly pay periods (60 months) following the date on which the Member begins participation in the DROP. The following time limits will apply for eligibility to elect to participate in the DROP.

Years of Credited Service at Time of Election	Maximum Pay Periods of Participation	Maximum Months of Participation
20 but less than 30 Years	130 bi-weekly	60
30 but less than 31 Years	78 bi-weekly	36
31 but less than 32 Years	52 bi-weekly	24

 

After the initial enrollment period a member who reaches 32 years of service after the effective date of this Section and who fails to make an election prior to attaining 32 years of service shall forfeit all rights to participate in the DROP.

(2) The beginning date of the DROP period shall be the first full bi-weekly pay period after the first day of January, April, July or October subsequent to the date of election to participate, or as soon as administratively practical thereafter, and shall not exceed the DROP participation period as provided in (b)(1), above.

(3) Upon electing to participate in the DROP , the Member shall submit on forms prescribed and required by the Board:

(i) A written election to participate in the DROP;

(ii) Selection of the DROP participation and retirement dates, which satisfy the limitation stated in subsection (b)(1) of this Section. Such retirement date shall be in a binding application for retirement with the employer establishing a deferred retirement date. The member may change the deferred retirement date within the limitations of subsection (b)(1) of this Section on forms required by the Board;

(iii) A written notification advising the member's employer of the date on which the DROP shall begin for the member;

(iv) A properly completed DROP application for service retirement as provided in this Section; and

(v) Any other forms required by the Board.

(4) The DROP participant shall be a retiree under the Pension Plan. DROP participants shall additionally continue to be eligible to vote for their respective members of the Advisory Committee.

(5) Except as provided by subsection (g) of this Section with respect to elected or appointed officials, election to participate in the DROP, once approved by the Board, is irrevocable.

(c) Benefits payable under the DROP.

(1) Effective with the date of DROP participation, the member's initial normal retirement benefit, including creditable service and average compensation, as provided in Section 120.306 and the effective date of retirement shall be fixed. Such normal retirement benefits and interest, shall accrue monthly in the fund for the benefit of the DROP participant. Such interest shall produce an annual rate of return equal to the rate of return earned on the Investment Portfolio held by the City of Jacksonville Retirement System. Interest calculations shall be administered in accordance with rules prescribed by the Board and interest distributions shall be credited using the 30 day month/360 day year method of calculation.

(2) The normal retirement benefit and interest thereon shall continue to accrue in the DROP until the established termination date of the DROP, or until the participant terminates employment or dies prior to such date. Although individual DROP accounts shall not be established, a separate accounting of each participant's accrued benefits under the DROP shall be calculated and provided to participants annually by the Board.

(3) At the conclusion of the participant's DROP and termination of employment with the City, the Board shall distribute the participant's total accumulated DROP benefits, as soon as administratively practical, subject to the following provisions:

(i) The Board shall receive written verification by the participant's employer that such participant has terminated employment.

(ii) The terminated DROP participant or if deceased, such participant's surviving spouse or representative, shall elect on forms provided by the Board to receive payment of the DROP benefits in accordance with one of the options listed below. For a DROP participant who fails to elect a method of payment within 90 days of termination of the DROP, interest will no longer accrue in the fund for the benefit of the DROP participant. For a surviving spouse of a current or former DROP participant who fails to elect a method of payment within 90 days of the date of death of the current or former DROP participant, interest will no longer accrue in the fund for the benefit of the DROP participant.

a. Lump Sum. All accrued DROP benefits, plus interest, less withholding taxes remitted to the Internal Revenue Service, shall be paid to the DROP participant or surviving spouse.

b. Direct Rollover. All accrued DROP benefits, plus interest, shall be paid from the DROP directly to the custodian of an eligible retirement plan as defined in Section 402(c)(8)(B) of the Internal Revenue Code. However, in the case of an eligible rollover distribution to the surviving spouse of the deceased participant, an eligible retirement plan is an individual retirement account or an individual retirement annuity as described in Section 402(c)(9) of the Internal Revenue Code. For purpose of this subsection, an eligible retirement plan shall also mean an annuity contract described in Section 403(b) of the Internal Revenue Code and an eligible plan under Section 457(b) of the Internal Revenue Code which is maintained by a state, political subdivision of a state, or an agency or instrumentality of a state or political subdivision of a state which accept rollovers and which agrees to separately account for amounts transferred into such plan from this plan.

c. Partial lump sum. A portion of the accrued DROP benefits shall be paid to the DROP participant or surviving spouse, less withholding taxes remitted to the Internal Revenue Service, and the remaining DROP benefits shall be transferred directly to the custodian of an eligible retirement plan as defined in Section 402(c)(8)(B) of the Internal Revenue Code. However, in the case of an eligible rollover distribution to the surviving spouse of a deceased participant, an eligible retirement plan is an individual retirement account or an individual retirement annuity as described in Section 402(c)(9) of the Internal Revenue Code. The proportions shall be specified by the DROP participant or surviving spouse.

d. Monthly distribution. The account balance shall be distributed in a monthly amount paid bi-weekly, until the DROP Account is depleted, over an annual period to be selected by the participant or the surviving spouse, but not to exceed ninety (90) days following actual retirement; less withholding taxes remitted to the Internal Revenue Service. Interest will accrue only for the first 90 days, such selection once made, cannot be changed, unless changed to Option (a), or (b), above. Notwithstanding the foregoing, in the event that the participant selected a payout period over the participant's life expectancy or over the joint life expectancies of the participant and the participant's spouse in order to avoid the application of the 10 percent additional tax on early distributions reflected in Section 72(t) of the Internal Revenue Code, such participant may shorten the number of bi-weekly payout periods originally selected by the participant, provided that the timing of such modification conforms to the standards described in Section 72(t)(4) of the Internal Revenue Code.

(iii) The form of payment selected by the DROP participant or surviving spouse shall comply with the minimum distribution requirements per Section 401(a)(9) of the Internal Revenue Code.

(iv) Subsequent to the month of termination or death, the accrual of interest on the accumulated DROP balance shall cease, provided, however, that an interst factor shall be embedded in the bi-weekly distribution option described in option (d) above from the initial bi-weekly distribution, which shall commence upon the execution of proper election forms by the DROP participant or the surviving spouse.

(4) The accrued benefits of any DROP participant and any contributions accumulated under such program, shall not be subject to assignment, execution, attachment, or to any legal process whatsoever, except for federal income tax levies.

(5) DROP participants shall not be eligible for the disability retirement benefits provided in Section 120.308.

(d) Death Benefits Under the DROP.

(1) Upon the death of a DROP participant, contributions to the DROP shall cease and the surviving spouse shall be entitled to apply for and receive the accrued benefits in the DROP, and apply for surviving spouse benefits in accordance with the provision of Section 120.307. If there is no surviving spouse, the accrued benefits in the DROP will be paid to the estate of the qualified member as provided by law.

(2) The normal retirement benefit accrued for the benefit of the DROP participant during the month of a participant's death, shall be the final monthly benefit credited for such DROP participant.

(3) Eligibility to participate in the DROP terminates upon the death of the participant. If the participant dies on or after the effective date of enrollment in the DROP, but prior to the first monthly benefit being credited to the DROP, retirement benefits shall be paid to the surviving spouse in accordance with the provisions of Section 120.307.

(e) Health Insurance Subsidy. DROP participants are not eligible for the health insurance subsidy as provided in Section 120.306 of this Chapter until termination of employment is effectuated.

(f) DROP recission for elected or appointed officials. The irrevocable nature of DROP participation shall not apply in the case of a DROP participant who becomes an elected or appointed official with such member being granted the option of rescinding DROP participation within one (1) calendar year of election or appointment. In such event of DROP recission, the elected or appointed official shall be granted pension service credit for DROP participation periods, the City shall be assessed the amount of City contributions that otherwise would have been remitted to the fund by the City during the DROP period, the member will be required to make the contributions in accordance with the provisions, and the retirement leave account frozen and removed shall be restored. All deposits plus interest into the DROP account will revert to the fund. Such appointed and elected officials shall be permitted to re-enroll into the DROP at a later date. However, members who were former DROP participants and who retired while in such status shall not be eligible to rejoin membership into the fund.

(g) Contributions and deductions.

(1) The employer contributions on the salary of DROP participants shall be zero percent.

(2) A deduction of two percent per annum shall be made from all earnable compensation of DROP participants as the contribution from the participant during the period of DROP participation, with such amount being credited to the Fund.

(3) Members of the fund may be removed from the regular City payroll for a variety of reasons. Such circumstances may include various forms of requested leaves of absence without pay, suspensions without pay, terminations under appeal, and removals pending the outcome of criminal charges. DROP participants who may be removed from the regular City payroll for all or a portion of a particular pay period(s), which is not covered by the use of leave balances, are unable to comply with the obligation to make the payment of the two percent per annum deduction from salaries. During such period of non-compliance (except in the case of military leaves of absence which shall be governed in accordance with F.S. § 115.12), the participant shall experience an interruption in the bi-weekly remittances to the participant's DROP account and such period of interruption shall count against the selected period of DROP participation. However, in the event that any such period of involuntary leave without pay was reversed and such period was accompanied by the award of back-pay from which the required DROP contribution is assessed, the DROP remittances which were interrupted during such period shall be credited to the participant's DROP account, along with any deferred interest related thereto.

(h) Forfeiture of retirement benefits. Nothing in this Section shall be construed to remove DROP participants from the scope of Fla. Const. Article II, Section 8 (d), F.S. § 112.3173. A DROP participant who commits a specified felony offense while employed will be subject to forfeiture of all retirement benefits, including DROP benefits, pursuant to those provisions of law.

(i) Administration of the DROP. The Board shall make such rules as are necessary for the effective and efficient administration of the DROP. Neither the Board nor staff of the Fund shall advise members of the federal tax consequences of an election related to the DROP. A copy of the rules and regulations governing the DROP shall be on file with in the Pension Office.

(j) Retirement leave account distribution during the DROP . Members who have a balance in their retirement leave account will have the account paid in accordance with Ordinance Code Section 116.606 (a), (b), and (c).