HSB 666 (LSB 6275YC (3) 90)

HOUSE FILE _____ 

BY  (PROPOSED COMMITTEE ON STATE GOVERNMENT BILL BY CHAIRPERSON BLOOMINGDALE)

A BILL FOR

An Act establishing a deferred retirement option plan for members of the public safety peace officers’ retirement, accident, and disability system, and including implementation provisions.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:

    Section 1.  NEW SECTION.  97A.6C  Deferred retirement option plan.
   1.  For purposes of this section, unless the context otherwise requires: 
   a.  “Applicable percentage” means that percentage, not greater than one hundred percentage points, equal to fifty-two percentage points plus two percentage points for each month for the period between the eligible member’s plan eligibility month and the month the eligible member commences membership in the plan. 
   b.  “Drop benefit” means, for a participant, an amount credited to the participant’s account each applicable month equal to the member’s applicable percentage multiplied by the member’s participant retirement amount. 
   c.  “Eligible member” means a member who has attained fifty-five years of age with at least twenty-two years of membership service. 
   d.  “Participant account” means an administrative record maintained by the system reflecting the participant’s accumulated drop benefit. 
   e.  “Participant retirement amount” means the amount equal to the monthly retirement allowance the eligible member would have received under section 97A.6 if the member retired on the date the eligible member commenced participation in the plan, based on earnings through the previous full quarter of earnable compensation earned by the member. 
   f.  “Plan” means the deferred retirement option plan established by this section. 
   g.  “Plan eligibility month” means the first full calendar month in which the participant is an eligible member. 
   2.  a.  An eligible member may elect to participate in the deferred retirement option plan as provided in this section. To participate in the plan, the eligible member shall be employed in a nonsupervisory position or shall be approved to be employed in a nonsupervisory position upon participation in the plan, notwithstanding any provision of law to the contrary, by the department of public safety upon recommendation of the state police officers council labor union for peace officers. A decision by an eligible member to participate in the plan is irrevocable. Upon commencing membership in the plan, the member shall remain an active member of the system and employed in a nonsupervisory position and shall have credited to a participant account on behalf of the member from the retirement fund as established in section 97A.8 for each month the member participates in the plan the member’s drop benefit. The amounts credited shall be invested by the system in risk-free assets of a short-term nature, and interest and earnings shall not be credited to the member’s participant account but shall remain with the retirement fund established in section 97A.8. In addition, the readjustment of pensions under section 97A.6, subsection 14, shall not apply to a participant’s drop benefit or to amounts credited to the member’s participant account. 
   b.  Upon termination of an eligible member’s participation in the plan, the eligible member shall be deemed to be retired under the system as of that date for purposes of the system and shall begin receiving a retirement allowance equal to the member’s participant retirement amount or such optional retirement benefits, based upon that amount, pursuant to section 97A.6A. In addition, the eligible member shall receive the moneys credited to the member’s participant account while participating in the plan. The eligible member shall select, upon written application to the system, whether to receive the amount in the member’s participant account in the form of a lump sum distribution or as a rollover to an eligible retirement plan as defined in section 97A.6B. 
   c.  If an eligible member terminates participation in the plan prior to the date selected by the member upon commencing membership in the plan and the termination is not due to the death or disability of the member under this chapter, then the system shall assess a twenty-five percent penalty on the amount credited to the member’s participant account prior to distributing the amount to the member. The penalty amount shall be transferred to and remain with the retirement fund. 
   3.  To participate in the plan, an eligible member shall make written application to the system. The application shall include the following: 
   a.  The month the eligible member intends to commence participation in the plan. 
   b.  The eligible member’s selection of a plan termination date. The plan termination date shall be either three, four, or five years after the date the eligible member commences membership in the plan. However, for the two-year period beginning with the first of the month following the implementation date of this section, an eligible member between sixty-two and sixty-four years of age may also select a plan termination date that is one or two years after the date the eligible member commences membership in the plan.
   c.  Verification by the department that the eligible member is in a nonsupervisory position or has been approved by the department upon recommendation of the state police officers council labor union for peace officers to be employed in a nonsupervisory position upon participation in the plan. 
   4.  Participation in the plan by an eligible member does not guarantee continued employment. Contributions required from members and participating cities shall continue based on the earnable compensation of an eligible member participating in the plan. However, contributions made while an eligible member participates in the plan shall remain with the retirement fund and shall not be subject to a withdrawal of contributions under section 97A.16. 
   5.  The system’s actuary, while making the annual valuation of the assets and liabilities of the retirement fund, shall determine whether establishment and operation of the plan created in this section has resulted in an increased actuarial cost to the system. If the actuary determines that the plan has resulted in an increased actuarial cost to the system, then, notwithstanding any provision of section 97A.8 to the contrary, the system shall increase the members’ contribution rate as necessary to cover the increased cost of the plan created in this section. 
   6.  This section shall not be implemented until the board of trustees adopts rules providing for the administration of this section which include the implementation date of the plan.
EXPLANATION
The inclusion of this explanation does not constitute agreement with
the explanation’s substance by the members of the general assembly.
   This bill establishes a deferred retirement option plan (DROP plan) for members of the public safety peace officers’ retirement, accident, and disability system (PORS).
   New Code section 97A.6C establishes a DROP plan for eligible members of PORS.
   The new Code section provides that members of PORS who are at least 55 years of age, have at least 22 years of service, and who are employed in a nonsupervisory position or have been approved by the department of public safety upon recommendation of the state police officers council labor union to be employed in a nonsupervisory position are eligible to participate in the DROP plan. The DROP plan provides that an eligible member can delay retirement, continue working in a nonsupervisory position for a set number of additional years, and have a portion of the retirement allowance they otherwise would have received if they had retired instead of participating in the DROP plan deposited in an account that is then distributed to them when they eventually retire. However, the member’s retirement allowance is set at the time the member enters the DROP plan.
    Prior to participating in the DROP plan, a member shall submit an application to the system indicating when they intend to start participation in the DROP plan and when they intend to terminate their participation in the plan and retire, and verifying that the member is in a nonsupervisory position or has been approved to be employed in a nonsupervisory position upon participation in the DROP plan. The bill permits an eligible member to elect to participate in the DROP plan for three, four, or five years. However, for the two-year period beginning on the implementation date of this Code section, an eligible member between the ages of 62 and 64 can elect to participate in the DROP plan and terminate their participation in one or two years.
    Upon electing to participate in the DROP plan, the eligible member continues to work but has a portion of the retirement allowance they would have received if they had decided to retire credited to an account. The amount credited is equal to a percentage of the retirement allowance they would have received. The percentage rate is determined by starting with 52 percent and adding 2 percent per month, up to a maximum of 100 percent, based upon the number of months between the month the member first became eligible to participate in the DROP plan and the month the member actually participates. The bill provides that the amount deposited in the member’s account does not accrue interest or dividends. Upon termination from the DROP plan, the eligible member begins to receive a retirement allowance based upon the amount the member would have received when the member commenced participation in the DROP plan plus the amount in the member’s account. If the member terminates participation in the plan prior to the date set by the member and the termination is not due to the member’s death or disability, PORS shall withhold 25 percent of the amount in the account as a penalty. The bill provides that participation in the DROP plan does not guarantee continued employment.
   The new Code section also provides that if the PORS actuary determines that the DROP plan has increased the actuarial cost of the system, the contribution rate paid by members shall be increased to cover this increased cost. The new Code section further provides that the DROP plan shall not be implemented until the board of trustees adopts rules providing for the administration of this new Code section which include the implementation date of the plan.