Borough of Blawnox, PA Deferred Retirement Option Program

Eligibility. Effective May 26, 2016, members of the Blawnox police officers' bargaining unit that have not retired prior to the implementation of the DROP program, may enter into the DROP on the first day of any month following the attainment of age 55 and the completion of 25 or more years of credited service with the Blawnox Police Department. Any members of the Blawnox police officers' bargaining unit who will reach normal retirement eligibility under the current collective bargaining agreement between the Blawnox Borough Police Association and the Borough of Blawnox, which expires on December 31, 2018, and reach the age of 50 before December 31, 2018 shall also be eligible for the DROP Plan.

Written election.

(1)

An eligible member of the plan electing to participate in the DROP program must complete and execute a DROP election form, prepared by the Borough, which shall evidence the member's participation in the DROP program, and document the participant's rights and obligations under the DROP. The form must be signed and notarized by the member and be submitted to the Borough within a twenty-one-day time period established by the Borough for the purposes contained within this proposal. The written election form completion and submittal must not exceed 30 days from the date on which the member wishes the DROP election to be effective, with the exception of those officers who will become eligible for retirement under the current collective bargaining agreement but will not reach the age of 55 until the year 2018 as defined above. These officers shall provide their written election during the twenty-one-day period established by the Borough with a DROP commencement beginning on the day following their 55th birthday. The DROP election form shall include an irrevocable notice to the Borough that the member shall terminate from employment with the Blawnox Police Department effective on a specific date ("resignation date") no later than 36 months from the effective date of the DROP election. An officer shall cease work as a Blawnox Borough police officer on the officer's resignation date, unless the employer terminates or honorably discharges the officer prior to the resignation date. In addition, all retirement documents required by the Police Pension Plan Administrator must be filed and presented to the Borough for approval of retirement and commencement of the monthly pension benefit. Once the retirement application has been approved by the Police Pension Administrator, it shall become irrevocable.

(2)

After a member enters the DROP program, contributions to the pension plan by the participant and the Borough on behalf of the participant will cease, and the amount of the monthly benefits will be frozen except for any applicable cost-of-living adjustment (COLA) increases awarded to all pension recipients.

(3)

Members shall be advised to consult a tax advisor of their choice prior to considering the DROP program, as there may be serious tax implications and/or consequences to participating in the DROP program.

Limitation on pension accrual. After the effective date of the DROP election, the participant shall no longer earn or accrue additional years of continuous service for pension purposes.

Benefit calculation. For all plan purposes, continuous service of a member participating in the DROP program shall remain as it existed on the effective date of commencement of participation in the DROP program. Service thereafter shall not be recognized or used for the calculation or determination of any benefits payable by the plan. The average monthly compensation of the member for pension calculation purposes shall remain as it existed on the effective date of commencement of participation in the DROP program. Service thereafter shall not be recognized or used for the calculation or determination of any benefits payable by the plan. The average monthly compensation of the member for pension calculation purposes shall remain as it existed on the effective date of commencement of participation in the DROP program.

Payments to DROP account. The monthly retirement benefits that would have been payable to the member elected to cease employment and receive a normal retirement benefit shall, upon the member commencing participation in the DROP program, be credited on the first day of each month into a separate subsidiary DROP participant ledger account established to track and accumulate the participant's monthly pension benefits. This account shall be designated the "subsidiary DROP participant account." The DROP account shall not contain a guarantee interest rate, but shall be credited with interest at the actual rate earned by the DROP account, but shall not be less than 0% nor greater than 4.5% per annum and shall be compounded monthly. The DROP account shall be a segregated account into which each DROP participant monthly retirement benefits shall be deposited. The account shall be managed by the Borough pursuant to the same fiduciary obligations and principals applicable to management of the municipal pension plans.

Early termination. A participant may change the DROP termination date to an earlier date and thereby effectuate a complete termination from service; however, such a change is irrevocable once written notice is submitted to the Borough. No penalty shall be imposed for early termination of DROP participation. Participation in the DROP does not guarantee the DROP participant's employment during the period specified for DROP participation. It is recognized that the participant shall not be permitted to make any withdrawals from the DROP account until DROP participation has ended.

Payout.

(1)

Upon the termination date set forth in the DROP election form or on such date as the participant withdraws or is terminated from the DROP program, if earlier, the terminating DROP participant, or, if deceased, the participant's survivor or named beneficiary, shall elect a method of receiving payment of the DROP benefits. Distribution, regardless of the method specified, shall be made within 45 days following the actual termination of a participant's employment with the Blawnox Borough Police Department. The following options for distribution shall be available to and selected on the approved form by the participant, participant's survivor or beneficiary: 1) the accumulated balance in the subsidiary DROP participant account shall be paid to the participant (or the participant's survivor or named beneficiary) in a single lump-sum payment, less withholding taxes; or 2) as a direct rollover to an eligible retirement plan as defined in Section 402(c)(8)(b) of the Internal Revenue Code of 1986; or, in the case of an eligible retirement plan that is an individual retirement annuity as described in Section 402(c)(9) of the Internal Revenue Code of 1986. If the participant, participant's survivor or beneficiary fails to elect a method of payment within 60 days after the participant's termination date, the Borough shall pay the balance as a lump sum. If the participant selects a rollover option, he/she must submit all appropriate paperwork from the IRA custodian within the required election period.

(2)

Following termination of DROP participation, the subsequently paid normal retirement benefits payable to the participant, participant's survivor or the participant's beneficiary shall no longer be credited to the DROP account, but shall be distributed monthly pursuant to normal retirement plan rules.

Disability during DROP. If a participant becomes eligible for a disability pension benefit and terminates employment, the monthly normal retirement benefit to the DROP participant shall terminate.

Death. If a participant dies before the DROP account balance is paid, the participant's surviving spouse or beneficiary shall have the same rights as the participant to withdraw the DROP account balance. The monthly benefit credited to the participant's DROP account during the month of the participant's death shall be the final monthly benefit for DROP participation. In addition, the DROP participant's survivor shall be eligible to receive the retirement system death benefits normally payable in the event of the death of retired employee.

Eligibility for other benefits. In accordance with the provisions of Act No. 44 of 2009, 53 P.S. §§ 895.1101 through 895.1131, a DROP participant shall be eligible for all pre-retirement benefits for employees provided by law, including but not limited to the Workers' Compensation Act, Public Safety Officer's Benefit Act of 1976, etc. Participants shall be awarded all benefits of the existing collective bargaining agreement in effect while they are participating in a DROP with the exception of any benefit that effects normal retirement pension calculation.

Amendment. Any amendments to this article shall be consistent with the provisions covering deferred retirement options plans set forth in any applicable collective bargaining agreement or state or federal law, and shall be binding upon all future participants and upon all participants who have balances in their DROP accounts.