1% Employee Contribution Refunds Processed
On October 3rd, the Pension Fund made a lump sum payment to 449 Firefighters and Police Officers who elected to contribute an additional 1% of their base salary in 2008. The amount refunded was deducted from those participants’ pay from February 26, 2009 through July 24, 2014.
In 2000, a Deferred Retirement Option Provision (DROP) was adopted into the Pension Plan. A DROP is an optional form of payment of a member’s earned retirement benefit. At retirement, members may elect to receive their full earned monthly benefit; or take a reduced monthly benefit and a partial lump sum, not to exceed 36 months of the earned benefit – the DROP.
Initially in 2000, it was approved by referendum to add interest to the DROP to encourage certain participants to extend their careers beyond normal retirement. The DROP was a success. Employees were working an average of 3 years longer and disability cases declined.
In 2008, the DROP was modified. Firefighters and Police Officers were given an option to contribute an additional 1% of their base salary to continue eligibility for the interest-bearing DROP. On July 1, 2014, the DROP was again modified to no longer include interest in the DROP calculation and the elective 1% contribution was refunded. Approximately 10% of those receiving refunds rolled their contributions into a 457(b) deferred compensation plan or other retirement account. The majority elected to receive a direct payment, opting to pay taxes on the lump sum distribution.