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New York State Correctional Officers & Police Benevolent Association, Inc.

NYSCOPBA represents over 26,000 New York State employees and retirees from the Security Services Unit. Our Union was formed in May 1998 and since that time has provided superior representation to our membership under the independent and democratic model. Our Mission continued...

DROP Plan

STATE OF NEW YORK
        ________________________________________________________________________
7378
IN SENATE
 
June 2, 2004
___________
Introduced  by  Sens.  ROBACH,  VOLKER, WRIGHT -- read twice and ordered
printed, and when printed to be committed to the Committee on Rules
AN ACT to amend the retirement and social security law, in  relation  to
the  establishment  of  a  deferred retirement option plan for certain
employees of the department of correctional services and the office of
mental health
The People of the State of New York, represented in Senate and  Assem-
bly, do enact as follows:
1      Section 1. The retirement and social security law is amended by adding
2    a new article 14-C to read as follows:
3                                   ARTICLE 14-C
4                        DEFERRED RETIREMENT OPTION PLANS
5    Section  570. Deferred retirement option plan payable to certain person-
6          nel.
7      § 570. Deferred retirement option plan payable to  certain  personnel.
8    a.    Deferred  retirement  option  plan. The deferred retirement option
9    plan, (hereinafter referred to as "DROP"), is a  retirement  plan  under
10    which  an eligible member may elect to participate, deferring receipt of
11    retirement benefits while continuing employment with the  department  of
12    correctional  services  or the office of mental health. For the purposes
13    of this section, "eligible members" are any members employed as officers
14    or employees holding the titles hereinafter set  forth  in  institutions
15    under  the  jurisdiction  of  the department of correctional services or
16    under  the  jurisdiction  of  the  office  of  mental  health,   namely:
17    correction  officers,  prison  guards,  correction sergeants, correction
18    lieutenants, correction captains,  deputy  assistant  superintendent  or
19    warden,  deputy  warden  or  deputy  superintendent, superintendents and
20    wardens, assistant director and director of correction reception center,
21    director of correctional program,  assistant  director  of  correctional
22    program,  director  of  community correctional center, community correc-
23    tional center assistants, correction hospital officers, male or  female,
24    correction hospital senior officers, correction hospital charge officer,
25    correction  hospital  supervising  officer, correction hospital security
26    supervisor, correction hospital chief  officer,  correction  youth  camp
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[ ] is old law to be omitted.
LBD18186-02-4
S. 7378                             2
1    officer, correction youth camp supervisor, assistant supervisor, correc-
2    tional  camp superintendent, assistant correctional camp superintendent,
3    director of crisis  intervention  unit,  assistant  director  of  crisis
4    intervention  unit,  security  hospital  treatment  assistants, security
5    hospital treatment  assistants  (Spanish  speaking),  security  hospital
6    senior  treatment  assistants,  security  hospital supervising treatment
7    assistants and security hospital treatment chiefs. Upon commencement  of
8    the  DROP period, the eligible member's monthly retirement benefit with-
9    out optional modification shall be calculated and fixed as if  the  date
10    of  retirement  was  the  effective  date  of  entry into the DROP. Upon
11    completion of the DROP period, the eligible member may elect an optional
12    form of payment and shall receive  such  calculated  and  fixed  monthly
13    retirement  benefit  as adjusted for optional modification if the member
14    so chooses plus an actuarially determined lump sum benefit  as  provided
15    in subdivision d of this section.
16      b.  Participation  in DROP. Any eligible member who is employed by the
17    department of correctional services or the office of mental  health  and
18    qualifies  to  retire by virtue of having completed twenty-five years of
19    total creditable service without regard to age may elect to  participate
20    in DROP.
21      c.  Election  in DROP. Such election must be on a form supplied by the
22    retirement system and may be for any period of time not less than twelve
23    months or more than sixty months in duration. Any  eligible  member  who
24    elects  to participate in DROP is considered retired although employment
25    continues, except for retirement system purposes  which  shall  consider
26    the  eligible  member's date of retirement the day following the expira-
27    tion of the DROP period.  Upon expiration of the time period selected by
28    the eligible member, such member's participation in  DROP  shall  termi-
29    nate.
30      d. Benefits payable under DROP. (1) Effective with the date of partic-
31    ipation in DROP, the eligible member's normal service retirement benefit
32    shall  be calculated and fixed, using creditable service and final aver-
33    age salary as if the effective date of retirement was the date of  entry
34    into  DROP.  In  addition to this normal service retirement benefit, the
35    eligible member shall receive an actuarially determined lump sum benefit
36    which shall be equal to the difference  between  the  actuarial  present
37    value  of  the  pension  benefit without optional modification which the
38    eligible member would have received had he or she not opted  to  partic-
39    ipate  in  DROP  and retired on the date the DROP period terminated, and
40    the actuarial present value of  the  pension  benefit  without  optional
41    modification which the eligible member would have received had he or she
42    retired  upon commencement of the DROP. The mortality and interest rates
43    used in determining actuarial equivalence shall be those in  effect  for
44    this purpose on the date the DROP period terminates. The eligible member
45    shall,  however,  elect  his or her actual method of payment of the lump
46    sum benefit as  provided  in  subdivision  e  of  this  section  at  the
47    completion of the DROP period.
48      (2)  If  the eligible member dies prior to completion of the period of
49    participation in DROP, the eligible member shall be treated as  if  such
50    DROP  election did not exist. In lieu of the DROP payment, a death bene-
51    fit shall be payable consistent with the terms of this chapter  and  all
52    salary  and  service  reported  for such eligible member during the DROP
53    period shall be considered in calculating the  eligible  member's  death
54    benefit.
55      (3)  If  the  eligible  member  is  approved  for  disability benefits
56    provided by this chapter during the DROP  period,  the  eligible  member
S. 7378                             3
1    shall  be treated as if such DROP election did not exist. In lieu of the
2    DROP payment, a disability retirement benefit shall be payable  consist-
3    ent  with  the terms of this chapter and all salary and service reported
4    for  such  eligible member during the DROP period shall be considered in
5    calculating the eligible member's disability retirement benefit.
6      (4) If an eligible member otherwise fails to complete his or her peri-
7    od of service as elected pursuant to subdivision c of this section,  the
8    eligible member shall be treated as if such DROP election did not exist.
9    In lieu of the DROP payment, the normal service retirement benefit shall
10    be  payable consistent with the terms of this chapter and all salary and
11    service reported for such eligible member during the DROP  period  shall
12    be  considered  in  calculating the eligible member's service retirement
13    benefit.
14      (5) If an eligible member remains employed after his  or  her  partic-
15    ipation  in DROP is terminated, such member shall forfeit all DROP bene-
16    fits and continue employment as if such DROP  election  did  not  exist.
17    Such  member  shall  then  be eligible to elect DROP consistent with the
18    terms of this section.
19      (6) If an eligible member is approved for  disability  benefits  after
20    benefits  payable  pursuant  to DROP have been paid, the eligible member
21    may elect to receive the disability benefits in lieu of  DROP  benefits,
22    but  such disability benefits must be actuarially adjusted for any bene-
23    fits paid under DROP.
24      e. Method of payment. At the conclusion of the member's  participation
25    in DROP, the retirement system shall pay the deferred service retirement
26    benefits in one of the following methods as elected by the member:
27      (1) Lump sum. All accrued DROP benefits, plus interest, less withhold-
28    ing  as  required  by the internal revenue service, shall be paid to the
29    DROP participant or eligible beneficiary or as otherwise  determined  by
30    operation of law;
31      (2)  Direct  rollover. All accrued DROP benefits, plus interest, shall
32    be paid from the retirement system to a custodian of an eligible retire-
33    ment plan or other eligible plan or account as provided pursuant to  the
34    internal revenue code as directed by the member or eligible beneficiary;
35    or
36      (3)  Partial lump sum. A portion of the DROP benefits shall be paid to
37    the DROP participant or eligible beneficiary, less withholding  required
38    by  the  internal revenue service and the remaining DROP benefits may be
39    rolled over as otherwise permitted by the internal revenue code.
40      For the purposes of this subdivision, the term "eligible  beneficiary"
41    is one who qualifies to rollover benefits from a qualified defined bene-
42    fit plan to another eligible plan or account as provided by the internal
43    revenue code.
44      The forms of payment provided by this subdivision must comply with the
45    minimum distribution requirements of the internal revenue code.
46      f.  Regulations.  The  comptroller shall prescribe such regulations as
47    may be required for the effective administration and  implementation  of
48    the provisions of this section.
49      §  2. The past service costs attributable to the operation of this act
50    shall be paid by the state of New York and may be paid  in  five  annual
51    installments commencing with the fiscal year ending 2005.
52      § 3. This act shall take effect immediately.
FISCAL  NOTE.--This  bill  would  allow  State Correction Officers and
Security Hospital Treatment Assistants to elect to participate in a cost
neutral Deferred Retirement Option Plan  (DROP),  deferring  receipt  of
S. 7378                             4
retirement  benefits  while  continuing  their  current  employment. The
features of this DROP are:
1. Members may elect to participate in the DROP upon the attainment of
retirement eligibility.
2.  The  service retirement benefit shall be fixed at the commencement
of DROP participation.
3. The NYS&LERS shall consider DROP participants active  members,  and
annual  employer  contributions  shall  continue to be made on behalf of
such members.
4. The length of participation in the DROP must be  specified  at  the
time  of  election, and may not be less than 1 year, nor exceed 5 years.
However, if the affected member should leave employment before or  after
the  scheduled DROP termination date, such member shall forfeit all DROP
benefits, and shall be treated as though there were no DROP election.
5. If an affected member should die or become disabled during the DROP
period, such member would be  treated  as  though  there  were  no  DROP
election.
6.  Upon  termination  from  DROP,  such  participants  shall begin to
receive their previously determined pensions with optional modification.
They shall also receive a lump sum payment which will be  calculated  as
the  present  value  of the pension which would have been payable at the
termination of DROP had DROP not been elected, reduced  by  the  present
value  of  the pension which would have been payable at the commencement
of DROP.
If this bill is enacted, we do not anticipate that there will  be  any
increase  in  employer contributions for employers in the New York State
and Local Employees' Retirement System.
This estimate, dated May 4, 2004 and intended for use only during  the
2004  Legislative  Session, is Fiscal Note No. 2004-331, prepared by the
Actuary for the New York State and Local Employees' Retirement System.
102 Hackett Blvd., Albany, NY 12209   518.427.1551 | 888.484.7279  Fax: (518) 426-1635  nyscopba@nyscopba.org