HOUSE BILL NO. 452
INTRODUCED BY J. WHITAKER, LEWIS, D. MOOD, NEWMAN, OLSON
AN ACT ESTABLISHING A DEFERRED RETIREMENT OPTION PLAN IN THE MUNICIPAL POLICE OFFICERS' RETIREMENT SYSTEM; SPECIFYING ELIGIBILITY AND PARTICIPATION CRITERIA; SPECIFYING CONTRIBUTIONS AND THE INTEREST RATE TO BE CREDITED; PROVIDING FOR SURVIVORSHIP BENEFITS AND DISTRIBUTION OPTIONS; AND PROVIDING EFFECTIVE DATES.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MONTANA:
Section 1. Short title. [Sections 1 through 8] may be cited as the "deferred retirement option plan" or DROP.
Section 2. Definitions. Unless the context requires otherwise, as used in [sections 1 through 8], the following definitions apply:
(1) "DROP" means the deferred retirement option plan established pursuant to [sections 1 through 8].
(2) "DROP benefit" means the lump-sum benefit calculated and distributed as provided in [sections 1 through 8].
(3) "DROP period" means the period of time that a member irrevocably elects to participate in the DROP pursuant to [section 4].
(4) "Participant" means a member of the retirement system who has elected to participate in the DROP pursuant to [sections 1 through 8].
Section 3. Deferred retirement option plan established -- compliance with federal law -- rulemaking. (1) The board shall establish a DROP for eligible members of the retirement system who elect to participate.
(2) The board shall administer the DROP in compliance with the internal revenue code and the applicable rules, regulations, and determinations of the internal revenue service.
(3) The board may adopt rules to administer [sections 1 through 8].
Section 4. Eligibility -- participation criteria -- membership status -- service interruptions. (1) Any member eligible to retire under 19-9-801(2) is eligible and may elect to participate in the DROP by filing a one-time irrevocable election with the board on a form prescribed by the board.
(2) A member electing to participate in the DROP shall participate for a minimum of 1 month and may not participate for more than 5 years.
(3) A member may participate in the DROP only once.
(4) A participant remains a member of the retirement system, but may not receive membership service or service credit in the system for the duration of the member's DROP period.
(5) If participation is interrupted by military service or disability and the participant has not received any distribution from the DROP, then the duration of the absence may not be included in calculating the DROP period.
Section 5. Retirement system contributions -- benefit payments to individual accounts -- investment returns. (1) During a member's participation in the DROP, state contributions under 19-9-702, employer contributions under 19-9-703, and member contributions under 19-9-710 must continue to be made to the retirement system.
(2) For each DROP participant, the board shall calculate a DROP benefit equal to the monthly benefit, including any postretirement adjustments, that would have been payable had the participant terminated employment and retired multiplied by each month of the DROP period that the participant completes.
Section 6. Survivorship benefits. (1) If a participant dies prior to the receipt of the DROP benefit pursuant to [section 8], the participant's surviving spouse or dependent child is entitled to receive a lump-sum payment equal to the participant's DROP benefit.
(2) If there is no surviving spouse or dependent child, the designated beneficiary is entitled to receive a lump-sum payment equal to the participant's DROP benefit.
(3) The benefit paid pursuant to this section must include interest reflecting the retirement system's annual investment earnings from the date the member's DROP period commenced.
Section 7. Employment and benefits after DROP period. (1) Except as otherwise provided in this section, if a member continues employment in a covered position after the DROP period ends, the board shall consider the member newly hired as of the date the DROP period ended.
(2) When a member, after the end of the DROP period, continues employment in a covered position, state contributions under 19-9-702, employer contributions under 19-9-703, and member contributions under 19-9-710 must continue to be made to the retirement system.
(3) A member who, after the end of the DROP period, continues employment in a covered position:
(a) is immediately vested for benefits accrued subsequent to the end of the DROP period; and
(b) is, upon terminating covered employment, entitled to:
(i) the member's service retirement benefit earned prior to the DROP period, including any postretirement benefit adjustment for which the member is eligible under this chapter;
(ii) a service retirement benefit based on the member's service and final average compensation during membership subsequent to the end of the DROP period, including any postretirement benefit adjustment for which the member is eligible under this chapter; and
(iii) the member's DROP benefit.
Section 8. Distribution of DROP benefit. (1) Upon termination of covered employment, a participant is entitled to:
(a) receive a lump-sum distribution of the participant's DROP benefit;
(b) roll the participant's DROP benefit into another qualified plan in a manner prescribed and authorized by the board; or
(c) any other distribution or method of payment of the DROP benefit approved by the board.
(2) A distribution pursuant to this section is subject to the provisions of 19-2-907 and 19-2-909 and all other applicable provisions of Title 19.
(3) The amount of a distribution, rollover, transfer, or other payment of a DROP benefit pursuant to this section must include interest reflecting the retirement system's annual investment earnings from the date the member's DROP period commenced.
Section 9. Board to seek commissioner's ruling. The public employees' retirement board shall, as soon as possible, request in writing a ruling from the commissioner of internal revenue as to whether the deferred retirement option plan established pursuant to [sections 1 through 8] constitutes a qualified plan pursuant to section 401(a) of the Internal Revenue Code. The board shall notify the secretary of state and code commissioner when the commissioner of internal revenue has issued a favorable determination.
Section 10. Codification instruction. [Sections 1 through 8] are intended to be codified as an integral part of Title 19, chapter 9, and the provisions of Title 19, chapter 9, apply to [sections 1 through 8].
Section 11. Effective dates. (1) Except as provided in subsection (2), [this act] is effective contingent on the notification to the secretary of state that the commissioner of internal revenue has made a favorable determination pursuant to [section 9].
(2) [Sections 1 through 3, 9, and 10 and this section] are effective on passage and approval.
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