Iowa-2023-HSB666-Introduced

H.F. _____ Section 1. NEW SECTION . 97A.6C Deferred retirement option 1 plan. 2 1. For purposes of this section, unless the context 3 otherwise requires: 4 a. “Applicable percentage” means that percentage, not 5 greater than one hundred percentage points, equal to fifty-two 6 percentage points plus two percentage points for each month for 7 the period between the eligible member’s plan eligibility month 8 and the month the eligible member commences membership in the 9 plan. 10 b. “Drop benefit” means, for a participant, an amount 11 credited to the participant’s account each applicable month 12 equal to the member’s applicable percentage multiplied by the 13 member’s participant retirement amount. 14 c. “Eligible member” means a member who has attained 15 fifty-five years of age with at least twenty-two years of 16 membership service. 17 d. “Participant account” means an administrative record 18 maintained by the system reflecting the participant’s 19 accumulated drop benefit. 20 e. “Participant retirement amount” means the amount equal 21 to the monthly retirement allowance the eligible member would 22 have received under section 97A.6 if the member retired on the 23 date the eligible member commenced participation in the plan, 24 based on earnings through the previous full quarter of earnable 25 compensation earned by the member. 26 f. “Plan” means the deferred retirement option plan 27 established by this section. 28 g. “Plan eligibility month” means the first full calendar 29 month in which the participant is an eligible member. 30 2. a. An eligible member may elect to participate in the 31 deferred retirement option plan as provided in this section. 32 To participate in the plan, the eligible member shall be 33 employed in a nonsupervisory position or shall be approved to 34 be employed in a nonsupervisory position upon participation in 35 -1- LSB 6275YC (3) 90 jm/ns 1/ 6

H.F. _____ the plan, notwithstanding any provision of law to the contrary, 1 by the department of public safety upon recommendation of the 2 state police officers council labor union for peace officers. 3 A decision by an eligible member to participate in the plan 4 is irrevocable. Upon commencing membership in the plan, the 5 member shall remain an active member of the system and employed 6 in a nonsupervisory position and shall have credited to a 7 participant account on behalf of the member from the retirement 8 fund as established in section 97A.8 for each month the member 9 participates in the plan the member’s drop benefit. The 10 amounts credited shall be invested by the system in risk-free 11 assets of a short-term nature, and interest and earnings shall 12 not be credited to the member’s participant account but shall 13 remain with the retirement fund established in section 97A.8. 14 In addition, the readjustment of pensions under section 97A.6, 15 subsection 14, shall not apply to a participant’s drop benefit 16 or to amounts credited to the member’s participant account. 17 b. Upon termination of an eligible member’s participation 18 in the plan, the eligible member shall be deemed to be retired 19 under the system as of that date for purposes of the system 20 and shall begin receiving a retirement allowance equal to 21 the member’s participant retirement amount or such optional 22 retirement benefits, based upon that amount, pursuant to 23 section 97A.6A. In addition, the eligible member shall receive 24 the moneys credited to the member’s participant account while 25 participating in the plan. The eligible member shall select, 26 upon written application to the system, whether to receive 27 the amount in the member’s participant account in the form 28 of a lump sum distribution or as a rollover to an eligible 29 retirement plan as defined in section 97A.6B. 30 c. If an eligible member terminates participation in the 31 plan prior to the date selected by the member upon commencing 32 membership in the plan and the termination is not due to the 33 death or disability of the member under this chapter, then 34 the system shall assess a twenty-five percent penalty on the 35 -2- LSB 6275YC (3) 90 jm/ns 2/ 6

H.F. _____ amount credited to the member’s participant account prior to 1 distributing the amount to the member. The penalty amount 2 shall be transferred to and remain with the retirement fund. 3 3. To participate in the plan, an eligible member shall 4 make written application to the system. The application shall 5 include the following: 6 a. The month the eligible member intends to commence 7 participation in the plan. 8 b. The eligible member’s selection of a plan termination 9 date. The plan termination date shall be either three, 10 four, or five years after the date the eligible member 11 commences membership in the plan. However, for the two-year 12 period beginning with the first of the month following the 13 implementation date of this section, an eligible member between 14 sixty-two and sixty-four years of age may also select a plan 15 termination date that is one or two years after the date the 16 eligible member commences membership in the plan. 17 c. Verification by the department that the eligible member 18 is in a nonsupervisory position or has been approved by the 19 department upon recommendation of the state police officers 20 council labor union for peace officers to be employed in a 21 nonsupervisory position upon participation in the plan. 22 4. Participation in the plan by an eligible member does not 23 guarantee continued employment. Contributions required from 24 members and participating cities shall continue based on the 25 earnable compensation of an eligible member participating in 26 the plan. However, contributions made while an eligible member 27 participates in the plan shall remain with the retirement fund 28 and shall not be subject to a withdrawal of contributions under 29 section 97A.16. 30 5. The system’s actuary, while making the annual valuation 31 of the assets and liabilities of the retirement fund, shall 32 determine whether establishment and operation of the plan 33 created in this section has resulted in an increased actuarial 34 cost to the system. If the actuary determines that the plan 35 -3- LSB 6275YC (3) 90 jm/ns 3/ 6

H.F. _____ has resulted in an increased actuarial cost to the system, 1 then, notwithstanding any provision of section 97A.8 to the 2 contrary, the system shall increase the members’ contribution 3 rate as necessary to cover the increased cost of the plan 4 created in this section. 5 6. This section shall not be implemented until the board of 6 trustees adopts rules providing for the administration of this 7 section which include the implementation date of the plan. 8 EXPLANATION 9 The inclusion of this explanation does not constitute agreement with 10 the explanation’s substance by the members of the general assembly. 11 This bill establishes a deferred retirement option plan 12 (DROP plan) for members of the public safety peace officers’ 13 retirement, accident, and disability system (PORS). 14 New Code section 97A.6C establishes a DROP plan for eligible 15 members of PORS. 16 The new Code section provides that members of PORS who are 17 at least 55 years of age, have at least 22 years of service, 18 and who are employed in a nonsupervisory position or have been 19 approved by the department of public safety upon recommendation 20 of the state police officers council labor union to be employed 21 in a nonsupervisory position are eligible to participate in the 22 DROP plan. The DROP plan provides that an eligible member can 23 delay retirement, continue working in a nonsupervisory position 24 for a set number of additional years, and have a portion of the 25 retirement allowance they otherwise would have received if they 26 had retired instead of participating in the DROP plan deposited 27 in an account that is then distributed to them when they 28 eventually retire. However, the member’s retirement allowance 29 is set at the time the member enters the DROP plan. 30 Prior to participating in the DROP plan, a member shall 31 submit an application to the system indicating when they intend 32 to start participation in the DROP plan and when they intend 33 to terminate their participation in the plan and retire, and 34 verifying that the member is in a nonsupervisory position or 35 -4- LSB 6275YC (3) 90 jm/ns 4/ 6

H.F. _____ has been approved to be employed in a nonsupervisory position 1 upon participation in the DROP plan. The bill permits an 2 eligible member to elect to participate in the DROP plan for 3 three, four, or five years. However, for the two-year period 4 beginning on the implementation date of this Code section, an 5 eligible member between the ages of 62 and 64 can elect to 6 participate in the DROP plan and terminate their participation 7 in one or two years. 8 Upon electing to participate in the DROP plan, the eligible 9 member continues to work but has a portion of the retirement 10 allowance they would have received if they had decided to 11 retire credited to an account. The amount credited is equal 12 to a percentage of the retirement allowance they would have 13 received. The percentage rate is determined by starting with 14 52 percent and adding 2 percent per month, up to a maximum of 15 100 percent, based upon the number of months between the month 16 the member first became eligible to participate in the DROP 17 plan and the month the member actually participates. The bill 18 provides that the amount deposited in the member’s account does 19 not accrue interest or dividends. Upon termination from the 20 DROP plan, the eligible member begins to receive a retirement 21 allowance based upon the amount the member would have received 22 when the member commenced participation in the DROP plan plus 23 the amount in the member’s account. If the member terminates 24 participation in the plan prior to the date set by the member 25 and the termination is not due to the member’s death or 26 disability, PORS shall withhold 25 percent of the amount in the 27 account as a penalty. The bill provides that participation in 28 the DROP plan does not guarantee continued employment. 29 The new Code section also provides that if the PORS actuary 30 determines that the DROP plan has increased the actuarial cost 31 of the system, the contribution rate paid by members shall be 32 increased to cover this increased cost. The new Code section 33 further provides that the DROP plan shall not be implemented 34 until the board of trustees adopts rules providing for the 35 -5- LSB 6275YC (3) 90 jm/ns 5/ 6