1. (a) This section applies to a county that adopts a deferred retirement option plan as part of its retirement plan under this chapter.
2. (b) As used in this section, "DROP" refers to a deferred retirement option plan established under this section.

3. (c) As used in this section, "DROP frozen benefit" refers to a monthly pension benefit calculated under the provisions of a retirement plan established under this chapter based on the employee beneficiary's:

   1. (1) salary; and

   2. (2) years of service;

      on the date the employee beneficiary enters the DROP.

4. (d) As used in this section, "maximum years of service" refers to the maximum number of years of service included in the monthly pension benefit calculation under a department's retirement plan.

5. (e) An employee beneficiary who:

   1. (1) is not yet credited with the maximum number of years of service; and

   2. (2) is eligible to receive an unreduced benefit immediately upon termination of employment;

      may elect to enter a DROP. The employee beneficiary's election is irrevocable.

6. (f) The employee beneficiary exits a DROP on the earliest of the following:

   1. (1) The date that the employee beneficiary is credited with the maximum years of service under the retirement plan.
   2. (2) The employee beneficiary's retirement date.
   3. (3) The date any required benefit begins.

7. (g) The retirement benefit paid to the employee beneficiary who participated in a DROP consists of:

   1. (1) the DROP frozen benefit; plus

   2. (2) an additional amount, paid as the employee beneficiary elects under subsection (h), determined in STEP THREE of the following formula:

      1. (A) the DROP frozen benefit; by

      2. (B) the number of months the employee beneficiary participated in the DROP.

         STEP TWO: Multiply the product determined in STEP ONE by an interest rate that does not exceed three percent (3%) annually.

         STEP THREE: Add the product determined under STEP ONE and the product determined under STEP TWO.

      STEP ONE: Multiply:

8. (h) The employee beneficiary shall elect, at the employee beneficiary's retirement, to receive the additional amount calculated under subsection (g)(2) in one (1) of the following ways:

   1. (1) A lump sum.
   2. (2) An actuarially equivalent increase in the monthly pension benefit payable to the employee beneficiary.
   3. (3) A combination of (1) and (2).
9. (i) The cost of living payment determined under section 23 of this chapter does not apply to the additional amount calculated under subsection (g)(2). No cost of living payment is applied to a DROP frozen benefit while the employee beneficiary is participating in a DROP.

10. (j) If an employee beneficiary becomes disabled:

    1. (1) in the line of duty; or

    2. (2) other than in the line of duty;

       benefits for the employee beneficiary are calculated as if the employee beneficiary had never entered the DROP.

11. (k) Except as provided in subsection (m), if, before the employee beneficiary's monthly pension benefit begins, an employee beneficiary dies, in the line of duty or other than in the line of duty, death benefits are payable as follows:

    1. (1) The benefit under subsection (g)(2) is paid in a lump sum to the employee beneficiary's surviving spouse. If there is no surviving spouse, the lump sum must be divided equally among the employee beneficiary's surviving children. If there are no surviving children, the lump sum is paid to the employee beneficiary's parents. If there are no surviving parents, the lump sum is paid to the employee beneficiary's estate.
    2. (2) A benefit is paid on the DROP frozen benefit under the terms of the county's retirement plan.
12. (l) A DROP under this section must be designed to be actuarially cost neutral to the county's retirement plan.

13. (m) This subsection applies if:

    1. (1) an employee beneficiary dies in the line of duty before payment of the employee beneficiary's monthly pension benefit begins; and

    2. (2) the calculation of a death benefit under the provisions of the county's retirement plan depends upon whether an employee beneficiary dies in the line of duty or other than in the line of duty.

       Death benefits for an employee beneficiary who dies in the line of duty are calculated under the provisions of the county's retirement plan as if the employee beneficiary had never entered the DROP and shall be adjusted as necessary to ensure compliance with subsection (l).

As added by P.L.97-2005, SEC.1. Amended by P.L.51-2006, SEC.4.