Today's Law As Amended


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SB-193 Deferred Retirement Option Program.(2001-2002)



As Amends the Law Today


SECTION 1.

 Chapter 20 (commencing with Section 21720) is added to Part 3 of Division 5 of Title 2 of the Government Code, to read:

CHAPTER  20. Deferred Retirement Option Program
Article  1. General Provisions
21720.
 This chapter shall be known and may be cited as the “Deferred Retirement Option Program.”
21720.1.
 The Deferred Retirement Option Program is hereby created to add flexibility to the system. It provides members who elect to participate in the program access to a lump sum in addition to their normal monthly retirement allowance.
21720.2.
 The design and administration of the Deferred Retirement Option Program shall conform with the applicable provisions of Title 26 of the United States Code and the Revenue and Taxation Code.
21720.3.
 If any provision of this chapter or application thereof to any person or circumstance is held invalid, that invalidity may not affect other provisions or applications of this chapter that can be given effect without the invalid provision or application, and to this end the provisions of this chapter are severable.
21720.4.
 The board shall be prepared to implement the Deferred Retirement Option Program pursuant to the provisions of this chapter no later than January 1, 2003, unless the board determines, by resolution, that the implementation tasks cannot be completed until a later date, in which case the board shall be prepared to implement the program pursuant to this chapter no later than the later of July 1, 2003, or six months after a memorandum of understanding that makes this chapter applicable to the members of a bargaining unit is ratified.
21720.5.
 The board may adopt regulations to implement the program.
21720.6.
 This chapter does not apply to any contracting agency, unless and until the agency elects to be subject to this chapter by amendment to its contract made in the manner prescribed for approval of contracts or, in the case of contracts made after the program has been implemented by the board, by express provision in the contract making the contracting agency subject to this chapter. The effective date of any contract provision making this chapter applicable to a contracting agency may not be earlier than the implementation date established by resolution of the board.
21720.7.
 A local contracting agency may, by amendment to its contract made in the manner prescribed for the approval of contracts, make this chapter inapplicable to employees hired by that contracting agency on or after the effective date of the contract amendment.
Article  2. Definitions
21722.1.
 “Program” means the Deferred Retirement Option Program established by this chapter.
21722.2.
 “Deferred retirement calculation date” means the date prior to the member’s actual retirement date as of which benefits under the program shall be calculated as provided in Article 4 (commencing with Section 21724.1).
21722.3.
 “Deferred retirement period” means the period of time between the deferred retirement calculation date and the member’s actual date of retirement, which period shall not be less than 12 months nor more than 60 months.
21722.4.
 “Program payment” means the amount to be paid to the member as a result of his or her participation in the program, as calculated in Section 21724.1.
21722.5.
 “Current employer,” for purposes of this chapter, means the contracting agency with which the member is employed at the time the member applies for retirement under this system.
21722.6.
 (a) “Eligible service,” for purposes of this chapter, means the member’s local safety service accrued as of the deferred retirement calculation date that was performed for a contracting agency to which this chapter has been made applicable prior to the election date.
(b) “Eligible service,” for purposes of this chapter, also includes additional service credit granted pursuant to Section 20965 for unused sick leave as of the member’s actual retirement date as certified by the member’s current employer.
21722.7.
 “Election date,” for purposes of this chapter, means the date on which the member elects to participate in the program.
21722.8.
 “Actual retirement date,” for purposes of this chapter, means the effective date of the member’s retirement following termination of employment.
Article  3. Eligibility
21723.
 The program is established for local safety members employed by a contracting agency that has elected to become subject to this chapter.
21723.1.
 A member described in Section 21723 shall be eligible to elect to participate in the program if all of the following conditions are satisfied:
(a) The member has met the minimum service requirements for a service retirement.
(b) The member has exceeded the minimum age requirements for service retirement by at least 12 months.
(c) The member’s current employer is subject to this chapter on or before the member’s election date.
(d) The member’s period of eligible service with the member’s current employer, as of the member’s actual retirement date, is not less than 12 months.
21723.2.
 A member who is eligible to participate in the program, pursuant to Section 21723.1, shall voluntarily:
(a) Make this election at the same time the member applies for retirement under this system on a form prescribed and retained by the board.
(b) Designate his or her deferred retirement calculation date, which date shall not be more than 60 months nor less than 12 months prior to the member’s actual retirement date, and may not be prior to the beginning date of the member’s most recent period of local safety service with his or her current employer. If the member has more than one period of local safety service with his or her current employer and there is no intervening period of service with another employer under this part, the member’s deferred retirement calculation date may be the beginning date of the member’s earliest period of local safety service with the current employer that meets this condition, but may not be more than 60 months prior to the member’s actual retirement date.
(c) Receive benefits from the system upon retirement at the time and in the manner provided in this chapter.
21723.3.
 The election to participate in the program shall be irrevocable.
21723.4.
 Members who participate in the Deferred Retirement Option Program may not participate in reduced worktime for partial service retirement pursuant to Article 4 (commencing with Section 21110) of Chapter 12 of this part.
21723.5.
 Members who participate in the program and reinstate from retirement are not eligible to again participate in the program upon subsequent retirement.
Article  4. Calculation of Distribution
21724.1.
 Upon the termination of employment and retirement of an eligible member who has elected to participate in the program, the system shall calculate the following amounts:
(a) If the member retires, either from service or due to industrial disability, the member’s monthly service retirement allowance as it would have been payable for eligible service had the member retired on the deferred retirement calculation date in accordance with the optional settlement selected by the member, except that the service retirement formula or formulas applicable to the member’s eligible service on the actual retirement date shall be used to calculate the amount of the member’s monthly service retirement allowance derived from eligible service; or
(b) If the member retires due to disability, the member’s monthly disability retirement allowance as it would have been payable for eligible service had the member retired on the deferred retirement calculation date, in accordance with the optional settlement selected by the member, except that the service retirement formula or formulas applicable to the member’s eligible service on the actual retirement date shall be used to calculate the amount of the member’s monthly disability retirement allowance derived from eligible service.
If applicable, the projected service to the age of 60 years shall be reduced by the deferred retirement period or, in the case in which the disability retirement allowance is limited to one-third of final compensation, the amount of service that would result in the allowance equaling one-third of final compensation shall be reduced by the deferred retirement period.
(c) The cost-of-living adjustment that would have been applicable under Article 3 (commencing with Section 21310) of Chapter 13 of this part, assuming the deferred retirement calculation date is the base year for the adjustment.
(d) The member’s program payment, which payment shall be the amount calculated under subdivision (a) or (b), multiplied by the number of months in the deferred retirement period, plus the cost-of-living adjustment calculated under subdivision (c). The program payment shall be credited with interest at a rate established by the board that reflects recent actual net earnings over a reasonable period of time.
(e) The amount shall also reflect a refund of the member’s contributions, plus the interest earned as described in subdivision (d) for the deferred retirement period, paid to the Public Employees’ Retirement System by either the member or the employer on behalf of the member.
(f) The amount may also reflect an additional percentage of the member’s compensation during the deferred retirement period. This subdivision does not apply to any contracting agency or to the employees of a contracting agency until the agency elects to be subject to the provisions of this subdivision by contract or by amendment to its contract in the manner prescribed for approval of contracts. The contract or contract amendment shall specify the additional percentage of compensation to be included in the program payment pursuant to this subdivision.
21724.2.
 The retirement allowance for service with an employer not subject to this program shall be based upon the member’s actual retirement date and not the deferred retirement calculation date.
Article  5. Distribution Methods
21725.1.
 Upon the termination of employment and retirement under the system, a member who has elected to participate in the program shall:
(a) Receive the member’s program payment as a single lump-sum payment.
(b) If the member retires from service, begin receiving a monthly retirement allowance in the amount calculated pursuant to subdivision (a) of Section 21724.1, plus a monthly retirement allowance for service, if any, that is not eligible service under this chapter.
(c) If the member retires due to disability, begin receiving a monthly disability retirement allowance in the amount calculated pursuant to subdivision (b) of Section 21724.1, plus a monthly disability retirement allowance for service, if any, that is not eligible service under this chapter.
(d) If the member retires due to industrial disability, begin receiving the greater of either of the following:
(1) A monthly industrial disability retirement allowance of 50 percent of the final compensation applicable to the member on the effective date of the member’s industrial disability, or the increased percentage of final compensation that may be applicable to the member pursuant to Section 21428, plus an annuity purchased with the member’s accumulated additional contributions, if any, and except as limited by Section 21417.
(2) The monthly industrial disability retirement allowance calculated pursuant to subdivision (a) of Section 21724.1, plus a monthly retirement allowance for service, if any, that is not eligible service under this chapter, except as limited by Section 21417.
(e) Have the total of the member’s monthly retirement allowance under subdivision (b), (c), or (d) plus the accumulated cost-of-living adjustment that would have been payable during the deferred retirement period, if any, pursuant to subdivision (c) of Section 21724.1 established as the member’s base allowance.
(f) Have the base year for all future cost-of-living adjustments for all portions of the monthly retirement allowance established based on the member’s actual retirement date.
21725.2.
 Notwithstanding any other provision of this chapter, a participant, nonparticipant spouse, or beneficiary may not be permitted to elect a distribution under this chapter that does not satisfy the requirements of Section 401(a)(9) of Title 26 of the United States Code, including the incidental death benefit requirements of Section 401(a)(9)(G) and the regulations thereunder.
(a) A lump-sum distribution to the participant that reflects the entire program payment of the participant shall be made not later than April 1 of the calendar year following the later of the calendar year in which the participant attains the age of 70 and one-half years or the calendar year in which the participant terminates all employment for the employer.
(b) In the case of a benefit payable on account of the participant’s death, distributions shall be paid no later than December 31 of the calendar year in which the fifth anniversary of the participant’s date of death occurs unless the beneficiary is the participant’s spouse in which case distributions shall be paid on or before the later of either:
(1) December 31 of the calendar year immediately following the calendar year in which the participant dies.
(2) December 31 of the calendar year in which the participant would have attained the age of 70 and one-half years.
Article  6. Applicability To Surviving Spouse
21726.
 (a) Upon the death of a member, the member’s surviving spouse may, in lieu of the member, make the election specified in Section 21723.2, if all of the following conditions are satisfied at the member’s date of death:
(1) This chapter applies to the member.
(2) The member has not made an election to participate in the program.
(3) The member’s death occurred prior to the member’s termination of employment.
(4) The member’s death occurred as a result of injury or disease arising out of, and in the course of, the member’s official duties.
(b) For purposes of this chapter, the member’s date of death shall be deemed the actual retirement date.
(c) A surviving spouse who elects to participate in the deferred retirement option program shall receive the program payment and monthly retirement allowance that the member would have received under this chapter had the member elected to participate in the program, retired for service, and elected Optional Settlement 2 and Section 21459. A surviving spouse who makes the election authorized by this section shall forfeit his or her eligibility for any other benefits or monthly allowances that would otherwise by payable under this part to the surviving spouse.

SEC. 2.

 Article 11.5 (commencing with Section 31770) is added to Chapter 3 of Part 3 of Division 4 of Title 3 of the Government Code, to read:

Article  11.5. Deferred Retirement Option Program
31770.
 This article shall be known and may be cited as the “Deferred Retirement Option Program.”
31770.1.
 (a) The Deferred Retirement Option Program is hereby created. It provides eligible members who elect to participate in the program access to a lump sum, or in some cases, additional monthly payments for a specified period in addition to a monthly retirement allowance.
(b) The design and administration of the Deferred Retirement Option Program shall conform to the applicable provisions of Title 26 of the United States Code and the Revenue and Taxation Code.
(c) If any provision of this article or application thereof to any person or circumstance is held invalid, that invalidity shall not affect other provisions or applications of this article that can be given effect without the invalid provisions or application, and to this end the provisions of this article are severable.
31770.2.
 Unless the context otherwise requires, the definitions contained in this section govern the construction of this article:
(a) “DROP” or “program” means the Deferred Retirement Option Program established by this article, as adopted by a county or district.
(b) “Election date” means the date the member elects to participate in the program.
(c) “Deferred retirement calculation date” means the date prior to the member’s actual retirement date, as of which benefits under the program shall be calculated as provided in Section 31778.1.
(d) “Implementing ordinance” means the ordinance or resolution adopted by the county board of supervisors or governing board of the district, pursuant to Section 31770.3, providing for the implementation of the program in the county or district and specifying the applicable program options as provided in this article.
(e) “Participant” means an eligible member of the system who has validly elected to participate in the program.
(f) “Program account” means the nominal account established by the system for each participant of the program pursuant to Section 31772.
(g) “Program period” means the period of time commencing on the election date and ending on the member’s retirement date, which period may not exceed 60 months of elapsed time.
(h) “Retirement date” means the date the member terminates employment and retires from the system.
31770.3.
 (a) This article, or selected provisions of this article, shall become effective in any county or district only when the county board of supervisors or governing board of the district adopts an ordinance or resolution providing for that implementation. The board of supervisors or governing board may not adopt that ordinance or resolution, and this article, or selected portions of this article may not become effective in the county or district unless and until the actuarial analysis described in Section 31770.4 has been completed and has determined that the program, as proposed to be adopted by the county or district, will be cost neutral and agreed to in a collective bargaining agreement.
(b) In the implementing ordinance, the county or district shall, based on actuarial analysis, the requirement of cost neutrality, and the collective bargaining agreement, elect one of the following:
(1) To be subject to the provisions of this article, including the actuarial equivalent DROP provisions outlined in Section 31777, the forward DROP provisions contained in Sections 31771 to 31776.5, inclusive, and the backward DROP provisions contained in Sections 31778 to 31778.2, inclusive.
(2) To be subject to the provisions of this article, including the forward DROP provisions contained in Section 31771 to 31776.5, inclusive, but excluding the actuarial equivalent DROP provisions contained in Section 31777 and excluding the backward DROP provisions contained in Sections 31778 to 31778.2, inclusive.
(3) To be subject to the provisions of this article, including the actuarial equivalent DROP provisions contained in Section 31777, but excluding the forward DROP provisions contained in Section 31771 to 31776.5, inclusive, and excluding the backward DROP provisions contained in Sections 31778 to 31778.2, inclusive.
(4) To be subject to the provisions of this article, including the backward DROP options contained in Sections 31778 to 31778.2, inclusive, but excluding the forward DROP provisions contained in Sections 31771 to 31776.5, inclusive, and excluding the actuarial equivalent DROP provisions contained in Section 31777.
(c) Except as provided in subdivision (d), the program shall become operative with respect to all law enforcement members of the system on the date specified in the implementing ordinance.
(d) The program shall only be operative as limited by paragraph (4) of subdivision (b) with respect to all members of the system defined in Section 31470 on the date specified in the implementing ordinance.
(e) The implementing ordinance shall specify a period of time, which shall be at least 4 years and not more than 10 years, after which an initial review of the program shall be conducted pursuant to Section 31779.
31770.4.
 (a) The board shall, upon the request of, and before adoption of the implementing ordinance by, the county board of supervisors or governing board of the district, cause an actuarial analysis to be conducted to determine whether the program, as proposed to be adopted, will be cost neutral. A proposed program shall be deemed to be cost neutral if, based on the applicable actuarial assumptions, it will not have a significant negative impact on the members, employer, or the retirement system, as specified in subdivision (b).
(b) The actuarial analysis shall take into account the impact of the proposed program on specific measures including, but not limited to, employer contributions, the system’s actuarial accrued liability, and the present value of benefits. A proposed program will not be deemed to be cost neutral if the anticipated increase to the program in any of these measures is greater than 3 percent or there is a decrease to the program in the present value of benefits of more than 3 percent.
(c) The actuarial analysis shall identify all cost elements expected to change due to the implementation of the program and shall include the impact of those changes. These may include, but are not limited to, cost elements such as benefit payments, expected retirement age, and the likelihood of termination or disability by those near retirement age. The analysis may not take into account items unrelated to the proposed programs, including the investment return on fund assets or the life expectancy of currently retired members.
(d) As used in this section:
(1) “Actuarial accrued liability” means the portion of the present value of benefits attributable to service before the valuation date.
(2) “Present value of benefits” means the value, as of the valuation date, of all benefits expected to be paid to current members of the system.
31770.5.
 (a) The implementing ordinance shall establish the eligibility requirements for participation in the program, subject to this section and the collective bargaining agreement. The ordinance shall specify the minimum age and the minimum and maximum, if any, years of service credit required to be eligible to participate in the program, which minimum and maximum, if any, may not be less than the minimum age and service credit requirements for service retirement. The ordinance may not establish eligibility based on a member’s collective bargaining group or tier.
(b) Members shall be eligible to elect to participate in the program at any time after the attainment of the minimum age and years of credited service in the system specified in the implementing ordinance. Members who satisfy the eligibility requirements on the operative date of the program, as set forth in the implementing ordinance, shall be eligible to elect to participate in the program as of the operative date of the program.
(c) Prior service purchased pursuant to this chapter and service performed by the member under another public retirement system shall be included for purposes of determining eligibility for the program to the extent provided in Section 31836.
(d) Members who have left county or district service and who have elected deferred retirement pursuant to Article 9 (commencing with Section 31700) will not be eligible to participate in the DROP provisions until and unless they return to county service during the operative period of the program.
31770.6.
 (a) Upon adoption of the implementing ordinance, the retirement system shall establish procedures for notifying members of their rights under the program.
(b) Each member, before electing to participate in the program, shall be given information regarding how benefits under the program would be calculated and a comparison of the member’s anticipated benefits at retirement with and without participation in the program. All members will be advised to seek advice from professional tax and investment advisors before electing to participate in the program.
31770.7.
 The right of a participant to benefits under the program is not subject to execution or any other process whatsoever, except to the extent permitted by Section 704.110 of the Code of Civil Procedure, and is unassignable except as specifically provided under this chapter.
31770.8.
 The rights of a participant or his or her spouse under the program shall be subject to any applicable provisions of law or court orders relating to dissolution of marriage, division of community property, and child or spousal support.
31771.
 The provisions of this section through those of Section 31776.5, inclusive, shall be referred to collectively as the “forward DROP provisions.”
31771.1.
 (a) Any member who elects to participate in the forward DROP provisions of the program shall make the election on a form prescribed and retained by the board. On that form the member shall do all of the following:
(1) Designate a program period that will not exceed 60 months of elapsed time, agree to terminate covered employment under the system no later than the end of that designated period, and acknowledge that participation in the program is not a guarantee of continued employment for any period.
(2) Waive any claims with respect to age and other discrimination in employment laws relative to the program as are required by the employer or the system.
(3) Waive the right to disability retirement benefits based on a condition relating to an event that occurred prior to the program period. This waiver does not apply to any rights the member may have under Section 31720.5, 31720.6, or 31720.7, which rights shall remain in effect until the member receives a distribution of some or all of the balance in his or her program account.
(b) If the member is married, the member’s spouse shall execute a statement, on a form prescribed by the board, acknowledging the spouse’s understanding of and agreement with the member’s election to participate in the program, with an express statement of the spouse’s understanding and agreement that benefits payable to the spouse upon the death of the member will be reduced as a result of that participation.
31771.2.
 (a) From and after the election date, the participant shall cease to accrue retirement benefits under this chapter, and instead shall begin to accrue benefits under the program pursuant to the terms of this article, which benefits shall be credited to the participant’s program account pursuant to Section 31772.
(b) A member’s election to participate in the program shall be irrevocable except in the following circumstances:
(1) If the member is married on the election date and if that spouse dies during the program period, the member may, within 90 days after the spouse’s death, elect to revoke his or her election to participate in the program. In that case, the member’s benefits shall be calculated on retirement as if the member had never entered the program.
(2) If the member elects to retire for disability under the circumstances described in Section 31774, the member’s participation in the program shall cease and the member may apply for conversion of the deferred retirement allowance to a disability allowance calculated at date of entry into the program, and the employee shall retain all proceeds in the program account.
(c) (1) A participant in the program shall have all of the rights, privileges, and benefits, and is subject to all terms and conditions, or active employment including, but not limited to, eligibility for other benefit programs not related to retirement benefits, seniority, accrual and use of vacation and sick leave, and pay increases.
(2) A participant shall continue to make normal member contributions under this chapter during the program period.
(d) Except as otherwise provided in Section 31773, eligibility of a spouse for any benefits, including survivor’s benefits shall be based on the participant’s marital status and the duration of the marriage as of the retirement date.
31771.3.
 The implementing ordinance shall specify, based on the results of the actuarial analysis and the requirement that the program be cost neutral, whether the employer shall be required to continue to make contributions to the system with respect to the compensation of participants in the program and whether than compensation shall be included in the determination of employer contribution rates.
31772.
 (a) A program account shall be established as a nominal, bookkeeping account within the system for each participant. No system assets shall be separately segregated for any program account. A participant may not have a claim on any specific assets of the system.
(b) A participant’s program account shall be credited with an amount equal to the service retirement allowance and the annual cost of living, the member would have received if the member had retired for service on the election date and had selected an unmodified allowance, subject to the following:
(1) Sick leave and vacation time accrued by the member as of the election date shall not be included in the calculation of service credit or final compensation for the retirement time where the member enters the program except as otherwise provided in a collective bargaining agreement.
(2) The provisions of Article 15 (commencing with Section 31830) may not be applicable in the calculation of the participant’s final compensation.
(c) Subject to the results of the actuarial analysis and the requirement that the program be cost neutral, the implementing ordinance may provide that some or all of the following amounts shall also be credited monthly to the participant’s program account:
(1) All of the normal contributions under this chapter made by the participant during the program period.
(2) Some or all of the employer contributions to the system made on account of the participant during the program period.
(3) Interest shall be credited biannually at a rate that is equal to (A) the interest rate, if any, applicable to employee contributions to the system, or (B) a fixed rate specified in the implementing ordinance, or (C) a rate determined biannually by the retirement board.
31772.1.
 The board shall provide a statement to the participant that displays the value, or balance, of the participant’s program account and summarizes any credits to the account or other transactions that occurred after the immediately preceding valuation date. The statement of account shall be provided at least once annually to each participant, and may be provided more often.
31773.
 (a) If a participant dies during the program period, he or she shall be deemed to have died while eligible for retirement and shall be calculated as if in active service except as provided in subdivisions (b) and (c).
(b) Benefits under Article 12 (commencing with Section 31780) or, if applicable, Section 31765, 31765.1, or 31765.11 shall be calculated as if the participant had died on the election date. Notwithstanding the foregoing, eligibility of a spouse for any benefits shall be based on the participant’s marital status and the duration of the marriage as of the actual date of death.
(c) The balance in the participant’s program account shall be distributed pursuant to Section 31776.4.
31774.
 If a participant becomes eligible for disability retirement due to an event occurring during the program period or pursuant to Section 31720.5, 31720.6, or 31720.7, the participant shall elect to either:
(a) Retire for disability, in which case the participant may apply for conversion of the deferred retirement allowance to a disability allowance calculated at the election date and the employee shall retain all of the proceeds in the program account.
(b) Retire for service, in which case the participant shall waive any rights he or she may have to disability retirement benefits except as provided in Section 31720.5, 31720.6, or 31720.7, and shall be entitled to a distribution of the balance in his or her program account and a month retirement allowance as provided in Section 31776.1.
31775.
 Participation in the program shall be terminated, and the member shall have no right or claim to any continuing benefits under the program upon the first occurrence of any of the following events:
(a) Revocation of participation as provided in subdivision (b) of Section 31771.2.
(b) Involuntary termination of employment. In the event a termination for cause is reversed, a member’s participation in the program shall be reinstated and if made whole for the duration of the original program period as designated by the member upon entry into the program.
(c) Commencement of disability retirement benefits by the board as provided in subdivision (a) of Section 31774.
31776.
 Participation in the program shall be completed and the participant shall be entitled to benefits under the program upon the first occurrence of either of the following during the program period:
(a) Retirement of the participant for service.
(b) Death of the participant.
31776.1.
 Upon termination of employment and retirement for service under the system, a participant shall:
(a) Receive a distribution, in the manner prescribed in Section 31776.3, of the balance in the participant’s program account.
(b) Begin receiving a monthly retirement allowance in an amount calculated pursuant to Section 31776.2.
(c) Waive the right to any disability retirement benefits from the system, except for post-retirement disability rights. This waiver shall include, but not be limited to, any rights the member may have under Sections 31720.5, 31720.6, and 31720.7.
31776.2.
 The participant’s monthly allowance shall be an amount equal to the monthly allowance the participant would have received if he or she had retired for service on the election date, subject to the following:
(a) Any unused sick leave or vacation that accrued as of the election date and was not used by the participant during the program period may be included in the calculation of the participant’s allowance in accordance with a collective bargaining agreement, subject to other retirement rules for members not participating in the program.
(b) The participant’s allowance shall be adjusted according to any cost-of-living adjustments that the participant would have received during the program period as if the participant had retired on the election date.
(c) The participant’s allowance shall be adjusted based on any election by the participant of any optional retirement allowance pursuant to Article 11 (commencing with Section 31760). The adjustment shall be based on the ages of the participant and, if applicable, the participant’s spouse or beneficiary as of the retirement date.
(d) The provisions of Article 15 (commencing with Section 31830) shall be applicable for purposes of calculating the participant’s allowance. The participant shall be deemed to have retired on the retirement date for purposes of determining whether the member retired concurrently under both systems as required under this article.
31776.3.
 (a) Unless the implementing ordinance otherwise provides, the balance in the participant’s program account shall be distributed to the participant in a single lump-sum payment at the time of retirement. If requested by the participant, the payment may be immediately deposited into a qualified tax-deferred account established by the participant.
(b) The implementing ordinance may provide one or more of the following optional forms of distribution for a participant’s account:
(1) Substantially level installment payments for a period of years equivalent to the life expectancy of the participant at retirement date. The balance in the participant’s account during the installment payout period shall be credited with interest monthly at the same rate, if any, as is being credited to program accounts for currently active members. No cost-of-living adjustment shall be made to the monthly amount being paid pursuant to this paragraph.
(2) An annuity in a form established by the board and subject to the applicable provisions of the Internal Revenue Code that shall be the actuarial equivalent of the balance in the participant’s program account on the retirement date. The “actuarial equivalent” under this paragraph shall be determined on the same basis as is used for determining optional settlements at retirement for a member’s monthly retirement allowance.
(c) Notwithstanding any other provision of this article, a participant, nonparticipant spouse, or beneficiary shall not be permitted to elect a distribution under this article that does not satisfy the requirements of Section 401(a)(9) of Title 26 of the United State Code, including then incidental death benefit requirements of Section 401(a)(9)(G) and the regulations thereunder. The required beginning date of distributions that reflect the entire interest of the participant shall be as follows:
(1) In the case of a lump-sum distribution to the participant, the lump-sum payment shall be made, at the participant’s option, not later than April 1 of the calendar year following the later of the calendar year in which the participant attains the age of 70 and a half years (or age determined by the Internal Revenue Service) or the calendar year in which the participant terminates all employment for the employer.
(2) In the case of a distribution to the participant in the form of installment payments or an annuity, payment shall begin, at the participant’s option, not later than April 1 of the calendar year following the later of the calendar year in which the participant attains age 70 and a half years (or age determined by the Internal Revenue Service) or the calendar year in which the participant terminates all employment subject to coverage by the plan.
(3) In the case of a benefit payable on account of the participant’s death, distribution shall be paid at the option of the beneficiary, no later than December 31 of the calendar year in which the first anniversary of the participant’s date of death occurs unless the beneficiary is the participant’s spouse in which case distributions must commence on or before the later of either:
(A) December 31 of the calendar year immediately following the calendar year in which the participant dies.
(B) December 31 of the calendar year in which the participant would have attained the age of 70 and one-half years (or age determined by the Internal Revenue Service).
31776.4.
 (a) A participant may designate a person or persons as beneficiaries of the balance in the participant’s program account at any time during the program period. The beneficiary or beneficiaries shall be designated on a form prescribed by the board, signed by the participant, and filed with the board.
(b) The participant’s beneficiary designation shall not be given effect and shall be overridden to the extent that designation would impair the rights of any surviving spouse or surviving minors under applicable federal or state law.
(c) Unless otherwise provided in the beneficiary designation form, each designated beneficiary shall be entitled to equal shares of the lump-sum distribution that shall be payable from the participant’s program account upon the death of the participant.
(d) The nomination of a beneficiary or beneficiaries under this section may be revoked at the pleasure of the person who made it and a different beneficiary or beneficiaries may be nominated by a written designation duly executed and filed with the board.
(e) If the participant dies without a valid beneficiary designation on file, or if no designated beneficiary survives the participant, any balance remaining in the participant’s account shall be payable to the participant’s estate.
31776.5.
 The final compensation calculated under Sections 31460 to 31462.1, inclusive, shall be the member’s final compensation for purposes of calculating any reciprocal benefits due the member from another retirement system pursuant to Article 15 (commencing with Section 31830).
31777.
 (a) The provisions of this section shall be referred to as the “actuarial equivalent DROP provisions.”
(b) A member who retires for service on or after the operative date of the program may elect, on a form prescribed by the board, to receive a lump-sum payment and an actuarially reduced monthly allowance pursuant to this section in lieu of the monthly allowance that would otherwise be payable to the member pursuant to this chapter.
(c) A member who has elected to participate in the forward DROP provisions of the program, pursuant to Section 31771.1, or the backward DROP provisions of the program, pursuant to Sections 31778 to 31778.2, inclusive, shall not be eligible to make the election provided under this section.
(d) (1) A member who makes the election described in this section shall receive a one-time lump-sum payment at the time of retirement in an amount, chosen by the member, that shall not exceed the maximum amount specified in the implementing ordinance as provided in subdivision (e).
(2) The payment shall be calculated using the actuarial equivalence factor adopted by the retirement board in the most recent actuarial valuation. That calculation shall include the value of the monthly retirement allowance that would otherwise be payable for the life of the member and any automatic cost-of-living increases that would accrue during that period. The calculation shall not include the value of other benefits such as death benefits or survivor continuances.
(e) The implementing ordinance shall prescribe one of the following amounts as the maximum amount of the lump-sum payment under this section:
(1) The aggregate amount of the member’s contributions to the system, plus interest if applicable.
(2) The actuarial present value of 20 percent of the monthly allowance otherwise payable to the member under this chapter.
(3) An amount that would cause the member’s monthly allowance under this chapter to be actuarially reduced to an amount equal to 50 percent of the member’s final compensation.
(f) Notwithstanding any other provision of this chapter, a member who makes the election described in this section shall receive a monthly allowance pursuant to this chapter that shall be actuarially reduced to reflect the lump-sum amount paid under subdivision (d).
31778.
 This section and Section 31778.1 shall be referred to collectively as the “backward DROP provisions.” A member who retires on or after the effective date of the program may elect upon application for service or disability retirement, on a form prescribed by the board, to receive:
(a) A backward DROP payment calculated under Section 3l778.1.
(b) A monthly retirement allowance calculated as if the member had retired on the deferred retirement calculation date, except that the retirement formula applicable to the member’s service as of the election date shall be used to calculate the amount of the member’s monthly retirement allowance.
31778.1.
 A member who makes the election described in Section 31778 shall receive a one-time lump-sum payment upon retirement in an amount as calculated below.
(a) A participant’s program account shall be credited with an amount equal to the retirement allowance the member would have received if the member had retired on the deferred retirement calculation date and had selected an unmodified allowance.
(b) The cost-of-living adjustment that would have been applicable during that period shall be included, assuming the deferred retirement calculation date is the base year for the adjustment.
(c) All of the normal contributions that the member made under this chapter, plus interest applicable during the period from the deferred retirement calculation date to the election date.
(d) Some or all of the employer contributions made on account of the participant under this chapter, as agreed to in a collective bargaining agreement, plus interest applicable for the period from the deferred retirement calculation date to the election date.
(e) The member’s program payment shall be the amount calculated under subdivision (a) multiplied by the number of months in the deferred retirement period, plus the cost-of-living adjustment calculated under subdivision (b), the member contributions calculated under subdivision (c), and the employer contributions calculated under subdivision (d). The amount shall also include interest at a rate agreed upon in the collective bargaining agreement and adopted by the board of retirement, applicable to the amounts derived from subdivisions (a) and (b), for the period from the deferred retirement calculation date to the election date. The program payment shall also be credited with interest at a rate established by the board for the period from the election date until the payment is made.
31778.2.
 (a) A participant may designate a person or persons as beneficiaries of the participant’s program account at any time during the period from the deferred retirement calculation date to the election date. The beneficiary or beneficiaries shall be designated on a form prescribed by the board, signed by the participant, and filed with the board.
(b) The participant’s beneficiary designation may not be given effect, and shall be overridden, to the extent that designation would impair the rights of any surviving spouse or surviving minors under applicable federal or state law.
(c) Unless otherwise provided in the beneficiary designation form, each designated beneficiary shall be entitled to equal shares of the lump-sum distribution that shall be payable from the participant’s program account upon the death of the participant.
(d) The nomination of a beneficiary or beneficiaries under this section may be revoked at the pleasure of the person who made it, and a different beneficiary or beneficiaries may be nominated by a written designation duly executed and filed with the board.
(e) If the participant dies without a valid beneficiary designation on file, or if no designated beneficiary survives the participant, the participant’s account shall be payable to the participant’s estate.
31778.3.
 Upon termination of employment and retirement from the system, a member who has elected to participate in the program shall receive the member’s program payment, as calculated pursuant to subdivision (e) of Section 31778.1 and in accordance with the distribution provisions of Sections 31776.3, 31776.4, and 31776.5.
31779.
 (a) After the program has been in effect for a period of at least four years and not more than 10 years, as specified in the implementing ordinance, or up to one year prior to the end of that specified period, the board shall cause an actuarial analysis of the cost impact of the program to be prepared and presented to the board of supervisors or governing body of the district for its review and consideration.
(b) If the actuarial analysis discloses that the program has not been cost neutral, the board of supervisors or governing board shall, by ordinance or resolution, either:
(1) Discontinue the program, subject to Section 31779.1.
(2) Modify the program in a manner consistent with the actuarial analysis and the provisions of this article so that the program will be cost neutral.
31779.1.
 The rights of a participant who has retired under the program, whose deferred retirement calculation date, or whose program period is in effect at the time the program is discontinued may not be affected by the discontinuance of the program and that participant shall remain subject to the provisions of the program as it existed on the participant’s election date.
31779.2.
 If the program is modified pursuant to paragraph (2) of subdivision (b) of Section 31779, participants who entered, or who were eligible for, the program prior to the effective date of the modification shall be entitled to elect whether to become subject to the modified provisions of the program or to remain subject to the program as it existed on the participant’s deferred retirement calculation date or election date, whichever occurred first.
31779.3.
 As long as the program remains in effect, either as originally adopted or as modified pursuant to paragraph (2) of subdivision (b) of Section 31779, the board of retirement shall cause an actuarial analysis of the cost impact of the program be prepared as provided in Section 31779 at the end of each successive period specified in the implementing ordinance or subsequently adopted ordinance or resolution, and the board of supervisors or governing body may take the actions described in Section 31779 as appropriate based on the outcome of that analysis.