ATRS RULE 10
RETURN TO SERVICE AND TEACHER DEFERRED RETIREMENT OPTION
PLAN
Arkansas Code §§
24-7-502,
24-7-708,
and
24-7-1301
et seq.
I.
Definitions
a. "Fiscal year" means the operating year for
the State of Arkansas that begins on July 1 of each calendar year and ends on
June 30 of the next calendar year;
b. "Plan participant" means a member who
elects to participate in the Teacher Deferred Retirement Option Plan (T-DROP)
under Arkansas Code §
24-7-1301
et seq.;
c. "Plan deposit" means a
deposit made to each plan participant's T-DROP account pursuant to Arkansas
Code §
24-7-1306;
d. "Plan interest" means one (1) or more
interest rates per annum that are adopted by the Board of Trustees of the
Arkansas Teacher Retirement System (Board) by the end of the first quarter of
the fiscal year in which the interest rate shall apply in order for the
appropriate interest to be credited to each plan participant's T-DROP account
in subsequent years following the Board's adoption of the interest
rate;
e. "Post 10-year T-DROP
interest" means a rate per annum that is compounded annually and adopted by the
Board by the end of the first quarter of the fiscal year in which the interest
rate shall apply in order for the interest to be credited on June 30 to the
T-DROP account of a plan participant who has not retired and whose
participation in T-DROP has ended;
f. "Quarter" means one-fourth (1/4) of a
fiscal year as follows:
1. 1st Quarter: July 1
through September 30;
2. 2nd
Quarter: October 1 through December 31;
3. 3rd Quarter January 1 through March 31;
and
4. 4th Quarter: April 1 through
June 30;
g. "Retiree"
means a member receiving a retirement annuity from the Arkansas Teacher
Retirement System (ATRS);
h.
"Salary" means the same as defined in Arkansas Code §
24-7-202
and does not include nonmandatory compensation that is taxable by the
IRS;
i. "T-DROP Cash Balance
Account" means a financial account established for a plan participant who
elects to defer distribution of his or her T-DROP account balance at the time
that he or she is eligible to receive a lump-sum distribution of the T-DROP
account balance;
j. "T-DROP Cash
Balance Account interest" means the interest rate per annum applicable to a
plan participant's T-DROP Cash Balance Account and compounded monthly into a
plan participant's T-DROP Cash Balance Account; and
k. "Uniformed Services of the United States"
means
service in the:
1. United States Armed
Forces;
2. Army National
Guard;
3. Air National Guard when
engaged in active duty for training, state active duty, inactive duty training,
or full-time National Guard duty;
4. United States Commissioned Corps of the
Public Health Service; and
5. Any
other category of persons designated by the President of the United States in
time of war or emergency.
II.
Return to
Service1
a.
Unless otherwise provided by the Office of Personnel Management's Policy No.
65, effective July 1, 2009, a
retiree who terminates employment under Arkansas
Code §
24-7-502
or reaches the normal retirement age may:
1.
Accept employment with a covered employer; and
2. Continue to receive a monthly retirement
annuity without a limitation of his or her retirement annuity.
b. A retiree who returns to
service with a covered employer and a covered employer who employs a retiree
shall report the retiree's employment to ATRS using forms and reports required
by ATRS.
c. A
retiree who receives
monthly retirement benefits and is employed by a covered employer shall not:
1. Pay member contributions;
2. Be responsible for employer contributions;
or
3. Accrue additional service
credit.
d. A covered
employer that employs a retiree shall pay employer contributions on the salary
paid to the retiree in an amount equal to the employer contribution rate
applicable to an active member.
III.
Teacher Deferred Retirement Option
Plan (T-DROP)
a. Participation -
Generally
1. In lieu of terminating
employment and voluntarily retiring, an active member with at least thirty (30)
years of service credit may elect to participate in T-DROP and continue to work
for a covered employer.
2. An
active member with at least twenty-eight (28) years of service credit may elect
to participate early in T-DROP and continue to work for a covered
employer.
3. The service credit of
a plan participant shall be determined using the same rules that apply for
determining the service credit of an active member.
4. On call availability shall not be used
for:
A. T-DROP service credit requirements;
or
B. Monthly plan deposits to a
plan participant's T-DROP account.
5. An active member who elects to participate
in T-DROP and continues his or her covered employment defers the receipt of
retirement benefits.
b.
Participation - Reciprocal Systems
1. Service
credit in ATRS, a reciprocal system, or a combination of service credit in ATRS
and the reciprocal system may be counted to meet the minimum service credit
requirements for participation under T-DROP and the reciprocal system's
deferred retirement option plan if the reciprocal system offers members of the
reciprocal system a deferred retirement option plan.
2. A retirement benefit payable by a
reciprocal system shall be determined according to the law, rules, and
regulations applicable to the reciprocal system.
3. The final average salary of a plan
participant with reciprocal service credit shall be the highest final average
salary calculated by ATRS or a reciprocal system in which the plan participant
has at least two (2) years of service credit. (Arkansas Code §
24-2-402)
4. Each reciprocal system shall
calculate final average salary in accordance with the law applicable to the
reciprocal system.
5. A salary
earned as a member of the Arkansas Judicial Retirement System or an alternate
retirement plan shall not be used to calculate final average salary.
6. A reciprocal system shall credit a
deferred retirement option plan account with plan deposits and plan interest
according to the deferred retirement option program applicable to the
reciprocal system.
c.
Limits on Participation
1. ATRS shall not pay
a monthly plan deposit into a plan participant's T-DROP account for more than
ten (10) consecutive years from the date on which the plan participant enters
T-DROP.
d. D. T-DROP
Benefits
1. A plan participant shall elect an
annuity option provided in Arkansas Code §
24-7-706 at the
time the plan participant:
A. Separates from
service; and
B. Either:
i. Applies for retirement upon reaching the
normal retirement age; or
ii. Is
granted a monthly retirement benefit.
2. A plan participant's T-DROP plan deposit
may be reduced as provided by the ATRS Rules and Arkansas Code §
24-7-1301
et seq.
3. A plan participant's
T-DROP benefit shall:
A. Be the monthly
straight life annuity benefit that the plan participant would have received if
he or she voluntarily retired; and
B. Not include a monthly benefit stipend
otherwise provided under Arkansas Code §
24-7-713.
e. Plan
Interest and
Plan Deposits
1. Generally
A. During participation in T-DROP, ATRS shall
credit the T-DROP account of plan participant with plan deposits and plan
interest.
2. Plan
Deposits
A. Determination of Plan Deposit
i. A plan participant's plan deposit shall be
determined as follows:
a. If a plan
participant has at least thirty (30) years of credited service in ATRS,
including combined service with a reciprocal system, the plan deposit shall be
the plan participant's T-DROP benefit, as calculated at the plan participant's
entry into T-DROP, reduced by one percent (1%) for each year of credited
service, including fractions of a year.
ii. If a plan participant enters T-DROP
early, the plan participant's plan deposit shall be the plan participant's
T-DROP benefit, as calculated at the plan participant's entry into T-DROP,
reduced by:
a. One percent (1%) for each year
of credited service, including fractions of a year; and
b. At least an additional one-half percent
(.5%), but no more than one percent (1%), of the initially reduced plan
deposit, for each month of credited service under thirty (30) years.
B. Crediting Plan
Deposit
i. A plan participant's T-DROP account
shall be credited with twelve (12) monthly plan deposits per fiscal year if
the:
a. Plan participant earns at least one
hundred sixty (160) days of service credit in a fiscal year and does not
terminate employment, retire, or die during the fiscal year; or
b. Plan participant's covered employer does
not terminate the employer-employee relationship.
ii. If a plan participant earns less than one
hundred sixty (160) days of
service credit in a fiscal year, the plan deposit
shall be made in accordance with the part-time employment schedule as follows:
a. If a plan participant earns at least
fifteen (15) days of service credit in the first or fourth quarter of the
fiscal year, the plan participant's T-DROP account shall be credited with three
(3) monthly plan deposits for the quarter.
b. If a plan participant earns less than
fifteen (15) days of service credit in the first or fourth quarter of the
fiscal year, the plan participant's T-DROP shall not be credited with a plan
deposit for the three (3) months of that quarter.
c. If a plan participant earns at least
twenty-five (25) days of service credit in the second or third quarter of the
fiscal year, the plan participant's T-DROP account shall be credited with three
(3) monthly plan deposits for the quarter.
d. If a plan participant earns less than
twenty-five (25) days of service credit in the second or third quarter of the
fiscal year, the plan participant's T-DROP shall not be credited with a plan
deposit for the three (3) months of that quarter.
C. Cost-of-Living Increase
i. A cost-of-living increase under Arkansas
Code §§
24-7-713
or 247-727 shall be applied to the T-DROP benefit that is used to calculate the
plan deposit.
ii. A T-DROP benefit
and the cost-of-living increase may be modified as provided by this ATRS Rule
10 and law applicable to ATRS.
D. Election to Cash-Out or Annuitize
i. Upon electing to retire, if a plan
participant elects to cash out or annuitize his or her T-DROP account balance,
the plan participant shall not be permitted to reenroll in T-DROP after his or
her T-DROP account is distributed unless the plan participant cancels his or
her election under Arkansas Code §
§
24-7-1302.
E. Annual Statement
i. ATRS shall provide each plan participant
with an annual statement of the plan participant's T-DROP account.
ii. The statement of plan deposits and plan
interest shall not be final until the annual accounting has been reconciled for
part-time plan participants.
3. Interest Rates
A. Plan
Interest
i. A plan participant who has not retired
shall receive plan interest at the end of each fiscal year.
ii. The plan
interest rate shall be based on
a:
a. Fixed interest rate that is adopted by
the Board by the end of the first quarter of the fiscal year in which the
interest rate shall apply; or
b.
Variable interest rate formula that is based on investment returns and other
factors adopted by the Board by the end of the first quarter of the fiscal year
in which the interest rate shall apply.
iii. The Board shall adopt a plan interest
rate by the end of the first quarter of the fiscal year in which the plan
interest shall apply if a variable interest rate formula is used.
B. Post-10-Year T-DROP
Interest
i. If a plan participant continues covered
employment after ten (10) consecutive years from the date of his or her entry
into T-DROP, the plan participant's T-DROP account shall be credited with a
post-ten-year T-DROP interest rate.
ii. The Board shall set the post-10-year
T-DROP
interest rate:
a. By the end of the
first quarter of the fiscal year in which the interest rate shall apply;
and
b. At the same meeting in which
the plan interest rate is set.
iii. The post-10-year T-DROP interest rate
shall be credited to a plan participant's T-DROP account on June 30 of each
year, or through the date of retirement, whichever occurs first.
iv. The post-10-year T-DROP interest rate for
T-DROP shall be determined by the Board and adopted by the by the end of the
first quarter of the fiscal year in which the interest rate shall
apply.
C. Incentive Rate
i. In addition to the interest rate for the
fiscal year, the Board may adopt an incentive rate during the fiscal year if
investment returns justify an incentive rate for the fiscal year.
4. Suspension or
Cessation of Plan Deposits and Benefit Distributions
A. Monthly plan deposits to a plan
participant's T-DROP account shall stop if the plan participant:
i. Separates from service and is granted a
monthly retirement benefit from ATRS or a reciprocal plan;
ii. Reaches normal retirement age and retires
without separating from covered employment;
iii. Separates from covered employment and
does not apply for retirement benefits; or
iv. Dies.
B. Separation from Covered Employment without
Applying for Retirement Benefits
i. If a plan
participant separates from covered employment and does not apply for retirement
benefits, monthly plan deposits into the plan participant's T-DROP account
shall be suspended beginning on the month in which the plan participant
separates from covered employment.
ii. The plan participant's T-DROP account
shall not be credited with a plan deposit for the duration of the plan
participant's separation from covered employment.
iii. Monthly plan deposits into a plan
participant's T-DROP account shall resume if the plan participant returns to
covered employment before the end of the plan period.
iv. If a plan participant applies for
retirement, the retirement benefits shall be paid according to the plan
participant's T-DROP account balance:
a. At
the time of the plan participant's separation from covered employment;
or
b. In the month before the
effective date of the plan participant's retirement benefits after the plan
participant reaches the normal retirement age.
v. A plan participant shall remain eligible
for annual plan
interest to be credited to his or her T-DROP account if the
member:
a. Does not separate from covered
employment; and
b. Remains on the
covered employer's payroll without earning sufficient service credit for
monthly plan deposits.
C. Plan Participant's in Uniformed Services
of United States
i. A plan participant shall
be treated as not having incurred a break in service with a covered employer if
the plan participant leaves covered employment to voluntarily or involuntarily
serve in the uniformed services of the United States and later returns to
covered employment.
ii. A covered
employer shall certify to ATRS that reemployment of the plan participant
complies with § 4312 of the Uniformed Services Employment and Reemployment
Act of 1994 (USERA).
f. Compliance - Section 415 of the Internal
Revenue Code
1. The operation of T-DROP shall
comply with U.S.C. § 415 and other applicable sections of the Internal
Revenue Code,
26
U.S.C. §
1 et seq.
2. Any provision concerning the operation of
T-DROP that conflicts with § 415 and other applicable sections of the
Internal Revenue Code,
26
U.S.C. §
1 et seq. is invalid.
g. T-DROP Account Balance -
Rollover
1. A lump-sum distribution of a plan
participant's T-DROP account balance may be rolled over into the plan
participant's qualifying retirement plan.
2. ATRS shall rollover the T-DROP account
lump-sum balance into only one (1) qualifying plan.
h. T-DROP Cash Balance Account Program
1. Election Option
A. In lieu of electing a lump-sum
distribution of his or her T-DROP account balance, a plan participant may elect
to transfer all or a part of his or her T-DROP account balance into a Cash
Balance Account (CBA).
B. If a plan
participant elects to have only a part of his or her T-DROP account balance
transferred into a CBA, the remaining balance of the T-DROP account shall be
annuitized under ATRS or paid as a lump-sum distribution.
C. A CBA shall be credited monthly with
T-DROP Cash Balance Account interest and debited monthly for withdrawals and
distributions beginning on the month immediately following the establishment of
the CBA.
2. T-DROP Cash
Balance Account
Interest Schedule
A. A CBA
established on or after July 1, 2012, shall be credited with T-DROP Cash
Balance Account
interest as follows:
T-DROP Cash Balance Account Program Years of
Participation
|
Interest Rate
|
First fiscal year of participation
|
Two and one-half percent (2.5%)
|
Two (2) fiscal years of participation
|
Two and seventy-five hundredths percent (2.75%)
|
Three (3) fiscal years of participation
|
Three percent (3.00%)
|
Four (4) fiscal years of participation
|
Three and twenty-five hundredths percent (3.25%)
|
Five (5) fiscal years of participation
|
Three and one-half percent (3.50%)
|
Six (6) or more fiscal years of participation
|
Four percent (4.00%)
|
B. The Board
may:
i. Increase the T-DROP Cash Account
Balance interest rate for future fiscal years and on an ad hoc basis;
ii. Consider current market conditions,
competing financial offerings to plan participants, bank rates for certificates
of deposits, the status of ATRS' return on investments, and the current state
of participation in the T-DROP Cash Balance Account program when determining
the T-DROP Cash Balance Account interest rate;
iii. Periodically authorize, by board
resolution, a special ad hoc incentive payment for CBAs if the Board determines
that payment of the special ad hoc incentive is likely to encourage continued
participation and increase future participation in the T-DROP Cash Balance
Account program; and
iv. Adopt, by
board resolution, a new T-DROP Cash Balance Account Interest Schedule
(Schedule) for future CBAs.
C. An ad hoc increase may be:
i. Set as a single amount to be applied to
each CBA; or
ii. Computed as a
graduated amount based on the length of time the CBA has existed.
D. The T-DROP Cash Balance Account
interest rate shall remain in effect until the Board adopts a new Schedule with
lower interest rates for future CBA accounts established by the end of the
first quarter of the fiscal year in which the interest rate shall
apply.
E. A CBA established before
the effective date of a board resolution adopting a new Schedule for future
CBAs shall not be subject to the provisions of the new Schedule.
F. If a plan participant dies with a CBA
balance, the CBA balance shall be paid as provided under Arkansas Code §
24-7-1310.
3. Withdrawals
A. If a plan participant's CBA has a balance,
a plan participant may withdraw funds from his or her CBA up to six (6) times
per quarter by using forms approved by ATRS.
B. A plan participant may make more than six
(6) withdrawals in a quarter with the approval of the Executive Director of
ATRS.
C. A plan participant may
request a recurring monthly distribution of a set amount from his or her CBA
until the CBA balance is depleted or the plan participant withdraws his or her
request.
D. Minimum distributions
made to a plan participant shall comply with Arkansas Code §
24-7-730
and the Internal Revenue Code,
26
U.S.C. §
1 et seq.
1 Rules concerning a disability retiree's
return to service are included in ATRS Rule 9.