(a) Pension payment options for optional and integrated plans.
(1)A member may elect an optional form of pension actuarially equivalent to the normal form of retirement pension otherwise payable, unless the member qualifies for a non-service-connected disability retirement before reaching the early retirement date. The Chief Administrative Officer must not consider the health condition of the member when deciding what is “actuarially equivalent”.
(2) A member who qualifies for non-service connected disability retirement on or after reaching the early retirement date may elect a pension payment option.
(3) A member who qualifies for a service-connected disability retirement may elect a pension payment option, regardless of age and credited service.
(4) To elect a pension payment option, the member must file the appropriate form at least one month before the normal, early, or disability retirement date.
(5) The pension payment option must take effect on the member's retirement date and is void if the member or the named beneficiary dies before that date.
(6) The following forms of pension options are available:
(A) Ten-Year Certain and Continuous. The member will be paid a monthly income until death, with payments continued to the designated beneficiary until a total of one hundred twenty (120) monthly payments have been made. If the designated beneficiary dies before the end of the ten-year certain period, payments will be made to the contingent beneficiary. If the designated beneficiary and contingent beneficiary predecease the retiree, the retiree's estate shall be paid the amount of money representing the value of the annuity as of the date of death of the retiree. This option shall be the normal form of retirement pension for members enrolled before July 1, 1978, and continuously enrolled to date of retirement.
(B) Cash Refund Pension Option (available to members who were members of the employees' retirement system of the state on August 15, 1965). If a member dies before the total pension payments made or due equal the present value of the pension determined on the member's retirement date, the difference will be paid to the member's beneficiary.
(C) Joint and Survivor Pension Option.
(i) Under this option, the County must make pension payments in an adjusted amount to the member during the member's lifetime and, at the member's death, make pension payments to the designated beneficiary (spouse, domestic partner, or children only) who survives. The County must make the pension payments to the surviving beneficiary for the rest of the beneficiary’s lifetime [pension payments] in the amount payable to the member or other amount elected by the member, but not less than 10 percent of the amount payable to the member.
(ii) Upon the death of both the member and the beneficiary, a death benefit must be paid in the same manner as is provided under the normal form of retirement pension for which the member had been eligible.
(iii) Pop-up Option. At retirement, the member may elect the pop-up variation of a joint and survivor option with an appropriate actuarial reduction. Under this option, if the member and designated beneficiary divorce or the designated beneficiary dies before the member dies, the member’s monthly payments for the rest of the member’s life must “pop up” to the amount that they would have been if the member had elected the modified cash refund annuity at retirement.
(D) Modified Cash Refund Annuity. Lifetime pension payments will be payable to the member. If a member dies before receiving benefits in an amount equal to member contributions plus credited interest the difference will be payable to the designated beneficiary. This option shall be the normal form of retirement pension for members enrolled on or after July 1, 1978.
(b) Voluntary adjustment of pension payment by a member who retires before qualifying to receive social security benefits.
(1) A member may elect to receive an actuarial equivalent benefit of a certain level of pension payments until normal social security payments begin and an adjusted level of payments after normal social security payments begin. A member may elect these adjustments to receive a more uniform total income from both sources.
(2) A member who elects to receive adjusted levels of pension payments under subsection (1) above must also choose one of the forms of pension payment options described in subsection (a)(6).
(3) If a member dies, the County must pay the pension benefit to the member's designated beneficiary in the form elected by the member under subsection (a)(6).
(c) Cost-of-living adjustment. A retired member or beneficiary, including the surviving spouse or domestic partner of a group D member or other beneficiary who survives the member under a pension option or who is otherwise eligible to receive benefits, must receive an annual cost-of-living adjustment in pension benefits.
(1) Each retired member or beneficiary must have a cost-of-living base which must be the Consumer Price Index most recently preceding the date of the member's retirement or death.
(2) The Consumer Price Index to be used for the fiscal year in which the cost-of-living adjustment is payable must be the index calculated for the month last preceding the end of the fiscal year immediately preceding the fiscal year in which the adjustment is to be effective.
(3) The percentage cost-of-living adjustment of pension benefits must be obtained by dividing the most recent index determined under paragraph (2) by the next preceding index multiplied by 100 less 100.
(A) A member enrolled before July 1, 1978, must receive the full cost-of- living adjustment.
(B) A member enrolled on or after July 1, 1978, must receive 100 percent of the change in the consumer price index up to 3 percent, and 60 percent of any change in the consumer price index greater than 3 percent, up to a total adjustment of 7 ½ percent in any year. The 7 ½ percent annual limit does not apply to:
(i) a retired member who is disabled; or
(ii) a pensioner aged 65 or older for a fiscal year beginning after the date the pensioner reaches age 65.
(4) For the purpose of this section, “Consumer Price Index” means, beginning January 1, 1978, the Consumer Price Index for All Urban Consumers (CPU-I) for the Washington-Arlington-Alexandria Core Based Statistical Area (CBSA), as published by the United States Department of Labor, Bureau of Labor Statistics (for months before 1978, the Consumer Price Index published previously for urban wage earners and clerical workers for such months must be applicable.)
(5) Pension benefits are subject to decreases in the Consumer Price Index. In no instance, however, must a retired member or beneficiary receive less than the amount of pension benefits for which eligible at the time of the member's retirement.
(6) Notwithstanding the provisions of this Section, the cost-of-living adjustment must not exceed 2.5 percent for:
(A) credited service beginning on the first pay period after June 30, 2011; or
(B) a disability retirement pension based on a disability occurring after June 30, 2011.
(d) Applicability of cost-of-living adjustments to surviving spouses or domestic partners of group D members. Effective July 1, 1973, the provisions of subsection (c) apply to an eligible surviving spouse or domestic partner of a group D member. The cost-of-living adjustment for the surviving spouse or domestic partner of a group D member who retired or died before July 1, 1970, must be based on the Consumer Price Index published as of August 15, 1955. The cost-of-living adjustment for the surviving spouse or domestic partner of a group D member who was an active member on June 30, 1970, and who retired or died on or after July 1, 1970, must be based on the Consumer Price Index published as of the date of the member's retirement or death, whichever is earlier.
(e) Applicability of cost-of-living adjustments to elected officials' plan and the guaranteed retirement income plan. Cost-of-living adjustments do not apply to the elected officials' plan and the guaranteed retirement income plan.
(f) Distributions from the elected officials' plan. The chief administrative officer must pay an elected officials' participant's account balances in the elected officials' plan upon normal retirement or withdrawal of vested county contributions under the provisions of this subsection.
(1) Normal Method of Distribution. Unless the elected officials' participant elects an option under paragraph (2), the normal method of distribution must be a variable annuity that reflects investment gains and must be paid for the elected officials' participant's life.
(2) Optional Methods of Distribution. An elected officials' participant may choose to have the account balances paid to that elected officials' participant in one of the following optional methods:
(A) A single, lump-sum cash payment.
(B) A joint and survivor annuity. A joint and survivor annuity as used in this subsection means an annuity payable for the life of the elected officials' participant, with a survivor's annuity payable for the life of the spouse or domestic partner of the elected officials' participant in an amount at least equal to one-half of the amount of the annuity payable during the joint lives of the elected officials' participant and the spouse or domestic partner of the elected officials' participant, and which is the actuarial equivalent of a single annuity for the life of a participant.
(C) A single-life annuity that will be payable to the elected officials' participant during the life of that participant. If the elected officials' participant dies before receiving an amount equal to the required and voluntary elected officials' participant contributions account balances, including picked-up contributions, the difference must be paid to the beneficiary of the elected officials' participant.
(D) A life annuity with a ten-year certain option. This option provides an adjusted pension payable as long as the elected officials' participant lives, but guaranteed for a period of ten (10) years beginning on the date the payment of the account balances is to begin. If an elected officials' participant dies before expiration of the guaranteed period, payment is continued to the beneficiary at the same rate. If the beneficiary dies after having received at least one (1) payment while further payments are due, the further payments are made to a person designated by the elected officials' participant as a contingent beneficiary, or, in the absence of a contingent surviving beneficiary, the commuted value of the payments is paid to the estate of the last surviving beneficiary in a single lump-sum.
(E) An annuity that provides gradually increasing pension payments, based on the elected officials' participant's life expectancy at the time of retirement. The payments are made for the life of the elected officials' participant.
(F) Payment of the account balances of the elected official participant in the form of as nearly equal periodic payments as the market will allow, over a period not exceeding the lesser of the joint life expectancy of the elected officials' participant and the elected officials' participant's beneficiary or twenty (20) years.
(3) If benefits under the elected officials' plan are payable under any method other than the lump sum method, the chief administrative officer may utilize the account balances of the elected officials' participant to buy an annuity contract from an insurance company authorized to do business in the State of Maryland. The contract must provide for payment in the method the elected officials' participant chose.
(4) The county executive may adopt regulations under method (3) to provide a procedure for an elected officials' participant to choose an alternate method of distribution.
(g) Distributions from the Guaranteed Retirement Income Plan. A participant who receives a contribution under Section 33-42A must not receive a distribution until the participant attains the Social Security retirement age. Any other participant may receive a distribution when the participant terminates County employment. A participant may elect a distribution from the guaranteed retirement income plan of a participant’s vested guaranteed retirement income plan account balance as follows: (1) Lump Sum Method of Distribution. Unless a participant elects an annuity under paragraph (2), a participant must receive the participant’s vested guaranteed retirement income plan account balance in a single lump sum. The participant may have the lump sum paid as a direct rollover to an eligible retirement plan as defined in the Internal Revenue Code.
(2) Annuity Method of Distribution. A participant may elect to receive the participant’s guaranteed retirement income plan account balance paid in:
(A) a single life annuity payable to the participant during the life of that participant; or
(B) a joint and survivor annuity payable to the participant over the participant’s lifetime and, at the participant’s death, payable to the designated beneficiary (spouse, domestic partner, or children only) who survives. Payments must be made for the designated beneficiary’s lifetime in the amount payable to the participant or another amount elected by the participant, but not less than 10 percent of the amount payable to the participant.
(3) No other form of payment options listed in this Section is available to guaranteed retirement income plan participants.
(h) (1) Required commencement of benefit payments. The distribution of an elected officials' participant's retirement benefits must be made no later than April 1 of the calendar year following the later of the calendar year in which the elected officials' participant attains age seventy and one-half (70 ½) or the calendar year in which the elected officials' participant retires. In the alternative, the payment of benefits to an elected officials' participant must begin not later than such April 1 under a method of payment that, in accordance with the applicable United States Treasury Regulations, provides for distribution of the elected officials' participant's benefits over:
(A) The life of the elected official's participant;
(B) The lives of the elected officials' participant and the elected officials' participant's designated beneficiary;
(C) A period not extending beyond the life expectancy of the elected officials' participant; or
(D) A period not extending beyond the life expectancy of the elected officials' participant and the elected officials' participant's designated beneficiary.
(2) Notwithstanding any other provision, an elected official’s account balance of $1,000 or less must be automatically distributed in a lump sum as soon as administratively feasible after termination of employment without a request from the elected official. If the distribution cannot be made because the elected official cannot be located, the elected official will forfeit the amount. If the elected official later contacts the County, the elected official will receive the forfeited amount.
(i) Period for distribution of death benefits of a retired elected officials' participant who was receiving benefits. If the distribution to a retired elected officials' participant has commenced in accordance with the second sentence of subsection 33-44(h) and the elected officials' participant dies before the elected officials' participant's entire benefit has been distributed to that elected official's participant, the remaining part of such benefit must be distributed at least as rapidly as under the method of distribution in effect as of the date of the retired elected officials' participant's death. (j) Period for distribution of death benefits of an elected officials' participant who was not receiving benefits.
(1) If an elected officials' participant dies before the payment of the benefits under the elected officials' plan has commenced, the benefits must be distributed before the end of the calendar year containing the fifth anniversary of the elected official participant’s death; however, the five-year rule does not apply if:
(A) Any portion of the elected officials' participant's benefit is payable to, or for the benefit of, a designated beneficiary;
(B) The portion of the benefit to which the designated beneficiary is entitled will be distributed over the life of the beneficiary, or over a period not extending beyond the life expectancy of the beneficiary; and
(C) The distributions commence before the end of the calendar year following the calendar year in which the elected official’s participant’s death occurred. Also, the five-year rule does not apply if:
(i) The portion of the elected officials' participant's benefit to which the surviving spouse is entitled must be distributed over the life of the surviving spouse, or over a period not extending beyond the life expectancy of the surviving spouse; and
(ii) The distributions commence before the later of the end of the calendar year following the calendar year in which the participant died or the end of the calendar year in which the elected officials' participant would have attained age 70 ½ .
(2) For purposes of subsections (f), (h), (i), and (j), the life expectancy of an elected officials' participant and the elected officials' participant's spouse may be recalculated each year. Also, for purposes of subsections (f), (h), (i), and (j), any amount paid to a child must be treated as if it had been paid to the surviving spouse of an elected officials' participant if the amount becomes payable to the surviving spouse of an elected officials' participant when the child reaches the age of majority (or other designated event permitted under applicable Treasury Regulations).
(k) Required commencement of benefit payments. The distribution of a member's retirement benefit must be made, or must begin, no later than April 1 of the calendar year following the later of the calendar year in which the member attains age seventy and one-half (70 1/2) or the calendar year in which the member retires. In the alternative, the payment of benefits to a member must begin not later than such April 1 in accordance with applicable United States Treasury Regulations over:
(1) The life of the member;
(2) The lives of the member and the member's designated beneficiary;
(3) A period not extending beyond the life expectancy of the member; or
(4) A period not extending beyond the life expectancy of the member and the member's designated beneficiary.
(l) Period for distribution of death benefits of a retired member who was receiving benefits. If the distribution to a retired member has commenced in accordance with the second sentence of subsection 33-44 (k) and the member dies before the member's entire benefit has been distributed to the member, the remaining part of such benefit must be distributed at least as rapidly as under the method of distribution in effect as of the date of the retired member's death. (m) Period for distribution of death benefits of a member who was not receiving benefits.
(1) If a member dies before the payment of the benefit has commenced, the benefit must be distributed before the end of the calendar year containing the fifth anniversary of the member’s death; however, the five-year rule does not apply if:
(A) Any portion of the member's benefit is payable to, or for the benefit of, a designated beneficiary;
(B) The portion of the benefit to which the designated beneficiary is entitled will be distributed over the life of the beneficiary, or over a period not extending beyond the life expectancy of the beneficiary; and
(C) The distributions commence before the end of the calendar year following the calendar year in which the elected official’s participant’s death occurred.
(2) Also, the five-year rule does not apply if:
(A) The portion of the member's benefit to which the surviving spouse is entitled will be distributed over the life of the surviving spouse, or over a period not extending beyond the life expectancy of the surviving spouse; and
(B) The distributions commence before the later of the end of the calendar year following the calendar year in which the participant died or the end of the calendar year in which the member would have attained age 70 ½.
(3) For purposes of this subsection, the life expectancy of a member and the member's spouse may be recalculated each year. Also, for purposes of this subsection, any amount paid to a child must be treated as if it had been paid to the surviving spouse of a member if the amount becomes payable to the surviving spouse of a member when the child reaches the age of majority (or other designated event permitted under applicable treasury regulations).
(n) Required distribution for guaranteed retirement income plan participants.
(1) The distribution of a participant’s guaranteed retirement income plan account balance must be made no later than April 1 of the calendar year after the later of the calendar year in which the participant attains age 70 ½ or the calendar year in which the participant terminates employment. Distributions must be made in accordance with subsection (g). If the participant does not elect a form of distribution, the distribution must be made in a lump sum. If the participant dies before beginning to receive benefits, the participant’s designated beneficiary under
33-46(h) must receive a lump sum distribution as soon as practicable after the participant’s death, but not later than the December 31
st of the year containing the fifth anniversary of the participant’s death. (2) A participant’s account balance of $1,000 or less must be automatically distributed in a lump sum as soon as administratively feasible after termination of employment without a request from the participant.
(o) Actuarial assumptions. The actuarial assumptions that will be used to determine the equivalence of various optional benefits are:
(1) Net interest rates (the difference between a gross interest rate and a cost-of-living allowance assumption): for actuarial equivalence under the optional nonintegrated and optional integrated provisions, the gross interest rate is six (6) percent per year, the cost-of-living allowance assumption is three (3) percent per year, and the net interest rate is three (3) percent per year; for actuarial equivalence under the mandatory integrated plan, the gross interest rate is six (6) percent per year, the cost-of-living allowance assumption is one and eight-tenths (1.8) percent per year and the net interest rate is four and two-tenths (4.2) percent per year.
(2) Mortality rate: UP 84 Mortality Table.
(p) Limitation on benefits. Notwithstanding any provision governing the retirement system to the contrary, the benefits provided by the retirement system for members whose anticipated annual benefit provided by such contributions will exceed fifteen hundred dollars ($1,500.00), and who are within the twenty-five (25) highest paid employees as of the time of the establishment of the retirement system (including any such highest paid employees who are not members at the time but who may later become members) must be subject to the conditions which are stated from time to time in applicable United States Treasury Regulations. The restrictions also apply to any increases in benefits following the establishment of the retirement system, as may be provided for in applicable United States Treasury Regulations.
(q)
Direct rollover distributions.
A member or beneficiary may elect, in any manner prescribed by the Chief Administrative Officer at any time, to have any portion of eligible rollover distribution paid directly to an eligible retirement plan specified by the member in a direct rollover. A member may not elect a direct rollover if the eligible rollover distribution is less than $200.00. As used in this subsection:
(1) direct rollover means a payment from the retirement system to the eligible retirement plan specified by the member;
(2) eligible retirement plan means:
(A) an individual retirement account described in Internal Revenue Code Section 408(a);
(B) an individual retirement annuity described in Internal Revenue Code Section 408(b) (other than an endowment contract);
(D) an annuity plan described in Internal Revenue Code Section 403(a);
(E) an eligible deferred compensation plan described in Internal Revenue Code Section 457(b) which is maintained by an eligible employer described in Internal Revenue Code Section 457(e)(1)(A); or
(F) an annuity described in Internal Revenue Code Section 403(b).
(3) eligible rollover distribution means any distribution of all or any portion of the retirement benefit; except:
(A) any distribution which is one of a series of substantially equal periodic payments (not less frequently than annually) made:
(i) for the life (or life expectancy) of the employee or the joint lives (or joint life expectancies) of the employee and the employee’s designated beneficiary; or
(ii) for a specified period of 10 years or more; or
(B) any distribution to the extent such distribution is required under Section 401(a)(9) of the Internal Revenue Code, as amended; and
(4) beneficiary includes a non-spouse beneficiary. A non-spouse beneficiary may make a direct rollover only to an inherited individual retirement account or annuity described in Sections 408(a) or 408(b) of the Internal Revenue Code that is established on behalf of the non-spouse beneficiary. Such rollover must be made in a manner consistent with Section 402(c)(11) of the Internal Revenue Code and any other applicable guidance.
(r) Limitations Under Internal Revenue Code. Distributions under a plan must be subject to the limitations of Section 401(a)(9) of the Internal Revenue Code, including the incidental death benefit rules under Section 401(a)(9)(G) of the Internal Revenue Code, in accordance with any proposed or final regulations under Section 401(a)(9) of the Internal Revenue Code.
(s) Transfer from Retirement Savings Plan. A participant who transfers his or her retirement savings plan account balance under Section 33-120 may elect to receive his or her account balance paid as an annuity under subsection (g)(2). (Ord. No. 5-152; Ord. No. 6-195, § 1; 1971 L.M.C., ch. 39, § 5; 1972 L.M.C., ch. 19, § 9; 1973 L.M.C., ch. 12, § 1; 1974 L.M.C., ch. 31, § 12; 1974 L.M.C., ch. 59, § 5; 1978 L.M.C., ch. 44, § 1; 1987 L.M.C., ch. 27, § 8; 1987 L.M.C., ch. 44, § 2; 1996 L.M.C., ch. 19, § 1; 1998 L.M.C., ch. 31, § 1; 1999 L.M.C., ch. 26, § 1; 1999 L.M.C., ch. 30; § 2; , § 1; , § 1; , § 1; , § 1; , § 1; , §§ 1, 2; , § 1; , § 1; , § 1; , § 1; , § 1
; , § 1; , § 1; , §1.) Editor’s note—2011 L.M.C., ch. 9, § 2, states in part: Effective Date. This Act takes effect on July 1, 2011 except as otherwise provided. For a member of the Optional Plan, Integrated Plan, or Guaranteed Retirement Income Plan holding the office of County Executive, Councilmember, or Sheriff, the amendments to Sections
33-39(a)(1),
33-39(a)(2),
33-44(c), and
33-40(e)(1) took effect on December 1, 2014. For a member of the Optional Plan, Integrated Plan, or Guaranteed Retirement Income Plan holding the office of State’s Attorney, the amendments to Sections
33-39(a)(1),
33-39(a)(2),
33-44(c), and
33-40(e)(1) took effect on January 5, 2015.
2003, ch. 3, § 1, states: Rule of Interpretation. The amendments made by Section 1 of this Act must be interpreted to comply with requirements stated in letters issued on December 11, 2002, and January 14, 2003, by the Internal Revenue Service to the County regarding the continued qualification of County employee retirement plans. 2003, ch. 3, § 2, states, in part: Retroactivity. (f) The amendment made by Section 1 of this Act to Code Section
33-44 takes effect January 1, 2001.
The above section is cited in Fultz v. Shaffer, 111 Md.App. 278, 681 A.2d 568 (1996) and in Montgomery County v. Buckman, 636 A.2d 448, 333 Md. 516 (1994).
