(1) (a) Any member covered by the statewide defined benefit plan established by this part 4 and terminating service may elect to have the member's accumulated contributions refunded in a lump sum and shall sign a statement to be filed with the member's employer evidencing such election and acknowledging that the member has no right to benefits provided by this article. A member shall only be eligible for a refund, from the association, of the contributions paid by the member to the association and any of the member's contributions that have been transferred to the association by an affiliating employer. Nothing in this subsection (1) shall prevent a member from obtaining a refund to which the member may be entitled from a nonaffiliating employer pursuant to policies established by the employer prior to December 1, 1978. In addition to receiving accumulated contributions, the member shall also receive, as interest, five percent of the member's total accumulated contributions. The contributions refunded pursuant to this subsection (1) shall not include contributions other than those required to be made by the member, and the return of contributions shall be made within one hundred twenty days.
(b) If the member who terminated service subsequently returns to service as an active member with an employer that covers its members under the statewide defined benefit plan, the member's prior service credit shall be restored when the member returns the member's refunded contributions, with interest accrued from the date of refund to the date of return, according to the terms and conditions established by the board. If the member fails to return such contributions and interest, the member shall be treated as a new member, and the member's prior service shall not be recognized in determining pension eligibility or pension benefits.
(2) (a) In lieu of having the member's contributions returned as provided in subsection (1)(a) of this section, a member who has at least five years of credited service may leave the contributions with the fund. When the inactive member attains age fifty-five, the member shall be eligible to receive an annual vested benefit equal to two percent of the member's average highest three years' salary multiplied by years of active service. Any such member shall be eligible to receive the applicable vested benefit as provided in this section or to make an election for a reduced pension in the manner provided in section 31-31-403 (5). All the provisions of section 31-31-403 (5) shall apply to the member; except that the benefits used to calculate the reduced benefits shall be the vested benefit provided to the member under this section rather than the retirement benefit provided in section 31-31-403. The member may not elect one of the options earlier than sixty days prior to the commencement of vested benefit payments. In the event that an inactive member who is eligible for vested benefits dies prior to the commencement of the member's benefit payments, the fire and police pension association shall refund the inactive member's contributions to the member's estate, and no vested benefits shall be payable to the inactive member's survivors or beneficiaries.
(b) The board shall determine after each annual actuarial valuation if the cost of all benefits established by this part 4 for members covered under section 31-31-403 and the cost of vested benefits beginning at age fifty-five for members then eligible may be fully funded on an actuarially sound basis without necessitating an increase in the employer and member contributions made pursuant to section 31-31-402 or such higher member contribution rate established pursuant to section 31-31-408 (1.5)(a). If the board cannot so determine, it shall order that the vested benefits commence such number of months as are actuarially supportable, from one to one hundred twenty, after age fifty-five for eligible members in accordance with the board's determination. The determination of the board shall be conclusive in the absence of fraud. A vested benefit commenced before age fifty-five pursuant to this subsection (2)(b) shall not be subject to annual review. If a court determines that this subsection (2)(b) is invalid, the age to be eligible for a vested benefit shall be age sixty-five except for persons receiving a benefit at the time of the court's decision.
(3) The board may promulgate rules to allow members who are eligible to receive any type of retirement benefits to defer receipt of the benefits to the extent permitted under section 401 (a)(9) of the federal "Internal Revenue Code of 1986", 26 U.S.C. sec. 401 (a)(9), as amended, and the regulations promulgated pursuant to section 401 (a)(9).
Source: L. 96: Entire article added with relocations, p. 907, § 1, effective May 23. L. 99: (1)(b) amended, p. 36, § 2, effective August 4. L. 2001: (2) amended and (3) added, p. 418, § 4, effective June 1. L. 2003: (2)(a) amended, p. 742, § 3, effective August 6. L. 2010: (2)(b) amended, (SB 10-022), ch. 18, p. 84, § 3, effective August 11. L. 2020: (2) amended, (HB 201044), ch. 105, p. 408, § 4, effective September 14.
Editor's note: This section was formerly numbered as § 31-30-1011.