(1) If a participant dies prior to the receipt of the DROP benefit pursuant to 19-6-1008, the participant's surviving spouse or dependent child is entitled to receive a lump-sum payment equal to the participant's DROP benefit as of the date of the participant's death and the benefit the surviving spouse or dependent child would have received under 19-6-505 had the participant retired rather than elected to participate in the DROP.
(2) If there is no surviving spouse or dependent child, the designated beneficiary is entitled to receive a lump-sum payment equal to the participant's DROP benefit as of the date of the participant's death and the participant's accumulated contributions minus any benefits paid from the participant's account, including monthly DROP accruals.
(3) The benefit paid pursuant to this section must include interest credited to the participant's account every fiscal yearend at the actuarially assumed rate of return. Proportionate interest must be credited for distributions taking place at a time other than a fiscal yearend.