Outline of Deferred Retirement Option Program (DROP)
Eligibility:
All employees would have option to elect DROP beginning on date of eligibility for normal retirement. (Uniformed – 25 years of service or age 55 with 6 or more years of service; Police Officers – 25 years of service or age 55)
Length of DROP Period
• Three years maximum.
• The election to enter DROP is irrevocable following the effective date. A member who has submitted an election to enter DROP may only rescind that election prior to the effective date of entry into DROP.
• At end of DROP period, employment must retire.
DROP Account Balance
• Your DROP account balance is the monthly retirement calculation times the
number of months you are in DROP, plus any applicable COLA, and interest.
• Amounts credited increase based on retiree COLA’s.
• Account balances are credited interest at pro rated annual rate of 5%.
Employment Status During DROP Period
• Employees are considered active employees for all other benefits/personnel policies.
End of DROP Period
• Employee terminates employment/retires
• Several distribution options are available for DROP balance, including:
• Direct lump sum payments
• Rollover to IRA or other qualified plan
• Increase in monthly annuity (actuarial equivalent)
• Combinations of above
Disability/Death During DROP
• If not service-connected ∼ Monthly retirement payments, plus DROP balance
• If service-connected ∼ Option of disability/death benefits and forfeiture of DROP, OR
∼ Monthly retirement payments plus DROP balance
Details
Sick leave – unused accumulated sick leave applies for determining retirement eligibility following the same conversion rules as for normal retirement (172 hours equals one month of service). Employees will have the option of converting the entire sick leave balance to retirement credit or all but 40 hours of the total balance in order to begin the DROP period with some sick leave balance.
Details
Disability During DROP Period
Non-Service Connected Disability
Overview
Benefits and payments are the same as if the member resigns or is terminated prior to the end of the DROP period.
Details
• If a member becomes disabled during the DROP period other than as a result of a service- connected disability, the monthly benefit which would otherwise be payable to the DROP account will be paid to the retiree.
• The irrevocable election made at time of entry to DROP regarding the joint & survivor (spousal) option continues to apply.
• The retiree will also be eligible to receive the balance of the DROP account in one of the optional forms provided.
Service-Connected Disability
Overview
A member will have the option of receiving benefits as though DROP was never selected or as if he/she had resigned or was terminated during the DROP period.
Details
• Option 1 – This option determines benefits as though DROP participation had not occurred. The member elects to forfeit the accumulated DROP balance and receive service-connected disability benefits based on the provisions of the applicable retirement system. In the Police System, benefits are initially established at 662/3% of the member’s salary at the time of injury. In the Uniformed System, the benefit is initially established at 40% of salary at time of retirement or, if the member qualifies for severe service-connected disability, at 90% of salary.
• Option 2 – The member elects to leave the DROP plan prior to the end of the DROP period. The DROP balance is distributed based on the member’s election of the distribution options available and begins to receive a retirement annuity. The annuity is based on the retirement benefit accrued up to the point of entry to DROP and the decision on the Joint & Last Survivor (spousal) option made when the member entered DROP.
Death During DROP Period
Non Service-Connected Death
If a member dies during the DROP period, then the joint & survivor (spousal) election made by the member at the point of entry to DROP determines whether and in what amount monthly benefits will be payable to the spouse. That is, if the member elected a form of payment that included a spousal benefit (such as a 50% joint and survivor option), then the monthly benefit payments to the surviving spouse will commence based on the terms of the form of payment elected. If the member did not elect a joint and contingent spouse option, then monthly benefits will not be payable. The surviving spouse and children benefit in the Police Officers Retirement System will be payable.
The designated beneficiary will be eligible to receive the balance in the DROP account at the time of death.
Service-Connected Death
If a member dies in the line of duty during the DROP period, the beneficiary may select one of two options:
• Option 1 – The beneficiary elects to receive benefits as though DROP participation had not occurred. The DROP account balance is forfeited and a monthly survivor benefit commences based on the member’s service and compensation through the date of death.
• Option 2 – The beneficiary elects benefits the same as in the case of non-service connected death of the member. That is, receipt of the DROP balance and any Joint & Last Survivor option the member elected at the time DROP was entered.
In both cases, the surviving spouse and children benefit provided in the Police Officers System is payable.
Other Human Resources Considerations
DROP participants are active employees for all other purposes, including but not limited to:
a. Promotions
b. Pay increases
c. Health and life insurance benefits
d. Annual Leave and Comp Payout
e. Sick leave accruals (unused sick leave to be translated into additional retirement benefits must be used at the entry point to the DROP plan. Additional sick leave accrued during DROP cannot be added to retirement benefit service later but may be used prior to retirement)
f. Benefit improvements effective during DROP period
g. Contributions to the 457 plan