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The Deferred Retirement Option Program (DROP)
What is drop?
The Deferred Retirement Option Program (DROP) is a voluntary retirement program that is available only to FRS Pension Plan members who qualify for normal retirement. DROP allows you to effectively retire while delaying your termination. As a participant of the DROP, you begin accumulating your retirement benefits while delaying your employment termination for up to 96 months from the date your DROP participation begins. While in DROP, you earn a salary while your monthly retirement benefits are held in the FRS Trust Fund on your behalf. See Page 5 for DROP eligibility requirements.
Before you participate in DROP, you earn one month of retirement service credit for each month you have compensation reported to the division for work performed. When you enter DROP, you are retired and you stop earning retirement service credit. While you are participating in DROP, your monthly retirement benefits accumulate in the FRS Trust Fund while you continue your FRS covered employment and earn tax-deferred interest. Tax-deferred interest means that you pay any taxes owed when you receive the interest, instead of when the interest was earned.
When you terminate your employment at the end of your authorized DROP participation period, you receive your DROP payout and begin receiving your monthly retirement benefit in the same amount determined at retirement, plus any applicable cost of living adjustment. The longer you participate in DROP, the greater your financial gain. However, even short periods of DROP participation can offer enough financial advantages to make participation the right choice for you. For many, DROP offers the best of both worlds by providing the financial security of a guaranteed lifetime monthly benefit and an opportunity to accumulate additional savings while you are working.