Reverse Deferred Retirement Option Plan (Reverse DROP)

CORP Tier 1, 2 or 3 Probation and Surveillance DB Members that are eligible for a Retirement Benefit that have at least 24 years of credited service as a non-dispatcher, or 25 years as a dispatcher, may elect to participate in the Reverse Deferred Retirement Option Plan (Reverse DROP).  Reverse DROP is an optional benefit program allowing members the opportunity to receive a one-time lump-sum payment (from 1 to 60 months) at the time of retirement in addition to their monthly retirement benefit.

The calculation for their monthly retirement benefit and Reverse DROP payment is based on the member’s service and salary at the time of participation in Reverse DROP and the lump-sum payment is credited as though it accrued monthly from the Reverse DROP date to the date the member elected to participate (plus interest equal to the yield on a 5-year Treasury note as of the first day of the month as published by the Federal Reserve Board). 

It is important to note that if a member elects to participate in Reverse DROP, their credited service cannot go less than 24 years as a non-dispatcher, or 25 years as a dispatcher; see Examples below to better understand this calculation.

Terms and Conditions

Under Reverse DROP, the member must voluntarily and irrevocably elect to terminate employment and receive a normal monthly retirement benefit and who is not awarded an accidental, ordinary or total and permanent disability pension.

The Reverse DROP date can be the first day of the month following completion of the required service, but again, the members service cannot go less than 24 years as a non-dispatcher, or 25 years as a dispatcher, and cannot be more than 60 months.

The member’s pension will be calculated using the factors of credited service and average monthly benefit compensation in effect on the Reverse DROP date.

Neither the member nor the employer are entitled to a refund of contributions made between the Reverse DROP date and the date the member elects to participate in Reverse DROP.

Rollover Requirements

Upon termination of employment and election to participate, pursuant to Senate Bill 1251 of the 53rd Legislature - 2nd Regular session, for members with an effective retirement date on/after September 1, 2018, the System will automatically issue ALL of the taxable portion of the Reverse DROP into a 401(a) Defined Contribution (DC) plan administered by Nationwide Retirement Solutions. However, if there are any previously taxed monies, those funds will be issued to the member in the same manner as the monthly retirement payment (either direct deposit or check). 

For members wishing to consult with a financial advisor for retirement planning and overall financial wellness, PSPRS has partnered with Public Safety Financial/Galloway.

IMPORTANT:  If the Reverse DROP lump-sum is required to be split with an ex-spouse/alternate payee pursuant to an acceptable certified Domestic Relations Order (DRO) or other court Order, and since all of the taxable portion of the Reverse DROP monies are required to be sent to Nationwide Retirement Solutions, the System will direct the entire taxable portion to Nationwide and will also advise them of the amount awarded to each party.  If there are any previously taxed contributions, those monies will be divided and paid to you and the ex-spouse/alternate payee, as applicable.

Examples

To understand the Reverse DROP calculation, examples are provided below:

Example 1) 
If a non-dispatcher works to 25 years of service, they can only elect a lump sum payment from 1 to 12 months because they cannot go less than 24 years of service credit.  So if the member elects a 12-month lump sum payment, the monthly retirement benefit and lump sum payment will be calculated based on the service and salary when the member reached 24 years of service credit as though they elected to participate at 24 years.

Example 2) 
If a dispatcher works to 30 years of service, they can elect a lump sum payment from 1 to 60 months since they will not go below 25 years of service credit.  So if the member elects a 60 month lump sum payment, the monthly retirement benefit and lump sum payment will be calculated based on the service and salary when the member reached 25 years of service credit as though they elected to participate at 25 years.

Making the Choice

You may estimate potential benefits by creating an online account via Members Onlyor you may contact your Local Board for an estimate or retirement packet. For additional benefit information, you may access the CORP Member Handbook.