Deferred Retirement Option Plan (DROP)

At any time following your qualification for a Retirement Benefit, depending on your Membership Tier, you may elect to participate in the Deferred Retirement Option Plan (DROP), which is a voluntary and irrevocable optional benefit program provided to you that offers the opportunity to receive a one-time lump-sum payment at the time of retirement in addition to your monthly retirement payment.

As such, at the time your monthly retirement payment is calculated, and during your DROP participation, the calculated retirement benefit is deferred and accrues interest while you continue your employment. You may participate in the DROP program for up to a maximum of 60 months (5 years) and then you must terminate employment and officially retire from your employer. (You may also terminate sooner than 60 months.)

Upon termination of your employment and exiting the DROP, pursuant to House Bill 2485 of the 53rd Legislature - 1st Regular session effective July 1, 2017, the PSPRS will automatically issue ALL of the taxable portion of your DROP, with interest, into a 401(a) Defined Contribution (DC) plan administered by Nationwide Retirement Solutions. If you have any previously taxed monies, those funds will be issued to you in the same manner as your 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 your 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 DROP monies are required to be sent to Nationwide Retirement Solutions, the PSPRS 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.

As a participant in the PSPRS, the benefits that are available to you vary depending on your Membership Tier:

Membership Tier 1a ("Old" DROP)

For members with 20 or more years of credited service on or before January 1, 2012

Interest on the DROP payment is earned at the System’s assumed earnings rate, which is set each fiscal year (FY) by the Board of Trustees.

The interest rate for July 1, 2017 to June 30, 2018 (FY 2017/18) is 7.4%.

The interest rate for July 1, 2018 to June 30, 2019 (FY 2018/19) is 7.3%.

During DROP participation, the employee and employer stop making contributions to the System.

Membership Tier 1b ("New" DROP)

For members with 20 or more years of credited service after January 1, 2012

Interest on the DROP payment is earned at a rate equal to the average annual return used to calculate the actuarial value of assets. The minimum interest rate is 2% and the maximum interest rate is the actuarial assumed earning rate. 

The interest rate for the following years is 6.6%:

July 1, 2017 to June 30, 2018 (FY 2017/18)

July 1, 2018 to June 30, 2019 (FY 2018/19)

During DROP participation, the employee is required to continue to make contributions to the System* (i.e., DROP Contributions), but at the end of the members participation in DROP, these contributions, plus interest, are returned to the employee in addition to the DROP payment.

The interest rate for the DROP contributions is 2.0%.

*The employer is not required to pay contributions during the employee’s participation in DROP.

Membership Tiers 2 and 3

Not available.

Making the Choice

You may estimate potential benefits by Creating a Members Only Account and then accessing your account at Members Onlyor you may contact your Local Board for an estimate or retirement packet. For additional benefit information, you may access the PSPRS Member Handbook.