DROP is a voluntary and irrevocable benefit program that offers you the opportunity to receive a one-time lump sum payment, at the time of your retirement, in addition to your monthly retirement benefit. The process to enter into DROP is that at the time you elect to participate in DROP, your monthly retirement benefit is calculated (solidified) based on the salary and service at the time of your participation and then that monthly amount is deferred each month while you continue to work with your employer up to a maximum of 60 months (5 years). Then, either before or at 60 months, you would terminate your employment with your employer and officially retire, thus receiving your previously calculated accumulated DROP retirement payments, plus interest, and you would also begin to receive your monthly retirement benefit payments.
Please note that PSPRS automatically issues ALL of the taxable portion of your DROP, with interest, into a 401(a) Defined Contribution (DC) plan administered by Nationwide Retirement Solutions and 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, 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.
Update: PSPRS is pending changes to the Tier 1 (b) DROP membership to be handled in the same manner as the Tier 1 (a). As such, PSPRS is working with each individual employer and eligible Tier 1 (b) member to be adjusted to Tier 1 (a). We appreciate your patience and understanding during this process.
Membership Tiers 2 and 3
Making the Choice
You may estimate potential benefits by creating an online account via Members Only, or you may contact your Local Board for an estimate or retirement packet. For additional benefit information, you may access the PSPRS Member Handbook.