Deferred Retirement Option Plan (DROP)

As a Tier 1 Member, who attain 20 years of credited service (see Retirement Benefit), you may elect to participate in the Deferred Retirement Option Plan (DROP).  DROP is a voluntary and irrevocable benefit program that allows members to receive a one-time lump sum payment at the time of their retirement, in addition to their monthly retirement benefit distributions.

When entering DROP, a monthly retirement benefit is calculated based on the salary and credited service earned prior to the time a member elects to participate. That amount is deferred each month and generates interest while the member continues to work for their employer for up to 60 months. Under certain conditions, members are able to extend their participation in DROP for up to 84 months under the provisions of Senate Bill 1268 (Laws 2022, Chapter 351). Please note that any time of employment and increases to a member’s salary while in DROP will not apply to a member’s monthly pension benefit upon exiting DROP. 

The interest applied to DROP account balances is equal to the Assumed Rate of Return set by the PSPRS Board of Trustees.

Please note that interest will not be applied to DROP accounts after five years of service in DROP. Members who are eligible and elect to extend their DROP service will have their subsequent monthly pension payments deposited by PSPRS into a 401(a) account maintained by Nationwide Retirement Solutions over the course of their remaining service, not to exceed 24 months.

To exit DROP, members must terminate employment with their employer and officially retire, thus receiving previously calculated accumulated DROP retirement payments, plus interest for the first 60 months in DROP and any funds, plus interest, in Nationwide Retirement Solutions while in extended DROP (24 months beyond regular DROP), and they would also begin to receive their monthly retirement benefit payments.

Education Services

By statute, PSPRS is required to make benefit education services available to members and has contracted with Public Safety Financial/Galloway for this purpose. PSPRS does not endorse any fee-based asset management services for our members. Additionally, members may always choose their own financial and investment counseling. Public Safety Financial/Galloway can be contacted by phone at (480) 325-8668, in-person at 1138 N. Alma School Rd., Suite 201, Mesa, AZ 85201, or online at https://galloway911.com.

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 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, at the same time and in the same manner as your monthly retirement benefit payments are issued (either direct deposit or check).

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

Membership Tier 1¹

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 this fiscal year is 7.3%:

July 1, 2022 to June 30, 2023 (FY 2022/2023)

The interest rate for the following fiscal year is 7.2%:

July 1, 2023 to June 30, 2024 (FY 2023/2024)

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

Membership Tiers 2 and 3

Not available.

¹Membership Tier 1 DROP Contributions Rollback

Pursuant to 2011 S.B. 1609, Tier 1 members who did not attain 20 years of credited service as of January 1, 2012 were required to continue to make contributions to the System (i.e., DROP Contributions) during their participation in DROP.  At the end of their participation in DROP and official election to retire, those DROP contributions, plus interest, were returned to the member in addition to their accumulated DROP and monthly retirement benefit.  However, the requirements to pay DROP contributions were reversed in accordance with 2019 S.B. 1146 and, for members who have paid, or previously received, their DROP contributions, the DROP contributions have either been reversed (with interest) through the members employer, or adjusted, as applicable, to the member.  All eligible Tier 1 members participating in DROP will receive the same DROP benefits based on the original DROP program.

DROP Process:

  • Enter DROP: Complete the PS-CORP Retirement Estimate Form (NEW) application and check the “Enter DROP” box. Submit DROP request 60 days prior to the enter DROP date. Note:
    • Requests are reviewed by PSPRS daily
    • Confirmation of receipt emails will be sent to employers and members
  • Payments go to Nationwide Retirement Solutions (NRS):
    • As the member enters DROP, shortly after the last pay period closes, PSPRS verifies member eligibility and calculates what will be paid to members NRS accounts
    • Payments then are made monthly to NRS
  • Exit DROP: Complete the PS-CORP Retirement Estimate Form (NEW) application and check the “Exit DROP” box and submit 60 days prior to the exit DROP date. Note:
    • Requests are reviewed by PSPRS daily
    • Confirmation of receipt emails will be sent to employers and members
    • PSPRS will finalize members DROP eligibility and calculate what’s due to be paid, and remit final funds to NRS.

Additional Resources

For additional resources, Plan summary, guide books and forms, you may access our Forms & Resources webpage and for the latest news and information, we encourage you to Sign Up for News and Updates.  To estimate future benefits, you may access your Members Only online account, or contact your Local Board for an estimate, or retirement packet.  If you are not certain who the Local Board contact person is, please Contact Us, or visit our Applying for Benefits webpage for retirement information.