Q 1: What are the eligibility requirements for participating in DROP?

A: Teacher Retirement System (TRS) members must be active contributing members, eligible for a service retirement annuity that is not reduced for early retirement age, and have at least 25 years of service credit in TRS. 

Q 2: Does election to participate in DROP imply a commitment from me to continue working for the length of the DROP period election? Does it imply a commitment for continued employment on the basis of my employer?

A: Participation in DROP does not affect the employer/employee relationship. Neither the employer’s agreement to retain the employee, nor the employee’s agreement to work is impacted.

Q 3: May I use the “Rule of 80” to determine my eligibility for participation in DROP?

A: Yes. But remember that eligibility for an unreduced standard annuity is just one of three tests for DROP participation. The other two are that the member must be an active contributing employee and have at least 25 years of creditable service.

Q 4: What paperwork is involved?

A: An election to participate in DROP must be on a form TRS 567, “Election to Participate in the Deferred Retirement Option Program,” available from the TRS Web site.

Q 5: Once members elect to participate in DROP, how can participation be terminated?

A: Only three events can terminate DROP participation: retirement, expiration of the participation period, or the member’s death.

Q 6: Is it possible to revoke one’s DROP participation after a member has elected to participate?

A: No.

Q 7: If I enter DROP and then the retirement multiplier increases, will my monthly annuity at retirement and my DROP deposit increase as a result of the multiplier?

A: Yes.

Q 8: What am I going to put into the program and what will I get out of it?

A: Participants who entered DROP on or before August 31, 1999, will have their accounts credited each month with an amount equal to 79% of the member’s standard service annuity. Members who enter DROP on or after September 1, 1999, will have their accounts credited each month with an amount equal to 60% of their standard annuity. The account will earn interest at the rate of 5% per annum through final distribution. Upon retirement, the balance of the DROP account will be disbursed either in a lump sum or in installments.

Q 9: Will I continue to make TRS payroll contributions at the rate established by the state during the time that I participate in DROP?

A: Yes. DROP participants will continue to make monthly contributions required by law to the TRS retirement fund and for TRS-Care, the retiree health program. Currently, the employee contribution is 6.4% of pay and the state contributes 6% to the retirement fund. Public school employees also contribute .25% of their pay to the retiree health program, and the state doubles this at .50%. Nothing is forfeited. The DROP account along with accumulated interest will be distributed to the member upon retirement.

Q 10: How will my annuity be affected during the period that I participate in DROP?

A: The amount of the annuity is established and frozen when DROP is elected. This means that participating members will not accumulate any further retirement benefits toward their annuity, e.g., no further years of service or compensation improvements. The member is not retired while participating in DROP; therefore, the amount of the annuity will not be impacted by annuity increases for retirees during the period of service as an active employee.

Q 11: Is interest earned on DROP accounts? If so, how much interest, and would it continue to accrue if an installment payout was elected?

A: Yes. Interest is accumulated at the rate of 5% per annum during participation and until all DROP balances have been distributed.

Q 12: May I continue to work for a TRS-covered employer after completing the DROP period?

A: Yes. The employee/employer relationship is not influenced by DROP participation. If a member continues to work after completing DROP participation, credit is earned toward a second, separate annuity. Should this occur, the member would have three sources of retirement income upon retirement — the first annuity, the DROP account, and the second annuity.

Q 13: How do early age reduction factors apply to DROP?

A: They don’t apply. One of the criteria for participation is that the member be eligible for an unreduced standard annuity.

Q 14: Can DROP participation begin at any time during a year?

A: Yes. The effective date of participation is the first day of the month designated on the DROP election form, or the first day of the month following the month in which TRS receives the election form, whichever is later.

Q 15: During payout of DROP balances, can a member or beneficiary change the form of the payment (i.e., from a monthly payment to a lump sum)?

A: A retiree or beneficiary who is first paid monthly or yearly distributions may later make a one-time election to accelerate installment payments to a lump-sum amount representing the remaining DROP account balance.

Q 16: How are special service credit purchases affected by DROP?

A: Members who wish to participate must complete the purchase of any special service credit that they want to acquire on or before the date of their participation in DROP. This means that DROP participation nullifies any future opportunity to purchase past special service credit.

Q 17: Although DROP deposits are calculated using a standard annuity, will I be able to select an optional annuity payment when I retire?

A: Yes, selection of one of the option choices may be made at the time of retirement.

Q 18: How can members determine whether DROP or the partial lump-sum option best meets their needs? Also, how are the lump-sum amounts calculated, and by how much will my monthly retirement benefit be reduced if I select one of the lump-sum options?

A: Since each individual’s situation is unique, it is recommended that members carefully consider each program to determine if participation in either one best serves their needs. For additional information, a special DROP brochure is available on the TRS Web site. Also, an explanation of the new partial lump-sum option is included in this Web site under the "Partial Lump Sum" tab, along with tables that show how much a member’s annuity would be reduced by selecting this option. As additional details become available, they will be shared through the TRS Web site.

Q 19: How long can a member participate in DROP?

A: For a period of one to five years in yearly increments.

Q 20: How is my DROP account paid to me on termination?

A: • One lump-sum payment

• Yearly or monthly payments over a five-year period

• Yearly or monthly payments over a 10-year period