The DROP
- The Indiana General Assembly made the Deferred Retirement Option Plan (DROP) available any time after January 1, 2003. This benefit allows eligible members of the 1977 Police Officers’ and Firefighters’ Pension & Disability Fund to accumulate a DROP benefit while they continue working.
- An employee eligible to retire and immediately begin drawing unreduced benefits may enter the DROP and declare a retirement date. 1977 Fund members must be at least 52 years old and have worked in a Fund covered-position for a minimum of 20 years.
- The DROP retirement benefit will be calculated as if the employee had retired on the date the DROP period begins.
- The employee who chooses the DROP will continue employment in his/her current status for the DROP period. During this time, the DROP benefit is accrued.
- An employee who terminates employment on the retirement date at the end of the DROP period may choose between, (i) a lump-sum/installment payment of the accrued amounts in the DROP account and a monthly pension calculated based on salary and service at the time the member entered the DROP, or (ii) a monthly pension calculated base on salary and service at the time the member exits from the DROP, with no lump-sum / installment amount.
- The Enrollment Process
The employee must submit:- An election to participate in the DROP specifying the DROP entry date, which must be the first day of the employees’ DROP period,
- A notice of retirement date, which must be the last day of the employee’s DROP period, and
- Any other forms required by PERF.
- The DROP Period
- Minimum of 12 months.
- Not more than 36 months.
- An employee may make only one DROP election during his/her lifetime.
- DROP may not extend past the mandatory retirement age of the local unit , if one exists.
- Pension Contributions While in DROP
- Employees will make 6% pension contributions while in the DROP unless they have already reached 32 years of service before their DROP entry date.
- Employers will make 21% contributions for the 1977 Fund members while in the DROP.
- Disability While in DROP
- If the member becomes disabled while in the DROP period any disability benefit for which they may be eligible would be calculated as if the member had never entered the DROP.
- Death While in DROP
- Benefits for survivors of members who die while in the DROP will be determined on the date of death, as if the member never entered the DROP, according to the provisions of the 1977 Fund.
- Eventual Benefit
- When the fund member exits the DROP and retires on the member’s DROP retirement date, the member can choose between the following two options:
CHOICE I: Benefits that consist of a DROP benefit and a monthly benefit, calculated as follows: (i) A DROP benefit equal to the amount that “accrued” while the member was in the DROP. This would be paid out, at the member’s election, in a lump sum, or three annual installment payments, plus (ii) a monthly benefit calculated based on the service and the unit’s first-class salary base in effect when the member entered the DROP.
CHOICE II : The monthly pension based on salary and service in effect when the member exits the DROP, and no lump sum/installment component. (In other words, the member would receive the monthly benefit that the member would have otherwise received without ever entering the DROP.)
If a member does not retire on their DROP date, the member’s benefits will be determined under the provisions of the applicable fund as if the member had never entered the DROP, and the member will not be able to make a future DROP election. Frequent Questions*
* Note: This information is being provided as a general explanation of pension related legislation. Every effort has been made to ensure that this information is correct. However, in the event that this information is inconsistent with the underlying statutes, the statutory provisions shall control.
