How much interest will I earn?



How much interest will your DROP account earn?

If your DROP begin date is on or after July 1, 2011, your DROP accumulation earns compounded monthly interest at an effective annual rate of 1.30 percent. After July 1, 2023, the interest rate is now 4 percent for all contributions on or after that date. Benefits on deposit for less than one month or after the month in which you end your DROP participation do not earn interest.

If your DROP beginning date was before Aug. 1, 2011, the monthly retirement benefit credited to your DROP account increases by a 3 percent cost-of-living adjustment (COLA) each July. Your first COLA will be a prorated amount of 3 percent if you have been in DROP for less than one year when you receive your first COLA. If your DROP begin date is on or after Aug. 1, 2011, your individual COLA each July is the sum of the pre-July 2011 service credit divided by the total service credit at retirement multiplied by 3 percent. Your first COLA will be a prorated amount of your individual COLA if you have been in DROP for less than one year.

Example: A member who enters DROP effective July 1, 2013, with 30 years of service of which 28 years occurred before July 1, 2011: 28/30 = .9333 x 3 percent = 2.8 percent. This member will receive a 2.8 percent COLA each July.

How can I estimate the value of my DROP account? Calculate your monthly benefit based on the FRS Pension Plan retirement benefit formula: Years of Service x Percentage Value x Average Final Compensation