The Deferred Retirement Option Program (DROP) is a unique option for eligible Florida Retirement System (FRS) Pension Plan members. Under this program, you stop earning service credit toward a future benefit.
Then, you will have your retirement benefit calculated at the time your DROP period begins and your monthly retirement benefits accumulate in the FRS Trust Fund earning interest while you continue to work for an FRS employer.
Upon termination, your DROP account is paid to you in one of three options:
- Lump sum payment – upon which you will pay ordinary income tax on the full amount
- Rollover – including into your State of Florida Deferred Compensation Plan account
- Combination partial lump sum payment and rollover – allowing you to take advantage of both of the previous options
By rolling over some or all of your DROP assets into an IRA account with a guaranteed lifetime income rider, you can continue the benefits of tax-deferred investing until withdrawing these assets. You control when you withdraw the assets until age 70½ when the IRS requires minimum withdrawal of tax-deferred assets, including DROP funds. You will pay ordinary income taxes upon withdrawal.
Qualified retirement plans, deferred compensation plans and individual retirement accounts are all different, including fees and when you can access funds. Assets rolled over from your account(s) may be subject to surrender charges, other fees and/or a 10% tax penalty if withdrawn before age 59½. Neither DROP Advisory Council members nor any of its representatives give legal or tax advice. Please contact your legal or tax advisor for such advice.
Get the help you need
If you’ll soon qualify for the DROP program, contact your DROP Advisory Council member. For more information, please or e-mail the DROP Advisory Council Chairman at DROP Advisory Council.