What are steps you must take to terminate from DROP?

If you work until your original Deferred Retirement Option Program (DROP) termination date, the Division of Retirement will mail you your DROP Termination Packet approximately 90 days prior to your last day of employment.

If your employment ends before your original DROP termination date, it is important that either you or your employer contact the Division of Retirement as soon as possible so you can receive your DROP Termination Packet in a timely manner. The Division of Retirement can be contacted via phone, mail, fax, or email to report your new DROP termination date.

If you have created your FRS Online account and selected “Electronic” as your communication preference, this packet will be uploaded to the inbox if your account instead of mailed to you. You may access your FRS Online account to log in or create an account by clicking here

What is in your DROP Termination Packet:

  • Cover letter explaining the process.
  • Form DP-TERM, DROP Termination Notification – to be completed by you and your employer’s authorized personnel staff to certify your employment termination.
  • Form DP-PAYT, Selected Payout Method – to choose your DROP distribution method.
  • You have three choices for the distribution of your DROP benefits:
    • Lump sum – less 20 percent tax withholding. The DROP payment is mailed directly to you. (Any portion of your payout that is taken as a lump sum prior to the year that you reach age 55 may incur an additional 10 percent tax penalty.)
    • Direct rollover – no tax withholding. The DROP rollover payment is mailed directly to the custodian(s) of your selected qualified plan.
    • Combined partial lump sum and direct rollover- the lump sum portion will be subject to the 20 percent tax withholding.
  • Direct Deposit information sheet.
  • Form DFS-A1-26R, Direct Deposit Authorization Form – this form can be used to set up your direct deposit or you may also set up your direct deposit by signing in online.
  • Special Tax Notice.
  • Form DP-JOINT (Option 4 participants only)

What happens next?

Upon receipt of the completed Form DP-TERM, your name will be added to the Retired Payroll and your first monthly benefit will be dated as the last state business day of the month following your termination date.

  • Your DROP payout will be processed after receipt of the completed Form DP-PAYT and will be mailed the month following termination. NOTE: If you fail to return a completed Form DP-PAYT to the Division of Retirement within 60 days after your termination date, a lump sum distribution, less 20 percent federal tax withholding, will be mailed to you at any time after the 60 day period.
  • Lump sum or partial lump sum checks are mailed directly to you as they cannot be direct deposited.
  • Rollover checks are mailed directly to the custodian(s) listed on your Form DPPAYT.
  • You will receive a letter notifying you when the payout has been processed and mailed.