You and your employer(s) must submit Form DP-TERM, DROP Termination Notification, to verify that you terminated all employment with FRS employers. Monthly benefits are payable on the last working day of the month. Your DROP payout is distributed the month following your termination as long as your termination has been verified.
Your DROP accumulation stops earning interest the month in which your participation ends. Your DROP accumulation is paid in one of three ways:
- as a lump-sum payment, with 20 percent withheld for federal income taxes;
- as a direct rollover to an eligible retirement plan; or
- as a combined partial lump-sum payment and direct rollover.
If your DROP accumulation includes certain personal contributions, such as required after-tax employee contributions you made prior to 1975 or payments for optional service credit you purchased using after-tax dollars, that portion of each monthly payment will be paid as a tax-free, lump-sum payment.
The division uses the Simplified Method under the Internal Revenue Code to compute that payment. This portion of your DROP accumulation represents your after-tax contributions that you cannot roll over with your pre-tax contributions.
Within 60 days after your DROP participation ends, the division distributes your account the way you choose. If you do not choose a distribution method within that 60-day period, the division issues a lump-sum payment and withholds 20 percent for taxes.
Note: If you hold an elected office at the end of your DROP participation, you must fulfill the termination requirement as provided in section 121.021(39), Florida Statutes. Your termination may occur at the end of your 60-month DROP eligibility period or be postponed to the end of the term of office in which your DROP participation ended or any successively held office. If your termination requirement is extended under this provision, you are not eligible for renewed membership in the FRS and will not receive pension payments or your DROP account distribution until you terminate from elected office. After the end of your DROP participation and prior to termination from office, your DROP account will no longer earn interest after your DROP participation ends. If you are an elected official and need more information, contact the Bureau of Retirement Calculations.