The regular DROP plan is available for members of certain State, statewide, and local
public entities (RS 11:4) who are eligible for normal service retirement. In lieu of terminating employment,
members have the option to defer receipt of their monthly retirement benefit while
they continue to work and participate in the DROP program. The monthly benefit that
would be payable if the member had elected to retire and receive a service retirement
allowance is then deposited into an individual DROP account, maintained by the retirement
system.
Generally, active membership participation and employee contributions into the regular
retirement system cease. Employer contributions into the regular retirement system
may or may not cease, depending on the plan administering DROP. When participation
ends, the monthly annuity credited into the DROP account ceases. The member may then
elect to retire, or continue working and defer retirement. If employment continues,
employer and employee contributions into the regular retirement plan resume and in
some situations, members may earn additional service credits. While employment continues,
DROP funds are not available for distribution.
DROP deposits do not earn interest while a member participates in the program. However,
interest income on the DROP account may accrue, as long as the member continues working
or if, at retirement, the member elects to defer receipt of all or part of the DROP
funds.
When employment terminates and the member retires, a monthly annuity from the regular
retirement benefit is payable. DROP funds are also available for distribution either
as a lump sum payment or as a benefit structured in an alternate manner, subject to
approval by the board of trustees. Some plans allow members to defer receipt of all
or part of their DROP funds and roll over the balance into a qualified plan.