|Frequently Asked Questions
Regarding the DROP Program
What does the phrase "DROP" stand for?
DROP is an acronym for “Deferred Retirement Option Program” or a “Delayed Retirement Option Plan”.
What is a Deferred Retirement Option Program (DROP)?
A DROP Program is a form of retirement benefit that allows an employee to continue working while accumulating a
savings account consisting of the benefits that would have been received had the employee actually retired. In other
words, it is a chance to earn two incomes at the same time, with one of them being saved and invested without current
tax liability. From a technical standpoint, a DROP program represents a method of providing for the deferred receipt
of retirement benefits from a defined benefit plan.
Where and when did DROP plans originate?
DROP arrangements first started with several public safety plans in Louisiana during the mid-1980's to:
- Encourage police and fire personnel who could retire early (after 20 years of service) to continue working.
- Allow a partial lump sum distribution option in the pension plan.
- Provide the employer with a predictable turnover picture.
DROP plans now exist in Louisiana, Arkansas, Oklahoma, and Florida on the state and local level as well as locally in
Texas, Colorado, and California. Originally popular with police and fire plans, they now exist for teachers and general
public employees as well.
Eligibility and Participation Questions
Who is eligible to participate in DROP?
All members of the Pension Plan (i.e., active members) are eligible to participate in the DROP providing such members are eligible for normal service
retirement as specified above.
What are the time limits under which a member must elect to participate in DROP?
Election to participate may be made on the date following the date on which a member first reaches eligibility for normal retirement. In order to participate
for the full eight (8) years in the DROP, entry into the program must commence prior to the member's completion of Tier One (1) members twenty-years (20) or Tier Two (2) members twenty-five years (25) of credited service. DROP participation eligibility shall be reduced by one month for each month following the attainment of Tier One (1) members twenty-years or Tier Two (2) members twenty-five years of credited service.
When will participation in the DROP begin?
The DROP Ordinance, Ordinance No. 00-16, was enacted by the City Commission in January of 2000 and became effective upon adoption. The
beginning date of the DROP period for participation shall be the first full bi-weekly pay period selected by the Pension Board for the commencement of
DROP participation. An employee shall be eligible to enter the DROP at the earliest date of eligibility for normal retirement and subsequently on his/her
anniversary date through completion of Tier One (1) member twenty-years (20) or Tier Two (2) member twenty-five (25) years of credited service.
How long can I participate in the DROP?
An employee's participation in the DROP when combined with the number of years of credited service in the retirement plan shall not exceed a total of
thirty (30) years. However, in no event shall total participation in the DROP exceed eight (8) years.
In the event that an eligible member decides to participate in the DROP, what must he or she do?
An eligible member may elect to participate in the DROP by complying with the election process and the administrative rules established by the Board of
Trustees. Such requirements shall include, but shall not be limited to the following:
- A written election to participate in the DROP;
- Selection of DROP participation and retirement dates. Such retirement date shall be a binding application for retirement, establishing a deferred
- A properly completed DROP application for service retirement. The DROP application will constitute an irrevocable letter of termination from
service with the City, upon completion of the DROP period.
Can a participant retire before the end of the DROP period?
Yes. A DROP participant can retire at any time before the end of the specified DROP period. DROP payments would continue as monthly pension
checks paid directly to the participant, who would be entitled to receive the entire balance in his l her DROP account.
While I continue to work during the DROP period do I have access to my DROP account before the end of the DROP period?
In order for a member to receive any payment from the DROP account, you must actually separate from service with the City of Miramar. It would violate
both local and federal law to receive a distribution while still an active employee.
Do I have to decide at the time I enroll in DROP how long I will participate and keep working for the city?
Yes. However, for purposes of preserving maximum flexibility, many individuals may find it advantageous to elect to participate for the maximum period of
time even if they feel that their actual period of DROP participation may, in all likelihood, end at an earlier date. You can always terminate employment
and retire prior to the end of your announced DROP participation period; however, once announced, you are not permitted to work beyond your
originally stipulated DROP ending date even if such date fell short of the maximum period allowed for DROP participants.
Employment Status Questions and Contribution Requirements
Are you covered by social security while you participate in DROP?
Is there any special membership designation once an active member begins participation in the DROP?
Yes. Upon participation in the DROP, the member shall be deemed a retiree of the Pension Plan.
Is a DROP participant considered to be an active employee or a retiree?
A DROP participant shall be a retiree under the Pension Plan for accumulation of increased pension benefits, unless otherwise prescribed, but for
purposes of employment with the City, the DROP participant shall be treated as any other active employee with respect to their ability to enjoy the
availability of salary increases, promotions, employee benefits and programs related thereto.
Are your active employee benefits affected while you are in DROP?
Generally speaking, no. DROP participants shall receive all other benefits payable to active employees. You continue to accrue sick leave if you are
eligible to do so now, and you continue to accrue vacation time. Any other time or holiday accrual for which you are presently eligible also continues.
Your health insurance coverage also continues uninterrupted and unchanged, at current active rates.
Can you enter the DROP and later change your mind or must a DROP participant actually retire at the end of the DROP period?
The decision about when to retire and whether or not to enter DROP is entirely your decision. Once made, the election to participate in the DROP
carries with it a" simultaneous election to retire that is irrevocable upon approval by the Board of Trustees. In essence, the DROP participant has
contractually agreed to retire as a condition of entering the DROP program. Once acted upon by the Board of Trustees, the election to retire becomes
What will my pension contribution requirements be during my period of DROP participation?
As an active employee participating in the Pension Plan you are currently required to make pension contributions in the amount of 13.4% of salary as
defined by the Plan. Upon DROP participation, your pension contribution requirements will be reduced to zero percent of pay or $0.
Does my participation in the DROP guarantee my continued employment with the City of Miramar?
Participation in the DROP is not a guarantee of continued employment. DROP participants are expected to conform to the same level of conduct and
efficiency as any other employee of the City.
Accumulation of Benefits Under the DROP Program
How are my retirement benefits accumulated in my DROP account?
Once you decide to enroll into DROP your monthly retirement benefit is calculated based upon your service and benefit levels as of the date you
entered the DROP. Instead of having this monthly retirement benefit paid directly to you or deposited in your bank, it will be credited into your DROP
account, where it will be invested, tax deferred, for as long as you participate in the DROP. Your retirement benefits will be paid into your DROP account
on a monthly basis on the same schedule as used for retirees.
How is interest calculated and credited to my DROP account?
A DROP participant can elect one of two methods to invest their DROP monies. A DROP participant can either elect to have his/her account monies
invested to earn the rate of return received by the pension plan, or he/she may agree to receive a fixed rate of return.
If a participant chooses the fixed rate of return vehicle, the participant's account shall earn interest at a rate equal to' the Pension Plan's assumed
investment earnings rate. The current assumption rate is 7.5% per year. This rate may be altered by the Pension Board. The investment earnings
assumption may be adjusted up or down during a member's participation in the DROP, which would result in a change in the prospective interest rate
credited to the member's DROP account.
A DROP participant can alternatively choose to earn or lose interest based upon the earnings and losses of the retirement plan for the preceding year.
DROP participants by virtue of their participation authorize the Pension Board to invest their DROP assets in the same manner as other assets of the
Pension Fund. By participation in the DROP, DROP participants agree to hold the Board of Trustees, the Retirement Fund and the City harmless from
any liability claims associated with investment losses which may occur in the ordinary course of the investment of assets of the Retirement System.
Can I purchase additional service credit in the retirement plan while participating in DROP?
No. Once participation in DROP begins, your retirement is final and you cannot add service credit.
Does a DROP program represent a separate retirement plan?
A DROP program simply represents a distribution option within a traditional defined benefit pension plan. It is not a separate qualified retirement plan.
Are all DROPs alike?
No. There is no rigid structure that must be followed for DROP programs. The design of DROP programs vary greatly and can be crafted to meet the
needs of the employees, the pension plan, and the plan sponsor.
Is a DROP program available as a benefit feature within the City of Miramar Police Officers' Retirement Plan and Trust Fund?
Yes, a DROP Program first became available as a retirement option to members with the adoption of Ordinance No. 00-16 in January of 2000.
How will the DROP program work?
DROP is designed to allow you to accumulate a lump sum cash amount for retirement without affecting your normal monthly retirement benefit as of the
date you became a DROP participant. Under DROP, you technically "retire" from the City of Miramar, yet continue to work as an active employee. For all
non-pension benefits, you will continue to be treated as an active police officer or deputy sheriff. If you become disabled after participating in the DROP,
you will not be entitled to receive a disability pension from the City of Miramar Police Officers' Retirement Plan and Trust Fund, since you are already
Here's how it works. Once you reach the service requirements for a normal service retirement, you are eligible to enroll in DROP. A member is eligible
for normal service retirement upon completion of one of the following:
- Tier I participants, this would be upon the completion of ten (10) years of credited service and the attainment of age fifty-five (55), or when the
member has completed twenty (20) years of service.
- Tier II participants, this would be upon the completion of ten (10) years of credited service and the attainment of age fifty-five (55), or when
the member has completed twenty (25) years of service.
When you enroll in DROP, you agree to "lock-in" your service and benefit levels as of the effective date of your participation. From a service and benefit
standpoint, it is as if you had retired on this date. You continue to work as an active police officer, though, and the Pension Plan credits your normal
monthly retirement benefit (based on your service as of the date you entered DROP) into your DROP account. You also continue to earn your normal
pay as a police officer, but since you are no longer an active contributing member of the Pension Plan, your employee contributions to the Plan will
Upon exercising the right to enter the DROP, your creditable service, compensation, and accrued pension benefit will become "locked-in". The amount
of your pension benefit will be determined based on the average of the three best years of the last ten years of service preceding participation in the
You can participate in DROP for a maximum of eight (8) years from your date of eligibility for normal retirement, however, a member's participation in the
DROP combined with the number of years of credited service may not exceed a total of thirty (30) years. During your participation in the DROP, your
normal retirement benefit payments are added to your account each month, plus your account earns interest based on the investment gains or losses
achieved by the Pension Fund. At the end of your DROP participation, you choose how you want to receive your DROP account balance from available