Deferred Retirement Option Program (DROP)
Any member eligible to retire as of September 30, 2010, continues to be eligible for DROP. A member who is eligible to retire as of January 1, 2013 (Service 55 years of age and 30 years of service, Service 60 years of age and 10 years of service, or Rule of 80) or was vested on October 1, 2010, is eligible to participate in DROP. Upon election of participation, a member’s creditable service, accrued benefits, and compensation calculation are frozen and the DROP payment is based on the member’s frozen average final compensation. The member’s contribution and the City contribution to the retirement plan for that member ceases as no further service credit is earned. The member does not acquire additional pension credit for the purposes of the pension plan but may continue City employment for up to a maximum of 48 months. Once the maximum participation has been achieved, the participant must terminate employment.
There are two DROP programs, the Forward DROP and the BACDROP. A member can participate in both programs simultaneously. The Forward DROP is a DROP benefit equal to the regular retirement benefit the member would have received had the member separated from service and commenced the receipt of benefits from the plan. The Trust will deposit monthly retirement benefits into the participant’s DROP account established at ICMA-RC. The BACDROP is a DROP benefit actuarially calculated. A member may elect to BACDROP to a date, no further back than the date of the member’s retirement eligibility date. The BACDROP period must be in 12 month increments, beginning at the start of a pay period, not to exceed 12 months.
An individual account is created for each participant. The Board of Trustees has established, by Administrative Rule, a series of investment vehicles which may be chosen by the participant. Any losses incurred on account of the option selected by the participant will not be made up by the City or the GESE Trust, and will be borne by the participant only. All interest will be credited to the member’s account.
Upon termination of employment, a participant may receive payment from the DROP account in a lump sum distribution; or periodic payments. A participant may elect to rollover the balance to another qualified retirement plan, individual retirement account, an Internal Revenue Code Section 457 Plan, or an annuity. A participant may defer payment until the latest date authorized by Section 401(a)(9) of the IRS Code. DROP participation will not affect any other death or disability benefit provided under law or applicable collective bargaining agreement.
If a participant dies before the account balances are paid out in full, the beneficiary will receive the remaining balance.