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If you like the idea of building
a nest egg for retirement, the Pension System offers
you a great way to build it while you are still employed.
The program is called the Deferred
Retirement Option Plan—or DROP.
What are the
requirements for Active Members to participate in
DROP?
To qualify for DROP, you must be in Active Service
when you enroll and be eligible to retire and immediately
receive a pension benefit.
How does DROP work?
Basically, a DROP account allows you to save a lump-sum
amount for retirement in addition to the regular
pension benefit that you will receive after you leave
Active Service. Here are the key features:
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After you enroll in DROP, you cannot
change your decision. |
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With DROP, you continue working and earning
a paycheck after you are eligible to begin receiving
a pension from the Pension System. |
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Your monthly contributions to the Pension System
stop when you become a DROP participant.This
means your monthly paycheck will be bigger. |
| • |
Instead of paying you a pension, the Pension
System puts your regular monthly pension benefit
into an account on your behalf—and you
earn interest on the account. |
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You are entitled to any benefit supplements
and annual adjustments that you would have received
if you have actually retired—and those
will be included in deposits to your DROP account. |
What happens when
I leave Active Service?
When you leave Active Service, you must decide:
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How to receive your monthly
pension benefit – You can receive your regular monthly
pension payments directly, have them deposited
to your bank account, or have them credited to
your DROP account and receive them later. |
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Whether to take money from your DROP account –
If you decide to receive payments from your DROP
account, they can be lump sum amounts or
monthly
payments. Your balance in DROP continues to earn
interest while it remains in your account. DROP
withdrawals are taxable income. Federal law requires
you to start taking money from your DROP account
when you reach age 701⁄2. |
The Pension System urges you to
meet with a tax or financial advisor before you decide
when and how
to receive distributions. By planning carefully and
getting help from an expert, you can make the best
possible decision and avoid or reduce any adverse
tax consequences.
Is DROP right for me?
When you enroll in DROP, in exchange for the advantage
of accumulating a DROP account, you are not entitled
to earn additional pension benefits through pay increases
or additional years of Pension Service. A Benefits
Counselor can explain the DROP rules to you in detail
and point out the advantages and disadvantages of
participating in DROP.
This is a general overview
of DROP. It is intended to increase your awareness
of the options available to you, but it does not
give legal or financial advice or provide enough
details for you to make decisions.
For additional
information, refer to your Member Handbook, the Plan
Document, or attend the Pension System’s educational
programs. Go to the Forms section. You also may contact a Benefits Counselor
via e-mail, or
call the Pension System office at 214.638.3863 or
1.800.638.3861. You also should
consider obtaining advice from a tax consultant or
financial advisor of your choice before deciding
when to retire and how to receive your pension benefit.
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