Griffin Speaks

WORKING UNTIL YOU DROP

As a State Attorney with less than three years before retirement I have become very educated about the DROP Program. I have had several state employees who are regular readers of my weekly column to ask me to write about the DROP program. DROP is the acronym for Deferred Retirement Option Plan. Any state of Alabama employee, teacher or State or County Officers and Employees’ Retirement System participant who has reached the ripe old age of 55 or older (age 52 for state police) with 25 years or more of service can join the DROP Program.

Those persons participating in the program must participate for at least three years and no longer than five years. A participant who voluntarily terminates employment or withdraws from the program in the first three years of participation is penalized. If a participant is fired or otherwise involuntarily removed from the program, becomes disabled, encounters an involuntary transfer of spouse, or dies within the first three years, no penalty will be assessed. Drop participants continue to receive the same employer benefits during DROP participation. Participation in DROP does not mean that you can not be terminated. 

DROP accounts earn on average 4% annual interest compounded monthly. DROP funds are not distributed until the participant terminates employment with his participating RSA agency. There are two methods for distributing DROP funds. The participant can choose to receive a lump-sum payment of the full amount in the DROP account less the 20% federal income tax withholding. DROP funds are exempted from Alabama State income taxes. A second method is to roll the DROP funds over into a regular IRA account, or another employer retirement plan. 

An employee becomes eligible to participate in DROP whenever he meets the requirements for participation which are: 25 years of employment and age 55 or 52 for state police officers. 

Sick-leave balances will be paid, but will not be included in determining years of service. DROP participants will continue to earn sick and annual leave. When the participant leaves service, his monthly retirement allowance will be recalculated to include earned sick leave. The number of days converted must not exceed the number of days the participant had on the date he entered the DROP program. If a participant leaves the DROP program before three years he will forfeit all employer contributions and interest. The participant’s contributions plus interest will remain. 

Once the five year period ends the participant is not required to terminate his employment. DROP proceeds will remain in the participant’s DROP account earning 4% interest until the participant terminates his employment. 

An employee considering the DROP program can determine what his benefits will be by visiting the RSA web site at www.rsa.state.al.us. This is a wonderful program. In addition to simultaneously earning a salary and accumulating retirement income, the program provides financial security for retirement; provides inheritance for a beneficiary not eligible for a continuing benefit under RSA; participants are able to accumulate a lump sum of money, with no maximum employment date. The only down side is you are forced to select the program in advance of your termination and the program reduces your monthly pension benefit for the rest of your life if you would have continued to contribute under RSA. 

My soon to be 79 year old dad, Dr. Melvin J. Griffin Sr., a State employee is determined to work until he DROPS. He has an incredible work ethic and vows to participate in the DROP program for the maximum number of 5 years. He spoke with a retirement counselor and was informed that he will be eligible to begin participating in the DROP program when he reaches age 95 (he will then have the required 25 years of service). He will start receiving his benefits when he reaches age 100. Isn’t GOD good? ALL the TIME!!!!!!!!!!!!!! Click Here

Greg Griffin is a free lance writer. You can read his previous articles by visiting his web page at www.greggriffin.com or write to him at P.O. Box 250194 Montgomery, Alabama 36125-0194. 

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