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Southern University System



Drop Summary

Explanation of DROP

The Deferred Retirement Option Plan (DROP) is an optional program in which a member of the Teacher's Retirement System of Louisiana (TRSL) chooses to freeze his/her regular monthly retirement benefit and to have this benefit deposited each month in a special account at TRSL while continuing to work and draw a salary from a TRSL employer.

DROP gives TRSL members the opportunity to build their savings on a tax-deferred basis. However, the plan may not be a good idea for every member. The decision to enter DROP should be considered very seriously and make very carefully.

Members must specify the consecutive period of time they plan to participate in DROP (up to two or three years, depending on eligibility). Once this participation period begins, the decision to participate is irrevocable. The participation period cannot be extended and can only be shortened by termination of employment or death.

During DROP, a member's take-home pay may increase because neither members nor employers make retirement contributions to TRSL.

At the end of DROP, the member may either terminate employment and begin regular retirement or continue working.

When the member terminates employment and retirees, he/she may begin withdrawing funds in the DROP account.

If the member continues working after DROP, withdrawals cannot be made from the DROP account during continued employment, and employee and employer contributions to TRSL must resume. The member earns additional service credit for the period of continued employment.

Members who terminate DROP early do not lose funds already deposited in their DROP early accounts. They may withdraw from their DROP accounts just as other members who complete DROP and terminate employment would.

DROP eligibility:

Regular Plan, Plan A, Plan B

The 1993 Legislature created a 3-year DROP, effective January 1, 1994, which supplements the 2-year DROP put into effect in July 1992.

This plan allows members to participate in DROP for a maximum of three years beginning on the date they first become eligible to retire and ending no later than 3 years and 60 days later. The extra 60 days allows time for members to have service credit certified by their employers.

Total service credit will be rounded to the nearest tenth. For example, 9.95 years would be rounded to 10 years; 24.94 years would be rounded to 24.9 years. Twenty years of service will not be rounded, if the member is retiring before age 60. Service credit earned after DROP will not be rounded.

Under the 3-year plan, Regular Plan members, to qualify for a benefit based on 2.5 percent of salary per year of service credit, must be:

  • Any age with 30 years of service
  • At least age 55 with 25 years of service; or
  • At least age 65 with 20 years of service.

Regular Plan members, to qualify for a benefit based on 2 percent of salary per year of service credit, must be at least age 60 with 10 years of service.

Plan A members may enter DROP:

  • At any age with 30 years of service;
  • At least age 55 with 25 years of service; or
  • At least age 60 with 10 years of service.

Plan B members may enter DROP:

  • At least age 60 with 10 years of service; or
  • At least 55 with 30 years of service.

NOTE: There are restrictions in all plans as to whether credit for military service can be used to meet eligibility requirements.

Unused annual and sick leave cannot be converted to establish eligibility for DROP. Members who were eligible for the 3-year DROP on or before January 1, 1994 (i.e., those who were eligible to retire on or before that date) may choose a 2-year DROP participation period at any time in the future as long as they continue working for a TRSL employer.

Those members who become eligible for the 3-year plan on or after January 2, 1994, (i.e., become eligible to retire on or after that date) do not have a choice of the 2-year DROP participation period. If these members wish to participate in DROP, they must decide to do so within the three years following the date on which they are first eligible to retire. If they do not participate in DROP during those three years, they cannot participate in DROP at all.

In summary, if a member was eligible to retire on or before January 1, 1994, he or she may choose the 2-year plan at any time in the future. If a member is eligible to retire on or after January 2, 1994, the only option open is the 3-year plan.

The 3-year DROP eligibility period begins when a member is first eligible to retire, even if that is when the member has 10 years of eligibility credit and is at least age 60. Unused annual and sick leave cannot be converted to establish eligibility for DROP.

 

NOTE: A Regular Plan member who is age 60 and who enters DROP with 10 years of service credit will have his/her benefit calculated at the 2 percent formula. This member may decide not to enter DROP so that he/she can retire later with a benefit calculated at 2.5 percent.

Members who enrolled in the 2-year DROP are not eligible for the 3-year plan and may not choose to extend their DROP participation.

Members who retire under the 20-year-retirement-at-any-age provision, or the Option 5 retirement provision, or who are members of the Optional Retirement Plan are not eligible to participate in DROP.

Members may participate in DROP while on workers' compensation, annual, sick, or sabbatical leave, or documented leave without pay. A member must be employed for the entire period of DROP participation. A member who has retired or terminated employment or who is not employed on a continuous basis is not eligible for participation.

NOTE: The benefit deposited during DROP does not include credit for sick or annual leave. This leave is included in the final retirement benefit computation after completion of DROP and termination of employment. Under Louisiana Revised Statute 11:787(A), participation in DROP will not change the seniority status or any other related benefits that any member is entitled to as a condition of employment.

Members should also be aware that credit given by school boards for purposes of seniority is not the same as years of service credit for which contributions were made to TRSL.

Members who wish to participate in DROP should start early getting documentation in order. They should begin by having employers certify all service credit and should apply for DROP up to six months in advance.