HB475 Alabama 2011 Session

Summary

Primary Sponsor

Craig Ford

Independent

Session

Regular Session 2011

Title

Retirement, new Deferred Retirement Option Plan established for teachers and state employees, Secs. 16-25-150.1, 16-25-151.1, 36-27-170.1, 36-27-171.1 added

Summary

HB475 would create a new Deferred Retirement Option Plan (DROP) for Alabama teachers, other state employees, and state police, allowing eligible workers to continue working while delaying retirement benefits.

What This Bill Does

It establishes DROP as an optional account where eligible participants can work for 3–5 years and defer retirement benefits until the end of the period. Eligibility includes: at least 30 years of creditable service, age 57 (or 52 for state police), and earning less than $75,000 at the start, with a maximum annual increase of 2%. Participants may enroll only once, and certain early Termination rules apply. While in DROP, service remains as-it-was, purchases are not allowed, contributions continue, and the retirement allowance is deposited into the DROP account; participants lose future cost-of-living increases during DROP and may have adjustments after exiting. At withdrawal, they receive a lump-sum from the DROP plus their accumulated contributions (or may roll over), and begin receiving the retirement benefit calculated for post-DROP service, with possible sick leave credits; death or disability during DROP triggers specific payout rules and may affect benefits.

Who It Affects

• Eligible employees (teachers, other state employees, and state police members) who meet the 30 years of service, age thresholds, and earnings limit, allowing them to participate in DROP and defer retirement benefits.
• Employers and retirement systems (e.g., boards controlling the retirement funds) responsible for administering DROP, continuing employer and employee contributions, managing DROP accounts, and ensuring benefits are recalculated and distributed per DROP rules.

Key Provisions

• DROP is an optional account within the retirement system to allow continued employment and deferral of retirement benefits for a defined period (3–5 years, not to exceed five years).
• Eligibility requires at least 30 years of creditable service, age 57 (or 52 for state police), and earnings under $75,000 at the start of DROP, with up to 2% annual increase; participation is one-time.
• Enrollment must occur within a 30–90 day window before the start of DROP, and retirement must occur at the end of the participation period; voluntary termination within the first three years can forfeit the DROP account (except for disability or death).
• While in DROP, service credit purchases are not allowed, sick leave cannot be converted to establish eligibility, and COLAs do not apply until DROP ends and the member has been retired for a year.
• The DROP account earns interest at the lesser of 2% or the two-year U.S. Treasury yield; the plan is not subject to fees, and benefits may be rolled over to an eligible retirement plan or paid as a lump sum at withdrawal.
• Upon withdrawal, the member receives the DROP balance plus accumulated contributions (with interest) or may roll over to another retirement plan; the monthly benefit is recalculated to reflect post-DROP service and any applicable sick leave credits; death or disability during DROP has specific payout rules that may limit other death benefits.

AI-generated summary using openai/gpt-5-nano on Feb 25, 2026. May contain errors — refer to the official bill text for accuracy.

Subjects

Retirement