HB503 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

HB503 would create a new Deferred Retirement Option Plan (DROP) for Alabama teachers and state employees to continue working while deferring retirement benefits for a set period.

What This Bill Does

It adds a DROP option for eligible employees to work 3–5 years while retirement benefits are deposited into a DROP account. Eligible participants must have 30+ years of service, be at least 57 (with some age variation for state police), and earn under $75,000 at the start, with benefits increasing up to 2% per year. Contributions continue during DROP, and after the period ends, participants withdraw a lump-sum or roll over the DROP funds, and begin receiving a recalculated retirement allowance; in DROP, they do not receive annual cost-of-living increases and sick leave credit is handled under specific rules.

Who It Affects

• Eligible teachers and state employees who meet service, age, and earnings requirements and choose to participate in DROP.
• The state retirement systems and participating employers, which must continue contributing during DROP, manage DROP accounts, and handle benefit calculations, distributions, and potential rollovers or lump-sum payments to beneficiaries.

Key Provisions

• DROP is established within the retirement systems for teachers and state employees, allowing deferral of retirement while continuing employment for a defined period.
• Eligibility requires at least 30 years of creditable service, age 57 (with a separate provision for state police), eligibility for service retirement, and earnings under $75,000 at the start of DROP, with a maximum annual increase of 2%.
• Participation in DROP lasts between 3 and 5 years and may occur only once; voluntary termination within the first 3 years forfeits the DROP account (disability or death exceptions apply).
• During DROP, the member’s service remains as of the start date, contributions continue, DROP earns interest (the lesser of 2% or the 2-year U.S. Treasury yield), and the member does not receive a retiree COLA until after DROP ends.
• Upon withdrawal from DROP, the member receives a lump-sum equal to DROP deposits plus interest or may roll over to an eligible retirement plan; the monthly benefit is recalculated and may reflect sick-leave credit, subject to applicable laws and existing limits.
• If the member dies or becomes disabled during DROP, applicable death benefits are handled with specified lump-sum or potential benefit recalculation for the beneficiary, following the act’s rules.
• If the DROP period ends and the member does not withdraw, DROP deposits stop and the member resumes active contributing membership without earning service credit for time spent in DROP.

AI-generated summary using openai/gpt-5-nano on Feb 24, 2026. May contain errors — refer to the official bill text for accuracy.

Subjects

Retirement