HB305 Alabama 2014 Session

Summary

Primary Sponsor

Craig Ford

Independent

Co-Sponsors

Artis McCampbellDarrio MeltonBarbara Bigsby BoydThomas JacksonMarcel BlackMerika Coleman

Session

Regular Session 2014

Title

Retirement, DROP reestablished, exceptions, Secs. 16-25-150, 36-27-170 am'd.

Summary

HB305 would reestablish the Deferred Retirement Option Plan (DROP) for Alabama’s Teachers’ and Employees’ Retirement Systems and lift limits on DROP interest.

What This Bill Does

It reopens DROP to new participants for eligible TRS and ERS members and removes prior caps on DROP interest. To participate, members must have at least 25 years of creditable service, be at least 55 (52 for state police), and be eligible for service retirement; they may participate for 3 to 5 years and only once. While in DROP, 60% of the retirement allowance that would have been paid is deposited into a DROP account, employer and employee contributions continue, and no service credits can be purchased; after five years the member withdraws from active service and cannot work full- or part-time for the state. DROP account interest would be calculated using rules tied to active accounts and investment performance, with no DROP fees and a temporary suspension of retiree cost-of-living increases during DROP.

Who It Affects

• Members of the Teachers' Retirement System and Employees' Retirement System who meet the eligibility rules could elect to participate in DROP and shift part of their retirement into a DROP account.
• State police retirement system members would be eligible under adjusted age rules (52+), allowing them to participate in DROP if they meet other requirements.
• Employers (school districts and state agencies) would continue to contribute to DROP, with 60% of the retirement allowance redirected into the DROP account during participation and ongoing funding requirements unchanged otherwise.
• Current retirees not in DROP are not directly affected, but the changes in DROP rules could influence future benefit calculations and plan funding; other rights and fringe benefits remain unaffected.
• Participants in DROP would suspend eligibility for retiree COLAs and would face specific withdrawal and employment restrictions during and after the participation period.

Key Provisions

• Reestablishes the Deferred Retirement Option Plan (DROP) for Sections 16-25-150 and 36-27-170 and allows new participation in DROP for eligible members.
• Eligibility requires at least 25 years of service, age 55 (or 52 for state police), and eligibility for service retirement; participation can last 3-5 years and may occur only once.
• During DROP, 60% of the retirement allowance that would have been paid is deposited into the DROP account; employer and employee contributions continue; service credit purchases are prohibited; after five years the member withdraws from active service and cannot work for the state upon completion.
• The election to participate can include an option allowance but is otherwise irrevocable once participation begins; sick leave cannot be used to establish retirement eligibility or to calculate the initial retirement allowance, except as specified elsewhere.
• DROP accounts earn interest according to a rate tied to active member accounts, with a cap and post-2011 rules allowing interest based on investment performance; DROP itself is not charged fees.
• DROP participation suspends retiree cost-of-living increases during participation and until withdrawal after which COLA eligibility resumes after meeting defined conditions; annual and sick leave accrual continues outside DROP.
• The act becomes effective on the first day of the third month following its passage and governor approval.

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