HB690 Alabama 2015 Session

Summary

Primary Sponsor

Craig Ford

Independent

Session

Regular Session 2015

Title

Retirement, DROP reestablished for state employees, provides requirements and terms of DROP participation, Secs. 16-25-150, 36-27-170 am'd.

Summary

HB690 would reestablish Alabama's Deferred Retirement Option Plan (DROP) for new state employees in Tier I and Tier II, with rules on eligibility, participation, and how benefits are saved and paid out.

What This Bill Does

The bill reestablishes DROP for new participants after the act's effective date, covering teachers and public safety employees. It sets who can join based on years of service, age, and a salary limit of 125,000 dollars adjusted for inflation, with some allowances for higher earners if otherwise eligible. It outlines how DROP works, including continued contributions, the transfer of the retirement allowance into a DROP account, interest accrual, and withdrawal after five years, plus rules about cost of living adjustments and the prohibition on new full or part time state employment after DROP.

Who It Affects

• State employees including teachers and public safety workers who meet the Tier I or Tier II eligibility criteria and may choose to participate in DROP.
• Administrators and boards responsible for the Teachers' Retirement System and Employees' Retirement System who would implement, manage, and oversee the DROP program and its benefits.

Key Provisions

• DROP is reestablished for new participants in Tier I and Tier II retirement plans with an effective date determined by the act.
• Eligibility includes at least 25 years of creditable service (tier I) or 10 years (tier II), an age threshold (55 for Tier I; 56 for Tier II; with state police exceptions), eligibility for service retirement, and an annual salary cap of 125,000 dollars adjusted for inflation.
• State police members have different age requirements: 52 for Tier I and 53 for Tier II.
• Participants may elect to join in one-year increments up to five years, not less than three years, and may participate only once; withdrawal after five years is required and no state employment is allowed after DROP.
• An optional benefit election may be chosen at the start of participation; otherwise the participant receives the maximum retirement benefit, and the election is irrevocable unless the law provides otherwise.
• Sick leave cannot be used to establish DROP eligibility or to calculate the original retirement allowance, with exceptions noted in related code.
• Employer and employee contributions continue; no credit purchases are allowed; the monthly retirement allowance that would have been paid is deposited into the DROP account and remains part of the retirement fund until disbursed.
• DROP accounts earn interest at the greater of 3% or the two-year U.S. Treasury yield, and participants may receive a retiree cost-of-living adjustment while in DROP, though future retiree COLAs begin after withdrawal and at least one year of retirement allowance.
• DROP shall not be subject to fees or other expenses, and participation does not affect other employee rights or accruals such as annual/sick leave; DROP participants may receive salary adjustments and COLAs.
• The act becomes effective on the first day of the third month after passage and governor’s 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