HB532 Alabama 2017 Session

Summary

Primary Sponsor

Tommy Hanes

Republican

Session

Regular Session 2017

Title

Retirement, Deferred Retirement Option Plan (DROP), options for Tier I and Tier II members to participate, reopened, Secs. 16-25-150, 16-25-151, 36-27-170, 36-27-171 am'd.

Summary

HB532 reopens and broadens the Deferred Retirement Option Plan (DROP) for Tier I and Tier II members of Alabama's ERS and TRS, with new eligibility rules and participation options.

What This Bill Does

The bill lifts the previous prohibition on DROP participation since 2011 and allows eligible Tier I and Tier II members to choose DROP again. It sets specific age and service requirements for eligibility (Tier I: 25+ years and age 55+; Tier II: 25+ years and age 62+ with some public-safety exceptions) and lets participants elect a DROP period of 3 to 5 years in one-year increments, on a one-time basis. While in DROP, the member’s retirement allowance is deposited into the DROP account and continues to accrue contributions; at withdrawal, a lump-sum plus accumulated contributions is paid and the monthly benefit is resumed and recalculated to reflect sick leave credits; DROP time does not count as service credit. The plan also specifies how rolls, potential forfeitures for early voluntary termination, and death or disability scenarios are handled, and states that DROP accounts earn interest and carry no fees.

Who It Affects

• Tier I and Tier II members of the Employees' Retirement System (ERS) or Teachers' Retirement System (TRS) who meet the new eligibility criteria and wish to participate in DROP.
• ERS/TRS and their participating employers, who will administer DROP accounts, manage contributions, and apply the new benefit calculations and withdrawal rules.

Key Provisions

• Reopens the Deferred Retirement Option Plan (DROP) by amending Sections 16-25-150, 16-25-151, 36-27-170, and 36-27-171.
• Eligibility: Tier I must have 25+ years of creditable service, be at least 55, and be eligible for service retirement; Tier II must have 25+ years of service and be at least 62 (with certain public-safety exceptions allowing 56 for some roles).
• Election window: Participants may elect DROP in periods of 3 to 5 years, in one-year increments, and may participate only once.
• Early termination: Voluntary termination within the first three years can forfeit portion of the retirement allowance in DROP, though member contributions and associated interest are preserved; involuntary termination, disability, or spousal transfer interruptions have no penalty for forfeiture.
• Contributions and DROP funding: Both employer and employee contributions continue; 80% of the would-be retirement allowance is deposited into the DROP account and earns interest; DROP funds remain within the retirement system until disbursed; there are no DROP fees.
• Benefits at withdrawal: Upon leaving DROP, the member receives a lump-sum payment of DROP contributions plus interest, plus accumulated employee contributions with interest; the monthly benefit resumes and may be rolled over, with sick-leave adjustments applied to retirement credits where allowed.
• Sick leave and option allowances: Sick leave cannot establish retirement eligibility through DROP and can be converted only as allowed by law; members can elect an option allowance at the start of DROP, which remains irrevocable except as provided.
• Time in DROP: Time spent in DROP is not considered service credit for Alabama public retirement system purposes.

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

Subjects

Deferred Retirement Option Plan (DROP)