SB2 Alabama 2018 Session

Summary

Primary Sponsor

Shay ShelnuttSenator

Republican

Session

Regular Session 2018

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

The bill would reopen the Deferred Retirement Option Plan (DROP) in Alabama and expand eligibility and rules for Tier I and Tier II members to participate.

What This Bill Does

It reopens DROP after it was prohibited and adds new options for Tier I and Tier II members to participate. Eligible Tier I members would need 25+ years of service and be at least 55, while eligible Tier II members would need 25+ years and be at least 62 (or 56 for certain public safety roles) and be eligible for service retirement. Participants may elect to join DROP in 1-year increments for 3 to 5 years, only once, with 80% of their monthly retirement placed into the DROP and ongoing employer and employee contributions. Upon exiting DROP, they receive a lump-sum payment plus accrued contributions with interest (or rollover to another retirement plan), and their monthly benefit resumes with adjustments for sick leave; time spent in DROP does not count as retirement service credit and COLA eligibility is affected during DROP.

Who It Affects

• Tier I and Tier II members of Alabama's Employees' Retirement System (ERS) or Teachers' Retirement System (TRS) who meet the age and service requirements and choose to participate in DROP.
• Beneficiaries and estates of DROP participants, who may receive lump-sum payments and, where allowed by law, rolled-over benefits or adjusted survivor payments upon the participant's withdrawal or death.

Key Provisions

• Reopens the DROP program for Tier I and Tier II members and provides new participation options.
• Defines eligibility: Tier I = 25+ years of service, age 55+, service retirement; Tier II = 25+ years, age 62 (or 56 for certain public safety roles) and service retirement.
• Allows DROP elections in one-year increments, with a total participation of 3 to 5 years and only one-time participation.
• During DROP, 80% of the monthly retirement allowance is deposited into a DROP account; employer and employee contributions continue; DROP time does not count as service credit; sick leave may not be used to establish DROP eligibility or initial retirement allowance except as provided by law.
• No DROP-related fees; participants may choose an option allowance but, if not chosen, receive the maximum benefit; election is irrevocable once DROP begins.
• At withdrawal, participants receive a lump-sum payment from the DROP account plus accumulated contributions with interest, with possible rollover to an eligible retirement plan; monthly benefits resume and may be recalculated to reflect sick leave credit; option election cannot be changed after DROP begins.
• If the participant dies or becomes disabled during DROP, specified lump-sum and survivor provisions apply, with certain death benefit limitations.
• Time spent in DROP is not eligible for service credit toward future retirement; COLA eligibility is suspended during DROP.
• Effective date: immediate upon passage following 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

Deferred Retirement Option Plan (DROP)