HB1 Alabama 2019 Session

Summary

Primary Sponsor

John W. Rogers

Democrat

Session

Regular Session 2019

Title

Retirement, Deferred Retirement Option Plan (DROP), open participation in Employees' Investment Retirement Plan (EIRP), 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

HB 1 would open participation in the DROP Employees' Investment Retirement Plan (DROP EIRP) and expand participation options for Tier I and Tier II members in Alabama retirement systems.

What This Bill Does

It creates DROP EIRP as an optional account inside the retirement system that lets a member continue working for a defined period while deferring retirement payments until the end of the participation term. Eligible Tier I and Tier II members can choose to participate, with age and service requirements that vary by system, and the election can be made in 1-year increments for 3 to 5 years and is irrevocable. While in DROP EIRP, 80% of the monthly retirement allowance is deposited into the DROP EIRP account, employer and employee contributions continue, and the account earns interest with no fees. At the end of the period, or upon withdrawal, the member can receive a lump sum and may roll over the benefits to another retirement plan; the monthly benefit resumes and is recalculated to reflect sick leave; additional service after DROP may provide extra retirement benefits; and death or disability provisions apply to beneficiaries.

Who It Affects

• Tier I and Tier II members of Alabama's retirement systems (ERS/TRS and state systems) who meet the specified age and service requirements and choose to participate in DROP EIRP.
• Beneficiaries or estates of participants who die during the DROP EIRP period, who may receive lump-sum payments and potential adjustments to sick-leave credits.

Key Provisions

• Establishes DROP EIRP as an optional, contract-based account within the retirement system to defer retirement payments while continuing employment.
• Tier I eligibility: at least 25 years of service, age 55 or, for state police, age 52; Tier II eligibility: at least 25 years of service, age 62 (with age 56 for certain public safety roles in some sections).
• Election to participate may be made in 1-year increments, not less than 3 years and not more than 5 years; participation can occur only once and is irrevocable once the period begins.
• During DROP EIRP, 80% of the monthly retirement allowance is deposited into the DROP EIRP account; employer and employee contributions continue; the account earns interest and is not subject to fees.
• Participation does not count as service credit for retirement purposes; sick leave conversion and retirement credit are handled per existing rules, with limitations.
• At withdrawal, participants receive a lump-sum payment plus accrued contributions and interest, with an option to roll over into another qualified retirement plan; monthly benefits resume and may be recalculated for sick leave credits.
• An additional retirement benefit may be paid for service after termination of DROP EIRP, calculated using standard retirement formulas and not combined with pre-DROP service; death or disability during this period affects how benefits are paid.
• If death occurs during DROP EIRP, a lump-sum payment goes to the beneficiary or estate, with certain restrictions on applying other death benefits.
• If a participant does not withdraw after the specified period, they resume active contributing membership and DROP time does not count toward qualifying service credit.
• Effective date: January 1, 2019.

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)