DROP (Deferred Retirement Option Program)

DROP is a voluntary program that allows eligible employees to initiate their monthly retirement distributions while continuing to work as an active employee for the County. Monthly retirement benefits are forwarded to a third party custodian (currently Nationwide) where the employee may select different investment options for the accumulated balance. Funds may not be accesed while the individual is still actively employed and regular contributions to SLOCPT cease upon entry.

Only certain Tier 1 Members can participate in DROP and for a maximum of five years. At the end of the five years, participants must officially retire from County employment. Retirement benefits are determined as of the date employee enters DROP. There are no provisions for emergency or hardship withdrawals under DROP.

To be eligible to participate in DROP, employees must be curently eligible to receive a service retirement from SLOCPT and employed in one of the following County Bargaining Units:

Miscellaneous Members: 01, 02, 04, 05, 07, 08, 09, 10, 11, 12, 13, 14, 17, 21 or 22
Safety Members: 03, 07, 10, 14, 15 or 16
Probation Officer Members: 07, 08 or 09

To learn more about DROP please contact our office or refer to Article 26 of the Retirement Plan.

FAQs

What is DROP?

DROP, or the Deferred Retirement Option Program, is a means by which Tier 1 Members may initiate their monthly retirement benefits with SLOCPT and maintain active employment with the County.

What is my status as County Employee during my participation in DROP?

During your participation in DROP, you continue as an employee of the County with all the rights and benefits associated with such employment. However, pension contributions are no longer deducted from your paycheck and forwarded to SLOCPT.

What is my status with SLOCPT once I enter into a DROP Agreement?

You will become a DROP participant. This means you are retired in the eyes of SLOCPT and have all the rights and benefits associated with retirement status.

What is my status after my DROP participation ends?

Upon separation from County employment, you become a Retired Participant and your monthly retirement benefit is redirected directly to you.

What happens to my Employee Additional Contributions?

At the time you enter DROP, you will make an election regarding the distribution of your Additional Contribution Account.

What is the procedure to apply for DROP?

To apply for DROP you will need to complete the Application for the Deferred Retirement Option Program (DROP) and submit the completed Application to SLOCPT. Applications must be receive in advance of your first DROP payment. Please contact SLOCPT directly to initiate a DROP Application.

What other documents will I need to provide?

You will need to provide copies of the originals or certified copies of the following:

            1. Your Birth Certificate
            2. Your Spouse’s or, if not married, your Beneficiary’s Birth Certificate
            3. Marriage Certification (with spouse's maiden name as applicable) to tie back to the birth certificate
            4. Court filed divorce documents addressing any community property division of pension benefits
            5. A copy of your most recent estimate from Social Security showing your estimated benefit at age 62.

What if I want to take back my DROP election?

Once your first DROP payment had been issued, participation can not be withdrawn.

What happens if I marry while I’m in DROP?

The marriage will be deemed to be a marriage occurring after retirement.

What happens if I get a divorce or become legally separated while I'm in DROP?

The amount in your DROP account, as well as your monthly benefit are considered community property under California Law. These assets should be addressed in your court filed divorce documents. We recommend you seek the advice of a qualified family law specialist.

What happens if I'm promoted while in DROP?

The amount of your retirement benefit, both the amount credited to your DROP account and the amount you eventually receive as a monthly retirement allowance, will not reflect your promotion. So, if you think a promotion for you is likely, you may want to consider the financial impact of delaying your entry into DROP until after your promotion.

What happens if I'm demoted while in DROP?

The amount of your retirement benefit, both the amount credited to your DROP account and the amount you eventually receive as a monthly retirement allowance, will not be reduced by any reduction in your pay that accompanies the demotion.

What happens if I'm disabled, whether for industrial or non-industrial reasons, while I'm in DROP?

You may apply for Disability Benefits from SLOCPT while in DROP. If approved by the Board of Trustees your monthly DROP benefit will be converted into a monthly disability benefit once you separate from employment with the County.

What happens if I die while in DROP?

For purposes of your DROP account, you will be treated as if you had died after retirement. Your DROP beneficiary will be able to select from several DROP distribution options. If you were married when you entered DROP and you remained married, your surviving spouse will be eligible for post-retirement benefits, provided all of the conditions for those benefits are met.

When do I choose a beneficiary for my DROP account?

This is very important. You must choose a beneficiary for your DROP account when you enter DROP. BUT PLEASE REMEMBER that circumstances change. You may get a divorce or marry; a loved one may pass away. So you should from time to time make sure that the person named as your DROP beneficiary is the person you want named. This is a frequently overlooked issue that could lead to some very unfortunate consequences.

Will I pay contributions into the retirement system while I'm in DROP?

No, your contributions will cease upon your entry into DROP.

Will I be able to take a loan from my DROP account?

No, you cannot take a loan from your DROP account.

Can I terminate DROP participation and continue to work for the County?

No. DROP participation is tied to your active employment with the County. If either are terminated (employment or DROP participation) the other must also terminate.

Will the monthly amounts credited to my DROP account receive any cost-of-living adjustments?

Yes, while in DROP, you will receive annual COLAs as approved by the Board of Trustees.

What is the effective date of my DROP participation?

You are not in DROP until the first of the month following receipt of your completed DROP Applications.

While in DROP, will I receive credit for retirement benefit calculation purposes for the time in DROP? What happens to my accumulated contributions?

Service credits are determined as of the time you enter DROP and no additional credit will be given for any time while you are in DROP. Once you enter DROP, you are no longer entitled, in the event you terminate county service, to withdraw your accumulated contributions; instead you are only entitled to receive your monthly retirement allowance and the balance in your DROP account.

Will DROP prevent me from establishing reciprocity with a prior agency?

No, you may establish reciprocity with a prior agency. However, you must do so before you become a DROP participant. Your final average salary at the time you enter DROP will be provided to the prior agency.

What are my options when I leave DROP?

At the time you leave DROP, you will have to choose between (1) a lump sum payment of the balance in your DROP account, (2) monthly installment payments, or (3) a rollover to an IRA or to another qualified retirement plan, or some combination of these three options. When you are nearing the end of your DROP participation period, we strongly suggest that you contact SLOCPT for further information on the payout options available and that you take this information to your personal financial adviser. There may be significant income tax ramifications depending on your choice.

Will DROP prevent me from establishing reciprocity with a future agency?

Yes, because you must retire when you leave DROP, you will not be able to go to another agency and establish reciprocity for the future.

What is my effective date of retirement for purposes of reciprocity?

Your retirement date is the first of the month following the separation of your employment.

As a DROP participant, what final compensation will be used for purposes of Reciprocity?

The same Final Compensation used to calculate the amount of your DROP allowance at the beginning of your DROP participation will be used (and reported to reciprocal agencies) for purposes of Reciprocity.