DROP Plans Explained

Updated August 3, 2026. Quick answer: a DROP lets you retire on paper while still working. Your pension is calculated and frozen on the day you enter, those payments accumulate in an account, and you collect the balance when you actually leave. The catch is the freeze: from that day you stop earning service credit and stop having raises counted. And most public pension systems do not offer one at all.

DROP is far rarer than the internet suggests

Of the state retirement systems verified for this guide, checked against each system’s own handbook or its governing statute:

Two honest notes on that table. The six systems in the last row are recorded as no DROP found in their own materials — absence of evidence, which is the correct way to state it. And the Texas position is inferred from how DROP is referenced rather than from a page announcing the programme’s closure, which TRS does not appear to publish. Your own system’s handbook is the authority, not this table.

The practical point stands regardless: DROP is a feature of some plans, most commonly for police, fire and other public-safety classes. If you have heard about DROP from a colleague in another state, that is not evidence your plan has one.

How a DROP actually works, using the one that is fully documented

Florida’s is set out in statute, so it can be described precisely rather than generically.

• You must already be eligible to retire. DROP is elected at normal retirement date, not before.
• Your benefit is fixed on the day you enter. Monthly amount, creditable service, average final compensation and payment option are all locked as of that date.
• You keep working and keep your salary. The statute is explicit that participation “does not alter the participant’s employment status,” and you are not treated as retired from employment until your deferred resignation takes effect.
• Eight years, not five. The statutory maximum is “a period not to exceed a maximum of 96 calendar months” — eight years. K-12 instructional personnel can extend beyond that in defined circumstances.
• You leave, then collect. The balance is paid as a lump sum, a direct rollover, or a combination, and normal post-retirement reemployment limits then apply.

The interest rate is the part that decides whether it was worth it

Florida’s credited rate is set by when you entered, and it has moved by a factor of five:

A member who entered DROP in 2015 accrued eight years of frozen pension payments at 1.3% a year — well under inflation for most of that window. The same decision made a few years earlier earned 6.5%. Nothing about the member changed; only the entry date did. This is why the credited rate belongs at the front of the decision, not in the small print.

What you give up, stated plainly

The freeze is the cost, and it is easy to underestimate. From the day you enter:

• No further service credit accrues. Eight more years of work adds nothing to the pension formula.
• Raises stop counting. Your average final compensation is fixed, so a promotion or a large late-career raise during DROP does not lift the pension at all.
• In a plan whose COLA is tied to your retirement date, that date is now set. Where COLA eligibility depends on when you retired — and in several systems it does — entering DROP is the moment that gets locked.

So DROP suits someone at the top of their pay scale, with a long enough career that additional service credit is worth little, who intends to leave within the window anyway. It suits far less well someone who is still being promoted, or who is not sure they will go when the clock runs out.

The questions to take to your own system

• Does my plan offer a DROP at all, and is my class eligible?
• What rate is credited to entrants this year — not the rate quoted in an older brochure?
• What happens if I do not leave when the DROP period ends? Some plans stop crediting; the consequences differ and they matter.
• Is my COLA eligibility keyed to my DROP entry date or to my actual separation date?
• How is the balance taxed, and can it be rolled over?

Every one of those has a plan-specific answer written in your member handbook. A DROP is one of the few pension decisions that is genuinely irreversible once entered, which is reason enough to get the answers in writing first.

Related: buying service credit · the buyback calculator · refund versus leaving it in.

General information drawn from IRS, Medicare, HUD and state statute and regulation, not legal, tax or financial advice. Continuing-care law is state law and differs materially between states; every figure here is year-labelled and every source named. Powers of attorney, guardianship and trusts are governed by STATE law and differ change, and interest rates published by the IRS change every month – never rely on a rate quoted on any page, including this one. We are not a law firm or a tax adviser, and this is not legal or tax advice.