Updated October 2, 2026. Quick answer: An Arkansas Public Employees’ Retirement System member picks an annuity option when filing to retire: straight life, or A60 (98%), A120 (94%), B50 (88%) or B75 (83%) of the straight life amount. The choice cannot be changed later without a life event, and retirement can be canceled only briefly. DROP, open at 28 years of actual service, accrues 63% to 75% of the annuity for up to 120 months. A refund returns contributions with interest but forfeits the retirement benefit.
Arkansas’s local police and fire system runs on separate rules: Arkansas LOPFI retirement decisions.
When an APERS member can retire, and how the benefit is reduced
The Arkansas Public Employees’ Retirement System (APERS) handbook describes the plan this way: “APERS is a governmental defined benefit plan, qualified under Section 401(a) of the Internal Revenue Code.” A member can take a full benefit under any of three tests: “Age 65 with five years of actual service.” “Age 55 with 35 years of credited service. (members with enhanced service credit)” “Any age with 28 years of actual service.” For work past 28 years the handbook adds that each month of service beyond that point is calculated “using a multiplier of 0.5%. This will be a permanent addition to your benefits.”
A member short of those tests can retire early on reduced terms: “Age 55 with five years of actual service.” “Any age with at least 25 years of actual service.” “Within 10 years of normal retirement. (members with enhanced service credit)” The reduction is stated in two forms: “If 28 years is used, the reduction is 1% for each month away from 28 years of service. If age 65 is used, the reduction is 0.5% for each month away from age 65.” The handbook text read does not say how the two are combined for a given member, so confirm the result on an APERS estimate.
Retiring also requires leaving the job: “A member must terminate employment to retire.” The handbook caps the starting benefit too: “your initial retirement benefit may not exceed 100% of your final average compensation.” The handbook says the cap does not apply to benefits “accruing under the DROP”.
How the benefit is built: contributions and service credit
Members first hired on or after July 1, 2005 pay in: the handbook says “members of APERS first hired on or after July 1, 2005, contribute a portion of their pre-tax salary to the system”. The schedule: “Starting July 1, 2022, the contribution rate increases by 0.25% every July 1 until July 1, 2029, when the rate will be 7%.” Those payments are held for the member: “These contributions will remain on deposit in your name unless you leave your job and receive a refund of your contributions.”
Service credit drives the benefit. “Actual service is earned at the rate of one month per month worked. To qualify for a month of credit, you must work 80 hours in that month.” “If you earn 11 months in a fiscal year (July 1 through June 30), you will receive credit for the full 12 months.” The handbook gives a plan multiplier that depends on when the service was earned: “Non-contributory service rendered June 30, 2007, and prior has a multiplier of 1.75%, and non-contributory service rendered July 1, 2007, and later has a multiplier of 1.72%.” Elected municipal and county officials earn faster credit: “Elected official credit is earned at the rate of two months per month worked. Contributory members may receive a maximum of 10 years enhanced credit.” That credit has a limit: “Enhanced Service Credit does not eliminate the requirement to meet all retirement eligibility criteria for full benefits, including having five years of actual service.”
The payment options, and what each does to a survivor
“You must choose one of the options when filing an application for retirement.” Straight life is the baseline, and the other four are expressed as a share of it. For straight life, “Under the straight life option, a monthly annuity is paid for the retiree’s lifetime. There is no provision for a monthly beneficiary annuity.” On a death, the beneficiary “will receive in a lump sum any balance of member contributions not paid to the retiree in the form of monthly annuity payments”.
| Option | What the retiree receives | What a survivor receives |
|---|---|---|
| Straight life | The full computed annuity for the retiree’s lifetime | No monthly beneficiary annuity; unpaid member contributions go to the beneficiary as a lump sum |
| Option A60 | 98% of straight life | The same annuity to the beneficiary for the balance of 60 monthly payments |
| Option A120 | 94% of straight life | The same annuity to the beneficiary for the balance of 120 monthly payments |
| Option B50 | 88% of straight life, adjusted for age difference | 50% of the annuity for the beneficiary’s lifetime |
| Option B75 | 83% of straight life, adjusted for age difference | 75% of the annuity for the beneficiary’s lifetime |
The B options carry an age adjustment. For B50: “The monthly benefit is adjusted by 0.5% for each year difference in age between you and your beneficiary. If your beneficiary is older, the monthly annuity increases (the maximum is 95% of the straight life annuity)”. For B75: “The monthly benefit is adjusted by 0.7% for each year difference in age between you and your beneficiary. If your beneficiary is older, the monthly annuity increases (the maximum is 90% of the straight life annuity)”. A computed example from an assumed $3,000 monthly straight life annuity, not an APERS figure: A60 pays a computed $2,940 a month, A120 pays a computed $2,820, B50 pays a computed $2,640 and B75 pays a computed $2,490. Under B50 the survivor would then receive 50% of $2,640, which is a computed $1,320 a month, and under B75 the survivor would receive 75% of $2,490, which is a computed $1,867.50 a month. If the B50 beneficiary were six years older, 0.5% per year of age difference would move 88% to 91%, within the stated maximum. These illustrate the stated percentages; the amount APERS pays is set by its own calculation.
Who can be named: “For the A options, you may choose any beneficiary or beneficiaries. For the B options, you must choose either a spouse to whom you have been married for at least six months or a dependent child 40 years of age or older claimed as a dependent on the previous year’s tax return.” For the general trade between a single-life and a survivor benefit, see single life versus joint and survivor.
What is irrevocable, and the deadlines
“The choice of option made when entering retirement cannot be changed without a life event occurring, such as a divorce or death of a beneficiary.” After a marriage, the handbook says a retiree on straight life, A60 or A120 who marries may request a change to B50 or B75 “starting six months after your marriage date and ending 12 months after your marriage date.” A retiree on B50 or B75 whose spouse dies or who divorces may request straight life, A60 or A120: “you may request to change your annuity option to straight life, Option A60, or Option A120”.
Retirement itself can be undone only in a short window. “You may cancel your retirement by notifying us in writing before your effective date.” After the effective date the cancellation must come “on or before the 15th calendar day of the month for which you received your first benefit payment. If you do not cancel your retirement within these guidelines, your retirement is irrevocable.”
The filing window is also fixed: “An application must be on file not more than 90 days, and not less than 30 days, prior to the effective date of retirement.” “APERS does not accept faxed applications.” A retiree who later returns to covered work faces another rule: “Members are required to have a 180-day minimum break in service before returning to employment covered by APERS.” “When retirees fail to meet termination requirements, they lose their benefits. They cannot begin receiving annuity payments again until they satisfy all requirements for terminating.”
DROP: retiring on paper while still working
The Deferred Retirement Option Plan (DROP) is a separate choice. It “allows members to retire and begin accumulating a percentage of their retirement benefits, without terminating employment, for up to 120 months from the date of DROP entry.” On eligibility the handbook says “a member must have 28 years of actual service, which can include service through reciprocity.” The accrual percentage is set by service: “will receive 63% of their calculated annuity for each month of DROP participation. For each additional month of service, the percentage is increased by 0.5%, up to a maximum of 75%, with 30 years of actual service.”
What stays on the table: “earning tax-deferred interest while DROP participants continue to work. You do not earn any additional service credit after entering the DROP. Compensation increases received after entering the DROP do not factor into the benefit calculation.” “The interest accrued on your DROP account balance is determined by the APERS Board of Trustees.” The option is locked in early: “The annuity option you choose at DROP Entry determines your annuity option in retirement as well.” That makes the DROP entry date the real option decision for a member who uses it.
| DROP term | What the handbook states |
|---|---|
| DROP eligibility | 28 years of actual service, which can include reciprocity |
| Accrual at 28 years | 63% of the calculated annuity per month of participation |
| Growth | 0.5% more for each additional month of service |
| Maximum accrual | 75%, at 30 years of actual service |
| Maximum participation | 120 months from the date of DROP entry |
| Interest on the DROP balance | Set by the APERS Board of Trustees |
A computed example from an assumed $3,000 monthly annuity, not an APERS figure: at the 63% starting accrual, each month of participation adds $1,890 to the DROP account, and at the 75% maximum it adds $2,250. A member six months past 28 years would be at 63% plus 0.5% for each of six months, which is 66%. Whether DROP beats working without it depends on pay, interest and years, so ask APERS for a projection before entering.
On exit: “you may elect to receive the accrued DROP account balance as a lump sum payment, a rollover to another retirement plan, a monthly annuity, or a combination of these payment methods.” “When the DROP period ends, participants must terminate all covered employment with APERS employers.” “If you die prior to exiting the DROP, the DROP balance will be paid to your designated DROP beneficiary.”
Partial Annuity Withdrawal (PAW)
A member who works past the first date of unreduced eligibility has one more choice. The handbook says the Partial Annuity Withdrawal (PAW) “allows a member who works beyond the date you were eligible for an unreduced benefit to take a lump sum distribution of up to 60 months of your retirement benefit. The monthly lifetime annuity is reduced by an actuarial factor tied to your age at retirement.” The lump sum is set by months worked: “with a maximum of 60 months. The choice to elect a PAW distribution is made when you complete your retirement application.”
The trade is a lump sum now for a smaller check for life. The handbook ties the reduction to age at retirement but, in the pages read, does not give the factor, so a member weighing PAW should ask APERS for both figures. The general method is on the lump sum versus monthly annuity break-even page.
Leaving before retirement: refund, or keep the benefit
A member who leaves covered work has two paths. The refund: “A member may request a refund of member (employee) contributions 30 days after terminating all covered employment. The refund will not include contributions made by any employers but will include accrued interest on your employee contributions.” The cost is stated plainly: “If you receive a refund, you forfeit your retirement benefit.” The other path is to leave the contributions in the system. The handbook defines being vested as entitlement to a monthly benefit at a specified age “with five years of actual service (10 years for those with only General Assembly service) credited to one’s account.”
A refund can be reversed, but with conditions. “you can repay the refund and re-establish the credited service.” “You must be re-employed for a period of 90 days and have worked at least 80 hours per month and have three months service credit before the refund can be repaid.”
Reciprocity adds a trap for anyone with service in more than one retirement system. “If you withdraw your employee contributions from a reciprocal system, you will forfeit reciprocity for the service associated with those contributions.” The handbook specifies that this applies “including a rollover to another retirement plan”. “You may be eligible to reestablish reciprocity by repaying withdrawn funds according to the law pertaining to the reciprocal system.” The general comparison of a refund and leaving the money is on pension refund versus leaving it in.
Buying service credit
Purchased service can raise the benefit: “Purchasing service credit increases the amount of your retirement annuity by increasing the amount of service on your account.” The handbook lists several categories, each with its own conditions. For military service: “A member may purchase up to five years (60 months) of active-duty service rendered in the United States armed forces.” On the price: “You will not be charged interest if the service is purchased within six months after having obtained five years of actual service. Otherwise, 6% interest will be charged on the purchase.”
Other categories include National Guard and reserve service, federal and out-of-state governmental service, prior public employer service, educational leave, work-injury service and certain federal-grant service. For federal service: “The cost to purchase this service is the actuarial present value of the credited service for which you apply. The exact cost is computed upon request.” For prior service with a public employer: “The cost to purchase is what would have been owed in employee and employer contributions, if you had been a member of the system, plus interest.”
Whether a purchase pays back depends on its price against the added annuity; the pension buyback calculator frames that test.
Cost-of-living adjustments
The COLA depends on hire date. “Every July 1, APERS retirees first hired prior to July 1, 2022, who have been retired for at least 12 months, receive a 3% Cost of Living Adjustment (COLA).” “This COLA also applies to those who have been participating in the Deferred Retirement Option Plan (DROP) for at least 12 months.” For retirees first hired after July 1, 2022: “the COLA amount will be the lesser of 3% or the percentage change in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W)” For state taxes on what APERS pays, see Arkansas retirement taxes and does Arkansas tax pensions.
What the IRS adds on tax
A refund or lump sum from a public pension is a distribution, so the IRS rules apply on top of APERS’s own. On withholding, the IRS says that a taxable eligible rollover distribution paid to you “is subject to mandatory income tax withholding (generally at a rate of 20%), even if you intend to roll it over later”, and that if you roll it over yourself “you’ll have to add funds from other sources equal to the amount withheld”. APERS’s handbook does not state the withholding or rollover tax rules for a refund or DROP lump sum, so the IRS text here is the source for them; the handbook does list a rollover to another retirement plan as a DROP payout form. The rollover clock, if the money is paid to you: “you have 60 days from the date you receive it to roll it over to another eligible retirement plan”.
On early distributions the IRS says “the law imposes a 10% additional tax on certain early distributions from certain retirement plans”. Its list of exceptions includes “Distributions made to you after you separated from service with your employer after attainment of age 55” and “Distributions made to a qualified public safety employee from a governmental plan”. Whether an exception fits a particular refund depends on your own plan and facts, so confirm it with a tax preparer before you take one.
What this page could not settle
- Whether a spouse must consent to an option election is not addressed in the handbook read.
- The handbook does not state the withholding, early-distribution or rollover tax rules for a refund, a PAW lump sum or a DROP payout, so this page relies on the IRS topics for those and does not say how they apply to a particular APERS payment.
- The interest rate on a refund and the interest rate credited to a DROP account are not stated; the handbook says only that the Board determines DROP interest.
- The actuarial factor that reduces the annuity after a PAW lump sum is not stated in the pages read.
- A cost schedule for most service purchases is not stated; the handbook says some costs are computed on request.
- The handbook does not state a deadline for electing DROP in the pages read, so the entry date should be confirmed with APERS before it is relied on.
- How the two early retirement reductions are combined for a given member is best confirmed on an APERS estimate.
Common mistakes
- Choosing an annuity option as if it can be revisited later; the handbook allows changes only after a life event such as a marriage, divorce or death of a beneficiary.
- Assuming a B option is open to any beneficiary, when the handbook limits it to a spouse married at least six months or a dependent child 40 or older.
- Letting the cancellation window pass, since retirement becomes irrevocable after the 15th calendar day of the month of the first benefit payment.
- Entering DROP without realizing that no more service credit is earned and later raises do not count in the benefit.
- Taking a refund without weighing that it forfeits the retirement benefit and can forfeit reciprocity for the service.
- Treating the percentages as a promise of a dollar amount, when the handbook defines the options as shares of the computed straight life annuity.
Related on this site: Arkansas retirement taxes, does Arkansas tax pensions, pension buyback calculator, pension refund versus leaving it in and public pension retirement decisions by system.
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Answer againSources
- Arkansas Public Employees’ Retirement System, Member Handbook (April 1, 2025): https://apers.org/wp-content/uploads/APERS-Handbook_04-01-2025-compressed_1.pdf
- IRS, Topic no. 413, Rollovers from retirement plans (irs.gov): https://www.irs.gov/taxtopics/tc413
- IRS, Topic no. 558, Additional tax on early distributions from retirement plans other than IRAs (irs.gov): https://www.irs.gov/taxtopics/tc558
Sources: the primary documents linked above, read on October 2, 2026. General information from each system’s own published materials, not legal, tax or financial advice. Your own member statement and the system’s current rules decide your benefit, and a pension counsellor at the system or a fee-only adviser is the right place to confirm anything consequential.