Updated October 2, 2026. Quick answer: An Arkansas Teacher Retirement System (ATRS) member who retires picks one of four annuity options: a straight life annuity, or a reduced Option A, B or C annuity (approximately 18%, 10% and 4% below straight life, per the 2026 to 2027 handbook). Option A pays 100% of the reduced annuity to a beneficiary and Option B pays 50%. Option C guarantees 120 payments. Option beneficiaries cannot be changed after retirement, and the option itself can generally be changed only within 1 year. T-DROP is open from 28 years of service. A refund cancels all service credit.
More on public pension systems, topic by topic: Arkansas ATRS disability retirement, Arkansas ATRS divorce and QDRO and Arkansas ATRS working after retirement.
How ATRS pays and who qualifies
The Arkansas Teacher Retirement System covers public school and other public education employees in Arkansas. This page works from the ATRS 2026 to 2027 Member Handbook, the only ATRS document read here. It describes ATRS as “a defined benefit plan, which means that it guarantees eligible vested members a specific monthly retirement benefit for life”. Vesting comes first: “You become vested once you have 5 years of actual service credit by working for an ATRS employer. You can also count reciprocal service credit toward those 5 years.” Only vested members can retire, so the decisions below assume that threshold has been met.
Members pay in at a set rate: “Contributory members must pay 7% in contributions on a pre-tax basis on any salary they earn”. Credit is earned by days worked: “You must work at least 160 days in a fiscal year to earn 1 year of service credit”.
When a member can retire, and the early reduction
ATRS has a full track and an early track. For full Age and Service Retirement the handbook lists two paths: “Have at least 28 years of service credit at any age; or Are vested in ATRS and are at least 60 years old.” Early retirement: “Have a total of 25 to 27.75 years of service credit” while vested and not yet 60.
The early track carries a permanent price. The handbook says “your monthly retirement benefit will be subject to a permanent early retirement annuity reduction. The reduction is 10% for each year less than 28 years of service credit or 10% for each year the member lacks being age 60, whichever is smaller”. A computed example from an assumed $2,000 monthly unreduced benefit, not an ATRS figure: a member who lacks 1 year of age and 2 years of service would take the smaller shortfall, 1 year, so the reduction is 10% and the benefit is 2,000 multiplied by 90%, which is $1,800 a month. The inputs are assumed, and ATRS computes the actual number.
A member who left covered work before 60 may still collect later, if the member “Became inactive before you turned 60 years old” and is vested. A further condition matters for anyone weighing a refund: the member “Did not receive a refund of your contributions from ATRS or any reciprocal system for service credit that you used to vest in ATRS”.
The statute lists more conditions for the deferred annuity than the refund test. Section 24-7-707(a)(1) requires that the member “has not participated in a buyout plan of the member’s rights to benefits in the system under” section 24-7-505, and that the member “is not employed in a position covered by another retirement plan that is supported wholly or in part by state contributions if the member’s being vested is based on the other system service”.
Deadlines for applying and cancelling
Timing is set by the effective retirement date. “you can file your application no earlier than 4 months before your anticipated effective retirement date and no later than 1 month before your anticipated effective retirement date.” After retiring there is a short cancellation window: “You have 2 full calendar months from your effective retirement date to cancel your retirement”, and cancelling means repaying benefits already received.
The statute states the outer limit differently from the handbook’s 4 month and 1 month window. Section 24-7-701(a)(1)(B) says “If a member fails to submit a complete retirement application by the end of the sixth full calendar month immediately following the effective date of benefits, including all additional documentation required by the system, the application shall be void unless an extension has been granted by the Executive Director of the Arkansas Teacher Retirement System.” The first payment can also wait for July. Section 24-7-701(d) says “If a member has accrued a full year of service credit for a fiscal year, the annuity shall not begin earlier than on July 1 after the fiscal year ends unless the board adopts by rule or resolution an earlier beginning date for all members whose retirement will not result in a reduction of classroom teachers.”
The four annuity options
At retirement the member picks how the lifetime benefit is shaped. “At the time of your retirement, you may choose 1 of 4 options to receive your annuity: Straight Life Annuity (SLA), a reduced Option A annuity, a reduced Option B annuity, or a reduced Option C annuity.”
| Option | What the member receives | What a survivor receives |
|---|---|---|
| Straight Life Annuity (SLA) | Unreduced; the handbook calls it the highest paying benefit | No monthly annuity to a beneficiary |
| Option A | Approximately 18% below SLA | 100% of the reduced annuity, for the beneficiary’s lifetime |
| Option B | Approximately 10% below SLA | 50% of the reduced annuity, for the beneficiary’s lifetime |
| Option C | Approximately 4% below SLA | Remaining balance of 120 guaranteed monthly payments, then nothing |
The straight life annuity means “you cannot designate a beneficiary to receive a monthly annuity when you pass away”. Option A is “approximately an 18% reduction from SLA” and “100% of your reduced annuity will be paid to your designated beneficiary(ies) for their lifetime”. Option B is “approximately a 10% reduction from SLA” and “50% of your reduced annuity will be paid to your designated beneficiary(ies) for their lifetime”.
Option C is a term guarantee rather than a lifetime survivor benefit. It is “approximately a 4% reduction from SLA”, and “Option C guarantees 120 monthly retirement benefit payments to you, or your designated beneficiary(ies) if you pass away before 120 payments”. After 120 payments the handbook says the retiree will move up to the straight life amount in the 121st month, and that “the remaining balance of the payments will be paid to your designated Option C beneficiary(ies)” if the retiree dies sooner.
The ATRS website describes Option C the same way the handbook does, and adds a rule the handbook relays only in part. It says “The retiree will receive reduced benefits for the first 120 months” and, if the retiree dies early, “the payments shall be continued for the remainder of the original 120 month period and be paid to the Option C beneficiary named by the retiree.” It also says “If you select Option C, and your beneficiary predeceases you, you can elect your monthly benefit payments” to pop up to the straight life amount, or the retiree may name a new beneficiary. The statute’s wording is shorter. Section 24-7-706(a)(2)(C)(i) says “Under Option C, a retiree shall receive a reduced annuity payable throughout his or her life” and does not use the words pop up. The handbook and the ATRS page are the source for the move to the straight life amount in the 121st month; ask ATRS for a written estimate before relying on it.
A computed example from an assumed $2,000 monthly straight life benefit, not an ATRS figure: Option A would be about 2,000 multiplied by 82%, which is $1,640 a month. Option B would be about 2,000 multiplied by 90%, which is $1,800, and Option C about 2,000 multiplied by 96%, which is $1,920. After the member dies, an Option A beneficiary would receive 100% of $1,640, which is $1,640, and an Option B beneficiary 50% of $1,800, which is $900. The 2,000 is assumed and the reductions are the handbook’s approximations, so the ATRS retirement estimate controls the real figures. For the general trade between a single life and a joint and survivor benefit, see single life versus joint and survivor.
What is irrevocable and who can be named
The beneficiary choice is the least reversible part of the election. The handbook says you “cannot change who you have named as your designated option beneficiaries after retiring unless they pass away”. The option itself has a one-year window: “you may change the annuity option you chose when you retired within 1 year of your effective retirement date”, and “You may have to repay ATRS some of the retirement benefits you previously received if you change your annuity option”.
For Option C the statute names a divorce route. Section 24-7-706(a)(2)(C)(iii)(a) says “If the designated beneficiary is the spouse of the retiree and the marriage ends in divorce or other marriage dissolution, the retiree may: (1) Nominate a successor beneficiary; or (2) Elect to return to his or her single lifetime benefit equivalent.”
Eligibility to be named depends on the option. “Your annuity Option A or Option B beneficiary can be your spouse, an eligible incapacitated child, or both. You may designate any person(s), entity, or trust as your Option C beneficiary.” Marriage length can change the choice. A spouse married under a year at retirement cannot be named under Option A or B at first: “you must initially select straight life annuity. You may elect to switch to Option A or Option B once you have been married to your spouse for 1 year, and within 6 months of reaching the 1 year”.
On divorce after retirement, if the former spouse is the only Option A or B beneficiary the handbook says the member “may elect to keep your former spouse as your beneficiary or cancel your Option A or Option B annuity and receive a straight life annuity instead”. Other divorce scenarios turn on further facts, so confirm the route with ATRS.
T-DROP: working past 28 years while the benefit accrues
The Teacher Deferred Retirement Option Plan, called T-DROP in the handbook, is the in-service alternative to retiring. “When you elect to participate in T-DROP, you do not officially retire from the System. You continue to work for and be paid by your covered employer”. Eligibility: “If you have at least 28 years of service credit, you may elect to participate in T-DROP with an additional reduction for early participation (6% reduction for each year early). If you have at least 30 years of service credit, you may elect to participate in T-DROP with no additional reduction.”
The deposit is “based on what your monthly retirement benefit would be if you retired, reduced by 1% for each year of service credit”. Early entry at 28 years adds “an additional 6% reduction for each year less than 30 years of service credit”. On growth: “Interest accrues on your T-DROP deposit account balance at the rate of 3% compounded annually”, and the Board “may authorize an increased incentive interest rate”.
The statute states these terms differently. The condition for participation is “The condition required for participation in the plan is that the member must have at least thirty (30) years of service credit in the system.” Entry at 28 or 29 years is a board option: the board “may authorize early participation in the plan.” The early reduction is a range, not a fixed 6%: the deposit “may be further reduced by at least an additional five-tenths of one percent (0.5%) but no more than one percent (1%) of the initially reduced plan deposit for each month of credited service under thirty (30) years.” That is 6% to 12% a year (0.5% x 12 = 6%, 1% x 12 = 12%). On interest, section 24-7-1307(c)(1) says “The board shall determine the plan interest rate to members’ plan accounts”, so the 3% rate is the board’s current figure, not a statutory one.
Entering T-DROP freezes the formula inputs. “You do not earn and cannot be given any additional service credit when you elect to participate in T-DROP since your retirement benefit is already calculated”. Also, “You do not pay contributions to ATRS while participating in T-DROP”.
Entry has a calendar. “You can only enter T-DROP on July 1, with applications only accepted between March 1 and May 31.” “If you submit your T-DROP application after the May 31 deadline, you will not be allowed to participate in T-DROP that upcoming July.” Participation has a ceiling: “You can participate in T-DROP for up to 10 consecutive years.” After that, “the monthly retirement benefit deposits to your T-DROP deposit account will stop” while interest continues at a rate that “varies from a minimum of 4% to a maximum of 6%”.
On the ceiling, section 24-7-1311(a) says “The Arkansas Teacher Retirement System’s monthly deposit into the member’s Teacher Deferred Retirement Option Plan shall not exceed one (1) plan term of ten (10) consecutive years, beginning with the member’s plan date.” So the ten-year limit is on the deposits, not on working; under section 24-7-1307(d) a participant who keeps working is credited interest on the account at a rate the board sets.
Liquidity is limited: the money “cannot be distributed until you stop participating in T-DROP and retire from the System, or pass away”.
Leaving T-DROP: four ways to take the balance
When the member retires out of T-DROP, the balance has to be assigned. The four routes are, in the handbook’s words: “Receive a monthly T-DROP deposit benefit that is annuitized and added into your already calculated monthly retirement benefit; Receive your T-DROP account balance in a lump-sum payment that is paid directly to you; Transfer your T-DROP account balance into the Cash Balance Account (CBA) maintained by ATRS; or Transfer your T-DROP account balance into a qualified retirement plan such as an IRA or 403(b).” The handbook says “The total allocation must equal 100%” when the balance is divided among them.
The statute lists three routes: section 24-7-1308(b)(1) says the member may “(A) Receive the balance in the plan account as a lump sum; (B) Annuitize the plan account as a monthly benefit paid under the annuity option selected by the member; or (C) Receive a part of the balance in the plan account as a lump sum and annuitize the remaining balance.” The Cash Balance Account and the qualified-plan transfer come from the board’s rules, which the statute allows it to adopt.
The tax warning is direct: “if you receive any portion of your T-DROP deposit account balance in a lump-sum payment, there may be significant tax consequences. Consult with your tax advisor for guidance.” On finality, the handbook says an election can sometimes be cancelled, “you cannot change your previous election if you chose to receive your T-DROP account balance as a rollover into a qualified retirement plan”. Any other change must be filed “by the end of the second full calendar month immediately following your effective retirement date”, with repayment of anything no longer owed.
The Cash Balance Account is the ATRS-held option: “CBAs are credited monthly with T-DROP CBA interest at a rate that grows over time”. State treatment is covered on Arkansas retirement taxes and does Arkansas tax pensions. If a member dies while in T-DROP, “your T-DROP deposit account balance will become your residue”, which makes the residue beneficiary designation relevant to anyone in the program.
Refund versus leaving contributions in the system
Leaving covered employment raises a different question from retiring. “You can request a refund of your contributions if you terminate your employment with an ATRS covered employer”. The cost of choosing it: “By electing to take a refund, you cancel all of your contributory and noncontributory service credit along with all membership rights and beneficiary designations”, so a vested member who takes one is not eligible for retirement benefits. The money paid out is the member side only: “employer contributions will not be refunded to you”. The glossary describes what is returned as “their member contributions plus interest”.
Leaving the money in place is what keeps the deferred-retirement route open, since that route requires no refund of the service used to vest. The handbook also says “you cannot borrow money from your member deposit account”, and that nothing is payable until the member retires or requests a refund. For the general trade, see pension refund versus leaving it.
A related program exists but is not always open. The Cash and Savings Help (CASH) program is described as “a voluntary program in which eligible members may choose to cancel their membership and forfeit their retirement benefit rights in exchange for receiving a one-time lump-sum payment from ATRS”. “The Board of Trustees decides when the CASH program will be offered”, and those who qualify must be “vested and eligible for deferred retirement” and have been “inactive with an ATRS covered employer for at least 1 year”. A member who later returns to covered work becomes “a new member of ATRS again”, with the cancelled rights not reinstated, though the cancelled service can be purchased as contributory service.
Buying service credit
Purchased service can add years that count toward the benefit. “You can use your purchased service credit to meet the eligibility requirements for Age and Service Retirement, early Age and Service Retirement, and participation in T-DROP”. On payment, “All purchases are computed using a formula and must be paid in a lump-sum payment”, and “The cost to purchase service credit changes at the beginning of a new fiscal year, or July 1”. The handbook lists the types, introduced by “Members may purchase service credit for the following types of service, up to the maximum years shown”. One example is out-of-state work: “A member may purchase up to 15 years provided that no other system would pay a benefit to the member other than Social Security”.
The statute adds a timing limit and a prerequisite. Section 24-7-612(e) says “All payments for service credit purchases shall be received by the system before the member’s first annuity installment or T-DROP deposit occurs.” For out-of-state service, section 24-7-603(c)(3)(A) says “The out-of-state service shall not become credited service under this system until the member has established five (5) or more years of actual service.”
Purchased years have limits that a calculator will not show. The handbook says “you cannot use purchased service credit or free military service credit to vest in ATRS”, and that they “DO NOT count toward the 10-year lump-sum death benefit or the retirement benefit stipend”.
One purchase type undoes a refund: “This is the restoration of service credit earned in ATRS that was forfeited by the member when they received a refund of their contributions or a payment under the CASH program.” To compare a price with the extra benefit, see the pension buyback calculator. The handbook says “Reach out to ATRS for a cost estimate to purchase service credit”, and the pages read do not give the cost formula.
Cost-of-living adjustment and returning to work
After retirement the benefit does not stay flat. “Every July 1, you will receive a simple cost of living adjustment (COLA) increase to your monthly retirement benefit if you have been retired for at least 1 full fiscal year. The annual COLA increase is 3% of your base retirement benefit.” The Board has discretion: “The Board of Trustees may authorize a higher COLA percentage or a compound COLA”.
Working for a covered employer after retiring is restricted. “Most retirees will have a 4-month termination separation period, which begins on your effective date of retirement. During this period, you may not work for an ATRS covered employer. However, if you meet Normal Retirement Age requirements, you may work for an ATRS covered employer immediately after retiring from ATRS.” The exception applies to a member who is “at least 65 years old before you retire”, or “at least 60 years old before you retire and the sum of your age and your combined years of service credit in ATRS, T-DROP, and from established reciprocal service, totals at least 98”. The handbook urges contacting ATRS first to avoid “possibly having to pay back benefits that you received from the System during that time”.
The statute bars more than the handbook’s wording. Section 24-7-502(a)(6) says that during the separation period the member “shall remain terminated and shall not: (A) Form an employment relationship with a covered employer; (B) Render any compensable services to or on behalf of a covered employer”, with a carve-out for volunteer work that does not hold a position open. It also bars acting “as a representative of a covered employer or exercise any authority over employees of a covered employer” and being indirectly employed through a contractor or other entity employed by a covered employer “if the member has substantial control of the employer-employee relationship, including without limitation the ability to negotiate rates of pay with the covered employer or assign work and work hours to the member.” A breach is costly. Section 24-7-502(a)(3) says the member “shall: (A) Repay retirement benefits paid during the period the member did not meet the requirements; and (B) Forfeit all future retirement benefits until the member files a new completed retirement application using the standard system process.”
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 ATRS’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”. The ATRS handbook itself warns that a T-DROP lump sum may carry significant tax consequences. 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
- The pages read do not state the option reduction as a table by age or age gap; the handbook calls each percentage approximate, so the real factor for a member comes from an ATRS estimate.
- The pages read do not state how the T-DROP deposit reduction of 1% for each year of service credit is applied in dollars, or give a worked example.
- The pages read do not state the interest rate paid on a refund, or how long a refund takes to pay.
- The pages read do not state that a spouse must consent to a refund, a CASH payment or the choice of a straight life annuity.
- The pages read do not state the purchase cost formula or the maximum years for every purchase type.
- The CBA interest schedule and the minimum working days per quarter for T-DROP sit in tables that did not extract legibly, so neither is stated.
- The pages read do not state how Arkansas taxes ATRS benefits or T-DROP payouts, or what withholding applies to a T-DROP lump sum.
Arkansas ATRS topic pages
Each row links to the page that reads one topic in the Arkansas ATRS member documents: the topic, then the summary that page carries.
| Page | What it covers |
|---|---|
| Arkansas ATRS T-DROP (2026): Who Qualifies and How It Works | What the ATRS Member Handbook says about T-DROP: 28 and 30 year eligibility, July 1 entry, the 10 year limit, interest and the four exit options. |
| Arkansas ATRS Disability Retirement (2026): Rules and Limits | What the ATRS Member Handbook says on disability retirement: who is eligible, the Medical Committee, no reduction, Social Security and the 79 day limit. |
| Arkansas ATRS Divorce and QDRO (2026): What ATRS Accepts | What the ATRS Member Handbook says about divorce: the QDRO is the only method, ATRS approval comes first, the 5 year minimum and beneficiary changes. |
| Arkansas ATRS Working After Retirement (2026): 4-Month Rule | What the ATRS Member Handbook says about working for a covered employer after retiring: the 4 month separation period and the Normal Retirement Age exception. |
| Arkansas ATRS Purchasing Service Credit (2026): Types | What the ATRS Member Handbook says on buying service credit: lump-sum payment, what it counts for, what it does not, and the types and maximum years. |
Common mistakes
- Treating the annuity option beneficiary as changeable later; after retiring it cannot be changed unless the person named dies.
- Assuming a spouse of under a year can be named Option A or Option B at retirement; straight life is required first, with a switch window afterward.
- Taking a refund and expecting to keep vesting or beneficiary designations; the handbook says a refund cancels all service credit and membership rights.
- Returning to work for a covered employer inside the 4-month separation period without checking whether Normal Retirement Age applies.
Related on this site: Arkansas retirement taxes, does Arkansas tax pensions, pension refund versus leaving it, pension buyback calculator and public pension retirement decisions by system.
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Answer againSources
- Arkansas Teacher Retirement System, 2026 to 2027 Member Handbook: https://www.artrs.gov/Publications/ATRS_Handbook_2627.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.