Maryland LEOPS Pension: Retirement Options and Refund

Updated October 8, 2026. Quick answer: A Maryland Law Enforcement Officers’ Pension System member can retire at age 50 or with 25 years of eligibility service, at 2% of average final compensation for each year of creditable service, capped at 65%. A married officer receives the Basic Allowance by law, with 50% continuing to a spouse. An unmarried officer chooses the Basic Allowance or one of six options, and the choice cannot change once the first payment is due. DROP is irrevocable. Withdrawing contributions forfeits any future benefit, with 20% federal withholding on the taxable part unless it is rolled over.

What this page covers and what it does not

This page covers one group: members of the Maryland Law Enforcement Officers’ Pension System (LEOPS), part of the Maryland State Retirement and Pension System (SRPS). It works from the State Retirement Agency’s LEOPS Benefits Handbook, marked “Revised July 2026”, plus its DROP brochure, option factor sheet, three website pages and Form 5 refund package, read on October 8, 2026. The Employees’ and Teachers’ systems of the same agency have different rules and are on Maryland MSRPS retirement decisions. The Handbook calls itself a summary, and says that “If there are any questions of interpretation, the provisions of the State Personnel and Pensions Article and regulations will control to resolve them”. State taxes are on Maryland retirement taxes and does Maryland tax pensions.

When a pension can start, and vesting

A member qualifies for normal service retirement at “Age 50, regardless of service” or with “25 years of eligibility service, regardless of age”. For those who leave earlier, the Handbook sets vesting at five years of eligibility service for members enrolled before July 1, 2011 and ten years for those enrolled on or after it. “A vested allowance is payable at age 50 for members of the Law Enforcement Officers’ Pension System.” The vested pension uses the same formula, and “Unused sick leave is not included in the calculation of your vested allowance”.

How the pension is calculated

“The total Basic Allowance will be 2% of your Average Final Compensation for each year of creditable service up to a maximum of 32 years and 6 months of creditable service.” “Your normal service retirement allowance may not exceed 65% (32.5 years x 2% per year) of your Average Final Compensation.” The cap checks out: 2% times 32.5 years is a computed 65%. Average final compensation is the highest three consecutive years for members who enrolled on or before June 30, 2011, and the highest five for those who enrolled on or after July 1, 2011. The Handbook adds that “a salary increase of more than 20% is generally not included in the calculation of Average Final Compensation”, with listed exceptions.

The Handbook’s sample, 28 years and $58,000: “2% x $58,000 x 28 = $32,480 (Annual Basic Allowance)”, then “$32,480 ÷ 12 = $2,706.67 (Monthly Basic Allowance)”. Recomputed: 2% of $58,000 times 28 is a computed $32,480 a year, or a computed $2,706.67 a month.

A computed example from assumed figures, not an SRA figure: an assumed average final compensation of $70,000 and 25.5 years of creditable service give 2% times $70,000 times 25.5, a computed $35,700 a year or $2,975.00 a month, before any option reduction. The agency’s own estimate controls.

The election: Basic Allowance if married, seven choices if unmarried

“If you are married on the date of retirement, by law, you will receive the Basic Allowance, which is the largest monthly allowance you can receive during your lifetime.” Upon the retiree’s death, the spouse receives 50% of the monthly allowance for life. “Unmarried officers may choose either the Basic Allowance or one of six additional options.” “Each option reduces the monthly allowance you would receive under the maximum, basic allowance during your lifetime”.

LEOPS options (Handbook, with factors from the agency’s option factor sheet)
Option	What the retiree receives	What a survivor receives
Basic Allowance (required if married)	The largest monthly allowance	50% to a surviving spouse for life; else shared among eligible children under 26 or disabled
Option 1	Lower. Printed factor, retiree age 50 and beneficiary age 50: 0.98009 (pre-reformed), 0.98215 (post-reformed)	Unpaid balance up to the benefit’s Present Value paid as a lump sum to living designated beneficiaries, else the estate
Option 2	Lower. Printed factor, age 50 and age 50: 0.88940 (pre), 0.90641 (post)	The same monthly benefit continues to one beneficiary for life
Option 3	Lower. Printed factor, age 50 and age 50: 0.94146 (pre), 0.95091 (post)	One half of the monthly benefit continues to one beneficiary for life
Option 4	Lower. Printed factor, age 50 and age 50: 0.98009 (pre), 0.98215 (post)	Unrecovered contributions and interest paid as a lump sum to living designated beneficiaries, else the estate
Option 5	Lower. Printed factor, age 50 and age 50: 0.87881 (pre), 0.89884 (post)	As Option 2, and the retiree’s benefit pops up to the Basic Allowance if the beneficiary dies first
Option 6	Lower. Printed factor, age 50 and age 50: 0.93550 (pre), 0.94673 (post)	As Option 3, with the same pop-up

Options 1 and 4 are single-life, and beneficiaries can be changed as often as the retiree likes with no effect on the allowance. Options 2, 3, 5 and 6 are dual-life: “You may designate only one beneficiary under the Dual-Life Annuities. You may change this beneficiary, but it will cause a re-calculation of your monthly allowance. In most cases the recalculated amount will be less than the current amount.” “If you choose Option 2 or Option 5, your beneficiary cannot be more than 10 years younger than you unless the beneficiary is your disabled child.” The Handbook says Options 1 and 4 do not provide continued beneficiary health coverage after the retiree’s death. See single-life versus joint-and-survivor pension and survivor benefit with a government pension.

A computed example of what an option costs

The agency’s sheet is titled “BENEFIT ANNUITY VALUE AND OPTION FACTORS” (“EFFECTIVE 1/1/2022”), with column groups headed “PRE-REFORMED BENEFIT TIERS” and “POST- REFORMED BENEFIT TIERS”. The pages read do not say which group applies to which member, or how a factor is applied to the Basic Allowance.

A computed example, not an SRA figure, that assumes the factor is multiplied by the Basic Allowance: take an assumed Basic Allowance of $3,000 a month and the sheet’s row for retiree age 50 and beneficiary age 50. The pre-reformed Option 2 factor is 0.88940, so 3,000 times 0.88940 is a computed $2,668.20 a month, a computed $331.80 less than the Basic Allowance, continuing in full to the beneficiary; the post-reformed factor 0.90641 gives a computed $2,719.23. Option 3 (0.94146, pre-reformed) gives a computed $2,824.38 and the beneficiary a computed $1,412.19. Under the Basic Allowance the spouse would receive 50% of $3,000, a computed $1,500. Another age pair prints different factors, so the agency’s own estimate is the figure to use.

What is permanent, and when to start

“You may ONLY change your option selection before your first allowance payment normally becomes due.” The agency’s website calls it “an important and permanent decision”. A member who picks an option and later marries may change the beneficiary but not the form of allowance. A married officer is placed in the Basic Allowance by law, and the pages read describe no waiver process; for how waivers work elsewhere see spousal consent to waive a joint-and-survivor annuity. The Handbook advises starting the process “approximately six months to one year from your desired retirement date”, and to “Discuss your estimated benefits/options with your family and financial advisor”.

DROP: retire on paper, keep working

DROP is voluntary. A member can retire and have the pension accumulate in a DROP account while continuing to work for the same employer. “An election to participate in DROP is irrevocable.” “You are eligible to participate in the DROP if you have at least 25 years and less than 32 years of creditable service.” “When your DROP participation ends, you must terminate employment with your employer.” The period is the lesser of seven years, the gap between 32 years and creditable service at election, or a term the member chooses; the brochure adds that “a member’s creditable service does not include credit for unused sick leave”. A computed example from an assumed 27.5 years at election: 32 minus 27.5 is a computed 4.5 years.

While in DROP a participant “Makes no employee contributions to the Law Enforcement Officers’ Pension System” and “Does not earn any service credit in his or her retirement account”, and “Is not eligible to receive an ordinary disability retirement allowance”. The account earns interest: “For DROP accounts established on or after July 1, 2011, interest accrues at the rate of 4% compounded annually”. The brochure says benefits “earn 4% a year, compounded annually”.

At the end, the member can take the balance directly, roll it over, or split it. “For any portion that you choose not to roll over, the Retirement Agency is required by law to withhold 20% for federal taxes and 7.75% for Maryland state taxes, if you are a Maryland resident.” The monthly pension that then starts “is based on the retiree’s creditable service and Average Final Compensation when the retiree elected to participate in DROP”.

A computed example from an assumed $60,000 DROP balance, not an SRA figure, treated as fully taxable and not rolled over: 20% is a computed $12,000 federal and 7.75% is a computed $4,650 Maryland (for a Maryland resident), leaving a computed $43,350. See 20% withholding on a pension lump sum.

If a participant dies: “If a DROP participant dies while in DROP, the balance in his or her DROP account is paid in a lump sum to the surviving spouse.” “If the participant has no surviving spouse, the amount is paid to the retiree’s child(ren) under age 26.” The pages read state no survivor percentage beyond that.

Leaving before retirement: leave contributions or withdraw

Members contribute 7% of earnable compensation, and “Member contributions earn 5% regular interest each year, compounded annually, until you retire or withdraw your accumulated contributions”. On leaving, the Handbook says “you may request to withdraw the balance of your member contributions and interest from the SRPS and either have this money paid directly to you or rolled over to another qualified retirement plan”. The cost: “if you withdraw your accumulated contributions, you forfeit any future benefit from the SRPS”. “To be eligible to request a refund of your member contributions, you must be separated from all and any employment with an employer that participates in the Maryland State Retirement and Pension System.” The website adds that “If contributions are not withdrawn within four years, they are considered abandoned and no longer accrue interest”, though funds “may be claimed at any time by the former member, or his/her beneficiary or estate”.

For a vested member the alternative is a future pension. The Handbook’s sample is 16 years of creditable service and an average final compensation of $50,000: “2% x $50,000 x 16 = $16,000 (Annual Basic Allowance)” and “$16,000 ÷ 12 = $1,333.33 (Monthly Basic Allowance)”, payable at age 50. Recomputed: 2% of $50,000 times 16 is a computed $16,000 a year, or $1,333.33 a month. Whether a refund beats that stream is the question on pension refund versus leaving it.

Taking a refund: steps, withholding and what it ends

“By completing the Form 5, you are terminating your membership in the Maryland State Retirement and Pension System and are forfeiting any right to a future benefit including disability benefits.” “Your signature on the withdrawal form must be notarized.” Processing time: “Please allow up to 90 days”, and the refund comes as a paper check.

On withholding the package says “the agency is required to withhold a minimum of 20% of any taxable amount paid to you for federal taxes, and if you are a Maryland resident, the agency is required to withhold 7.75% of any taxable amount for Maryland state taxes”. For a transfer to an eligible plan, “then the agency will not withhold any amount for federal or Maryland state taxes”. The Special Tax Notice says “If you are under age 59½ and do not do a rollover, you will also have to pay a 10% additional income tax on early distributions”, with an exception for “Payments from a governmental plan made after you separate from service if you are a qualified public safety employee and you will be at least age 50 in the year of the separation”. Whether it fits a given refund is a question for a tax preparer.

A computed example from an assumed $10,000 taxable refund paid to the member, not an SRA figure: 20% is a computed $2,000 federal and 7.75% is a computed $775 Maryland (for a Maryland resident), leaving a computed $7,225.

Buying service credit

A purchase request must come before retirement. For a normal cost purchase the member pays contributions that would have been paid plus interest at “4% compounded annually”, and eligible service includes “Previous service credit withdrawn from the Law Enforcement Officers’ Pension System”, which ties the purchase to the refund decision. A computed example from an assumed $5,000 of contributions, not an SRA figure: at 4% compounded annually for three whole years it grows to a computed $5,624.32.

Full cost purchases are limited: “In the 12 months before retirement, an eligible member may be able to purchase service credit at full cost”. The pages read give no price. See the pension buyback calculator.

Cost-of-living adjustments and a vested member’s death

“You must be retired at least one year as of July 1 to be eligible to receive the adjustment.” “Eligible retirees will receive a COLA capped at 2.5% when the SRPS’s investment performance equals or exceeds its assumed actuarial rate of return or capped at 1% in years when the assumed actuarial rate is not met.” For earlier enrollees the cap on service before July 1, 2011 is generally 3%. A computed example from an assumed $2,500 monthly allowance: the 2.5% cap is a computed $62.50 a month and the 1% cap a computed $25.00.

For a vested former member who dies before payments start, the designated beneficiaries receive “a single payment consisting of your accumulated member contributions (with interest)”.

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 the Maryland State Retirement and Pension System’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 agency’s Form 5 package uses the same federal framework in its Special Tax Notice, including the 20% withholding. 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” if the employee separated from service during or after the year they attained age 50 or 25 years of service under the plan, whichever is earlier. 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.

Where the documents differ

DROP interest: the brochure says “Retirement benefits deposited in the DROP account earn 4% a year, compounded annually”, while the Handbook gives 4% compounded annually only for accounts established on or after July 1, 2011 and describes a 2% and 2% method. DROP paperwork: the Handbook calls it an enrollment package, while the brochure lists Form 98-101, a binding resignation (Form 507) and Form 504. Four years: the Handbook ends membership when a member is separated more than four years, the website says contributions not withdrawn within four years are abandoned and stop accruing interest, and a vested member is guaranteed a future benefit; the pages read do not reconcile these for a vested member.

What this page could not settle

Which member belongs in the pre-reformed or post-reformed factor columns, and how a factor is applied; the multiplication above is an assumption.
Whether the factor sheet, marked effective 1/1/2022, is current beside the Handbook marked Revised July 2026.
The DROP interest rate for accounts established before July 1, 2011.
The full cost price of any service purchase; the pages read give only the method.
The statute (State Personnel and Pensions Article) and Title 22 regulations, which the Handbook says control; they were not read.
Disability retirement, retiree health insurance, and members who transferred from the Employees’ Retirement System, whose formulas and COLA may differ.
Whether a particular refund qualifies for an exception to the 10% additional tax; the agency says it cannot advise on tax.

Common mistakes

Assuming a married officer can pick an option; the Handbook says the Basic Allowance applies by law.
Naming an Option 2 or 5 beneficiary more than 10 years younger; the Handbook bars it unless a disabled child.
Treating the option as changeable once the first payment is due.
Withdrawing contributions without weighing what ends; membership and any future benefit, including disability, are forfeited.
Waiting to buy service; a request must come before retirement.

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Sources

Maryland State Retirement Agency, Benefits Handbook: Law Enforcement Officers’ Pension System (Revised July 2026): https://sra.maryland.gov/wp-content/uploads/2026/01/benefithandbook-leo.pdf
Maryland State Retirement and Pension System, Deferred Retirement Option Program: Law Enforcement Officers’ Pension System (brochure, 7/24): https://sra.maryland.gov/wp-content/uploads/2026/01/welcometodrop-leops.pdf
Maryland State Retirement Agency, Benefit Annuity Value and Option Factors, Correctional Officers, State Police and Law Enforcement Officers, Service Retirement (effective 1/1/2022): https://sra.maryland.gov/wp-content/uploads/2026/01/cors_state_police_leops_service.pdf
Maryland State Retirement and Pension System, Separating from Membership (web page, read October 8, 2026): https://sra.maryland.gov/members/separating-from-membership/
Maryland State Retirement and Pension System, Request for Refund Member Contributions (web page, read October 8, 2026): https://sra.maryland.gov/members/separating-from-membership/request-for-refund-member-contributions/
Maryland State Retirement and Pension System, Pension Payment Options and Annuity Factors (web page, read October 8, 2026): https://sra.maryland.gov/members/option-and-annuity-factors/
Maryland State Retirement Agency, Application for Withdrawal of Accumulated Contributions Package (REV. 7/25): https://sra.maryland.gov/wp-content/uploads/2026/01/form_5.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 8, 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.

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