How deferred retirement option plans (DROPs) work
Many civil service workers and government employees are enrolled in defined benefit plans, which provide a guaranteed amount of retirement funds based on salary and years of service. They are an alternative to defined contribution plans, which are common in the private sector and allow you to contribute a set amount but don't guarantee any specific retirement income.
Workers who are enrolled in defined benefit pension plans can become eligible to receive a pension after a certain number of years of work. The amount of their pension is based on factors such as the length of their service and their salaries over their careers.
It's common for these employees to become eligible to retire at a relatively young age, especially if they've stayed at the same job for most or all of their working lives. DROPs allow them to effectively begin collecting pension funds while still working.
Employees who participate in a DROP will no longer accrue years of service that count toward their pensions after enrolling in their plan. Instead, their employers begin paying their pension money into a special interest-bearing account, which they can access upon retirement.
The employee's interest-bearing account continues to grow for each additional year of service. The money goes to the employee when they finally leave the workforce, in addition to the pension money they are owed.
