Alabama Bill Seeks to Revive Deferred Retirement Program

Proposed legislation would benefit teachers and state employees missing out on cost-of-living raises.

An Alabama state representative has introduced a bill that would reinstate a deferred retirement program, benefitting teachers and state employees who have missed out on costofliving raises.

Alabama Rep. Tommy Hanes (R-Bryant) wants to reinstate the Deferred Retired Option Plan, or DROP, which was closed down in 2011.

After last year’s increase in health insurance premiums cut into a pay raise for education employees, “it kinda made my blood boil a little bit,” Hanes, a former firefighter, told “Coming from a public sector employee background like I did, I know how these people felt.

The Alabama state legislature shuttered DROP six years ago because it said it was too expensive for taxpayers, however, Hanes said he wants to start a more streamlined version of the plan.

House Bill 1, which is slated for the 2018 session, would reopen participation in the DROP program, which allows a member of the Employees’ Retirement System (ERS) or the Teachers’ Retirement System (TRS) to continue employment for a specific period of time while deferring a portion of his or her retirement allowance until the end of the participation period, at which time the member retires.

According to the proposed legislation, participation in DROP would be an option available to any Tier I member of the retirement system who meets all of the following requirements:  Has at least 25 years of creditable service exclusive of sick leave; is at least 55 years of age; and is eligible for service retirement. DROP would also be available to any Tier II member of the retirement system who meets all of the following requirements: has at least 25 years of creditable service exclusive of sick leave; is at least 62 years of age, and is eligible for service retirement.

An election to participate in DROP may be made in oneyear increments that doesn’t exceed five years, and is no less than three years, and a member may participate in DROP only once. Any voluntary termination within the first three years in DROP will result in a forfeiture of the portion of his or her DROP account that constitutes the retirement allowance.

The original DROP plan, which was launched in 2002, placed 100% of a participant’s pension allowance in the account. Participants were also guaranteed interest that they collected at the end of the agreed term. Hanes is seeking to reduce that amount to 80%.

“I’ve had a lot of people contacting me that are just now turning 55 years of age with 25 years of service, so it’s going to hit them just perfect,” said Hanes. “Instead of them retiring and maybe going to another state and going to work, it will be just as easy for them to stay on the job and keep their job and keep making their wages and having 80% of their pension put in a fund for them that they’ll draw when they leave.”

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