HB136INTRODUCED
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HB136
I1T9ZZ6-1
By Representative Collins
RFD: Fiscal Responsibility
First Read: 04-Feb-25
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5 I1T9ZZ6-1 1/23/2025 CD (F)dj 2024-2743
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First Read: 04-Feb-25
SYNOPSIS:
Existing law provides for the Deferred
Retirement Option Plan (DROP), which contractually
allows a member of the Teacher's Retirement System
(TRS) to continue employment with his or her employer
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
withdraws from his or her service.
Existing law provides that participation in DROP
is prohibited after March 24, 2011.
This bill would reopen participation in the DROP
program and would further provide options for Tier I
and Tier II members to participate in DROP.
A BILL
TO BE ENTITLED
AN ACT
Relating to the Deferred Retirement Option Plan (DROP);
to amend Sections 16-25-150 and 16-25-151 of the Code of
Alabama 1975; to reopen participation in the DROP program for
certain members; to further provide options for Tier I and
Tier II members to participate in DROP; and to add Section
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Tier II members to participate in DROP; and to add Section
16-25-155 of the Code of Alabama 1975; relating to the
termination of DROP.
BE IT ENACTED BY THE LEGISLATURE OF ALABAMA:
Section 1. Sections 16-25-150 and 16-25-151 of the Code
of Alabama 1975, are amended to read as follows:
"§16-25-150
(a) As governed by this subsection, there exists as a
part of this retirement system an optional account known as
the Deferred Retirement Option Plan, which may be cited as
"DROP." The purpose of DROP is to allow, contractually, in
lieu of immediate withdrawal from service and receipt of a
retirement allowance, continued employment for a specific
period of time, coupled with the deferral of receipt of a
retirement allowance until the end of the period of
participation, at which time the member shall withdraw from
service.
(b)(1) Participation in DROP is an option available to
any Tier I plan member of this retirement system who meets all
of the following requirements:
(1)a. Has at least 2530 years of creditable service
exclusive of sick leave.
(2)b. Is at least 55 years of age.
(3)c. Is eligible for service retirement.
d. Is or will be employed as a classroom teacher.
(2) Participation in DROP is an option available to any
Tier II plan member of this retirement system who meets all of
the following requirements:
a. Has at least 30 years of creditable service
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a. Has at least 30 years of creditable service
exclusive of sick leave.
b. Is at least 62 years of age.
c. Is eligible for service retirement.
d. Is or will be employed as a classroom teacher.
(3)a. For purposes of this paragraph, "classroom
teacher" means an employee of a local board of education
assigned the professional activity of instructing K-12
students in an academic instructional setting for not less
than an average of four hours each day. This term excludes a
teacher's aid or a full-time administrator.
b. The State Superintendent of Education shall certify
to the retirement system:
1. Prior to the member's participation in DROP, that an
employee meets this definition; and
2. No less than annually, that a member participating
in DROP maintains employment or duties that meet this
definition.
(c) An election to participate in DROP may be made in
one year increments not to exceed five years, nor to be less
than three years. A member may participate in DROP only one
time. 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.
However, member contributions will not be forfeited, nor will
any interest attributable to the retirement allowance. There
will be no penalty forfeiture if the participation period is
interrupted due to an involuntary dismissal, disability,
involuntary transfer of his or her spouse, or death of the
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involuntary transfer of his or her spouse, or death of the
participant.
(d) A member who chooses to participate in DROP may
elect an option allowance set out for members of the Teachers'
Retirement System in subsection (h) of Section 16-25-14 at the
beginning of the participation period. Otherwise, he or she
shall receive the maximum benefit. Such election shall be
irrevocable once the participation period begins except as
otherwise provided in this chapter.
(e) For purposes of DROP, sick leave may not be
converted for purposes of establishing retirement eligibility,
nor used in the calculation of the original retirement
allowance except as provided in Section 16-25-151.
(f) The election to participate in DROP shall be made
in accordance with procedures set forth in a uniform and
nondiscriminatory election and application form adopted by the
Board of Control. The election to participate in DROP may be
made at any time on or after the date the member becomes
eligible to participate as set out in subsection (b). TheSuch
application must be made at least 30 days, but not more than
90 days, before the effective date of participation in DROP ,
and shall be made no later than March 24, 2011 . A member must
be eligible to participate, as provided above at the time the
application is made.
(g) Upon the effective date of the commencement in
DROP, the member's service shall remain as it existed on that
date for the duration of DROP. Once a member enters DROP,
service credit purchases are prohibited. Both the employer and
employee member contribution shall continue to be made. The
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employee member contribution shall continue to be made. The
monthly retirement allowance that would have been payable, had
the person elected to withdraw from service and receive a
retirement allowance, shall be paid into a DROP account that
reflects the credits attributed to the person in DROP.
However, the monies shall remain a part of the regular
retirement fund until disbursed to the participating member in
accordance with this section. Any monies paid into this
account are subject to the exemptions set out in Section
16-25-23.
(h)(1) The DROP account shall earn interest at the same
rate that interest is posted to active member accounts as
defined in subdivision (15) of Section 16-25-1. A
personindividual who participates in this plan shall not be
eligible to receive a retiree cost-of-living increase while
participating in DROP , and shall not be eligible for a retiree
cost-of-living increase until participation in the plan ceases
and he or she withdraws from service and has been receiving a
retirement allowance for at least one full year.
(2) Notwithstanding any other provision of this
chapter, for any member who has fulfilled his or her
obligation under DROP and does not withdraw from service and
any member who begins participation in DROP on or before April
1, 2011, and fulfills his or her obligation under DROP and
does not withdraw from service, the amount of interest payable
on benefit deposits after March 24, 2011, shall be the lesser
of (1) the investment performance of the immediately preceding
fiscal year but no less than $0, or (2) as provided in
subdivision (1) of subsection (d) of Section 16-25-151.
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subdivision (1) of subsection (d) of Section 16-25-151.
(i) DROP shall not be subject to any fees, charges, or
other similar expenses of any kind for any purpose.
(j) Participation in DROP shall not affect the rights
of any education employee to including, but not limited to,
the Fair Dismissal Act, Section 36-26-100 et seq., the tenure
law, Section 16-24-1, et seq., or any other fringe benefit.
(k) Participation in DROP shall not affect the accrual
of annual and sick leave by the participant.
(l) Participants in DROP may receive salary
cost-of-living adjustments and salary increases."
"§16-25-151
(a) On withdrawing from service pursuant to Section
16-25-14, a member who participated in DROP:
(1) Who fulfilled his or her contractual obligation
pursuant to DROP shall receive a lump-sum payment from his or
her DROP account equal to the payments made to that account on
his or her behalf plus interest. Further, the member shall
receive his or her accumulated contribution made during
participation in DROP, together with interest for the period
of DROP participation as provided in subdivision (1) of
subsection (g) of Section 16-25-14 (i)(1). In lieu of a
lump-sum payment from the DROP account, to the extent eligible
under applicable tax laws, the member's total accrued benefit
may be "rolled over" directly to the custodian of an eligible
retirement plan. The member shall also begin receiving his or
her monthly benefit that would have been payable had the
member elected to withdraw from service and receive a
retirement allowance at the commencement of which had been
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retirement allowance at the commencement of which had been
paid directly into the DROP account during his or her
participation in DROP. However, the monthly benefit shall be
recalculated prospectively to reflect any accrued sick leave
as credit for retirement purposes. Conversion of sick leave is
limited to the applicable laws pertaining to conversion of
sick leave into retirement credit. In no event can the number
of days converted be greater than the number of days the
participant had on the date he or she entered DROP. The member
is not allowed to change the option allowance chosen at the
beginning of DROP participation.
(2) Who did not fulfill his or her obligation under
DROP due to involuntary termination, disability, or
involuntary transfer of his or her spouse, shall receive a
lump-sum payment from his or her DROP account equal to the
payments made to that account on his or her behalf plus
interest. Further, the member shall receive his or her
accumulated contribution made during participation in DROP,
together with interest for the period of DROP participation as
provided in subdivision (1) of subsection (g) of Section
16-25-14(i)(1). In lieu of a lump-sum payment from the DROP
account, to the extent eligible under applicable tax laws, the
member's total accrued benefit may be "rolled over" directly
to the custodian of an eligible retirement plan. The member
shall also begin receiving his or her monthly benefit that
would have been payable had the member elected to withdraw
from service and receive a retirement allowance at the
commencement of which had been paid directly into the DROP
account during his or her participation in DROP. However, the
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account during his or her participation in DROP. However, the
monthly benefit shall be recalculated prospectively to reflect
any accrued sick leave as credit for retirement purposes.
Conversion of sick leave is limited to the applicable laws
pertaining to conversion of sick leave into retirement credit.
In no event can the number of days converted be greater than
the number of days the participant had on the date he or she
entered DROP. The member is not allowed to change the option
allowance chosen at the beginning of DROP participation.
(3) Who did not fulfill his or her obligation under
DROP due to voluntary termination within the first three years
of participation shall forfeit a portion of his or her DROP
account that constitutes the retirement allowance. The member
shall be entitled to a return of his or her member
contribution made during his or her participation in DROP as
well as any interest attributable to the retirement allowance.
However, following termination of employment, the member shall
begin receiving his or her monthly benefit which had been paid
directly into the DROP account during that would have been
payable had the member elected to withdraw from service and
receive a retirement allowance at the commencement of his or
her participation in DROP. However, the monthly benefit shall
be recalculated prospectively to reflect any accrued sick
leave as credit for retirement purposes. Conversion of sick
leave is limited to the applicable laws pertaining to
conversion of sick leave into retirement credit. In no event
can the number of days converted be greater than the number of
days the participant had on the date he or she entered DROP.
The member is not allowed to change the option allowance
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The member is not allowed to change the option allowance
chosen at the beginning of DROP participation.
(b) If a participant dies during the period of
participation in DROP, a lump-sum payment equal to the
payments made to the DROP account on his or her behalf plus
interest shall be paid to his or her named beneficiary or, if
none, to his or her estate. Further, the beneficiary of the
estate shall be entitled to a return of the member's
contribution made during his or her participation in DROP
together with interest for the period of DROP participation as
provided in subdivision (1) of subsection (g) of Section
16-25-14(i)(1). However, death benefits payable pursuant to
subsection (g) of Section 16-25-14 (i) or Section 36-27B-3
shall not be applicable. Where there is a beneficiary that
would be entitled to an ongoing monthly benefit, if applicable
laws allow, the monthly benefit may be recalculated
prospectively to reflect accrued sick leave as credit for
retirement purposes. If applicable laws allow, the beneficiary
may elect to be paid for the deceased member's sick leave as
would any other member upon retirement. In no event can the
number of sick leave days used for either calculation be
greater than the number of days the participant had on entry
into DROP. The member is not allowed to change the option
allowance chosen at the beginning of DROP participation.
(c) At the end of the specified period for DROP:
(1) Payments into the DROP account made on behalf of
the member shall cease.
(2) Payment from the DROP account shall not be made to
the member until he or she withdraws from service, nor shall
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the member until he or she withdraws from service, nor shall
the monthly retirement allowance being paid into the DROP
account during the period of participation be payable to the
member until he or she withdraws from service pursuant to
Section 16-25-14.
(3) If the member does not withdraw from service after
the period specified for participation in DROP, he or she
shall resume active contributing membership in the system for
the purpose of earning creditable service. Under no
circumstance will any time spent participating in DROP be
eligible to constitute service credit in any Alabama public
supported retirement system.
(d)(1) Upon a future withdrawal from service, the
member shall receive a lump-sum payment from his or her DROP
account equal to the payments made to that account on his or
her behalf plus interest. Further, the member shall receive
his or her accumulated contribution made during participation
in DROP together with interest for the period of DROP
participation as provided in subdivision (1) of subsection (g)
of Section 16-25-14 (i)(1). In lieu of a lump-sum payment from
the DROP account, to the extent eligible under applicable tax
laws, the member's total accrued benefit may be "rolled over"
directly to the custodian of an eligible retirement plan.
(2) Upon withdrawal from service, the monthly
retirement allowance that would have been payable had the
member elected to withdraw from service and receive a
retirement allowance at the commencement of his or her
participation in DROP was being originally paid into the DROP
account shall begin to be paid to the member. However, the
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account shall begin to be paid to the member. However, the
monthly benefit shall be recalculated prospectively to reflect
any accrued sick leave as credit for retirement purposes.
Conversion of sick leave is limited to the applicable laws
pertaining to conversion of sick leave into retirement credit.
In no event can the number of days converted be greater than
the number of days the participant had on the date he or she
entered DROP. The member is not allowed to change the option
allowance chosen at the beginning of DROP participation.
(3) Upon withdrawal from service, the member shall
receive an additional retirement benefit based on his or her
additional service rendered to the system since termination of
participating in DROP, using the normal method of computation
of benefit for that period only. This additional service shall
not be added to any service prior to his or her participation
in DROP. The member's average compensation for that time
worked after the participation in DROP shall be multiplied by
the appropriate benefit factor multiplied by the amount of
time worked after the participation in DROP. Under no
circumstances is this service to be combined with service
prior to participation in DROP.
(4) The option used for retirement purposes shall be
that applicable to the original benefit.
(5) If the member dies or becomes disabled during the
period of additional service, he or she shall be considered as
having retired on the date of death or commencement of
disability. However, no death benefits pursuant to subsection
(g) of Section 16-25-14 (i) or Section 36-27B-3 will be
applicable."
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applicable."
Section 2. Section 16-25-155 is added to the Code of
Alabama 1975, to read as follows:
§16-25-155
(a) No member may participate in DROP after July 31,
2031.
(b) The Board of Control shall adopt procedures to
implement this section.
Section 3. This act shall become effective immediately.
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