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Fund announces changes to DROP payment options

On September 8, 2022, the Fort Worth Employees' Retirement Fund Board of Trustees approved a change to the Fund's Deferred Retirement Option Program, commonly known as DROP. Current and future DROP participants will want to be aware of these changes.

Under the previous format, program participants could collect their DROP balance payments upon retiring with the Fund through a variety of ways. These were:

  • As a lump sum payment
  • In monthly payments
  • As an annuity

Retirees also could choose a combination of these methods. In addition, they had the option to defer receiving their payments up to age 72 (or 70 1/2 for retirees born before July 1, 1949). 

Going forward, participants will choose from just one of three payment options:

  • Immediately receive a lump sum payment of their entire DROP account balance.
  • Receive the entire DROP account balance in five equal, annual installments.
  • Have the entire DROP account balance converted into an annuity and added to the member’s pension.

In addition, DROP participants who chose to defer their payments were able to earn positive or negative returns at the same rate as the Fund's investment portfolio. Along with the recent changes to the DROP payment options, returns based on the Fund's investment returns will no longer be applied.

Changes to DROP: Common Questions and Necessary Documents

What is the DROP?
Briefly, DROP is an optional program that allows employees who are eligible for normal retirement to continue working while at the same time setting aside dollars. When a member joins DROP, the components used to calculate their pension are frozen. The monthly amount that would have been paid as a pension accumulate in a separate DROP account. These specific funds become available when the member officially retires. 

Exactly what changes are being made to the program?
Effective immediately, participants will choose from one of three ways to receive their money:
1. You can immediately receive your entire DROP account balance in a lump sum payment. 
2. You can receive the funds in five equal, annual installments. 
3. You can have the entire balance converted into a defined benefit annuity and added to your pension.
What else is changing?
Previously, retirees’ DROP accounts could accrue returns (positive or negative) based on the Fund’s investment returns. Going forward, members who are already retired and have a DROP balance will have their final balance, with returns, calculated through August 31, 2022. 

I am planning to join DROP soon. How does this impact future participants?  
The changes to the DROP payment options and returns are effective September 8, 2022 and will apply to future DROP participants. 

How do I select my payment option? 
Download the DROP Payment Selection Form here. A form also will be sent to you or provided to you during your retirement benefits meeting. 

Will I have to pay taxes on the payments?
DROP payments are usually taxable. A tax consultant or financial adviser can advise you on your situation. You also will receive a Special Tax Notice. Note that you may be able to roll over your payments to an eligible retirement plan or an IRA. To determine if your DROP payments are eligible for a rollover, call us at 817-632-8900. Download the Special Tax Notice.

How will I receive my payments? 
The payment process does not change. Participants can choose to receive their DROP payments either through direct deposit to a designated account or by having a physical check mailed to them. 

Why are you doing this now?
With these changes, the Fund hopes to streamline the retirement process for both active members who are concluding their careers and current retirees. While some retirees like having a large number of DROP payment options to mix and match, some retirees will appreciate not having to conduct quite as much research regarding how they want to receive their payments.

Do I HAVE to join the DROP?
No. Joining DROP is a voluntary decision. 

To get more information or set up an appointment, please email Ask@fwretirement.org or call 817-632-8900.